Gay rights are human rights

The human rights of LGBTQ (Lesbian, Gay, Bisexual, Transgender, and Queer) people have reached centre stage. Curative petitions have been referred to a Constitution Bench with observations by Chief Justice of India (CJI) T.S. Thakur that “the issues sought to be raised are of considerable importance and public interest …”.

When Michael Kirby, a distinguished former Judge of the High Court of Australia and a former President of the International Commission of Jurists, delivered the 2013 Tagore Law Lectures, his theme was ‘Sexual Orientation and Gender Identity — a new province of law for India’. In 1999, Justice Kirby had publicly shared with the world that he was homosexual.

Since the early 1990s, the non-profit Lawyers Collective led by Anand Grover (the lead counsel in the Naz Foundation case) has been in the vanguard of asserting, upholding and enlarging the rights of people living with and vulnerable[vúl-nu-ru-bul(weak,कमज़ोर)] to HIV, including homosexual men and transgender people.

Lawyers Collective invited Michael Kirby and Edwin Cameron (then in the Court of Appeal and now a Judge of the South African Constitutional Court) to conduct a series of judicial workshops on HIV/AIDS and related issues in the 1990s and 2000s. One of these workshops was inaugurated by former CJI J.S. Verma (then Chairperson of the National Human Rights Commission). Justice Cameron publicly revealed that he was himself both homosexual and HIV-positive. Justice Kirby describes the event:

“The effect on the audience was electric. His courage and dignity attracted respect. At the end of the session, Justice Verma publicly embraced Justice Cameron in a spontaneous gesture of solidarity and appreciation for his sharing his knowledge and experience of the epidemic with judicial colleagues in India.”

From symbolism to reality
This warm embrace changed from symbolism to reality when the Delhi High Court delivered its judgment on July 2, 2009 (Chief Justice A.P. Shah and Justice S. Muralidhar) decriminalising Section 377 in the case of consensual adult sex in private in the Naz Foundation case. LGBTQ people could breathe easier, free of the yoke of criminality. It opened up a new world of dignity, privacy and equality for them.

After enjoying this freedom for four years, five months and nine days, the Supreme Court judgment in Suresh Kumar Koushal (Justices G.S. Singhvi and S.J. Mukhopadhaya) came like ‘Rahu’ eclipsing[i'klips(overshadow,ग्रहण लगाना)] their rights and reversing the Naz Foundation judgment. If Justice Kirby and Justice Cameron were to visit India after the Koushal judgment, would they be treated as honoured guests or as suspected felons?

In fairness to the reader I must disclose that I appeared in the review for Naz Foundation in the Delhi High Court, which was dismissed on November 3, 2004 on the ground of lack of cause of action (Chief Justice B.C. Patel and Justice Badar Ahmed). Later the Supreme Court set aside this order and remanded the matter. I also appeared in the preliminary stages in the Supreme Court in the Koushal case for some parents supporting Naz Foundation.

Second, I wrote an article in The Hindu on October 12, 2006 (“Human rights versus Section 377”) where I argued that homosexual practices between consenting adults in private should be decriminalised. My article adverted to the rich jurisprudence of the European Court of Human Rights (ECHR) liberating homosexuals and lesbians. It also referred to the U.S. Supreme Court decriminalising homosexual behaviour between consenting adults in private by invalidating a Texas law while reversing its earlier decision. Justice Clarence Thomas in the dissenting minority, despite upholding the law, characterised it as “uncommonly silly” and observed: “If I were a member of the Texas legislature, I would vote to repeal it.”

Third, I am the parent of a son who is homosexual.

The curative jurisdiction

It is an oft-repeated fallacy[fa-lu-see(false belief,भ्रांति)] that the curative jurisdiction of the Indian Supreme Court can be invoked only when there is a denial of natural justice, or a person who is not a party is adversely affected, or a person who is a party is not served, or the judge is biased[bI-ust(partial,भेदभाव)].

The leading judgment in Rupa Hurra holds: “The upshot of the discussion in our view is that this Court, to prevent abuse of its process and to cure a gross miscarriage of justice, may reconsider its judgments in exercise of its inherent power… It is neither advisable nor possible to enumerate[i'nyoo-mu,reyt(count,गणना)] all the grounds on which such a petition may be entertained.” In fact, a curative petition was allowed in National Commission for Women v. Bhaskar Lal Sharma, by a Bench of three judges observing, “Accordingly it was too early a stage, in our view, to take a stand as to whether any of the allegations had been established or not… Accordingly we allow the curative petitions… and recall the judgment”. This was in a case of miscarriage of justice where matrimonial disputes led to allegations of criminal conduct. Again, in Devender Pal Singh Bhullar’s case the curative petition was allowed, reducing the death penalty to life imprisonment on the ground that the earlier decision was per incuriam in the light of a subsequent decision. The other ground was the medical condition of Bhullar.

The Naz Foundation judgment declared that Section 377 in so far as it criminalised consensual adult sex in private violated Articles 21, 14 and 15 of the Constitution. It brought human rights of LGBTQ people in line with international legal norms applied in Europe, the U.S., Canada, South Africa, Australia, New Zealand, Hong Kong and Fiji among others.

The Universal Declaration of Human Rights adopted on December 10, 1948 states that “all human beings are born free and equal in dignity and rights. They are endowed with reason and conscience and should act towards one another in a spirit of brotherhood”. December 10 is Human Rights Day. Ironically, on December 11, 2013, a liberating and internationally acclaimed judgment was reversed by the Supreme Court after over four years.

A subsequent judgment delivered by the Supreme Court (Justices K.S. Radhakrishnan and A.K. Sikri) on April 15, 2014 in National Legal Services Authority v. Union of India recognised a third gender status for transgender people and their fundamental rights as human beings. The underlying reasoning of this judgment is wholly inconsistent with the Koushal judgment and a Constitution Bench is essential for resolving this conflict.

The way forward

Miscarriage of justice is writ large in the Koushal judgment. LGBTQ people are treated as “unapprehended felons” — a great blow to the doctrine[dók-trin(belief,सिद्धान्त)] of equality, privacy and dignity embodied in liberal judgments of our Supreme Court under Articles 21, 14 and 15. It has caused enormous[i'nor-mus(big,बड़ा)] public mischief and, as represented by the Ministry of Health, contributes to gravely exacerbating[ig'za-su,bey-ting(worsen,बिगड़ना)] the spread of HIV.

The Koushal judgment diminished[di'mi-nisht(lessen,कमी)] the high standing of Indian human rights jurisprudence. It ignored a long line of the ECHR judgments. It exhibited a total disconnect with the expanding horizon of human rights. Without being pejorative[pi'jó-ru-tiv(express disapproval,निंदात्मक)], a queer judgment on queer people has muddied the waters of India’s human rights record.

The balance must be rapidly restored by institutional action of the Supreme Court. The reference of the curative petitions to a Constitution Bench is the first step in the right direction.

Lord Denning observed, “The doctrine of precedent does not compel[kum'pe(force,मजबूर)] your Lordships to follow the wrong path until you fall over the edge of the cliff. As soon as you find that you are going in the wrong direction you must at least be permitted to strike off in the right direction.” The pithy observation of Justice Robert H. Jackson of the U.S. Supreme Court is also worth recalling: “I see no reason why I should be consciously wrong today because I was unconsciously wrong yesterday.” To conclude with the admirable words of Justice V.R. Krishna Iyer: “Horace wrote: ‘But if Homer, who is good, nods for a moment, I think it a shame.’ We, in the Supreme Court, do ‘nod’ despite great care to be correct, and once a clear error in judgment is revealed, no sense of shame or infallibility complex obsesses us or dissuades[di'sweyd(prevent,रोकना)] this Court from the anxiety to be ultimately right, not consistently wrong.”

Courtesy:the hindu

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Know your English

WHY IS AN ACTOR SOMETIMES CALLED A ‘HAM’?
(R. Aswath, Chennai)

An actor who is overly theatrical — in other words, ‘overacts’ — is usually referred to as ‘ham’. He does such a bad job that the audience ends up laughing. The word is frequently used in everyday contexts to refer to someone who likes to draw attention to himself by being overly dramatic.

*As expected, the acting was pure ham.

There are many theories regarding the origin of this word. According to one theory, in the past, not all actors could afford to buy cold cream to remove their makeup. The ones who were struggling to make a living, invariably made use of pig fat or ‘ham fat’ for this purpose. This practice led to actors being called ‘hamfatters’; it was later shortened to ‘ham’. Another theory is that the word comes from the title of Shakespeare’s play ‘Hamlet’. Many of the actors who played the hero were often very theatrical.

WHAT IS THE DIFFERENCE BETWEEN ‘NOXIOUS’ AND ‘OBNOXIOUS’?
(K. Vinay, Bangalore)

The two words have very different meanings. When you say that someone is ‘obnoxious’, you mean that the person is rather rude or offensive; he says and does things that make people angry. The word can be used with things as well; a smell that is ‘obnoxious’ is something that is terrible. An obnoxious painting is one that is really bad; it is awful to look at.

The word ‘noxious’, on the other hand, is mostly limited to things; something that is harmful or poisonous is usually referred to as ‘noxious’. An obnoxious smell need not necessarily be dangerous to living things.

*Three workers died after inhaling the noxious fumes.

*Sita had obnoxious things to say about her boss.

*What made you buy such an obnoxious painting?

WHY IS A BATSMAN IN CRICKET SOMETIMES REFERRED TO AS THE ‘SHEET ANCHOR’?
(R. Kaushik, Delhi)

When a batsman is referred to as ‘sheet anchor’, it means that he is holding up one end. In other words, he is defending stoutly; though he may not be scoring runs very quickly, he ensures that he does not get out. His job is to provide support to the batsman at the other end whose aim it is to score runs quickly. The sheet anchor plays a supporting role.

I don’t see Dhawan playing the role of a sheet anchor.

The expression comes from the world of sailing. A sheet anchor was a relatively large anchor that was used only in case of emergencies — for example, when the sea was rough. When applied to people, it began to mean someone you could fall back on or depend upon during times of difficulty.

IS THERE A DIFFERENCE BETWEEN ‘SHE’S A LOVELY WOMAN’ AND ‘SHE’S A BEAUTIFUL WOMAN’?
(Jayashree, Chennai)

In the second sentence, you are talking about a person’s looks. In this case, you are saying that the individual is good looking or attractive. In the case of ‘lovely woman’, you are thinking of the character of the person. She may not be good looking, but there is something about her you find endearing. A lovely person is a very likeable person; a beautiful person need not be likeable.

******

“People are seldom too busy to stop and tell you how busy they are.” — Anonymous

Courtesy: the hindu

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Cities at crossroads: Why cities matter

Urbanisation is the talk of the town. A number of new initiatives have been launched by the government of India in the last two years, raising the level of ambition of Indian cities — smart cities, clean cities (Swachh Bharat), rejuvenated cities (Amrut), and housing for all. The first recognition of the importance of urbanisation, after years of neglect by both the Centre and the states, came in 2005 when the government of India launched the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) in December 2005. The mission ran its course till March 2014, with mixed results. Public service delivery improved only in cities where state governments provided an enabling environment for innovation and better governance.

Indian cities mostly remain in very wretched[re-chid(poor,गरीब)] condition with respect to public service-delivery and governance. For the new initiatives to succeed, it is important to recognise that while some funding through the new missions will help, as in the case of JNNURM, the key issue is whether our cities will be empowered with finances and capacity by the state governments and helped by the government of India. Without this, private funds will not come forth to supplement the limited funds of the government and the hope of public-private partnership will not materialise.

There must, of course, be elected local governments as the Constitution mandates, but there must also be greater autonomy to the elected urban local governments in the running of city affairs. Unless this is done, our cities will not be able to improve the quality of life of their citizens and also play their role as engines of rapid growth.

In order to explain why cities matter, particularly for India’s current stage of development, let me begin with some frequently asked questions about the relationship between rapid economic growth, structural transformation and urbanisation.

If we aspire for GDP growth of 8 to 10 per cent per annum, which is necessary to improve economic conditions in India and remove/ reduce poverty within a short period, this can only be driven by industry and services sectors, which can grow much faster than agriculture. After having grown at close to 4 per cent per annum during the Eleventh Plan period (2007-08 to 2011-12), agricultural growth in India has slowed down to less than 2 per cent in more recent years. Undoubtedly, Indian agriculture can and should grow at 4 to 4.5 per cent per annum and, for this, we need to make large investments in research and development, soil and water management and agricultural extension. But rapid growth of GDP will have to be driven by non-agricultural sectors.

Faster growth of industry and services leads to a decline in the share of agriculture in both GDP and employment. This is called structural transformation and should be welcomed. Urbanisation occurs when people move out of rural areas into cities in search of employment and opportunity. This has been the development experience of almost all countries. This is because cities play an important role in developing industries and services. By generating economies of agglomeration[u,gló-mu'rey-shun(collection,ढेर)] and by acting as centres of knowledge and innovation, they make investments in industry and services more productive.

India has been among the fastest growing economies of the world for quite some time now. In the last 12 years or so (2003-15), the growth rate of GDP was 7.7 per cent per annum, and the latest estimate for 2015-16 shows only a minor dip to 7.6 per cent. However, the rapid growth has not been associated with employment growth in non-agricultural sectors. The change in the structure of output has not been accompanied by a change in the structure of employment. About 50 per cent of the workforce is still “employed” in agriculture, even though agriculture contributes less than 15 per cent to GDP.

With far too many people dependent on agriculture for their livelihoods, productivity of labour is low in Indian agriculture as farmers engage in labour-intensive farming. This limits their potential to earn a higher income. Since it is not possible for the existing rural population to earn a decent living in rural areas, they have to, and do, move to the cities. To absorb the exodus[ek-su-dus(escape,निष्क्रमण)] of people from rural to urban areas, we need to fix our cities. We need to provide employment, skills and opportunity for people to engage in industry and services sectors.

Indian cities are simply not ready to support non-agricultural growth of the kind we need. They are in a state of disrepair and are visibly deficient[di'fi-shunt(lacking,अपूर्ण)] in the public services they provide, with alarming consequences['kón-si-kwun(t)s(result,परिणाम)] for public health. With rising incomes and the even faster rising aspirations of India’s young population, patience is running out.

Whether it is the severe air pollution in Delhi, traffic congestion in Bangalore, the floods in Chennai or the garbage menace[me-nis(threat,खतरा)] in a number of cities, technology provides only a miniscule[mi-ni,skyool(small,छोटा)] part of the solution. The larger challenge is that of reorienting the federal framework to strengthen governance.

The government of India can provide strategic leadership and the new missions are very welcome from this perspective. But the funds needed for the missions are much larger than what the government of India has offered, or can possibly offer, given the competing demands on the financial resources of the Centre. The private sector can generate funds for urban infrastructure projects but will do so only if a reasonable return is assured, and for this, reforms in urban planning, finance and management are crucial, and state governments will have to be the principal players.

Public-private partnership works best when it is based on an open and transparent arrangement, with a unambiguous[ún,am'bi-gyoo-us(clear,स्पष्ठ)] assignment of risks, backed by an effective dispute-resolution mechanism. The Centre can help with a model framework. But state governments will have to come on board in a partnership mode with the urban local bodies, the community and the private sector to make public-private partnerships work.

Whether the new national missions will succeed in bringing about urban rejuvenation depends on how much the Centre can nudge/ push the state governments to bring about the necessary reforms.

Courtesy: indian express

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Why 7.6% growth is hard to square

This year, the gross domestic output (GDP) is forecast to grow at 7.6 per cent in real terms, that is, net of inflation. It is higher than China’s growth rate projection of 6.9 per cent, making India the world’s fastest-growing large economy. The growth rate has steadily climbed from 2012-13, when it had plummeted[plú-mited(fall,गिरना)] to 4.5 per cent. Why, then, is no one celebrating the turnaround or applauding the policymakers for their success? Apparently, few trust the official figures. Why?

Last year, a new series of National Accounts Statistics (NAS) was released with 2011-12 as the base year (replacing the earlier series with 2004-05 base year) — roughly a 10-yearly routine for the Central Statistics Office (CSO) to keep up with the economy’s structural changes using newer databases and improved estimation methods. This time around, the CSO has also incorporated the United Nations System of National Accounts (SNA 2008) — a welcome effort to keep up with international accounting standards.

A game of numbers

Usually, the base year revision changes the absolute level of GDP (and its major constituents), but its growth rates invariably remain the same. But it is different this time. While the absolute GDP size for 2011-12 with the new base year was smaller by 2.3 per cent, its growth rates for the following two years are significantly higher (compared to the older series). The difference is sharper by sectors (or industry): for instance, manufacturing sector growth rate for 2013-14 is 5.3 per cent in the new series, compared to negative 0.7 per cent in the older series. Disconcertingly, such a high growth rate is out of line with many other economic indicators such as credit flows, output expansion in major industries or capacity utilisation in critical industries such as steel or cement. In other words, the rosy official estimates did not pass the “smell test”. Hence the widespread scepticism[skep-ti,si-zum(disbelief,संशयवाद)] of the new GDP numbers, shared by some policymakers as well.

India has thus not only surpassed China’s official growth rate but now shares its dubious[dyoo-bee-us(doubtful,संदिग्ध)] distinction of inflated output estimates. China’s Premier, Li Keqiang, when he was the governor of Liaoning province, said famously about his country’s GDP that it is man-made and hence unreliable; it was meant for reference only. He further added that the true measures of China’s economy are growth in bank credit, rail freight and electricity output.

Why have the GDP estimates become unreliable after the revision? To be sure, early on, Indian national income estimates were not without blemishes[ble-mish[defect,कलंकित)] . But the revision seems to have worsened the situation with widely questioned figures. Though the absolute GDP size for 2011-12 in the new series is marginally smaller (than that in the old series), its institutional composition has changed significantly. The private corporate sector’s (PCS) share in the GDP has expanded to 34 per cent now (23 per cent in the older series); and household (unorganised or informal) sector’s share in the GDP has shrunk to 45 per cent in the new series (from 56 per cent earlier). How could this happen? It is the result of changes in methodologies and the databases used.

Arithmetically, the sharp compositional change in favour of the fastest-growing sector would mean higher GDP growth rate, everything else remaining the same.

Private corporate sector

The revised NAS has used the Ministry of Corporate Affairs MCA-21 database of about 5.2 lakh companies to estimate PCS’s contribution to domestic output. It is then “blown up” (scaled up) to over 9 lakh “active companies” that claimed to have filed their financial returns at least once during the previous three years. Detailed investigations suggest shortcomings in these procedures, leading to an overestimation of the size and growth rates of PCS in the new GDP series — a tentative result that can be verified only if the MCA-21 database is made available for independent verification.

The CSO is, however, convinced of the superiority of the revised estimates compared to the earlier one based on Reserve Bank of India’s purposive sample of about 4,500 high paid-up capital companies. Prima facie[prI-mu'fey-shee(Clear,प्रत्यक्ष)] , it is hard to dispute the CSO’s contention. But the truth lies in knowing the structure of PCS and the MCA-21 database.

There are close to a million registered companies (2014 figure), but their distribution is extremely skewed: about 65,000 (6.4 per cent) are public limited companies; those listed on the Bombay Stock Exchange are about 5,000. The Centre for Monitoring Indian Economy’s (CMIE) Prowess database consists of about 26,000 non-financial private corporations accounting for about 18 per cent of the GDP. The top 100 companies accounted for nearly one-half of gross value added of the CMIE estimate. Could the majority of registered companies, producing output sporadically (if at all), account for the rest of output of the PCS? Probably not, we would contend. Hence official GDP of the PCS overestimates the sector’s output.

One suspects that a large proportion of the private limited companies are tax hedges and are used to ensure promoters’ control over productive enterprises via benami (illegal) holdings, and/or to avoid laws and regulations. It is widely known that behind most gargantuan[gaa'gan-choo-un(large,बड़ा)] public limited companies there exist numerous[nyoo-mu-rus(many,बहुत से)] private limited companies and unincorporated businesses, which promoters often use to optimise private returns for the entire group. Hence, a company (as a legal entity) exists mainly as a cog in the wheel supporting family business. The spate of scams in India in recent years has offered ample[am-pu(full,प्रचुर)] insights into such structures of private business, which effectively use a large array of private limited companies to siphon off[sI-fun óf(empty,बेईमानी से निकालना)] surpluses into untraceable corporate and even non-corporate entities, via intra-group and inter-corporate transactions.

If the foregoing account is a fair characterisation of the PCS, then blowing up the sample estimates for the universe of active companies may be statistically valid, but its economic implications could be suspect. Therefore, the revised method could have contributed to an overestimation of the corporate sector’s contribution to the GDP.

Household sector

Since, by definition, the household sector’s production is not directly recorded in audited balance sheets, they are captured by large, nationwide sample surveys.

Conventionally, the sector’s output is estimated as a product of output per worker and the number of workers employed — an imperfect but widely accepted method for the unorganised sector. Usually, during the NAS revision, latest survey data are utilised to capture the most recent output trends. The shortcomings of such a method are widely known, but for lack of anything better, the simple yet sound practice was followed.

But the recent revision introduced a new procedure under the assumption that the older method overestimated the contribution of self-employed workers. The changed methodology drastically reduced output per worker in the unorganised sector, leading to the shrinkage of this sector’s output in the GDP.

In other words, methodological changes enlarged the size of the PCS and contracted the size of the household sector (keeping the overall size of GDP almost the same). They together seem to have contributed to render[ren-du(provide,देना)] the growth rates in new GDP unreliable.

To conclude, the new NAS has forecasted a GDP growth rate of 7.6 per cent for the current year, making India the world’s fastest-growing economy. Few seem elated[i'ley-tid(joyful,प्रफुल्लित)] at the prospect, as the growth estimate seems out of line with other economic indicators. This is a continuation of the doubts expressed on the revised NAS published last year. After the revision, the size of the fast- growing private corporate sector has got enlarged and that of the household sector contracted. These changes are the result of questionable changes in the methodologies and databases used in the revision. We have contended that they could have seriously affected the GDP growth rates and its constituents. Hence, serious doubts about the GDP estimates persist[pu'sist(remain,बने रहना)].

Courtesy: the hindu

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No bailout with taxpayer money

The banking sector in India is in a crisis, with the burden of bad loans brewing for some time now. As far back as November 2014, the Reserve Bank of India (RBI) Governor castigated[kas-tu,geyt(condemn,फटकारना)] “riskless capitalism” being enjoyed by Indian big businesses — while the profits of the boom period have accrued as lucrative[loo-kru-tiv(profitable,लाभप्रद)] returns on their equity, the losses during the downturn have accumulated as bad debt in the banking system, particularly the public sector banks. Little has happened since then by way of corrective policies.

Two parliamentary committees — the Public Accounts Committee and the Standing Committee on Finance — have meanwhile studied the problem of stressed loans in the banking system and expressed outrage['awt,rey(anger,नाराजगी)], recommending measures such as forensic audit of bad loans. The Finance Ministry is now reportedly working towards the creation of a public-funded asset reconstruction company (ARC), which will buy off the bad debts and cleanse the banks’ balance sheets. But is such a bailout justified?

The “stressed” banking sector
According to RBI statistics, annual growth of bank credit in India, which had crossed 30 per cent in the boom years of 2004-2007, has markedly declined to around 9.7 per cent in 2014-15 and further down to 9.4 per cent in the first half of 2015-16. The decline in credit growth has followed a severe decline in the profitability of scheduled commercial banks, with public sector banks suffering the most in this profit squeeze.

This is not surprising given the fact that public sector banks are saddled[sa-d(u)ld(burdened,लदा होना)] with a disproportionate share of non-performing and bad loans within the banking system. As per RBI’s banking statistics, out of Rs. 75.6 lakh crore gross advances made by all scheduled commercial banks taken together till March 2015, a sum of Rs. 3.22 lakh crore was classified as non-performing assets (NPAs), taking the gross non-performing advances (GNPA) to gross advances ratio to around 4.27. The public sector banks accounted for 74 per cent of the gross advances and 86 per cent of GNPA of the scheduled commercial banks in March 2015.

RBI’s Financial Stability Report (FSR, December 2015) states that out of the total GNPA, the share of “large borrowers” — defined as having aggregate exposure of Rs. 5 crore and above — has increased from 78 per cent in March 2015 to 87 per cent in September 2015. These large borrowers are not farmers or small producers but large or medium-sized corporates.

Moreover, the banks have been simply rolling over a large volume of debt owed by the large borrowers, mainly through corporate debt restructuring, in order to downplay the growing incidence of NPAs and window-dress their balance sheets. ‘Restructured advances’ amounted to over Rs. 5.24 lakh crore at end-March 2015. This, added to Rs. 3.22 lakh crore of NPAs, amounted to Rs. 8.47 lakh crore of ‘stressed advances’ in the banking sector in 2014-15, accounting for 11.2 per cent of the total gross advances of banks and around 6.7 per cent of India’s GDP.

Such huge amounts of stressed assets in the bank balance sheets persist[pu'sist(remain,बने रहना)] despite substantial debt write-offs that have already been made by the banks. As per RBI data, NPAs totalling over Rs. 60,000 crore were written off by the scheduled commercial banks in 2014-15. The beneficiaries of such largesse have remained unknown to the public.

The Finance Ministry had divulged[di'vúlj(disclose,खुलासा)] earlier that the top 30 NPAs of the public sector banks amounted to over Rs. 95,000 crore in December 2014, which accounted for over one-third of GNPAs of the public sector banks. However, the Ministry also cited[sited(mentioned,उल्लेख)] Section 45E of the RBI Act and other banking laws to withhold specific information regarding the defaulters. Only a small list of “wilful defaulters” has been made available, with Vijay Mallya’s Kingfisher Airlines topping the list.

The Finance Ministry has recently revealed in Parliament that the public sector banks have identified 7,265 cases of “wilful defaulters” till September 2015, amounting to Rs. 64,334 crore, accounting for around 20 per cent of the GNPAs of the public sector banks. Out of this, FIRs have been filed only in 1,624 cases (22 per cent) involving Rs. 16,602 crore. It is clear that not only are the laws and institutions related to recovery of debt and corporate bankruptcy in India lax and loophole-ridden, the banks are themselves reluctant[ri'lúk-tunt(unwilling,अनिच्छुक)] to bring even the wilful defaulters to book.

The picture that emerges is one of a toxic nexus of unscrupulous[ún'skroo-pyu-lus(dishonest,बेईमान)] businessmen, negligent and corrupt bankers, complicit auditors and an easy-going regulator ripping off the banking system, especially the public sector banks. What this calls for is a moratorium[mó-ru'to-ree-um(suspension,स्थगन)] on corporate debt restructuring and non-transparent debt write-offs, through which this scam is being perpetuated[pu'pe-choo,eyt(remain,बने रहना)] , and a complete overhaul[ow-vu'ho(repair,सुधारना)] of the laws and regulations governing corporate defaults and debt recovery. The penal provisions of the Insolvency and Bankruptcy Code introduced in Parliament last December need to be further strengthened in that direction. The focus of legislative changes should be on dismantling[dis'man-tu-ling(break,विखंडन)] the edifice[e-du-fis(structure,स्वरुप)] of parasitic, crony capitalism rather than on enhancing the supposed ‘ease’ of doing business.

Credit-Suisse Securities Research and Analytics has been closely tracking the company financials of the 10 most severely debt-stressed corporate groups over the past three years, namely Lanco, Jaypee, GMR, Videocon, GVK, Essar, Adani, Reliance ADAG, JSW and Vedanta. Its latest ‘House of Debt’ report (October 2015) reveals that the combined debt of these 10 groups taken together have increased by seven times in the past eight years to reach Rs. 7.33 lakh crore in 2014-15, accounting for nearly 10 per cent of the banking system’s gross advances. Credit-Suisse’s analysis further shows that large chunks of corporate debt are yet to be recognised as ‘stressed advances’ by the banking system, despite the solvency ratios of those large companies crossing the danger mark.

Misplaced priorities

A key systemic cause behind such intense corporate debt distress and the accumulation of bad loans within the public sector banks is to be found in the premature euthanasia[,yoo-thu'ney-zhu(mercy killing,इच्छा-मृत्यु)] of the Development Financial Institutions (DFIs) in India. Following the recommendations of the Narasimham Committee-II, DFIs like the ICICI and IDBI, which were created in the post-Independence period to provide long-term finance for industry, were converted into universal commercial banks. The committee’s presumptions regarding the capacity and skills of the commercial banks and capital markets in India being sufficient in meeting the financing needs of the industrial sector have turned out to be gross overestimates. NPAs have not only made a comeback, but are threatening the very stability of the banking system.

Industrialisation and infrastructure development in developing economies like ours is crucially dependent upon the availability of long-term development finance with transparent state support. But while DFI loans as a proportion to GDP have increased significantly in countries like Germany, Japan, China and Brazil between 2000 and 2010, it fell in India from 7.4 per cent to 0.8 per cent. Rather than bailing out the delinquent[di'ling-kwunt(due,बकाया)] corporate borrowers and negligent bankers using taxpayers’ money, the government would do well to revive the DFIs, even create new ones through fiscal support, in order to bring transparency in industrial and infrastructure financing and restore the credibility of the banking system.

Courtesy: the hindu

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