The Hindu Editorial Analysis | 30th Nov’19 | PDF Download

GDP growth plunges to 4.5%, lowest since 2012

• An official says fundamentals are strong, numbers will pick up
• The lowest GDP growth in six years and three months comes as Parliament has been holding day-long discussions on the economic slowdown, with Union Finance Minister Nirmala Sitharaman assuring the Rajya Sabha that the country is not in a recession and may not ever be in one.
• Growth in the gross domestic product (GDP) in the July-September quarter hit a 25-quarter low of 4.5%, the government announced on Friday.
• The lowest GDP growth in six years and three months comes as Parliament has been holding day-long discussions on the economic slowdown, with Union Finance Minister Nirmala Sitharaman assuring the Rajya Sabha that the country is not in a recession and may not ever be in one.

 GVA dips to 4.3%

• Growth in gross value added (GVA) also dipped to 4.3% in Q2 of 2019-20 from 4.9% in Q1, and 6.9% in the Q2 of last year.
• According to the data released on Friday, the manufacturing sector contracted 1% in the second quarter of the current financial year, compared with a robust growth of 6.9% in the same quarter of the previous year.
• The manufacturing sector saw an overall contraction of 0.2% in the first half (April to September) of the current financial year compared to a growth of 9.4% in the first half of last year.
• “We take note of announcement of the rate of GDP growth,” Economic Affairs Secretary Atanu Chakraborty told the media following the data release. “The fundamentals of the Indian economy remain strong and GDP growth is expected to pick up from the third quarter of FY 2019-20.”
• He further highlighted the fact that the International Monetary Fund has projected India’s GDP growth at 6.1% in financial year 2019-20 and 7% in 2020-21 in its October 2019 report.
• ‘Recognise real fiscal deficit, put cash in people’s hands’ Non-government sector in a tailspin, govt. needs to realise problem is on demand side and conduct expenditures to prop it up, say economists
• The government needs to acknowledge its true fiscal deficit so that it can increase its expenditure and put money in people’s hands in order to stimulate demand and investments in the economy, economists said in reaction to the 25-quarter low GDP growth figure.
• The government on Friday announced that GDP growth for the second quarter of the 2019-20 financial year was at a dismal 4.5%.
• “There is scope for lower growth than even this,” Pronab Sen, former Chief Statistician of India told The Hindu. “At the end of the day, the non-government sector is in a tailspin. It’s not going to correct by itself. The government has to step in. They need to recognise that there is a real, genuine problem on the demand side, and there is a problem with people’s incomes, and they need to conduct expenditures that will prop this up.”
• One major structural problem that the government has created for itself, Dr. Pronab Sen said, is the non-recognition of the true fiscal deficit, which has tied up expenditure, which could otherwise have been released.
•  “This was pointed out by the CAG for 2017-18 and it has only become worse subsequently,” he said. “The first step is to recognise this problem so that you can start paying your bills and making the expenditures that you have committed to make. The moment you recognise the fiscal deficit, you can tell the RBI that it must start buying bonds, so that this will open up space for the government to issue new bonds. But if you say that you are going to issue bonds as per a 3.3% fiscal deficit, it’s not going to cut it.”
• “The role of putting cash into the economy is relevant, but relevant only for the unorganised sector,” said Abhijit Sen, former member of the Planning Commission. “For them, it is quite important because they are a cash economy. They are currently feeling all the problems of a cash economy without cash.”
• “As far as the overall growth impetus is concerned, even there, getting the unorganised sector going is important because in the past Indian slowdowns, what has led us out of it has been the unorganised sector,” Dr. Abhijit Sen added.
• When the big companies are doing badly, he said, it has been the smaller companies that have been able to secure credit from the banks and invest. “But that is not happening this time around because the banks have not been lending to anyone and the smaller players do not have the cash to invest,” Dr. Abhijit Sen added. “If there is more cash in the economy, they will kick-start something.”
• “India is not facing a slowdown, but is in recession,” Arun Kumar, a noted economist and Malcolm S. Adiseshiah Chair Professor at the Institute of Social Sciences said earlier on Friday before the release of the latest GDP figures. “If one includes the unorganised sector, India’s GDP is negative.” Anubhuti Sahay, economist with Standard Chartered Bank, said, “Whichever way you dissect the data, there is board based slowdown. Whether you look at services or industry, or government versus private, slowdown is pretty evident. In fact the number would have been even worse had the net exports not contributed.
• India is a trade deficit economy; whenever it is wider, it takes away a few percentage points from our GDP. But this time, because the trade deficit reduced on the back of lower import and weaker demand, it actually contributed to GDP growth.”
• While there is consensus among market participants that growth may have bottomed out, the recovery is expected to be prolonged.

DRDO defends Nag missiles

• The state-of-the-art indigenous Anti-Tank Guided Missile (ATGM) Nag is in advanced stages of development, the Defence Research and Development Organisation (DRDO) has said in a sharp response to statements that raised questions on the programme. A new Man Portable ATGM (MPATGM) was also in advanced stages of trials, it noted.
• Early this week, the Army fired two newly inducted Spike-LR (Long Range) ATGM at the Infantry School at Mhow in Madhya Pradesh.
• A statement on the test-firing, issued by a public relations firm on behalf of Spike manufacturer Rafael Advanced Defense Systems, said that with the confidence in the missile established, the Indian Army may need to “revisit” their plans for third generation missiles.
• “Both the DRDO ATGM programme, as well as the invitation to Indian industry to develop a 3rd Gen missile will need a rethink, as having a 4th Gen missile will put the plan for the development of a 3rd Gen missile questionable,” the statement said.
• A DRDO statement on Twitter said the statement was circulating “incorrect facts.

” ‘Best in its class’

• Nag, the 3rd gen ATGM, was in the process of being inducted after extensive tests. The MPATGM, in an advanced stage of development, defence sources said, was a fourth generation ATGM. Six tests had been conducted so far and all developmental trials were over, a defence source said. “In a year it will be ready for production.” The Nag missile, the best in its class, was built for Indian conditions, officials said
• The Nag missile also called Prospina for the land attack version is an Indian third generation all weather fire-and-forget, lock-on after launch anti-tank guided missile (ATGM) with an operational range of 500m-20km, single-shot hit probability of 0.9 and 10 years of maintenance free shelf-life.
• It comes in five variants which are under-development namely – (a) Land version (for mast mounted system), (b) HeliNa (Helicopter-launched Nag), (c) Man portable (MPATGM), (d) Airlaunched version (for air interdiction which will replace imaging infra-red (IIR) to millimetricwave (mmW) active radar homing seeker. and (e) NAMICA (Nag Missile Carrier) tank buster which is a modified BMP-2 Infantry Fighting Vehicle (IFV) produced under licensed in India by Ordnance Factory Medak (OFMK).
• Nag is under the Integrated Guided Missile Development Program (IGMDP) run by Defence Research and Development Organisation (DRDO) and is manufactured by Bharat Dynamics Limited (BDL). The Ministry of Defence (MoD) announced on 19 July 2019 that the missile is ready to enter series production.
• As the country honours the donation process, and distributes awards to donor families — Indian Organ Donation Day is observed by the Government of India on November 30 — it also needs to reflect on certain negative perceptions that appear to be growing and undermining the altruistic donation mindset of donor families. A classic example of this is the steep drop seen in Kerala — from 76 deceased donors in 2015 to eight in 2018 — due to a perceived, however unfounded, scandal that private hospitals were declaring persons brain dead when they were not really so, in order to harvest their organs and profit from them.
• The underlying factor is the highly privatised health-care system in India and the growing trust gap between patients and doctors trapped in the profit-seeking business of tertiary care; seeking second and third opinion on patient treatment is commonplace today. While an organ comes free, as donated to society, transplanting it to another person costs anywhere between ₹5 lakh and ₹25 lakh, including profit to the hospital. Hence the unavoidable suspicion that unethical practices may take place — as highlighted in a recently published book, Healers or Predators? Healthcare Corruption in India. There is one more factor. The reality that a majority of accident victims who become donors are lower middle class and below, while the majority of organ recipients are from the small number of persons who can afford transplant surgery and costly lifetime medication thereafter. The cost factor is the key reason why more than three quarters of donated hearts and lungs do not get taken.

Public hospitals cannot help

• A common solution to this, advocated by many, is that public hospitals should chip in and help the poor. Very few public hospitals in the country do kidney transplants and less than five do liver and heart transplants. Should they get involved much more? The answer is, no. In a country where public spend on health care remains an abysmal 1.2% of GDP — less than a third of what even some developing countries spend — priority should be on spending the limited allocation on areas that would benefit the greatest number of persons. Which is why a World Health Organisation Consultative Group in its 2014 report points to a study in Thailand which finds that money spent on dialysis can save 300 times more healthy life years if spent on tuberculosis control. It considers expansion of low- and medium-priority services before near-universal coverage of high priority services as an “unacceptable trade-off” and does not include dialysis or organ transplantation even in the low-priority category. A given amount, if spent on organ failure prevention will save many more lives than if spent on organ transplant.

Faultlines and solutions

• Are there any solutions to these issues of trust gap and inequality? Only steps to moderate are possible in these deep-rooted societal fault lines. One usual approach is to regulate hospitals through acts and rules. In the 25th year of the Transplantation of Human Organs Act, 1994 , it is time to revisit its effectiveness. Substitution of bureaucratic procedures for hospital and transplant approval by self-declaration and mandatory sample verification involving civil society will improve compliance — as proved in other countries — and will also help get more hospitals involved. Further amendment is needed to ensure full State autonomy in this area, avoiding the Central government’s interference in organ distribution, which is now demotivating many hospitals. Apart from this, all State organ distribution agencies need to make their operations fully transparent. Steps such as making online organ distribution norms and the full details on every organ donation will help build public confidence in the system.
• As for “organs from poor to rich” some moderation of the inequality in our country is called for, especially as India figures in the top 10% of unequal countries in the world and among the top 10% of high proportion population spending more than a tenth of their income on health.
• This must also be considered in light of the fact that the organ comes totally free to a hospital from a donor.
• One approach could be to mandate that every third or fourth transplant done in a private hospital should be done free of cost to a public hospital patient. This will amount to cross-subsidisation, with the hospital, the doctor and the recipient footing the bill for free surgery to the section of the population that donates a majority of organs.
• This may not please present stakeholders in this field but they need to avoid the tendency to sweep inconvenient issues under the carpet and discuss seriously how to address the trust gap and inequality that are factors impacting family consent for organ donation.

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