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1.Watch the gap: On widening trade deficit

The widening trade deficit puts more pressure on the rupee and aids growth-retarding inflation.

Official data on India’s merchandise trade for April give reason for cheer at first glance. Emerging from a record export performance during the just-concluded financial year, outward shipments for the month rose 24.2% from a year earlier, with electronics and chemicals showing healthy expansion, while petroleum products more than doubled. However, imports continued to outpace exports, growing by 26.6% to broaden the goods trade deficit, which widened to $20.07 billion from $18.5 billion in March. The trade deficit — the extent to which the import bill exceeds export receipts — worryingly breached $200 billion for a rolling 12-month period for the first time in April, impacted predominantly by petroleum imports of $172 billion. Global crude oil prices have surged by more than 40% in 2022 in the wake of Russia’s war on Ukraine, swelling the import bill. The early onset of the Indian summer, with a heatwave, has bolstered power demand, setting the pace for coal imports, which grew 136% last month, notwithstanding record output by key domestic supplier Coal India. For the first time ever, the Ministry of Power has set timelines for States to import coal over the next few months, a far cry from the 16% year-on-year decline in imports of the fuel in the April 2021-January 2022 period and a clear portent that the bill for overseas purchases of coal is also set to swell.

Monitoring the trade deficit is crucial as this has a direct bearing on the current account deficit (CAD). Disconcertingly, foreign direct investment, which typically helps bridge the CAD, has seen a moderation. And, the wider the CAD, the greater the downward pressure on the rupee, which has already weakened considerably since the conflict in eastern Europe began in February. A weaker rupee, in turn, makes imports costlier, potentially widening the trade deficit, and thus triggering a vicious cycle. The RBI has sought to steady the rupee against wild swings, evident in the dip in foreign exchange reserves to $600.4 billion (April 22), from $640 billion just six months earlier. But a central bank can draw on the reserves to ease any rupee weakening only to a limited extent. The RBI also has its hands full with the battle against imported inflation as global commodity prices remain sharply elevated. To help avoid added stress, the Government must consider additional incentives for exports, while encouraging local production of items that strain the import bill. The coal crisis could have been averted with better advance estimates of power demand as the country emerged from the worst of the pandemic, and optimal allocation of coal-carrying rail wagons. Policymakers can ill afford to let their guard down on trade imbalances and risk growth-retarding inflation and more pressure on the rupee.

2.Standing on ceremony: On Charak Shapath and medical education

UPDATED: MAY 06, 2022 01:50 IST

An overemphasis on a ritualistic oath does not aid quality medical education

Observance of rituals largely serves a symbolic function; they are infused with meaning that gives a semblance of human-made order to the vagaries of nature. But pushing the meaning beyond the symbolism is fraught with danger. Standing on ceremony, particularly, does not quite fit in with the roles and the responsibilities of a medical professional, and the Charak Shapath row in Tamil Nadu, in which a top official of a government medical college was put on a waitlist, has clearly dragged one ceremony beyond its original intent and purpose. While things came to a head with the suspension of the dean of Madurai Government Medical College, the controversy has been brewing since February, when the minutes of the National Medical Commission’s (NMC) discussions with medical colleges were leaked. One of the points read: “No Hippocratic Oath. During white coat ceremony, the oath will be Maharishi Charak Shapath.” The Charak oath appears as part of Charaka Samhita, an ancient text on Ayurveda, and seeks to, much like the Hippocratic Oath, lay down the ground rules for the practice of medicine for a student. While it emphasises compassion, and the scientific and ethical practice of medicine, it also highlights certain values embedded in the cultural and social ethos of the time of Charaka, and seen today as retrograde. References to caste, old-style subjugation of student to a guru, and gender bias have been flagged since. Though it was later clarified that the oath was not compulsory, there were valid concerns about projecting it as a substitute for the Hippocratic Oath.

In the English version that was read out at Madurai Medical College, there were two references that are repugnant — ‘Submitting myself to my Guru (teachers) with complete dedicated feeling,’ and ‘I, (especially a male doctor) shall treat a woman only in the presence of her husband or a near relative’. The rest of the oath stresses, in simple language, the very principles of the Hippocratic Oath, including serving the sick, a pleasant bedside manner, and not being corrupt. Subsequent investigations have revealed that the dean was not even part of the decision to substitute the Charak Shapath for the Hippocratic Oath (the Students’ Council claimed responsibility), and he has since been reinstated. But launching severe action for what might have been just procedurally deviant, rather than a crime or violation of ethics, seems a knee-jerk reaction, or worse, the pursuit of a political agenda. The focus should rather be on ensuring quality medical education, inculcating in students a scientific temper, and a sense of service to patients. While Tamil Nadu has often rightly argued for States’ autonomy in a federal structure, this act adds little heft to that critical issue. For the NMC, even more so, the stress should not be on the bells and whistles, but rather on the quality of education.

3.Dampen food prices: To stop inflation spreading across crops, GoI’s wheat stockpile must be mobilised firmly

Wheat, the world’s most important source of food calories, is currently the focal point of anxiety about food inflation. The World Bank’s Commodity Markets Outlook has forecast that wheat prices this year will increase over 40%, hitting a record high in nominal terms. India, despite its large stockpile of wheat, has already begun to feel the effect. GoI expects to procure about 19.5 million tonnes of wheat in the ongoing exercise, less than half of what was initially forecast. This dip in procurement is disproportionately large, as wheat production is expected to fall only 6% in relation to last year.

Global wheat prices are surging on the heels of drought in parts of North America and the Russia-Ukraine conflict. After a few years where India’s market prices were largely in line with GoI’s MSP, or lower, the trend has reversed. Procurement has dropped because traders are offering farmers rates higher than MSP in anticipation of wheat prices rising in the future. GoI in turn is preparing for the season ahead by calibrating the release of its wheat stock. The first step has been to switch to extra rice in place of wheat, in its cereal allocation to 11 states.

The risk going forward is that the wheat price trend will spill over to other crops. This can happen on account of input substitution – because fertiliser, land etc to an extent can be used across crops. Input substitutability in agriculture often results in co-movement of prices in some commodities such as edible oil as farmers switch in response to price signals. The next sowing season for wheat will begin around November when market price is expected to be high. It could nudge farmers to reallocate land from other crops to wheat, which will put upward pressure on the price of those crops.

Area allocated to wheat has been around 30-32 million hectares in the last few years, representing about 56% of the area under food grains in the rabi season. The other key crops in terms of land allocation are gram and coarse cereals. Given the dominance of wheat in the rabi land use, even small shifts can have a big price effect on other crops. India has a sizeable international trade in agricultural commodities. Therefore, domestic prices in November will also be influenced through the trade channel. Against this backdrop, a well-judged release of GoI’s wheat stockpile must play an important role in dampening food inflation this year.

4.Next up: J&K polls: Steps to restore political normalcy should follow promptly on the heels of delimitation

The gazette notification of the much-awaited final delimitation order for Jammu & Kashmir brings to an end a two-year-long exercise and clears a major hurdle in restoring normalcy in the region. After all, delimitation was a prerequisite for holding assembly elections in J&K following the nullification of Article 370 and the creation of a new Union territory. Towards that end, the delimitation commission has taken a sensible approach and viewed J&K as one unit. This should put to rest long-held complaints that the Valley wielded disproportionate power in the erstwhile political arrangement of the region.

Accordingly, the final delimitation order has increased the number of assembly constituencies in the Jammu region from 37 to 43 seats, while the Kashmir region will see its seat count go up by one to 47. Plus, for the very first time, nine assembly constituencies have been reserved for STs out of which six will be in the Jammu region and three in the Valley. Continuing with the unitary approach, the commission has also carved out a parliamentary constituency combining Anantnag region in the Valley with Rajouri and Poonch in Jammu. This will allow each parliamentary constituency in J&K to have an equal number of 18 assembly seats and do away with the previous region-wise division of Lok Sabha seats.

These changes should be acceptable to most political groups in J&K. What’s needed now is their fair participation in assembly polls that will restore full democratic processes in the UT. In fact, holding these polls along with the Himachal Pradesh and Gujarat elections later this year is now feasible. Of course the fructification of various development promises by the Centre is also tied to residents of the region feeling like stakeholders in this development. Once they vote again and political normalcy returns, this should allow for the restoration of their statehood next.

5.What the new ruling on taxation entails

 

Justices MR Shah and BV Nagarathna created a new judicial precedent when the court invoked its extraordinary powers under Article 142 of the

Taxation laws are arguably the most complex pieces of legislation in India. At the same time, they are required to be read strictly and the scope of latitude in interpreting them is minimal. A raft of Supreme Court (SC) judgments held that the court will take recourse to the golden rule of strict interpretation while dealing with taxation statutes. It has evolved as trite law that their interpretation would not depend upon contingency — until a day ago, when justices MR Shah and BV Nagarathna created a new judicial precedent when the court invoked its extraordinary powers under Article 142 of the Constitution to prevent over 9,000 cases from gutting the top court’s board.

Article 142 empowers the SC to issue any directive that it deems appropriate “for doing complete justice between the parties”. The ruling ushers in a paradigm shift in tax jurisprudence where interpretation of a financial statute has been juxtaposed with the rights of the entities involved and avoided a possible deluge of cases that a judgment may result in. The SC used Article 142 to hold that around 90,000 tax reassessment notices, issued on or after April 1, 2021, under the 1961 Income Tax Act should be treated as issued as per the new requirement of the 2021 Finance Act.