There are two aspects to the news- knowing the headline and understanding the intricacies of it. We at The Connectere focus on both. While The First Forum edition gives a brief about the headlines, The Weekly Analysis Edition is meant to educate the reader on what do various news mean and what are their intricacies. This initiative is meant to educate the reader on how to understand the important news. In the Forty Fourth Edition we are covering the following news:

  1. Myanmar Coup: What is happening and why?
  2. Experts ‘disappointed’ over the reduction in allocation to the environment ministry
  3. Economic Survey sees counter-cyclical fiscal policy, 11% growth
  4. Infra thrust: Capital-intensive sectors get boost in Union Budget 2021
  5. Why India has the highest levels of OOPEs?

Myanmar Coup: What is happening and why?

Myanmar’s de facto leader and former nobel peace prize winner Aung San Suu Kyi was detained, along with her ally President Win Myint, and other senior leaders as Myanmar’s military launched a coup ending the country’s decade-long dalliance with democracy and declared a one-year state of emergency.

Earlier this week when the new Parliament was scheduled to convene, the coup was launched. Myanmar has toggled between military and civilian leadership since 1948, though the Tatmadaw, as the country’s armed forces are formally known, has remained the most powerful institution the entire time. In the late 1980s, a civilian pro-democracy movement gained strength with Suu Kyi as its leader and in 2015, the Suu Kyi-led  National League of Democracy (NLD) won 77% of the seats in Parliament in Myanmar’s first recognized, free and fair election in 25 years.
Why did the military stage this coup?
For weeks, the top leadership of the Tatmadaw had been accusing Suu Kyi’s party, the NLD, of voter fraud in elections. Although the allegations of fraud against Suu Kyi were rejected by Myanmar’s Election Commission, the Tatmadaw continued to claim that there was “widespread violation of laws and procedures” and threatened to “take action”.
However, it is believed that the real motivation behind the military’s action is Suu Kyi’s growing power and popularity, which could erode its control over critical policy domains. With Senior General Min Aung Hlaing’s tenure set to end soon and a convenient excuse in form of voter fraud allegations, the Tatmadaw decided to act.
Another reason could also be that taking over in a coup could allow the Tatmadaw to write a new constitution that weakens the pro-democracy movement and solidifies the military’s supreme role as NLD came very close to curtailing their influence. Widespread rejection of Tatmadaw could have also led the armed forces to act out in revenge and frustration. What could be the aftershocks of this coup?
Firstly, the shift in governance could create even worse management of the COVID-19 crisis, as people may try to flee the country or migrate to other parts of the country, as they did after prior coups, potentially spreading the virus.
Secondly, the coup could lead to an unwinding of deals with ethnic minority Rohingya’s insurgencies, who could go back to war, further splintering Myanmar and leading to a massive spike in violence in what is already a conflict-ridden country. Mobile and internet communications in Rakhine state have already been heavily restricted amid accusations from rights groups that the atrocities are going on.
As the NLD try to rally Myanmar citizens, who now have lived through a decade of some degree of freedom, Suu Kyi has released a statement calling on Myanmar people to oppose the coup that could crack the army, the party or citizens, try to hold protests or rallies.
For now, all signs indicate that the Tatmadaw is unlikely to allow a return to democracy in Myanmar any time soon. It has pledged to hold new elections within a year and said it will respect the results of that election and transfer power. But this one-year timeline appears arbitrary and leaves open the possibility that the military will delay the election and hold on to power for a longer-term.


Experts ‘disappointed’ over the reduction in allocation to the environment ministry

The Rs 230-crore reduction in the budgetary allocation to the environment ministry has drawn flak from environmentalists who say it may slow down or completely halt green initiatives. Besides the shrunk budget, they also feel that the Centre has not clarified how a separate amount of Rs 2,217 crore, set aside for tackling air pollution in 42 cities with minimum population of one million, will be utilised. The budget presented by Finance Minister Nirmala Sitharaman has also reduced the sum allotted to the climate change action plan by Rs 10 crore to Rs 30 crore. Experts also felt that the amount of Rs 470 crore allocated for “Control of Pollution” out of Rs 2869.93 crore, was not enough.
The Budget document mentions that under Control of Pollution’, a total of 470 crore are allocated for 2021-22. This includes providing financial assistance to Pollution Control Boards/Committees, funding to the National Clean Air Programme (NCAP). There are 122 cities presently under NCAP and the allocation for it is merely around Rs 470 crore, which is clearly not enough. According to Greenpeace India’s annual Airpocalypse report 2020, 231 cities out of 287 had PM10 levels exceeding the 60 g/m3 limits, prescribed under National Ambient Air Quality Standards (NAAQS) by CPCB, implying that all these cities/towns belong to the non-attainment list.
In her budget speech, Sitharaman also announced a voluntary vehicle scrapping policy, to phase out old and unfit vehicles as per which vehicles will undergo fitness tests in automated fitness centres after 20 years in case of personal vehicles and after 15 years in case of commercial vehicles.
The minister also proposed to provide an additional capital infusion of Rs 1,000 crore to Solar Energy Corporation of India and Rs 1,500 crore to Indian Renewable Energy Development Agency. She also announced the extension of the city gas distribution project to 100 more districts. Despite being one of the cleanest and most easily available gas, Auto LPG remains highly under-utilized in India’s transport sector.
Air pollution is a far greater public health emergency than COVID; while COVID claimed 1.5 lakh lives in 2020, air pollution is responsible for about 18 lakh deaths across India. Thus, a reduced portion of spending towards cleaner air quality and environmental protection will lead to a much larger threat than what the government thinks of and also another factor which can’t be completely eliminated is that how many of the COVID survivors still have side effects on their body and adding polluted to it is definitely not going to be safe unless proper measures are strictly taken.


Economic Survey sees counter-cyclical fiscal policy, 11% growth

The Economic Survey 2020-21 authored by Chief Economic Advisor Krishnamurthi Subramanian, has analysed the state of the Indian economy across various dimensions. It predicts India’s economy is in the middle of a V-shaped recovery and will bounce back to record 11% growth after an estimated 7.7% contraction this year. Growth has been termed as a ‘lockdown dividend’ from the country’s stringent response to the COVID-19 pandemic. These projections are in line with the International Monetary Fund (IMF) which estimates real GDP growth of 11.5 per cent in 2021-22 for India and 6.8 per cent in 2022-23. India is expected to emerge as the fastest growing economy in the next two years as per IMF, the Survey has noted. Moreover, the Survey calls for more active, counter-cyclical fiscal policy as it is desirable to use to enable growth during economic downturns. The countercyclical fiscal policy is part of the cyclical fiscal policy.
Let see how this policy works?
Cyclicality of the fiscal policy simply refers to a change in direction of government expenditure and taxes based on economic conditions. There are two types of cyclical fiscal policies one is counter-cyclical and second is pro-cyclical policy. Counter-cyclical fiscal policy refers to the steps taken by the government that go against the direction of the economic or business cycle. The survey gives a colourful example of ancient Indian kings who used to build palaces during famines and droughts to provide employment and improve the economic fortunes of the private sector. Economic theory, in effect, makes the same recommendation: in a recessionary year, the government spends more than during expansionary times. Such counter-cyclical fiscal policy stabilizes the business cycle by being contractionary (reduce spending/increase taxes) in good times and expansionary (increase spending/reduce taxes) in bad times. On the other hand, a pro-cyclical fiscal policy is the one wherein fiscal policy reinforces the business cycle by being expansionary during good times and contractionary during recessions. It was acknowledged in the economic survey of 2017.
To sum up, Counter-Cyclical Fiscal Policy is the only way forward to decrease the economic slowdown in the country when private consumption contributes to 54% of GDP is contracting, and investment, which contributes to around 29% is uncertain, the relevance of counter-cyclical fiscal policy is paramount.


Infra thrust: Capital-intensive sectors get boost in Union Budget 2021

The Budget, with its emphasis on capital expenditure and infrastructure projects, is a boost for capex-related companies but this has been tempered by a reduction in overall government expenditure in FY22. The latter could dampen the pace of consumer demand in the next fiscal year and is negative for companies in the FMCG, consumer durables, and automotive sectors. Gross Budgetary support for capital expenditure is up 26.2 per cent in the Budget estimates for FY22 compared to the revised estimates for FY21. The Budget has allocated Rs 5.54 trillion for capital expenditure in FY22 against the actual capex of Rs 4.39 trillion in FY21 and Rs 3.35 trillion in FY20.
The BSE Infrastructure Index was up 5.6 per cent and closed the day at a fresh 52-week high. The Budget proposals are also positive for industrial commodity sectors such as metals and cement. The fiscal multiplier is, however, likely to be tempered by a cut in capital expenditure by central public sector companies including those under the Ministry of Railways. Public capital expenditure is budgeted at Rs 11.37 trillion in FY22 against the FY21 revised estimates of Rs 10.84 trillion and Rs 9.77 trillion in FY20. Overall the Budget is not expansionary compared to the level of public spending in the current financial year. Central government expenditure is budgeted to rise by just 1 per cent y-o-y in FY22 over FY21 revised estimates. And the net of interest payments, government expenditure is expected to decline by 3 per cent in FY22. The interest payment is expected to grow by 16.9 per cent in FY22. In comparison, central government gross tax revenues are expected to grow by 16.7 per cent in FY22.
The Budget impact on corporate earnings in FY22 is likely to be neutral, given that CAPEX-related stocks have a small share in corporate profits. Most of the corporate earnings are accounted for by top companies in technology, retail lending, FMCG, oil and gas, automotive and pharma sectors. Apart from this as we get into more depths of analysis, we see that we still can’t completely trust our own predictions because we might be getting flexible with the restrictions on our movement but the COVID virus has still not completely vanished and the fear of the side-effects that come with the vaccine are still there in minds of people especially those working in corporate jobs finding themselves comfortable in work from home and at the same time the companies saving their costs with the work from home setups.


Why India has the highest levels of OOPEs?

The global coronavirus pandemic has showcased how a healthcare crisis can be transformed into an economic and social crisis. One of the central problems has been the low levels of public spending on health and as a result, there is low access to affordable and good quality of healthcare to the majority of India’s population. And to battle with this, the Economic Survey saw the need of the hour to increase the spending on healthcare services from 1% to 2.5-3% of GDP, to reduce out of pocket expenditures (OOPE) from the current level of 60% to 30%.
The Out-of-pocket (OOP) expenditure for health is direct payments made by individuals to health care providers at the time-of-service use. It includes cost-sharing, self-medication and other expenditure paid directly by private households. And constitute a major access barrier to access the needed health care and contribute to high OOP payments that generate problems of financial protection and leads to catastrophic health expenditure (CHE). It observed that India has one of the highest levels of OOPE in the world, contributing directly to the high incidence of catastrophic expenditures and poverty. The reasons that led to OOP expenditures to rise are many as increasing health care cost is one of the major public health challenges in developing countries like India. While the household remains the major source of financing health care, the extent of poverty, impoverishment and indebtedness due to high out-of-pocket expenditure is on the rise. The poor quality of services at public health centres and low insurance coverage lead to the increasing use of private health centres and high OOPE in India.
The bulk of healthcare services in India is provided by the private sector. The Survey added that for enabling India to respond to pandemics, the health infrastructure must be agile and incorporate flexibility. And applauded that Pradhan Mantri Jan Arogya Yojana Scheme (PMJAY) has been a marquee evolution in the direction of providing financial affordability to a large percentage of the Indian population. The states that have higher per capita spending have lower out-of-pocket expenditure and hence it is vital to increase spending to lower the OOP expenditure. OOP increases the risk of vulnerable groups slipping into poverty because of CHEs. It is a need to increase the prioritization of healthcare in the central and state budgets which crucially impacts how much protection citizens get against financial hardships due to OOP payments. And the Finance Minister Nirmala Sitharaman has proposed ₹2,23,846 crore budget outlay for health and well-being for 2021-22, compared to ₹94,452 crore in the current fiscal, registering an increase of 137% which could help reduce the OOP expenditure.



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