The Hindu Editorial : 19-08-2017

Cause for caution, not gloom

Macroeconomic stability has been a hard-won battle. We must remain mindful of the lurking dangers


The much debated Economic Survey II presents a mixed picture of the Indian economy. It highlights some obvious strengths but “optimism about the medium-term is moderated by a gathering anxiety about near term deflationary impulses”. How valid is this?
This year’s Economic Survey is innovative in more ways than one. This is the first time that a second volume is being presented containing a “backward looking review” and “historical data tables”, and it subsumes the mid-term economic analysis usually presented in December. Some key chapters included in this volume on agriculture, industry, infrastructure should normally have come in Volume I itself. These were displaced by the dominance of more preferred themes like Universal Basic Income, and “India on the Move”. Over the years both the presentation and the format of the Economic Survey have under gone fundamental changes. For most of us, the Economic Survey was a document presented on the eve of the Annual Financial Statement. It was, by and large, an analytical underpinning and precursor of the Budget. There was a meaningful connection between the Economic Survey and the Budget proposals.
For some time, this relationship has ceased. The Economic Surveys have come to increasingly reflect the predilections and preferences of its authors, raising the question whether Economic Surveys are designed to trigger intellectual debate and become incubators of nascent ideas. However, seeking a congruence and connect between the prognosis and prescriptions for the economy with the budgetary proposals would not be inappropriate. That said, this Economic Survey has transparency and candour. The Preface has a disclaimer to say that the update in the State of the Economy chapter in this volume “can be attributed to the CEA, with the Economic Division taking the lead for other chapters”. This can lead to contradictions and asymmetry between the different segments of the report.
Rate of growth
Leaving aside these issues, what are some key conclusions?
One, on the growth rate, while adhering to the forecast in Volume 1 for real GDP growth of 6.75%-7.5% this year, it suggests that the balance of risk has shifted to the downward side of the range. In plain language, this means a sub-7% rate of growth.
Just one day prior to the Economic Survey, the Finance Minister presented to Parliament the Medium-Term Expenditure Framework statement in pursuance of the Fiscal Responsibility and Budget Management Act, 2003. This was “essentially a vertical expansion of the aggregates of expenditure in the fiscal framework presented with the Annual Financial Statement to provide closer integration between Budget and FRBM Statements”.
In this statement, some of the subsequent developments both on the revenue and expenditure side like the Goods and Services Tax (GST) and the Seventh Pay Commission have also been factored. This framework assumes that nominal GDP growth for the current (2017-18) and subsequent two years would be 11.75%, 12.3% and 12.3%, respectively. Assuming inflation to be in the acceptable range of about 4%, the expected growth would be 7% plus.
No doubt, the savings and investment ratio has declined in recent years. To sustain the projected rates of growth, the savings-investment ratio would need to be increased, which is contingent on continuation of structural reforms, reducing public dissavings through privatisations such as Air India and other measures to boost savings to earlier high figures in the mid-thirties. The demand boost inevitably comes from domestic consumption which accounted for about 96% of GDP growth in FY 2017. This is likely to continue.
The projections also implicitly accept the fiscal deficit of 3.2% in the current year and 3% for the subsequent two years.
Inflation targets
Two, on inflation, the Economic Survey seeks to demonstrate that for sustained 14 quarters the actual inflation (WPI-CPI) has undershot the projections made by the Reserve Bank (RBI). It argues that India has moved to a low inflation trajectory, given supply-side elasticity in agriculture and long-term softening of global oil prices due to alternatives such as shale and increasing competitiveness of renewable fuels, particularly solar. It concludes that in the Indian context real neutral interest rates hover around 1.25-1.75% and that the present rate is about 25-75 basis points above the neutral rate. In short, a deeper cut in the interest rates would be warranted, given that current inflation at 1.5% is running well below the 4% target.
On monetary policy, the central bankers have all over made calculations (based on conservative assumptions) and undershot inflation targets. It is equally ironic that the data in the last two days suggest that both the consumer price index (CPI) and the whole-sale price index (WPI) have risen quickly in July primarily led by food inflation and the housing index reflecting the 7th Pay Commission recommendations, and so did the core index. Analysts now expect the underlying inflation to rest at the 4% ballpark figure, which also happens to be the RBI target.
It is said that in politics a week is too long a time. This could be equally said in economics, for events in the last one week have questioned the inflationary projections made in the Survey. At any rate, monetary policy cannot be on a roller-coaster ride. Prudence would prompt adherence to the analysis of the Monetary Policy Committee and judgment on interest rate calibration. Besides, multiplier benefits from low interest rate regimes are contingent on deeper structural reforms.
Three, regarding the exchange rate, real effective interest rates have appreciated significantly. The RBI has the unenviable challenge of managing significant inward capital flows with exchange rates which do not penalise domestic industry through a premium on cheaper imports. However, export competitiveness needs interventions which go beyond dependence on the exchange rate by way of improved logistics, infrastructure and altering the mix of commodities and destinations to meet new demand preferences.
Four, fiscal tightening by States due to Ujwal DISCOM Assurance Yojana (UDAY), farm loan waivers, declining profitability of some key sectors like power and telecom, the shadow of unresolved twin balance sheet problems and transitional issues of the GST are contributory to deflationary pressures. Normally understood, farm loan waivers, by reducing the indebtedness of farmers, enhance their income with a positive impact on consumption and demand. The constriction of capital expenditure for adherence to fiscal limits is somewhat mitigated by past experience. The quantum of actual farm loan waivers inevitably turns out to be somewhat smaller than the initial estimate; but more importantly, their impact on State finances is spread over a typical three-year cycle.
Equally, UDAY is designed to clean up the balance sheets of electricity boards in the short run and is expected to improve management of electricity boards. Appropriate action on tariff fixation, regular billing cycles, monitoring timely collection by distribution companies is an integral part of the UDAY package. This would also benefit States’ finances. In a complex federal polity, States in financial distress may need hand-holding. Cooperative federalism entails amelioration of the transient financial distress experienced by States. While these issues would need to be holistically addressed by the 15th Finance Commission, their recommendations are two years away. Short-term State-specific measures would need to be innovatively conceived. The recent initiatives to improve the fertilizer mix through extensive soil-testing along with the Pradhan Mantri Fasal Bima Yojana will prove beneficial to stabilise farm incomes. Nonetheless, the prescriptions contained in the chapter on agriculture by way of extending assured irrigation benefits, better market linkages for producers to prolong the shelf life of perishable commodities, improving the sale of commodities deserve priority action.
Rekindling investment
The Economic Survey II cautions policymakers of a possible deflationary cycle. Faster resolution of the twin balance sheets is critical to rekindling private investment. Equally, accelerating the pace of agricultural reforms, targeted capital expenditure, improving ease of doing business and the multiple infrastructure initiatives, particularly in roads and power, are integral to any coherent action. Similarly, stressed sectors like telecom and power need speedier resolution.
Macroeconomic stability has been a hard-won battle. The centrepiece lies in continued fiscal rectitude and inflation targeting. No doubt, macroeconomic stability must also spur growth and the two objectives need constant recalibration. It has been famously said, “the basic prescription of preventing deflation is not to get into it in the first place.” These lurking dangers and the cautionary note of the Economic Survey II are a valuable contribution.
N.K. Singh is a former Member of Parliament and Chairman, FRBM Committee. The views expressed are personal

Politics of probe

The inquiry into Jayalalithaa’s death is another set piece in Tamil Nadu’s political theatre

In ordering a judicial inquiry into the circumstances leading to the death of former Chief Minister Jayalalithaa, Tamil Nadu Chief Minister Edappadi K. Palaniswami has adopted a political response to a political demand. There is little doubt that Jayalalithaa received the best possible medical treatment when hospitalised. However, the purpose of ordering an inquiry is to satisfy one of the three conditions put forward by the faction of the All India Anna Dravida Munnetra Kazhagam, the AIADMK (PTA) led by O. Panneerselvam, for a merger. Having first removed V.K. Sasikala’s nephew, T.T.V. Dhinakaran, as the party’s deputy general secretary, Mr. Palaniswami fulfilled another condition set by the faction, by declaring Jayalalithaa’s residence a public memorial. These demands were a cover for backroom bargaining on ministerial berths and party posts. But by acceding to them, Mr. Palaniswami seems to have put the pressure back on Mr. Panneerselvam to move towards a merger. The larger purpose behind the AIADMK (PTA)’s demands was to force the ruling AIADMK faction, the AIADMK (Amma), to distance itself from the Sasikala family. Now, at least for public consumption the AIADMK (Amma) seems to have done so in the interest of the merger (to pave the way for the retrieval of the Two Leaves election symbol), and to maintain good relations with the BJP-led government at the Centre.
By all accounts, the BJP wants the two factions to merge, and it can be expected to put added pressure on the AIADMK (PTA) to do so. In any case, Mr. Panneerselvam no longer can hope to be recognised as the sole inheritor of Jayalalithaa’s political legacy. MLAs in his camp are tired of waiting it out without the benefits of being in office. If his demand for a judicial inquiry into Jayalalithaa’s death is to yield real political dividends, then the inquiry would have to point to some shortcomings on the part of Sasikala in administering good care during the days immediately before hospitalisation. Some of the leaders in his faction have been asking for an inquiry by the Central Bureau of Investigation, perhaps in the hope that the agency would do the bidding of the Centre. The BJP seems to have opted for a strategy that allows it to deal with a united AIADMK that is beaten into submission as an ally, instead of pushing for a high-risk scenario that would have meant aiding the AIADMK factions to self-destruct and waiting to take up the political space vacated by them. Any other course would have amounted to surrendering the political advantage to the main Opposition party, the Dravida Munnetra Kazhagam, which lost the Assembly election narrowly last year. Clearly, the BJP is unwilling to sacrifice its short-term political interests in Tamil Nadu in the implementation of a long-term vision.

The disease that just won’t go away

Around 3,000 people afflicted with kala-azar come in the way of India declaring itself free of the scourge, reports Jacob Koshy as he tracks down patients in West Bengal

Black fever: “India accounts for half the global burden of the disease, which is endemic to the subcontinent ” Picture shows Rohim Sarkar during his check-up at a hospital in Malda.Ritu Raj KonwarRitu Raj Konwar;Ritu Raj Konwar
The English Mohanpur village, one of the worst-affected areas in Malda district.Ritu Raj Konwar;Ritu Raj Konwar
Patients waiting for their examination at a medical camp in Malda.
At 17, Rohim Sarkar weighs as much as the average 11-year-old. When shirtless, each of the seven pairs of bones that make up his upper ribcage is visible from five feet away. An attending doctor at the Habibpur block hospital in Malda, West Bengal feels his spleen and the verdict is clear: “VL,” he declares, followed by two other colleagues jotting the verdict and leading the boy aside for a confirmatory dipstick test, a detailed set of photographs, a skin biopsy and a recommendation that he “immediately” begin treatment.
Sarkar presented symptoms considered typical of visceral leishmaniasis (VL), or kala-azar, a disease that is endemic to a contiguous blob of districts spanning West Bengal, Bihar, Jharkhand and eastern Uttar Pradesh. Caused by the Leishmania donovani parasite, harboured by an insect called the sandfly, the Habibpur block, barely 30 km from Bangladesh, is considered particularly vulnerable to kala-azar outbreaks.
A parasitic disease
Kala-azar is a parasitic disease that is confined to humans, meaning that unlike, say, bird flu, there is no other animal that harbours the infection in Asia. Endemic to the Indian subcontinent in 119 districts in four countries (Bangladesh, Bhutan, India and Nepal), India itself accounts for half the global burden of the disease. If untreated, kala-azar can kill within two years of the onset of the ailment, though the availability of a range of drugs for almost a century has meant that less than 1 in 1,000 now succumb to the disease. According to numbers from the Union Health Ministry, 2016 was the first year that no kala-azar death was reported in India. Experts, however, note that like malaria and several other vector-borne diseases in India, the government only considers lab-confirmed and officially registered deaths and therefore, frequently underestimates both caseload and mortality.
Historically, a 20-day treatment schedule with sodium stibogluconate (SSb) injection and the spraying of the malarial insecticide dichlorodiphenyltrichloroethan (DDT) in houses and surroundings were the only weapons against the disease.
When DDT was used as part of the malaria eradication programme, very few cases of kala-azar were reported. When the use of DDT was stopped a few years later, there was an increase in the number of kala-azar cases.
Over a period of time, resistance to the only drug (SSb injection) led to frequent outbreaks and fatalities and the Union Health Ministry, which had committed to eliminating kala-azar by 2010, revised it to 2015. Bangladesh, India and Nepal committed to eliminate the disease from the region, where elimination (as opposed to eradication) is defined as no more than one case per 10,000 population at the upazila level in Bangladesh, sub-district (block PHC) level in India and district level in Bhutan and Nepal.
Since 2003, India’s National Vector Borne Disease Control Programme (NVBDCP) is in charge of coordinating with endemic States to eliminate the disease. With funds from a World Bank-supported project (2008-2013), the NVBDCP now funds consultants at State and district level and Kala-azar Technical Supervisors (KTS) at the State’s blocks (or clusters of village panchayats) to conduct active surveillance. That means local village health workers (Accredited Social Health Activists or ASHAs) are entrusted with constantly visiting houses and looking for patients who may present symptoms of the disease and alert health authorities.
Several new medical advances have aided the fight against kala-azar. A rapid diagnostic test, called rK39 can — with a pinprick of blood — indicate the presence of the parasite. With SSb injection on the decline, there are now two mainline drugs, miltefosine — originally conceived as an anti-cancer drug and taken orally — and liposomal amphotericin B (LAmB), a drug that once needed to be injected at regular intervals over four weeks but now only requires a single shot. These, besides an array of genetic tests that have obviated the need for painful jabs to the spleen and liver to confirm the presence of parasites, and global and national political commitment in terms of funding research and drug dispensation, has meant that kala-azar may be on the verge of being stamped out. However the 2015 elimination target was missed and postponed to September 2017, again a deadline that won’t be met. This, in spite of the number of kala-azar patients plummeting from 36,000 in 2005 to 2,969 in 2017, according to Central government figures.
At the camp
Sarkar is one of 57 residents who’ve made it to the Habibpur hospital as part of biannual medical camps organised as part of the active surveillance process. About 160 were expected but a bus strike has thwarted attendance. West Bengal, like the other endemic States, was to have eliminated kala-azar in 2015, but is set to miss the deadline this year too despite the number of patients in the State coming down from 2,700 in 2005 to less than 50 as of this July.
Among the camp attendees, seated on the rows of wooden benches that made up the capacious common hall of the hospital, Sarkar was the only one who presented the typical symptoms — the emaciation, anaemia and signs of a puffed spleen — that have helped doctors quickly ferret out kala-azar cases for almost a century. More than Sarkar, however, what worried the visiting doctors were 20 outwardly healthy occupants of those benches. Most were once kala-azar patients and, as the doctors who screened them found, are stricken in various degrees by a mixture of blotches and ulcers on their hands, legs, backs and, sometimes, on their faces.
Painless and never known to trigger the fevers and pains typical of parasitical diseases, the blemished skin is the only sign of post-kala-azar dermal leishmaniasis (PKDL). It isn’t the kind of disease that prompts villagers of Habibpur block, who besides kala-azar also live under the constant threat of malaria and tuberculosis, to skip farm work or forego a day’s earnings from manual labour, to line up outside hospitals. “One of the patients with PKDL told me that the only reason he wanted treatment was because he was looking to get married,” says Dr. Mitali Chatterjee, a medical doctor and researcher at the Institute of Post-Graduate Medical Education and Research (IPGME&R), Seth Sukhlal Karnani Memorial Hospital, Kolkata, which is known informally as the “PG” hospital.
PKDL results from the parasites left over from a kala-azar infection that couldn’t be slain by the chemical cocktails used to treat kala-azar. Though harmless, the pigmented skin can provide harbour, says Chatterjee, to the parasites and they can make their way onto other sandflies. Like the anopheles mosquito, the sandfly needs human blood to nourish their larvae and in the process can pass on parasites to new people and trigger a kala-azar infection. Roughly a tenth of those with a history of kala-azar will go on to develop PKDL and, potentially, seed a fresh outbreak. The precise reason for this isn’t known yet. “In the 1970s or early ’80s, VL [kala-azar] had almost disappeared and then there was suddenly an epidemic,” says Srija Moulik, a research scholar at IPGME&R, “it was later traced back to a single case of PKDL. There’s a paper on that.”
Case and cure files
The earliest empirical evidence for a link between PKDL as a silent agent provocateur for kala-azar outbreaks and DDT sprays came in the 1990s from C.P. Thakur, a physician and now a BJP Rajya Sabha MP. He reported an unusual trend in kala-azar cases in Bihar. Between 1970 and 1989, 530 individuals were confirmed with PKDL at the Patna Medical College (PMC), with the number of cases rocketing from two in 1970 to 59 in 1989. This was in contrast to no cases of this disease being reported at the PMC from 1958-1970. In the period 1977-1990, there were 3,01,076 cases of kala-azar reported in Bihar alone, with a mortality rate of over 2% (compared with 31,074 cases and a mortality rate below 0.4% for the rest of India). “It seems possible, that once DDT spraying stopped, the re-establishment of large sandfly populations and infection of these vectors, largely as a result of them feeding on cases of PKDL, provoked the resurgence of kala-azar,” Thakur and co-author K. Kumar reported in the June 1992 edition of the Annals of Tropical Medicine and Parasitology.
Even though this link between kala-azar and PKDL was hinted at since 1922, it wasn’t until 2005 that the World Health Organization (WHO) and health authorities in India, Nepal, Bangladesh, Sudan (who together account for 90% of kala-azar cases) began concerted efforts to eliminate PKDL, as part of kala-azar elimination strategies.
In a round-up of the country’s progress in dealing with the disease, at a conference in Bengaluru earlier this year, Chatterjee showed a slide illustrating that in spite of the rapid dive in kala-azar cases across endemic States, PKDL cases in Bihar, which bears 70% of India’s kala-azar burden, had risen to 500 from nil in 2013; from 300 in 2013 to 900 in 2017 in Jharkhand and 50 to 250 in West Bengal, in the same period. To Chatterjee, however, the rise in cases indicates States’ increased efforts to find kala-azar patients and hidden PKDL cases becoming manifest.
At the IPGME&R, one of the nodal research medical labs in Kolkata that’s part of the kala-azar surveillance-detection-and-analysis network, scientists are finding out through DNA analysis that the leishmaniasis parasite is an extremely resilient entity and can be dormant in the body and seed infections even after as many as five years.
The group of mostly-women scientists, who are trying to cleave apart the mysteries of the parasite, are located a five-minute walk away from a modest building that once hosted the laboratory of Sir Ronald Ross, the India-born British Nobel Laureate who established that mosquitoes were responsible for transmitting malaria. Ross was also the one who christened the kala-azar parasite as Leishmania donovani, after the scientist duo that discovered them.
Over the days spent peering through blood samples and skin biopsies from medical camps such as at Malda, Moulik points to yet another possible chink in the government’s artillery to weed out kala-azar. The single injection of LAmB, which is now used to treat kala-azar, dramatically reduces the number of parasites in the blood and can cure the infection. However, when PKDL patients were subjected to the same medicine (targeting the same parasite), it didn’t completely clear the parasite load. On the other hand, prior to LAmB, the treatment of choice for kala-azar was miltefosin, which is an oral pill taken over 12 weeks. It usually brought about nausea and other discomfort because of which several patients would quit treatment midway. However Moulik points to data in the lab that shows miltefosin did a superior job in flushing out the parasites from PKDL patients. There is a catch though. The ultra-sensitive probes that Moulik employs can spot parasites only if there are at least 10 of them in a microgram of DNA. It is quite possible that a patient might be well and disease-free for a few years but have a miniscule amount of parasites that will multiply at an opportune time in, say, five years, and then radiate the vicious cycle of outbreaks and epidemics that has undermined anti-kala-azar programmes through the years. “I believe that if parasite loads go down to 10, the body’s immune system should ideally stave off infection but this is indeed the million-dollar question: ‘How long till we are sure that the parasite loads never increase enough to pose a threat?’” says Moulik.
The ground realities
The Habibpur hospital, from where IPGME&R gets a significant number of patient samples, is as large as a single-screen movie hall with X-ray machines, photocopiers, beds and a handful of trained nurses. To get to it, one must cross a stream of stagnant water that, according to local residents, swells up during the monsoon. Within several areas of the hospital, debris is piled up. There is a mossy pool of garbage alongside a water cooler that is inaccessible to the most flexible of gymnasts.
The block medical officer is a busy man who must, alongside coordinating a kala-azar camp, dragoon the same set of field workers to fan out into the villages looking for tuberculosis, malaria and leprosy patients. Since 2015, when the government authorities woke up to the urgency of eliminating PKDL, patients are being given financial incentives. All those who complete the course of treatment will get ₹2,500 (and the medicines made available through the WHO network) and the village field staff, consisting of ASHAs and KTSs, stand to get ₹500 for every such patient. “If financial incentives are given, then we get patients,” says a doctor who has been part of several field camps, “but almost never has a district medical officer accompanied us. They are supposed to.”
English Mohanpur, an inexplicably-named village a few km away from the hospital, is a slushy hamlet between rice fields. Several tribal communities populate its interiors and Koel, an ASHA worker, says some of the tuberculosis and kala-azar patients also battle alcoholism. Few houses have concrete roofs and fewer still comply with the government directive to spray the houses with the insecticide synthetic pyrethroid, the replacement for DDT. These sprays are needed at regular intervals and need a thorough application in every room including the kitchen. “The problem is that the spray stinks and people say they’d rather risk kala-azar than bear with the smell,” says Chatterjee. “There is also a cluster effect. Families stay very close together and one infected person can spread it to the others.”
Sripad Mandal, 42, a daily-wage labourer and village resident, was bedridden for three months because of kala-azar. He says he visited the block hospital and was given a course of medicine but that didn’t work. He wasn’t given a second round of medicine at the hospital and finally had to get himself admitted to the Calcutta School of Tropical Medicine. He now claims to be well. His disease, however, manifested before the government announced financial incentives for completing the treatment. “This is the disease of the poorest of the poor. Unless socio-economic conditions are improved and better sanitation is available, I don’t see just medicines and drugs completely eradicating kala-azar,” says Chatterjee.
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