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There is a strong connection between bolstering democracy and achieving a better functioning financial system

A great debate has surged in recent weeks in India about democracy and “tough” economic reforms. In the field of finance the main path of reforms is intertwined with deepening of democracy. This is what has been observed elsewhere in the world in the early experience of India with reforms and in the way ahead for financial economic policy. The essence of democracy — dispersion of power and the rule of law — generates the precise conditions for the flowering of the market economy of which finance is the core.

The NITI Aayog CEO Amitabh Kant reportedly said that “tough” reforms are “very difficult in the Indian context” as “we are too much of a democracy” but the government has shown “courage” and “determination” in pushing such reforms across sectors including in areas like mining coal labour and agriculture. This led to a storm with many critics fervently defending Indian democracy and the CEO clarifying in a column in The Indian Express that he had been misunderstood.

While the concept of peaceful handover of power through elections looms large in our minds there is much more to democracy than elections that determine who is the elected ruler. The essence of democracy lies in dispersion of power in containing arbitrary state power in channelling state power into the path of the rule of law. Under the rule of law private persons and economic agents feel safe that the coercive power of the state will be deployed in a predictable and rules-based way impartially. This encourages investments in building firms and building personal wealth. There is thus a deep connection between the emergence of democracy and the willingness of the private sector to commit to spend decades building organisations and to keep their wealth in the country.

These concepts apply with full force in the essence of the market economy i.e. finance. Every financial system involves financial regulation. When state and regulatory power is unchecked regulators have discretion on who is targeted. Under these conditions private persons invest in the power game in influencing the use of state power. The focus of private persons is then more on managing the political regulatory and bureaucratic environment and less on understanding consumers technology and efficient methods of running organisations.

For these reasons there is a strong connection between bolstering democracy and achieving a better functioning financial system. A common law framework is one where legislators or regulators operate in a more principles- based way where the state does not prescribe details of products or processes where the state does not pick winners where micro-management of private persons is absent which give a bigger role to judges to think about a novel situation and to effectively make law. Many researchers starting from Brown University Professor Rafael La Porta and co-authors in the Journal of Political Economy in 1998 have developed the idea that common law frameworks work better for financial sector development. A recent literature has looked at events where a country graduated to a higher level of democracy and the evidence is positive in favour of the idea that increased democracy is good for increased financial development. This includes two important papers by Peking University Professor Yiping Huang in World Development in 2010 and by W Ghardallou in the Journal of Financial Economic Policy in 2016. In this sense in finance we know that more democracy is good for financial development.

The establishment of a national expert group for Covid-19 vaccine distribution and Electronic Vaccine Intelligence Network (eVIN) to track and manage vaccine stocks and storage is welcome. However little attention has been directed towards the last-mile challenges in vaccine distribution. Three challenges deserve particular attention.

Twice is Nice

First cold storage requirements make it impossible to deliver some vaccines directly to people’s doorsteps as has been the case with other vaccination programmes. Second if recipients take one dose of the vaccine but do not follow up with a second dose they will not be fully inoculated. Poor compliance experience for diseases such as diabetes tuberculosis and hypertension do not give us a reason for complacence.

Third a small number of vaccine recipients may either forget not understand the requirement or may choose to take more than two doses with unknown consequences. Fortunately India has a unique experience in delivering vaccines at scale and it would be a pity if we were to overlook this in designing a vaccine delivery system.

The Pulse Polio campaign introduced by the Indian government in 1995 is one of the most successful vaccination programmes in the world. Administration of oral polio vaccine (OPV) faced some of the same challenges that Covid-19 vaccine administration is going to face although at a more limited level. OPV required storage in cold temperatures and required multiple doses.

Nurses transporting vaccines found it difficult to maintain cold chain storage and families were not particularly convinced of the merit of vaccination. As the study by Nizamuddin Khan and Niranjan Saggurti published in the journal Vaccine in May 2020 notes the National Family Health Survey of 1992-93 recorded only 54% of children receiving all three doses of the polio vaccine and 52% of children receiving three doses of DPT (diphtheria pertussis (whooping cough) and tetanus) vaccine.

Pulse Polio campaign set up vaccination booths in central locations such as train station Panchayat Bhawan and parks; arranged cold storage to ensure a steady supply of vaccine to booths; and widely advertised the date and place of vaccination often via popular film actors. The DPT vaccine was not administered in this campaign mode and hence provides an interesting comparison.

Children receiving three doses of OPV increased from 54% in 1992-93 to 60% in 1998-99 and 78% in 2005-06. In contrast full coverage of DPT stagnated and barely grew from 52% to 55% between 1992-93 and 2005-06.

When it comes to delivering the Covid-19 vaccine can we build on this tradition without falling prey to some of the dangers inherent in campaigns? Fortunately we now have an option of combining vaccine administration with Aadhaar-enabled digital infrastructure. Using biometric identification it would be possible to ensure that no one gets more than two doses.

Camp Calling

Moreover for individuals who do get one dose of vaccine and do not get the second dose it is possible to send a text message reminding them of the need for a second dose and the location where they can obtain it. Should we choose to restrict vaccination to some priority age groups it would be possible to identify the target population using the Aadhaar database and invite them to the vaccination camp via a text message.

Using vaccination camps as a vehicle would allow us to maximise the number of locations using scarce resources such as freezers and cold-storage vans and provide vaccination in a convenient location across the length and breadth of India since each area will only need to be covered twice. Using Aadhaar-linked vaccination records and text messaging will allow us to reduce attrition and make sure that individuals get both doses. Vaccination camps where a large number of individuals are being vaccinated may also allow us to reduce vaccine resistance by ensuring that people do not feel alone.

The strategy outlined above relies on an adequate supply of vaccines and a relatively open distribution channel where vaccine prioritisation is based largely on the area of residence and age but not restrictive otherwise. As Anup Malani from the University of Chicago notes an India-specific strategy of vaccine delivery would require a focus on areas where the disease has the greatest likelihood of spreading and a focus on the age group that is most likely to be susceptible to serious complication due to Covid-19.

If these are the primary criteria we plan to use then a campaign-like strategy will allow us to efficiently build on our past successes.

The writer Sonalde Desai is professor of sociology University of Maryland US and director National Council of Applied Economic Research (NCAER)-National Data Innovation Centre.

The importance of credit to an economy cannot be over-emphasised.

The NCAER Quarterly Reviews of the Economy (June & September) has detailed out the tsunami like effect of the novel coronavirus (SARS-CoV-2) on the Indian economy. Unlike the contraction in year-on-year (y-o-y) growth shown by majority of indicators like Index of Industrial Production exports imports etc. the y-o-y growth of non-food credit was positive. However the y-o-y growth rate fell from 6.7% in April 2020 to 5.1% in September 2020. It is usually opined that banks were or are still reluctant to lend due to high risk aversion. However that may not be the complete story. Instead NCAER Business Expectation Surveys (N-BES) carried out in June & September 2020 indicates that firms were neither taking credit nor were planning to do so. Therein lies the puzzle-is low credit uptake a reluctance on the part of financial institutions or absence of preference from firms.

NCAER one of India’s oldest think-tanks has been carrying out the N-BES on a quarterly basis since 1991 covering 500 to 600 firms across six cities of Delhi (North) Kolkata (East) Bengaluru & Chennai (South) and Mumbai & Pune (West).  Its platform is used to assess the impact of SARS-CoV-2 on firms for the last three quarters.

The NCAER Business Confidence Index (a measure of business sentiments computed from the N-BES) fell from 111.2 in 2019-20:Q3 to 77.4 in 2019-20:Q4 to 46.4 in 2020-21:Q1 before rising to 65.5 in 2020-21:Q2.  Sentiments regarding production and sales deteriorated and costs remained elevated in June. There were additional costs that firms incurred for providing food & transport of workers.  This means that working capital of firms especially micro small and medium enterprises (MSMEs) would have been under pressure.

Under these circumstances the Reserve Bank of India announced moratorium on payments of instalments and interest on working capital facilities in respect of all term loans in March for three months initially. This was further extended till the end of August 2020.  In addition the Government of India announced an Emergency Credit Line Guarantee Scheme (ECLGS) to Businesses/MSMEs from banks and Non-bank finance corporations (NBFCs) upto 20% of entire outstanding credit as on February 29 2020. This has since been extended upto the end of this year.

What has been the usage of these measures by firms?

The N-BES finds that 39.3% & 49.6% of firms had paid interest on loans in Rounds 113 (2020-21:Q1; June) and 114 (2020-21:Q2; September) respectively. In Round 114 29.3% of firms responded had that they were paying full interest on loans and 20.3% were paying partially. Clearly the moratorium policy was reasonably successful i.e. firms utilised this policy.

However in Round 113 only 17% of firms had responded that they had taken credit in the last three months. This number fell down further to 9.6% in Round 114 (Figure 1).  In Round 113 23% of firms had planned to take credit for working capital and 8.4% for new investment.  Out of the 17% of firms who had taken credit in Round 113 75% had faced moderate to severe issues in obtaining them.

Not only uptake of credit but preference for credit also appears to have fallen between the two rounds. In June about 31.6% responded that they plan to take credit in the next six months. But by September we find that only 19.5% of firms planned to do so. (Figure 2)

There are differences across firm sizes as a smaller-sized firms were more likely to take loans (Figure 1) and were more likely to have plans for taking loans in the future (Figure 2).  Consistent with the overall trend we find that the share of firms either taking loans or planning to take drops down between the two rounds across firm sizes.

The ECLGS scheme was drafted as a measured response to the expressed need and economic intuition of helping firms tide over the bad times. However N-BES suggests that demand for credit was muted in the early days and has become more subdued over time. The ECLGS scheme has been relatively underutilised.

The lower credit offtake coincides with the period when demand sentiments of firms improved between Rounds 113 and 114. 40.2% of firms expected production to increase in next six months in Round 114 compared to 16.2% of firms in Round 113. The corresponding numbers for domestic sales were 49.5% in Round 114 and 15.4% in Round 114. At the same time 46.3% of firms reported ‘severe’ difficulties in getting dues on time. Both factors should have spurred a demand for credit but instead we see a dampening. The dampening could be explained by improvement in receipts which should have improved working capital.  There could be other non-monetary challenges faced by firms while seeking credit. For e.g.; cumbersome paper work may repel smaller firms from availing credit. Approximately 47% of firms had reported ‘severe’ difficulties in accessing loans in Round 113.

The credit behaviour of firms needs to be understood and resolved in a systematic manner. The importance of credit to an economy cannot be overemphasised.

Bornali Bhandari is a Senior Fellow Samarth Gupta & KS Urs are Associate Fellows and Ajaya K Sahu is a Senior Research Analyst at NCAER. Views expressed here are personal.

International Day of Persons with Disabilities (IDPD): The WHO estimates that more than one billion people – about 15% of the world’s population – experience some form of disability

Not many of us are aware that we celebrate about 173 “international days” every year which as per the United Nations “serve as an indicator of the interest that a given subject attracts in each part of the world”. The UN says that “International days are occasions to educate the general public on issues of concern to mobilize political will and resources to address global problems and to celebrate and reinforce achievements of humanity”.

One such day is the 3rd of December which is observed as the International Day of Persons with Disabilities (IDPD). This was proclaimed in 1992 by United Nations General Assembly resolution with aims to promote the rights and well-being of persons with disabilities in all spheres of society and development and to increase awareness of the situation of persons with disabilities in every aspect of political social economic and cultural life. The theme for this year is “Building Back Better: toward a disability-inclusive accessible and sustainable post Covid-19 World”.

The WHO estimates that more than one billion people – about 15% of the world’s population – experience some form of disability. Pertinently it is possible that almost everyone will be temporarily or permanently impaired at some point in life. Despite this perhaps we still do not have adequate mechanisms in place and the effort to fully respond to the needs of people with disabilities.

What is the status in India?

After the Act of 1995 was repealed we now have the Rights of Persons with Disabilities Act 2016 which defines a “person with disability” as “a person with long term physical mental intellectual or sensory impairment which in interaction with barriers hinders his full and effective participation in society equally with others”. As per the estimates of the 76th Round National Sample Survey of Persons with Disabilities- 2018 there are about 25.8 million persons with disabilities which constituted around 2.2 per cent of the total survey estimate of the population. It is mind boggling to note that there are 184 countries (as per UN database) whose population is less than the number of India’s disabled population. Another worrying factor is that out of the total disabled population around 10 per cent are suffering from multiple disabilities. It is a double whammy of sorts for such persons.

Amongst the types of disabilities prevalence of locomotor disability accounted for more than 55 per cent of the disabilities in India. Hearing disabilities (deaf and hard of hearing) comes next with about 12 per cent while visual (blindness and low vision) disabilities and speech & language disabilities accounted for a little over 9 per cent each. The other types of disabilities (mental retardation and intellectual disability mental illness & other disability) accounted for around 14 per cent of the disabilities.

Level of education amongst the disabled

Even under normal circumstances persons with disabilities suffer from the lack of access to healthcare education and employment keeping them suppressed both economically and their overall integration with society at large. But specific provisions have been made in Chapter-III of the Rights of Persons with Disabilities Act 2016. For instance Section 16 laid down the duties of educational institutions Section 17 specified measures to promote and facilitate inclusive education including measures to promote protect and ensure participation of persons with disabilities in adult education and continuing education programmes under Section 18 of the Act. If such detailed provisions are available in an Act framed by the Parliament it would be of interest to find out where disabled persons stand in terms of education.

Unfortunately according to the above survey illiteracy amongst the disabled is very high ranging from 50 per cent of persons with mental illness to almost 70  per cent of persons with mental retardation & intellectual disability. What could be the reasons for such high illiteracy amongst persons with disabilities? Is it the problem of accessibility and/ or affordability? It could be both coupled with the absence of a congenial environment to accommodate such persons. Data also revealed that the percentage of disabled persons (across all types of disabilities) with a graduate degree and above are abysmally low in single digit. If this does not portray a worrisome picture then what is?

The lower level of education among disabled persons indicates the lack of willingness and effort to fully implement the various provisions of the Act wherein at Section 31 it provides for “Free education forchildren with benchmark disabilities” and Section 32 provides for “Reservation in higher educational institutions”. Forceful and dedicated implementation with regular monitoring of the various provisions of the Act is the need of the hour. All stakeholders will also have to introspect what has gone amiss in the existing educational system.

Disabilities hinder employment opportunities

Section 19 (vocational training and self-employment) and Section 20 (non-discrimination in employment) and Section 21 (Equal opportunity policy) of the Act provides a whole host of provisions on how systems are supposed to cater to the special needs of disabled persons. Just like any other person they have every right to participate in various types of economic activities for gainful employment.

But in the face of low levels of education it appears that the noble objectives as specified in the Act are yet to be fully translated into actual employment opportunities for this section of our society. As per the above said survey we find that being disabled itself offers little or no opportunity for fruitful employment. Data says that as high as 60 per cent of persons with mental illness are not able to work due to disability. Similar trends are seen in other forms of disabilities. It is no wonder that not even 4 per cent of persons with locomotor disabilities find regular salaries / wage employment and less that even 1 per cent are employers.

Conclusion

Dedicating one day to celebrate an International Day of Persons with Disabilities hardly has any meaning if we are not able to bring solace to the immense hardships and discrimination that disabled persons faced in their daily lives. It is rightly said that disability is a development issue and it will be hard to improve the lives of the most disadvantaged people without addressing their specific needs. Education and employment are two important issues (apart from healthcare) which warrant immediate attention of all concerned.

The 2030 Agenda for Sustainable Development’s Vision of a better future can only be achieved with the full participation of everyone including persons with disabilities. It is to be noted that “disability” is referenced in various parts of the United Nations’ SDGs and specifically in parts related to education growth and employment inequality accessibility of human settlements (SDG Goals 4 8 10 11 and 17). If we as a country do not pull our socks and still move at a laggard pace as is evident we are bound to be left behind in achieving an inclusive development for all sections of our society.

Views and opinions expressed in this article are personal

D L Wankhar is a Retd Indian Economic Service Officer & Dr Palash Baruah is Senior Research Analyst National Council of Applied Economic Research (NCAER).