A Storm Brewing Over The Horizon In West Asia
A storm brewing around Iran; Behavioural economics wanders into NITI Aayog; A GST catch for the first electric SUV & How healthcare still pinches the poor most
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A Storm Brewing Over The Horizon In West Asia
West Asia seems to be in turmoil again. Tension has been brewing in the region ever since the Trump Administration in the United States decided to pull out of the 2015 nuclear deal. The 2015 deal between Iran, the five permanent members of the United Nations Security Council and Germany, had eased sanctions on Iran. Having retracted from the deal in 2018, the US has imposed more than a thousand sanctions on Iran, crippling its economy. Iran now has a dangerous inflation rate of 50 per cent and its GDP has shrunk by six per cent. The US sanctions hurt Iran more because the second-largest trading bloc, the European Union, has so far shown little resilience to the unilateral sanctions imposed on Iran by the US. Europe has spent a year trying to launch a very limited financial vehicle, the Instrument in Support of Trade Exchanges (INSTEX), designed to insulate some of its trade with Iran from the US sanctions. The INSTEX has not worked and business firms are now breaking off from the Iranian market.
Meanwhile, the International Atomic Energy Agency says Iran has crossed its uranium enrichment threshold and threatens to increase the stockpile. West Asia has suddenly become a scene of mishaps, including some mysterious oil tanker attacks near the Strait of Hormuz. The downing of a US military drone by Iran and the seizure of an Iranian oil tanker off the Gibraltar coast by the British Royal Marines, signal conflict in the region. It is important for India, which has already stopped buying oil from Iran, to play its best diplomatic card at this juncture and help contain the storm brewing over West Asia. — Manish Kumar Jha
The GST catch
Finally, there is a 100 per cent electric car available in India, thanks to the country’s second-largest passenger car maker – the Hyundai Motor India. Hyundai is now the first Indian carmaker to launch the country’s first fully electric SUV, named Kona Electric. Kona Electric is being offered at an introductory price of Rs 25.3 lakh (ex-showroom and inclusive of GST). Yes, that is correct. If and when you decide to buy Kona, you will find the 12 per cent GST included in Hyundai India’s ex-showroom price. Plans are afoot to make the vehicle available at zero registration charges as well.
Meanwhile, the government’s intention to bring down the GST rate on electric vehicles to five per cent shortly has stumped the Hyundai India management. So, should you wish to book your first electric car, perhaps it is a good idea to wait till there is an official announcement of the GST rate reduction because it will mean straight savings of over Rs 1 lakh rupees? — Ashish Sinha
Reaching out to the region
Prime Minister Narendra Modi’s thrust on diplomacy, evident in his whirlwind tours across the globe, finds reflection in Budgetary allocations for the Ministry of External Affairs (MEA). The Budgetary allocation for the MEA as a whole has shot up by Rs 2,873 crore to Rs 17,884.78 crore for FY20. The allocation for the MEA had been Rs 15,011 crore in the fiscal gone by.
The allocation for “aid to countries” has jumped 36 per cent from Rs 5,545 crores in FY19 to Rs 7,582.79 crores in FY 20, a major share of which is for the mountain kingdom of Bhutan. The aid for Bhutan increases to Rs 2,801.79 crore for the year ahead, from Rs 2,510 crore allocated for FY19.
Allocations for aid to Nepal and Mauritius have increased conspicuously to Rs 1,050 crore and Rs 1,100 crore respectively. Some of the beneficiaries of the enhanced aid from India, it may be remembered, are also recipients of financial assistance from China, which has been actively engaging nations in the region in financial contracts, particularly for its Belt and Road Initiative. — Manish Kumar Jha
The wisdom of the earth
The 2017 Nobel Prize for Economic Sciences had been awarded to Professor of Behavioural Sciences at the University of Chicago, Richard Thaler. Thaler, now acknowledged as the father of Behavioural Economics, expanded the stodgy boundaries of the discipline of immutable theories and statistics to the other behavioural sciences, particularly psychology.
Humans, he told the world in his 2015 book, Misbehaving: The Making of Behavioral Economics did not respond to the presumed outcomes defined in classical economics with robotic precision, simply because homo sapiens were not really the rational beings traditional economics had assumed them to be. Thaler used his research on “human miscalculations” to explain among other things, market behaviour and consumer responses. Some of the rhetoric from his Nobel lecture resonated in the Economic Survey in the chapter titled ‘Policy for Homo Sapiens; Not Homo Economics: Leveraging the Behavioural Economics of “Nudge”’. At last, it seems, the earthy maxims of the carrot and stick and that drawing a horse to the water, did not imply that it would drink et al, have gained sanctity within the pearly gates of academia. Hopefully, policy-makers will now find out why huge chunks of development funds for a plethora of welfare schemes have failed to make a dent in India’s impenetrable morass of rural poverty. The NITI Aayog will soon set up a unit to audit government programmes before they are implemented. Well, as they say, ‘better late than never!’
— Madhumita Chakraborty
And The damned of the earth
People of developing countries spend half a trillion dollars annually ( over $80 per person) out of their own pockets for health services, and these expenses hit the poor hardest, says a recent report of the World Bank Group. The report suggests that lack of universal access to quality and affordable health services not only threatens the decades-long progress on healthcare, it also endangers the long-term economic prospects of these countries, and renders them more vulnerable to pandemic risks. The report titled ‘High-Performance Health Financing for Universal Health Coverage’ says most developing countries will fail to achieve their Universal Health Coverage (UHC) targets and health and poverty-related Sustainable Development Goals (SDGs) unless they take urgent steps to strengthen their health financing. Today expensive healthcare pushes 100 million into poverty. — Prabodh Krishna