- Limits to accommodation: on RBI’s monetary policy
- The next step is a constitutional right to health
Limits to accommodation: on RBI’s monetary policy
The RBI’s latest monetary policy statement and accompanying actions reflect the dilemma confronting monetary authorities.
While the RBI’s Monetary Policy Committee voted unanimously to keep benchmark interest rates unchanged as part of its efforts to support growth as the economy recovers, one of the six members on the MPC demurred yet again and voted against continuing with an accommodative stance for ‘as long as necessary’.
GS-III: Indian Economy (Economic Development of India, Macroeconomics, Monetary Policy, Inflation)
Dimensions of the Article:
- Uncertainties and Caveats in the current Scenario
- India’s decision regarding maintenance of Inflation rate at 4%
- Monetary Policy Committee (MPC)
- How does the MPC target inflation?
- How is Inflation Controlled?
Uncertainties and Caveats in the current Scenario
- In an acknowledgment of the difficulty it faces in containing price pressures even as it keeps interest rates at growth-supportive lows, the monetary panel reiterated its plea for fiscal authorities to step in and help contain inflationary pressures, especially the pass-through impact of elevated transportation costs.
- Economists have flagged the risks that prolonged monetary accommodation posed to the inflation outlook by ‘stimulating asset price inflation’ and also highlighted its impact in ‘mitigating the distress in the economy’ as being arguably far more marginal.
- The RBI Governor conceded that the time had come to wind down the pandemic-era liquidity support as he announced the suspension of the G-SAP bond buying programme and simultaneously outlined measures to drain out surplus liquidity from the banking system. Here again, the MPC’s prognostication on growth is filled with uncertainties and caveats.
Some of the uncertainties are:
- Contact intensive services, which contribute about two-fifths to economic output and were among the worst hit by the COVID restrictions, still considerably lag their pre-pandemic levels
- the manufacturing sector is still nowhere near supporting a rebound in investment demand;
- the external environment that has so far been a major tailwind — through capital inflows and the demand for the country’s goods and services — is turning more uncertain.
India’s decision regarding maintenance of Inflation rate at 4%
- In 2016 itself, the central government mandated he RBI to keep the retail inflation at 4% with a margin of 2% on either side for a five-year period (i.e., till March 2021) to control the price rise.
- The central bank and the government agreed in 2015 on a policy framework that stipulated a primary objective of ensuring price stability while keeping in mind the objective of growth.
- The Flexible Inflation Target (FIT) was adopted in 2016. The Reserve Bank of India Act, 1934 was amended to provide a statutory basis for a FTI framework.
- The amended Act provides for the inflation target to be set by the Government, in consultation with the RBI, once every five years.
- Now, the inflation target for the period 1st April, 2021 to 31st March, 2026 under the Reserve Bank of India Act 1934 has been kept at the same level as was for previous 5 years.
Monetary Policy Committee (MPC)
- The Monetary Policy Committee of India is responsible for fixing the benchmark interest rate in India.
- The meetings of the Monetary Policy Committee are held at least 4 times a year and it publishes its decisions after each such meeting.
- The committee comprises six members – three officials of the Reserve Bank of India and three external members nominated by the Government of India.
- They need to observe a “silent period” seven days before and after the rate decision for “utmost confidentiality”.
- The Governor of Reserve Bank of India is the chairperson ex officio of the committee.
- The Reserve Bank of India Act, 1934 was amended by Finance Act (India), 2016 to constitute MPC which will bring more transparency and accountability in fixing India’s Monetary Policy.
- The monetary policy are published after every meeting with each member explaining his opinions.
- The committee is answerable to the Government of India if the inflation exceeds the range prescribed for three consecutive months.
- Key decisions pertaining to benchmark interest rates used to be taken by the Governor of Reserve Bank of India alone prior to the establishment of the committee.
- The Governor of RBI is appointed and can be disqualified by the Government anytime.
How does the MPC target inflation?
- Every two months, the Reserve Bank’s MPC has a review meeting where they discuss the likely inflation and growth estimates over the coming months.
- Based on this review, the MPC targets inflation using the policy rate, or the repo rate. When inflation is higher than the inflation target set by the central bank, then the MPC must increase the repo rate. On the other hand, when the actual inflation is lower than the target, the MPC could decrease the repo rate.
- The MPC looks at consumer price inflation (CPI) as the inflation target that it must keep between 2% and 6%.
How is Inflation Controlled?
There are broadly two ways of controlling inflation in an economy:
- Monetary measures and
- Fiscal measures
- The most important and commonly used method to control inflation is monetary policy of the Central Bank (RBI in India).
- Most central banks use high interest rates as the traditional way to fight or prevent inflation.
Monetary measures used to control inflation include:
- Bank Rate Policy
- Cash Reserve Ratio and
- Open Market Operations.
- Fiscal measures to control inflation include taxation, government expenditure and public borrowings.
- The government can also take some protectionist measures (such as banning the export of essential items such as pulses, cereals and oils to support the domestic consumption, encourage imports by lowering duties on import items etc.).
-Source: The Hindu
The next step is a constitutional right to health
As our people continue to face individual and collective grief as a result of the novel coronavirus pandemic, it becomes important to consider the need for the constitutional ‘Right to Health for all’.
GS-II: Social Justice and Governance (Issues related to Health, Government Policies and Interventions), GS-II: Polity and Constitution (Constitutional Provisions, Fundamental Rights)
Dimensions of the Article:
- Understanding the Right to Health
- Right to Health: Constitutional Provisions
- Supreme Court on Right to Health
- International Commitments
- How would a constitutional right to health help?
- Significance of Right to Health for India:
- Conclusion and Way forward
Understanding the Right to Health
- The right to health, as with other rights, includes both freedoms and entitlements:
- Freedoms include the right to control one’s health and body (for example, sexual and reproductive rights) and to be free from interference (for example, free from torture and non-consensual medical treatment and experimentation).
- Entitlements include the right to a system of health protection that gives everyone an equal opportunity to enjoy the highest attainable level of health.
Right to Health: Constitutional Provisions
- Article 21 of the Indian Constitution guarantees the protection of life and personal liberty to every citizen.
- The Supreme Court which is the guarantor of the fundamental rights has held that the right to live with human dignity enshrined in Article 21 derives from the directive principles of state policy and includes protection of health.
- The Directive Principles of State Policy (DPSP)s under Articles 38, 39, 42, 43, & 47 put the obligation on the state in order to ensure the effective realization of right to health.
Supreme Court on Right to Health
- The Supreme Court has also held that the right to health is integral to the right to life and the government has a constitutional obligation to provide health facilities.
- Supreme Court in Paschim Bangal Khet Mazdoor Samity case (1996) held that in a welfare state, primary duty of the government is to secure the welfare of the people and moreover it is the obligation of the government to provide adequate medical facilities for its people.
- Also, in its landmark judgment in Parmanand Katara Vs Union Of India (1989), Supreme Court had ruled that every doctor whether at a government hospital or otherwise has the professional obligation to extend his services with due expertise for protecting life.
- India is a signatory of the Article 25 of the Universal Declaration of Human Rights (1948) by the United Nations that grants the right to a standard of living adequate for the health and well-being to humans including food, clothing, housing and medical care and necessary social services.
- The provisions of Article 25  of the Universal Declaration of Human Rights and Article 7 (b) of the International Covenant on Economic, Social and Cultural Rights have been cited by the Supreme Court while upholding the right to health.
- Further, these covenants find a mention in the Statement of Objects and Reasons of The Protection of Human Rights Act, 1993.
How would a constitutional right to health help?
- Farmers are the primary protectors of our fundamental right to life. Yet, the majority remain at a loose end when it comes to their own rights and well-being, and that of their families.
- Employment benefit schemes do not reach them, and the ones that do are mostly on paper. The implementation of the right to health can provide simple, transparent and quality health care to those who are most in need of such care.
- Women bear a disproportionate burden of the gaps in our health-care system.
- The taboos and patriarchal expectations surrounding their health lead to immense avoidable suffering and in addition social and economic challenges prevent them from freely and openly accessing the little care that is available.
- A ‘Right to Health’ would mean that services reach the woman where and when she needs them.
- A large number of children who belong to the poorest and most marginalised communities of our country grow up working in hazardous situations be it fields, mines, brick kilns or factories.
- They are either not enrolled in schools or are not able to attend it due to the pressing financial needs of the family — often because of unexpected out-of-pocket medical expenses.
- The ‘Right to Health’ will help transition the children in exploitative conditions into a safer future.
Significance of Right to Health for India:
- Right Based Healthcare Services: The people are entitled to the right to health and it puts a compulsion for the government to take steps toward this.
- Wide Access to Health Services: Enables everyone to access the services and ensures that the quality of those services is good enough to improve the health of the people who receive them.
- Reduce Out of Pocket Expenditure: Protects people from the financial consequences of paying for health services out of their own pockets and reduces the risk of people getting pushed into poverty.
Conclusion and Way forward
- A constitutional ‘Right to Health’ will transform not only the health and well-being of our people but will act as a leap for the economic and developmental progress of the nation.
- Presently, any investment in health care fails to translate into a sense of security and sanctuary for the people of India.
- Instead, the complex and often corrupt means of accessing even existing health care only adds to the suffering instead of alleviating it.
- The vision for Ayushman Bharat will be strengthened with a constitutional ‘Right to Health’.
- The immediate financial security that will come with the constitutional ‘Right to Health’ will be seen as a measurable impact on family savings, greater investment, and jobs creation on the one hand, and in the long-term emotional, psychological and social security of people.
-Source: The Hindu