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PYQ 1200 Q/A Part - 1
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Kerala PSC Indian Economy Book Study Materials Page 550
Book's First Page21.8 ndian onom possible. And that is precisely what the creation of It could solve the coordination problem since PARA would aim to do. debts would be centralised in one agency; Capital requirements: It would require large It could be set up with proper incentives by capital, which may be managed in the following giving it an explicit mandate to maximise way: recoveries within a defined time; First and the most important source of it It would separate the loan resolution would be the government (through issues process from concerns about bank capital. of securities); By mid-2017, the Government had hinted at Second source could be capital markets taking some actions in this regard, however, the (if shares in the PSBs are sold or private Union Budget 2018-19 remained almost silent on sector buys stakes in the PARA); the issue. Meanwhile, the recapitalisation process of the public sector banks got a big boost when Third source of capital could be the RBI the Government announced ( in October, 2017) (the central bank may transfer some a sum of Rs. 2.11 lakh crores for the purpose. This government securities it is holding to way, one half of the TBS crises looks under the PSBs and PARA—this will decrease Government’s policy priority. RBI’s capital, the capital of the PSBs and PARA would increase. It would create no 4. UNiverSAl heAlThcAre implications for monetary policy since no new money would be created). introDuction Risks and difficulties: Creating the PARA is It was the 12th Plan, the first official document, not without its own difficulties and risks; the which advised in favour of the universal healthcare, country’s history is not favourable to public sector estimating a total allocation of around 2.5 per cent endeavours. Yet, one must ask how long India of the GDP. The idea could not be implemented should continue with the current decentralised as the Government of the time could not commit approach, which has still not produced the itself to the required funds (estimated to allocate desired results eight years after the GFC, even maximum 1.6 per cent of the GDP). At present, as East Asian countries were able to resolve their the total government expenditure (centre plus much larger TBS problems within two years. states) on healthcare is 1.4 per cent of the GDP One reason, of course, was that the East Asian (Economic Survey 2016-17). The healthcare related countries were under much more pressure that sufferings in the country have been always a matter they were in crisis, whereas India has continued of high concern—out of pocket expenditure being to grow rapidly. But an important reason was one of the highest in the world (at over 70 per that it deployed a ‘centralised strategy’, which cent since many decades). The idea has been a allowed debt problems to be worked out quickly major issue of the public debate. During the last using public asset rehabilitation companies. In General Elections, the idea kept resonating across sum, current efforts have not been successful in the promises of the political parties. addressing the TBS problem. New solutions must be tried. Perhaps it is time for India to consider the chAllenges the PARA as one such solution. Committing to the cause of universal healthcare The approach of PARA could eliminate most at the practical level has been a daunting task for of the obstacles currently plaguing loan resolution: the Government, given the scarcity of resources.