Recently, the Kelkar Committee published a roadmap for fiscal consolidation. The report stresses the need and urgency to address India’s fiscal deficit. A high fiscal deficit – the excess of government expenditure over receipts – can be problematic for many reasons. The fiscal deficit is financed by government borrowing; increased borrowing can crowd out funds available for private investment. High government spending can also lead to a rise in price levels. A full PRS summary of the report can be found here. Recent fiscal trends Last year (2011-12), the central government posted a fiscal deficit of 5.8% (of GDP), significantly higher than the targeted 4.6%. This is in stark contrast to five years ago in 2007-08, when after embarking on a path of fiscal consolidation the government’s fiscal deficit had shrunk to a 30 year low of 2.5%. In 2008-09, a combination of the Sixth Pay Commission, farmers’ debt waiver and a crisis-driven stimulus led to the deficit rising to 6% and it has not returned to those levels since. As of August this year, government accounts reveal a fiscal deficit of Rs 3,37,538 crore which is 65.7% of the targeted deficit with seven months to go in the fiscal year. With growth slowing this year, the committee expects tax receipts to fall short of expectations significantly and expenditure to overshoot budget estimates, leaving the economy on the edge of a “fiscal precipice”.
Figure 1 (source: RBI)
Committee recommendations - expenditure To tackle the deficit on the expenditure side, the committee wants to ease the subsidy burden. Subsidy expenditure, as a percentage of GDP, has crept up in the last two years (see Figure 2) and the committee expects it to reach 2.6% of GDP in 2012-13. In response, the committee calls for an immediate increase in the price of diesel, kerosene and LPG. The committee also recommends phasing out the subsidy on diesel and LPG by 2014-15. Initial reports suggest that the government may not support this phasing out of subsidies.
Figure 2 (source: RBI, Union Budget documents, PRS)
For the fertiliser subsidy, the committee recommends implementing the Department of Fertilisers proposal of a 10% price increase on urea. Last week , the government raised the price of urea by Rs 50 per tonne (a 0.9% increase). Finally, the committee explains the rising food subsidy expenditure as a mismatch between the issue price and the minimum support price and wants this to be addressed. Committee recommendations - receipts Rising subsidies have not been matched by a significant increase in receipts through taxation: gross tax revenue as a percentage of GDP has remained around 10% of GDP (see Figure 3). The committee seeks to improve collections in both direct and indirect taxes via better tax administration. Over the last decade, income from direct taxes – the tax on income – has emerged as the biggest contributor to the Indian exchequer. The committee feels that the pending Direct Tax Code Bill would result in significant losses and should be reviewed. To boost income from indirect taxes – the tax on goods and services – the committee wants the proposed Goods and Service Tax regime to be implemented as soon as possible.
Figure 3 (source: RBI)
Increasing disinvestment, the process of selling government stake in public enterprises, is another proposal to boost receipts. India has failed to meet the disinvestment estimate set out in the Budget in the last two years (Figure 4). The committee believes introducing new channels [1. The committee suggests introducing a ‘call option model’. This is a mechanism allowing the government to offer for sale multiple securities over a period of time till disinvestment targets are achieved. Investors would have the option to purchase securities at the cost of a premium. They also propose introducing ‘exchange traded funds’ which would comprise all listed securities of Central Public Sector Enterprises and would provide investors with the benefits of diversification, low cost access and flexibility.] for disinvestment would ensure that disinvestment receipts would meet this year’s target of Rs 30,000 crore.
Figure 4 (source: Union Budget documents, PRS)
Taken together, these policy changes, the committee believe would significantly improve India’s fiscal health and boost growth. Their final projections for 2012-13, in both a reform and no reform scenario, and the medium term (2013-14 and 2014-15) are presented in the table below: [table id=2 /]
The Medical Council of India (MCI) has seen a few major controversies over the past decade. In the latest incident, MCI President, Dr. Ketan Desai was arrested by the CBI on charges of accepting a bribe for granting recognition to Gyan Sagar Medical College in Punjab. Following this incident, the central government promulgated an ordinance dissolving the MCI and replacing it with a centrally nominated seven member board. The ordinance requires MCI to be re-constituted within one year of its dissolution in accordance with the provisions of the original Act. Background The Medical Council of India was first established in 1934 under the Indian Medical Council Act, 1933. This Act was repealed and replaced with a new Act in 1956. Under the 1956 Act, the objectives of MCI include:
Over the years, several committees, the most recent being the National Knowledge Commission (NKC) and the Yashpal Committee, have commented on the need for reforms in medical regulation in the country. The Ministry of Health and Family Welfare (MoH&FW) has recently released a draft of the National Council for Human Resources in Health (NCHRH) Bill for public feedback. (See http://mohfw.nic.in/nchrc-health.htm) Key issues in Medical Regulation Oversight Currently, separate regulatory bodies oversee the different healthcare disciplines. These include the Medical Council of India, the Indian Nursing Council, the Dental Council of India, the Rehabilitation Council of India and the Pharmacy Council of India. Each Council regulates both education and professional practice within its domain. The draft NCHRH Bill proposes to create an overarching body to subsume these councils into a single structure. This new body, christened the National Council for Human Resources in Health (NCHRH) is expected to encourage cross connectivity across these different health-care disciplines. Role of Councils Both the NKC and the Yashpal Committee make a case for separating regulation of medical education from that of profession. It is recommended that the current councils be divested of their education responsibilities and that these work solely towards regulation of professionals – prescribing a code of ethics, ensuring compliance, and facilitating continued medical education. In addition, it has been recommended that a national exit level examination be conducted. This exit examination should then serve the purpose of ‘occupational licensing’, unlike the prevalent registration system that automatically grants practice rights to graduating professionals. In effect, it is envisaged that the system be reconfigured on the lines of the Institute of Chartered Accountants, wherein the council restricts itself to regulating the profession, but has an indirect say in education through its requirements on the exit examination. A common national examination is also expected to ensure uniformity in quality across the country. Both committees also recommend enlisting independent accrediting agencies for periodically evaluating medical colleges on pre-defined criteria and making this information available to the public (including students). This is expected to bring more transparency into the system. Supervision of education – HRD vs. H&FW The Ministry of Human Resources and Development (MHRD) is proposing a National Council for Higher Education and Research (NCHER) to regulate all university education. However, MoH&FW is of the opinion that Medical Education is a specialized field and needs focused attention, and hence should be regulated separately. However, it is worth noting that both the NKC and the Yashpal Committee recommend transferring education overseeing responsibilities to the NCHER. Internationally, different models exist across countries. In the US, the Higher Education Act, 1965 had transferred all education responsibilities to the Department of Education. In the UK, both medical education and profession continue to be regulated by the General Medical Council (the MCI counterpart), which is different from the regulator for Higher Education. Composition of Councils In 2007-08, MCI, when fully constituted, was a 129 member body. The Ministry in its draft NCHRH Bill makes a case for reducing this size. The argument advanced is that such a large size makes the council unwieldy in character and hence constrains reform. In 2007-08, 71% of the members in the committee were elected. These represented universities and doctors registered across the country. However, the Standing Committee on H&FW report (2006) points out that delays in conducting elections usually leads to several vacancies in this category, thereby reducing the actual percentage of elected members. MCI’s 2007-08 annual report mentions that at the time of publishing the report, 29 seats (32% of elected category) were vacant due to ‘various reasons like expiry of term, non-election of a member, non-existence of medical faculty of certain Universities’. In November 2001, the Delhi High Court set aside the election of Dr. Ketan Desai as President of the MCI, stating that he had been elected under a ‘flawed constitution’. The central government had failed to ensure timely conduct of elections to the MCI. As a result, a number of seats were lying vacant. The Court ordered that the MCI be reconstituted at the earliest and appointed an administrator to oversee the functioning of the MCI until this was done. Several countries like the UK are amending their laws to make council membership more broad-based by including ‘lay-members’/ non-doctors. The General Medical Council in the UK was recently reconstituted and it now comprises of 24 members - 12 ‘lay’ and 12 medical members. (See http://www.gmc-uk.org/about/council.asp) Way ahead According to latest news reports, the MoH&FW is currently revising the draft Bill. Let's wait and see how the actual legislation shapes up. Watch this space for further updates!
