27 April, 2021 - Daily Current Affairs Analysis & MCQs - The Daily News Simplified from The Hindu

  • Healthcare Infrastructure in India- Constraints, Challenges and Strategies
  • Proposal of Global Minimum Corporate Tax- Rationale, Concerns and Challenges
  • India’s first InVIT
  • QoD

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    UPSC Current Affairs: Healthcare Infrastructure in India- Constraints, Challenges and Strategies| Page 14

    UPSC Syllabus: Mains – GS Paper III – Economy

    Sub Theme: Healthcare Infrastructure | UPSC

    The recent COVID-19 pandemic has underscored the importance of Healthcare system in a country and its key linkages to other sectors. It has clearly highlighted that a healthcare crisis can transform into an economic and social crisis. Having recognized this important linkage, in the Union Budget 2021-22, the Finance Minister has substantially increased the healthcare expenditure by almost 137% in comparison to previous financial year. A new centrally sponsored scheme known as "PM Aatma Nirbhar Swasth Bharat Yojana" has also been launched. Keeping in mind the importance of Healthcare sector from the perspective of UPSC exam, we will focus on the following dimensions:

    1. Universal Health Coverage- Definition and Significance
    2. Problems in Healthcare system
    3. Union Budget 2021-22 Announcements for Healthcare sector
    4. Critical Analysis of Ayushman Bharat Scheme
    5. Strategies to ensure Universal Health Coverage.

    Defining Universal Health Coverage (UHC)

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    UHC can be defined as ensuring equitable access for all Indian citizens quality health care which encompasses promotive, preventive, curative and rehabilitative care.

    It should be based upon 4 A's - Availability, Accessibility, Affordability and Accountability. The Universal Health coverage should be provided by both Government and Private sector. In order to facilitate the private sector to provide UHC, the Government should act as an enabler and facilitator.

    Significance of UHC in India

    • Enables us to meet Sustainable Development Goals ( SDG 3.8- Universal Health Coverage, SDG 1- Ending Poverty in all forms etc)
    • Enables the people to have access to healthcare without suffering financial hardship.
    • Prevents the people from slipping back to below the Poverty line.
    • Enhances the Human Capital Formation and reaps demographic dividend.

    Problems in ensuring UHC in India

    Lower Expenditure on Health: The Combined expenditure of Centre and States on Health is around 1.5% of India's GDP, which translates into Rs 3 per person per day. It is much below the target of 2.5% as set under the National Health Policy, 2017. Countries such as Bhutan (2.5%) and Sri Lanka (1.6%) spend more money on health as compared to us.

    Low Insurance Penetration: 86% of people in rural areas and 82% in urban areas do not have access to insurance coverage. Problems- Forced to use their meagre savings, borrow money, or delay the treatment. Implications: 

    (a) perpetuate vicious cycle of poverty (poor people remain poor due to higher health costs)

    (b) Push the above poverty line people back to BPL. (Drives 55 million Indians into poverty, more than the population of South Korea (51.1 million))

    Out-of-pocket expenditure on Health: In case of India, Government spends only 35% of healthcare expenditure, while the major chunk 65% of expenditure is incurred by people themselves. At the global level, the average out-of-pocket expenditure is hardly around 18%.

    Lack of Accessibility: Most of the secondary and tertiary care hospitals are located in Tier-1 and Tier-2 Cities. Similarly, most of the doctors are unwilling to practice in Rural areas.

    Lack of Affordability: The contribution of private sector in healthcare expenditure in India is around 80 percent while the rest 20 percent is contributed by Public Sector. The private sector also provides for 58 percent of the hospitals and 81 percent of the doctors in India. However, since the private sector hospitals work on the profit motive and charge high fees, the private sector hospitals do not address the needs of the poor patients.

    Shortage of Medical Personnel:

    Country

    No. of Qualified doctors per 1000 People

    No. of nurses per 1000 People

    China

    18

    23

    Italy

    41

    59

    India

    3.4

    3.2


    Poor Healthcare Infrastructure

    Country

    No. of Hospital beds per 1 lakh

    No. of ICU beds per 1 lakh

    China

    420

    3.6

    Italy

    340

    12.5

    India

    70

    2.3


    Union Budget 2021-22 Announcements

    The main focus of this year's budget has been on enhancing Healthcare expenditure due to COVID-19 pandemic.

    PM ATMA NIRBHAR SWASTH BHARAT YOJANA

    It is a new Central Sponsored Scheme

    • Develop capacities of primary, secondary and tertiary health care systems
    • Strengthen existing national institutions such as National Centre for Disease Control (NCDC) and create new institutions such as National Institution for one Health.
    • Cater to detection and cure of new and emerging diseases.

    Critical Analysis of Ayushman Bharat Scheme

    Details:

    Ayushman Bharat seeks to provide for Universal health coverage (UHC) by adopting two approaches (a) Creation of 1.5 lakh Health and Wellness centres (HWCs) and Pradhan Mantri Jan Arogya Yojana (PM-JAY). The PM-JAY aims at providing a health insurance cover of Rs. 5 lakhs per family per year for secondary and tertiary care hospitalization.

    Coverage: 50 crore people who belong to bottom 40% of India's population. Beneficiaries are identified through socio-economic caste census (SECC).

    Achievements:

    The Economic Survey 2020-21 has highlighted the achievements of PM-JAY by taking into account two important aspects:

    • PM-JAY was implemented in 2018. Hence, health indicators measured by National Family Health Surveys 4 (in 2015-16) and 5 (in 2019-20) can be compared to understand the impact of this scheme.
    • Some of the states such as West Bengal, Odisha, Telangana etc. are not implementing the PM-JAY scheme. Hence, to analyse the impact of PM-JAY scheme, the health outcomes in these states can be compared with rest of India.

    Benefits:

    Improvement in Health Insurance: The proportion of households covered under health insurance increased by 54 per cent from NFHS 4 to NFHS 5 in the states that adopted PMJAY. However, it decreased by 10 per cent in the states that did not adopt PMJAY.

    Improvement in Health Outcomes (such as IMR, MMR, Access to Family Planning, Institutional births etc)  in the states that have adopted PMJAY.

    Concerns and Challenges

    Low package rates: The government has published the rates that insurance companies would pay hospitals for around 1500 procedures covered under the scheme. These rates have become a sticking point for hospitals, which have criticised them as arbitrary and low. For example, the price of Caesarean section, at Rs 9,000 for five days of hospital stay, food and consultation. Implications- Reduce the quality of healthcare or make it unviable for private hospitals.

    Frauds: Under the scheme, though the card is issued to the head of the family, any number of family members may be enrolled to avail benefits under the programme. As such, people who do not meet the eligibility criteria for Ayushman Bharat may either get false poverty certificates to get a card themselves or claim false relationships to people who have these cards.

    Politicisation of Scheme: Some of the states such as West Bengal, Odisha, Telangana etc. have decided not to implement PM-JAY Scheme.

    Budget allocation for PM-JAY has stagnated at Rs 6,400 crore. ( Needed amount- around Rs 1 lakh crores on annual basis)

    Low Coverage of beneficiaries

    Absence of Private healthcare facilities in backward states.

    Unethical practices by private sector wherein hospitals are performing unnecessary procedures ( for example, Caesarean operation instead of normal delivery)

    Strategies to ensure Universal Health Coverage in India

    We can learn from countries such as South Korea, Singapore, Thailand, Switzerland, Sri Lanka etc. which have provided for universal health care. This can be done through

    (a) Steadily increasing the Public expenditure on health

    (b) Enhancing the capacity of the Public healthcare facilities to utilize funds efficiently.

    (c) Expanding the coverage of Healthcare Insurance

    (d) Government acting as enabler and facilitator to enable private sector to provide affordable healthcare.

    Declaration of Right to Health as Fundamental Right: Presently, the Right to health is not explicitly included under the Indian constitution as Fundamental right. In order to ensure greater commitment of the government towards health, there is a need to include health as a constitutional and fundamental right as provided under Brazilian constitution.

    Reducing Information Asymmetry in Private healthcare: The Economic Survey 2020-21 has highlighted the problem of Information asymmetry in the private healthcare system leading to exploitation of the patients, higher costs and poor-quality delivery. Hence, there is a need to set up Information Utilities that would give ratings to the private hospitals and doctors based upon the quality of healthcare delivery. Such a rating mechanism would enable the people to choose the best doctors (or hospitals), reduce the information asymmetry and force the private healthcare system to be cost-efficient and provide high quality service delivery.

    Devising Universal Health Coverage: The National Health Policy 2017 seeks to progressively achieve the Universal health coverage by enhancing the public health expenditure to 2.5% of the GDP in a time bound manner. The Srinath Reddy Committee which submitted its recommendations in 2010 has highlighted as to how the Universal Health coverage can be achieved in India. This can be done in the following manner:

    • Both Central and State Governments should increase public expenditures on health to at least 3% of GDP by 2022. The increase in the public expenditure can be possible by increasing the Tax-to-GDP ratio of the Government.
    • The Government must ensure availability of free essential medicines by increasing public spending on drug procurement.
    • Since the primary health care forms the foundation of the health care system, the Government must spend at least 70% of its fund for improving the primary health care system.

    Decentralised approach: Decentralization has played a fundamental part in Brazilian health-financing reform. In 1996, legislation transferred part of the responsibility for the management and financing of health care to the states and municipal governments. States are required to allocate a minimum of 12% of the total budget to health while municipal governments must spend 15% of their budget on health.

    Similarly, in case of India, there is a need to take the states and local bodies on board to ensure the success of health care interventions. The states and local bodies must be required to spend a certain percent of their total budget towards the health.

     

    UPSC Current Affairs: An idea on taxation that is worth a try| Page 07

    UPSC Syllabus: Mains – GS Paper III - Economy

    Sub Theme:  Taxation | UPSC

    A number of multinational companies shift their profits from high tax jurisdiction to tax haven countries such as Mauritius, Singapore, Hongkong, Cayman Islands, Panama, Bermuda etc. This is referred to as "Base Erosion profit Shifting" (BEPS). The BEPS takes place multiple routes such as:

    1. Misuse of DTAA
    2. Treaty Shopping
    3. Round Tripping
    4. Misuse of Patent box Regime etc.

    This causes huge loss to the revenue of the Governments. According to research by the Tax Justice Network campaign group, total revenue lost at the global level on an annual basis due to BEPS is as high as $ 427bn.  India’s annual tax losses due to corporate tax abuse are estimated at over $10 billion. Almost $8.7 trillion of global wealth is stored in these low-tax jurisdictions (known to us more familiarly as tax havens). 

    Hence, in order to prevent these MNCs from shifting their profits to low tax jurisdictions, recently, the Joe Biden Administration in USA has unveiled a new plan known as "Made in America Tax Plan" in order to boost economic activity and create employment opportunities. One of the most important proposals put forward by US is with respect to adoption of Global Minimum Corporate tax.

    What is Base Erosion and Profit shifting (BEPS)?

    It refers to tax avoidance strategy wherein the companies take undue advantage of the tax exemptions in order to pay less tax. As part of tax avoidance strategy, the Multinational companies shift their profits from high tax jurisdictions to low tax jurisdictions (tax havens) in order to pay less tax. This leads to erosion of the tax base of the high tax jurisdictions. This causes significant revenue losses for the high tax jurisdictions.  A report published by OECD in 2017 has stated that BEPS is responsible for tax losses of around $200bn globally.

    Some of the tools of the BEPS are misuse of DTAA, Round Tripping, Treaty Shopping.

    DTAA

    A DTAA is a tax treaty signed between two or more countries. Its key objective is that tax-payers in these countries can avoid being taxed twice for the same income. A DTAA applies in cases where a tax-payer resides in one country and earns income in another. DTAAs are intended to make a country an attractive investment destination by providing relief on dual taxation. Such relief is provided by exempting income earned abroad from tax in the resident country. India has signed DTAA with more than 80 countries.

    Misuse of DTAA

    India has signed DTAA with the tax havens such as Mauritius, Singapore, Cayman Islands etc. These DTAAs have been misused by the MNCs in order to reduce their tax liability in India. For example, If company (Shell Company) is registered in tax haven and carries out the operations through its subsidiary based in India. Under the provisions of DTAA, the company would be liable to pay tax only in the tax haven country, even for the profits which it makes in India. This causes significant revenue loss for India.

    Note: There is no universally acceptable definition of a tax haven country. However, a Tax Haven Country has certain peculiar features such as:

    • Nil or Nominal Tax rates.
    • Does not share Tax related Information with other Countries
    • Presence of large number of Shell Firms. These Firms are legally registered in a tax haven countries, but do not have substantial presence there. Most of its activities are carried out through its subsidiaries based in other countries. This is mainly done because under the Terms of DTAA, the Firm would be required to pay tax only in a tax haven country and not in other countries. Since, the tax rates are either Nil or Nominal in a tax haven country, the shell firm significantly reduces its tax liability.

    Treaty Shopping

    Under Treaty Shopping, a foreign company routes its investment into India through a tax haven country i.e. it registers a company headquartered in tax haven and then establishes its Indian subsidiaries to carry out the operations. For example, Hutch's investment into India was routed through Cayman Islands. Since, the company is based in tax haven, it would be liable to pay tax to the Tax haven country.

    Round Tripping

    Round tripping refers to the practice where, capital belonging to India goes out to tax haven country where it is used to set up Shell Company. The money is then, reinvested back in India in the form of FDI.

    The profit out of such investment cannot be taxed in India as the capital  is coming from tax haven.

     

    UPSC Current Affairs: India’s first InVIT | Page 03

    UPSC Syllabus: Mains – GS Paper III – Economy

    Sub Theme: National Monetization Pipeline | UPSC

    In the Union Budget 2021-22, the Finance Minister had announced the National Monetization Pipeline. As part of National Monetization pipeline, assets created by PSUs such as NHAI, PGCIL, Railways etc. would be sold and money raised would then be used for the creation of new infrastructure assets.

    Presently, we have around 2 publically listed InVITs ( IRB InVIT and India Grid) both of which have been sponsored by the private companies. Now, the PGCIL has become the first PSU in India to sponsor its own InVIT to monetize its assets.

    Comments

    Aditi Garg 1 week ago

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    Adnan khan 1 week ago

    How to download notes of this analysis

    Vishal Gohil 1 week ago

    @Aditi Garg & @Adnan Khan Try downloading them via telegram channel. Notes are available there.