THE HINDU EDITORIAL : October 26, 2017


A) Pursuit of growth

The Centre’s decision to infuse ₹2.11 lakh crore of fresh capital into public sector banks over the next two years, through a blend of financial mechanisms, should help revive the growth momentum. Saddled with bad loans as well as stressed assets of close to ₹10 lakh crore, India’s banking sector has been naturally wary in recent quarters of extending fresh loans, as reflected in bank credit growth slipping to a 60-year low of just 5% this April. Since its first year in office, the government has been seized of what Chief Economic Adviser Arvind Subramanian calls the twin balance-sheet problem. If over-leveraged companies are unable to invest or borrow afresh, and banks are unwilling or/and unable to finance fresh investments, a private investment-led recovery is unlikely. However, it was only late last year that a new bankruptcy law was introduced, and over the course of this year the Reserve Bank of India has asked banks to invoke insolvency proceedings in the case of 50-odd accounts if settlements remain elusive. Banks, under pressure from the RBI to acknowledge the stress on their books, face the prospect of taking heavy haircuts to write off some of these loans at whatever residual value remains in the businesses. When combined with their need to scale up their capital base to comply with Basel III norms, public sector banks have naturally been in damage control mode rather than chasing growth like their private sector peers. The three-part package for lenders includes ₹18,000 crore from the Budget, ₹58,000 crore that banks can raise from the market (possibly by tapping the significant room available to dilute the government’s equity that remains well over 51%) and the issue of recapitalisation bonds worth ₹1.35 lakh crore. Though there are still many unknowns about the nature of these bond issues (whether they will affect fiscal deficit calculations or be off-balance-sheet sovereign liabilities, for instance), the overall plan gives banks a better sense about their immediate future. The bonds will front-load capital infusion while staggering the fiscal impact, which Mr. Subramanian expects to be limited to the annual interest costs on these bonds of about ₹9,000 crore. The Centre is betting this will strengthen the banks’ ability to extend credit at a faster clip. RBI Governor Urjit Patel has said this is the first time in a decade that there is a real chance of meeting the banking sector’s challenges. But it is still a long haul. While more details on this package are awaited, including how banks will be picked for funding and the possible interplay with proposed mergers of banks, equally critical will be the reforms that Finance Minister Arun Jaitley has promised as a necessary adjunct. Banks are where they are, not just because of capital constraints but also because of their inefficiencies and past lending overdrives.

B) The life of Xi

When Xi Jinping was elected the leader of China and the Communist Party five years ago, many had predicted that he would become the most powerful leader since Deng Xiaoping, the architect of the country’s economic rise. They may be wrong. With the 19th party congress, which concluded on Tuesday and has written his name and ideas into the party constitution, Mr. Xi now appears to be the strongest leader since Mao Zedong. This amassing of Mao-like powers could also allow Mr. Xi to stay in power beyond the usual two terms. Two of Mr. Xi’s predecessors had stepped down after two terms to ensure an orderly transition in the party and the government, where there is no dearth of talented and ambitious leaders. The practice has been for the mid-term party congress to choose the likely successor of the incumbent and groom him over five years to eventually take over the reins. However, the party doesn’t seem to have chosen anyone this time. All five new faces in the seven-member Politburo Standing Committee, the highest decision-making body in China, are in their 60s, which lends credence to speculation that Mr. Xi is not planning to step down when his second term ends in 2022. Even if he does step down from the government, given the stature he has already achieved within the party, he could retain a Deng-like sway over policy matters. In Mr. Xi’s world view, China has passed two eras — the revolutionary era launched by Mao and the economic reforms spearheaded by Deng. The “Xi Jinping thought on socialism with Chinese characteristics for a New Era” that has been written into the party charter marks “a new era”. This one is about making China economically stronger and geopolitically more influential. In his three-and-a-half-hour speech at the congress, Mr. Xi placed great emphasis on strengthening the military and resisting “the whole range of erroneous viewpoints”. The message is that the era of “peaceful rise” is over. The more combative foreign policy Mr. Xi’s administration is pursuing will continue, perhaps more aggressively, while at home he will consolidate more power. But this doesn’t mean it will be a cakewalk. If China takes a more aggressive, militaristic view of its neighbourhood, it could trigger an aggressive response from neighbours such as India and Japan. North Korea remains as much a foreign policy problem for Mr. Xi as for President Donald Trump. China’s export-oriented economy is still not free from the global economic whirlwinds. Mr. Xi will have to factor in global market concerns while taking key economic decisions at home. Besides, though the transition in the Communist Party has been orderly at least in the last 30 years, it was not free from troubles. Mr. Xi would be mindful of how he projects his own power, lest it triggers a backlash. The challenge before him is to find a balance between his ambitions and the realities that China confronts today.


Words/ Vocabulary

1) Saddled

Meaning: Burden (someone) with an onerous responsibility or task.

Example: He’s saddled with debts of $12 million.

Synonym: Burden, Encumber

2) Wary

Meaning: Feeling or showing caution about possible dangers or problems.

Example: Dogs which have been mistreated often remain very wary of strangers.

Synonym: Cautious, Careful

Antonym: Incautious, Careless

3) Slipping

Meaning: Be behaving in a way that is not up to one’s usual level of performance.

Example: Oh, Daddy, I don’t understand why my common sense is slipping.

Synonym: Decline, Deteriorate

Antonym: Remain, Prefect

4) Seized

Meaning: Take hold of suddenly and forcibly.

Example: She jumped up and seized his arm.

Synonym: Grab, Grasp

5) Over-leveraged

Meaning: (of a company) having taken on too much debt.

Example: Thus the strain of the adjustment forced on its overleveraged UK operations falls directly on the Tata group in India.

6) Afresh

Meaning: In a new or different way.

Example: She left the job to start afresh.

Synonym: Anew, Again

7) Bankruptcy

Meaning: The state of being bankrupt.

Example: Many companies were facing bankruptcy.

Synonym: Insolvency, Liquidation

Antonym: Richness, Wealth

8) Invoke

Meaning: Cite or appeal to (someone or something) as an authority for an action or in support of an argument.

Example: The antiquated defence of insanity is rarely invoked in England.

Synonym: Cite, Refer to

9) Insolvency

Meaning: The state of being insolvent.

Example: The club was facing insolvency.

Synonym: Bankruptcy, Liquidation

Antonym: Rise, Win

10) Elusive

Meaning: Difficult to find, catch, or achieve.

Example: Success will become ever more elusive.

Synonym: Difficult to catch, Difficult to find

Antonym: Confronting, Enticing

11) Prospect

Meaning: The possibility or likelihood of some future event occurring.

Example: There was no prospect of a reconciliation.

Synonym: Likelihood, Hope

Antonym: Hopelessness, Unlikelihood

12) Haircuts

Meaning: A reduction in the stated value of an asset.

Example: The banks would probably be willing to take a haircut on the rest.

13) Residual

Meaning: Remaining after the greater part or quantity has gone.

Example: The withdrawal of residual occupying forces.

Synonym: Remaining, Leftover

Antonym: Base, Core

14) Comply

Meaning: Act in accordance with a wish or command.

Example: We are unable to comply with your request.

Synonym: Abide by, Act in accordance with

Antonym: Deny, Dissuade

15) Dilute

Meaning: Make (something) weaker in force, content, or value by modification or the addition of other elements.

Example: The reforms have been diluted.

Synonym: Diminish, Reduce

Antonym: Grow, Develop

16) Recapitalisation

Meaning: Provide (a business) with more capital, especially by replacing debt with stock.

Example: A plan to recapitalize the state-owned airline.

17) Deficit

Meaning: The amount by which something, especially a sum of money, is too small.

Example: An annual operating deficit.

Synonym: Shortfall, Deficiency

Antonym: Enough, Abundance

18) Instance

Meaning: An example or single occurrence of something.

Example: A serious instance of corruption.

Synonym: Example, Occasion

19) Front-load

Meaning: Distribute or allocate (costs, effort, etc.) unevenly, with the greater proportion at the beginning of the enterprise or process.

Example: What we need, they say, is front-loaded temporary tax cuts.

20) Infusion

Meaning: The introduction of a new element or quality into something.

Example: The infusion of $6.3 million for improvements.

Synonym: Introduction, Instilling

21) Staggering

Meaning: Arrange (events, payments, hours, etc.) so that they do not occur at the same time.

Example: Meetings are staggered throughout the day.

Synonym: Spread, Spread out

22) Haul

Meaning: Pull or drag with effort or force.

Example: He hauled his bike out of the shed’

Synonym: Drag, Pull, Tug

Antonym: Loss, Effortless

23) Interplay

Meaning: The way in which two or more things have an effect on each other.

Example: The interplay between inheritance and learning.

Synonym: Interaction, Interchange

24) Adjunct

Meaning: A thing added to something else as a supplementary rather than an essential part.

Example: Computer technology is an adjunct to learning.

Synonym: Supplement, Addition

Antonym: Lessening, Subtraction

25) Constraints

Meaning: A limitation or restriction.

Example: Time constraints make it impossible to do everything.

Synonym: Restriction, Limitation

Antonym: Liberty, Allowance

26) Amassing

Meaning: Gather together or accumulate (a large amount or number of material or things) over a period of time.

Example: He amassed a fortune estimated at close to a million pounds.

Synonym: Gather, Collect

Antonym: Divide, Scatter

27) Transition

Meaning: The process or a period of changing from one state or condition to another.

Example: Students in transition from one programme to another.

Synonym: Change, Move

Antonym: Same, Idle

28) Dearth

Meaning: A scarcity or lack of something.

Example: There is a dearth of evidence.

Synonym: Lack, Scarcity

Antonym: Plenty, Sufficient

29) Incumbent

Meaning: Necessary for (someone) as a duty or responsibility.

Example: The government realized that it was incumbent on them to act.

Synonym: Binding, Obligatory

30) Credence

Meaning: Belief in or acceptance of something as true.

Example: Psychoanalysis finds little credence among laymen.

Synonym: Acceptance, Belief

Antonym: Denial, Distrust

31) Stature

Meaning: Importance or reputation gained by ability or achievement.

Example: An architect of international stature.

Synonym: Reputation, Repute

Antonym: Inability, Insignificance

32) Spearheaded

Meaning: Lead (an attack or movement)

Example: He’s spearheading a campaign to reduce the number of accidents at work.

Synonym: Lead, Head

Antonym: Mislead, End

33) Erroneous

Meaning: Wrong; incorrect.

Example: Employers sometimes make erroneous assumptions.

Synonym: Mistake, Error

Antonym: Correct, Right

34) Combative

Meaning: Ready or eager to fight or argue.

Example: He made some enemies with his combative style.

Synonym: Pugnacious, Aggressive

Antonym: Kind, Agreeable

35) Consolidate

Meaning: Combine (a number of things) into a single more effective or coherent whole.

Example: All manufacturing activities have been consolidated in new premises.

Synonym: Combine, Unite

Antonym: Scatter, Remove

36) Cakewalk

Meaning: An absurdly or surprisingly easy task.

Example: Winning the league won’t be a cakewalk for them.

Synonym: Easy task, Easy job

Antonym: Difficult

37) Trigger

Meaning: Cause (an event or situation) to happen or exist.

Example: An allergy can be triggered by stress or overwork.

Synonym: Precipitate, Prompt

Antonym: Halt, Prevent

38) Whirlwinds

Meaning: Used with reference to a very energetic person or a tumultuous process.

Example: A whirlwind of activity.

Synonym: Turbulence, Swirl

Antonym: Delay, Rest

39) Mindful

Meaning: Conscious or aware of something.

Example: I arrived home for the summer, ever mindful of my obligations to my parents.

Synonym: Aware of, Conscious of

Antonym: Heedless, Ignorant

40) Confronts

Meaning: Face up to and deal with (a problem or difficulty)

Example: Usually the best thing you can do in an embarrassing situation is to confront it head on.

Synonym: Tackle, Face

Antonym: Evade, Avoid