What is liquidity premium in finance?

Also known as the illiquidity premium, this refers to the additional return that an investor can earn from any investment that cannot be immediately liquidated for cash in the market. Risk-averse investors generally try to avoid investing in highly illiquid assets like real estate due to the time it takes to sell these assets. This causes successful investors in illiquid assets to earn a much higher return than other investors who prefer to invest only in highly liquid assets. By the same logic, since most investors would be willing to invest in highly liquid assets, the returns from such investments generally turn out to be lower than the returns from illiquid investments.

Source: The Hindu, 7/02/2019

At the cost of quality

The decision to provide financial rewards for publication in science journals and patents is fraught with problems

On January 30, a little more than four years after the last hike, the Ministry of Science and Technology increased the fellowship stipend for PhD students by nearly 25%. The government says the hike will be reviewed periodically. Since the increase is far less than the 80% hike that research fellows have been demanding for the last six months, they have decided to continue with their protests. The government is also planning to provide “financial and academic incentives to enhance and recognise the performance of research fellows”, for which an Inter-Ministerial Empowered Committee has been set up. Excerpts of the Committee’s recommendations, tweeted by the Department of Science and Technology on February 2, provide a glimpse of the financial rewards to be given for publication and patents. While the modalities are yet to be worked out, offering financial rewards for publication is a bad idea.

Cause for concern

Giving rewards based on papers published in journals, and determining the incentive based on whether the paper is published in an international or Indian journal, is fraught with problems. In China, for example, researchers were given about $44,000 in 2016 for a single paper published in prestigious journals such as Nature and Science . The impact factor (a proxy for the relative importance of a journal) of journals was used to calculate the prize money for publication. This led to an unprecedented increase in unethical research practices and frauds committed by Chinese researchers. This could also happen in India, which already has an ignominious record in this area and has no nodal body to address scientific frauds and unethical practices.

In India, a one-time financial reward of Rs. 50,000 and Rs. 20,000 has been recommended for a paper published in an international and Indian journal, respectively. This is a “hare-brained scheme,” says P. Balaram, former director of the Indian Institute of Science and former editor of Current Science . “Whoever has come up with this is ignorant of the history of scientific publishing. They will destroy research (with this scheme).” It is worth remembering that though the University Grants Commission’s intent to introduce Academic Performance Indicators was good, APIs were largely responsible for the spike in predatory journals published from India. There is little guarantee that the reward system based on publication will not lead to further erosion in the quality of science research in India.

In addition, giving greater rewards for publication in international journals makes no sense as international journals are not uniformly superior in quality to Indian ones. While Nature, Science, Cell and The Lancet are prestigious, there are many journals which are of poor quality. Similarly, some Indian journals are better than international ones despite having a low impact factor.

“If average or below average papers are submitted to Indian journals, the overall quality of the journals will be low compared with international titles,” says Professor Balaram. By giving 60% lower stipend to students publishing in Indian journals, the government will unwittingly be widening the gap between Indian and international journals, which will be self-destructive in the long run.

Also, “Indian science suffers from deep-rooted, structural problems — fellowships get delayed and project funding is not released on time,” says Gautam Menon, a computational biologist at the Institute of Mathematical Sciences, Chennai. He argues that “the government should reward good research with generous funding and fewer constraints.” With hundreds of papers being published each year, it is debatable whether the government will be able to provide incentives given that research labs have reportedly been facing a fund crunch of late.

Reward for patents

The proposal to provide students an incentive of Rs. 1,00,000 on obtaining a patent (Indian or international) is a bigger recipe for disaster. While obtaining a patent is not difficult, it costs Rs. 10,000-Rs. 30,000 to file a patent in India. Drafting the patent costs an additional Rs. 50,000 and there is also an annual renewal fee. Also, not all patents translate into products. The Science Ministry has not learnt from the mistakes of the Council of Scientific and Industrial Research (CSIR). In late 2016, the CSIR instructed its 38 labs to stop indiscriminate filing of Indian and foreign patents. Then CSIR Director-General Girish Sahni had said that a “majority of patents are ‘biodata’ patents” and had been “filed for the sake of filing without any techno-commercial and legal evaluation”. In such a scenario, a financial incentive for patent-filing will only exacerbate the problem.

prasad.ravindranath@thehindu.co.in

Source: The Hindu, 7/02/2019

We need a leap in healthcare spending

India needs to focus on long-term investment, not only episodes of care

The Central and State governments have introduced several innovations in the healthcare sector in recent times, in line with India’s relentless pursuit of reforms. However, while the government’s goal is to increase public health spending to 2.5% of GDP, health spending is only 1.15-1.5% of GDP. To reach its target, the government should increase funding for health by 20-25% every year for the next five years or more.

While the Interim Budget is responsive to the needs of farmers and the middle class, it does not adequately respond to the needs of the health sector. The total allocation to healthcare is Rs. 61,398 crore. While this is an increase of Rs. 7,000 crore from the previous Budget, there is no net increase since the total amount is 2.2% of the Budget, the same as the previous Budget. The increase roughly equates the Rs. 6,400 crore allocated for implementation of the Ayushman Bharat-Pradhan Mantri Jan Arogya Yojana (PMJAY).

Per capita spending on health

According to the National Health Profile of 2018, public per capita expenditure on health increased from Rs. 621 in 2009-10 to Rs. 1,112 in 2015-16. These are the latest official numbers available, although in 2018 the amount may have risen to about Rs. 1,500. This amounts to about $20, or about $100 when adjusted for purchasing power parity. Despite the doubling of per capita expenditure on health over six years, the figure is still abysmal.

To understand why, let’s compare this with other countries. The U.S. spends $10,224 per capita on healthcare per year (2017 data). A comparison between two large democracies is telling: the U.S.’s health expenditure is 18% of GDP, while India’s is still under 1.5%. In Budget terms, of the U.S. Federal Budget of $4.4 trillion, spending on Medicare and Medicaid amount to $1.04 trillion, which is 23.5% of the Budget. Federal Budget spending per capita on health in the U.S. is therefore $3,150 ($1.04 trillion/ 330 million, the population).

In India, allocation for healthcare is merely 2.2% of the Budget. Per capita spending on health in the Budget in India is Rs. 458 (Rs. 61,398 crore/ 134 crore, which is the population). (Medicare and Medicaid come under ‘mandatory spending’ along with social security.) Adjusting for purchasing power parity, this is about $30 — one-hundredth of the U.S.

Admittedly, this runaway healthcare cost in the U.S. is not to be emulated, since comparable developed countries spend half as much per capita as the U.S. Yet, the $4,000-$5,000 per capita spending in other OECD countries is not comparable with India’s dismal per capita health expenditure. The rate of growth in U.S. expenditure has slowed in the last decade, in line with other comparable nations.

The Rs. 6,400 crore allocation to Ayushman Bharat-PMJAY in the Interim Budget will help reduce out-of-pocket expenditure on health, which is at a massive 67%. This notwithstanding, per capita Budget expenditure on health in India is among the lowest in the world. This requires immediate attention.

Health and wellness centres

Last year, it was announced that nearly 1.5 lakh health and wellness centres would be set up under Ayushman Bharat. The mandate of these centres is preventive health, screening, and community-based management of basic health problems. The mandate should include health education and holistic wellness integrating modern medicine with traditional Indian medicine. Both communicable disease containment as well as non-communicable disease programmes should be included. An estimated Rs. 250 crore has been allocated for setting up health and wellness centres under the National Urban Health Mission. Under the National Rural Health Mission, Rs. 1,350 crore has been allocated for the same. The non-communicable diseases programme of the National Programme for Prevention and Control of Cancer, Diabetes, Cardiovascular Diseases and Stroke has been allocated Rs. 175 crore, from Rs. 275 crore. Allocation to the National Tobacco Control Programme and Drug De-addiction Programme is only Rs. 65 crore, a decrease of Rs. 2 crore. The allocation for each of the wellness centres is less than Rs. 1 lakh per year. This is a meagre amount.

History shows that where there is long-term commitment and resource allocation, rich return on investment is possible. For instance, AIIMS, New Delhi is the premier health institute in India with a brand value because of resource allocation over decades. AIIMS Delhi alone has been allocated nearly Rs. 3,600 crore in the Interim Budget, which is a 20% increase from last year. Similar allocation over the long term is needed in priority areas.

Prevention and its link to GDP

NITI Aayog has proposed higher taxes on tobacco, alcohol and unhealthy food in order to revamp the public and preventive health system. This has not found its way into the Interim Budget. A focused approach in adding tax on tobacco and alcohol, to fund non-communicable disease prevention strategies at health and wellness centres, should be considered. Cancer screening and prevention are not covered. There is no resource allocation for preventive oncology, diabetes and hypertension. Prevention of chronic kidney disease, which affects 15-17% of the population, is not appropriately addressed. The progressive nature of asymptomatic chronic kidney disease leads to enormous social and economic burden for the community at large, in terms of burgeoning dialysis and transplant costs which will only see an exponential rise in the next decade and will not be sustainable unless we reduce chronic kidney disease incidence and prevalence through screening and prevention.

Due to lack of focus in preventive oncology in India, over 70% of cancers are diagnosed in stages III or IV. The reverse is true in developed countries. Consequently, the cure rate is low, the death rate is high, and treatment of advanced cancer costs three-four times more than treatment of early cancer. The standard health insurance policies cover cancer but only part of the treatment cost. As a consequence, either out-of-pocket expenditure goes up or patients drop out of treatment.

Increase of GDP alone does not guarantee health, since there is no direct correlation between GDP and health outcomes. However, improvement in health does relate positively to GDP, since a healthy workforce contributes to productivity. We don’t mean to say that funding must be redirected from current allocations to preventive care. The 1,354 packages for various procedures in PMJAY must be linked to quality. For various diseases, allocation should be realigned for disease management over a defined time period, not merely for episodes of care. Further, the health sector must be made a priority area, like defence. Since a major innovation in universal healthcare is being rolled out, it must be matched with a quantum leap in funding. Only if we invest more for the long-term health of the nation will there be a similar rise in GDP.

Dr. T.S. Ravikumar is Director of JIPMER, Puducherry, and Dr. Georgi Abraham is Professor of Medicine at Pondicherry Institute of Medical Sciences

Source: The Hindu, 7/02/2019

Develop effective policies to regulate tech giants

Facebook doesn’t merely connect people. It is a growing marketplace where user information is sold to advertisers.

It was a leap year. The year of the Athens Olympics. Only four years since Y2K, George W Bush would win his second term as President in November, and there would be a devastating tsunami in the Indian Ocean towards the fag end of the year. But early in 2004, recovering from an almost expulsion from Harvard for having hacked their student directories to create Facemash (a sort of ‘Hot or Not’ ranking site for Harvard students) and having had Facemash unceremoniously taken down, a 19-year-old Mark Zuckerberg was toying with code to create a way to connect all the student directories (called “face books”) of Harvard. This project was launched 15 years ago on February 4, 2004, as The Facebook. It was such a hit that within a month of going live, more than half the undergraduate students of Harvard had signed up to the service. In about three months, it had expanded to most universities in the US and Canada. By June, it had become an incorporated company, set up headquarters in Palo Alto, California, and was well on its way to becoming the social media behemoth it now is.

In the past 15 years, with their famous “move fast and break things” mantra, Facebook (having dropped the definite article from its name) has managed to go from being a place where people found old, long lost school friends in the mid-2000s, to being the harbinger of borderless digital movements, such as the one that aided the Arab Spring and Occupy Movements in the early 2010s, to now being one of the Big Four in the technology world, and one of the worst offenders in terms of privacy, surveillance, harassment, and bad psychological effects. The rise and growth of Facebook — which now owns Instagram and WhatsApp — has allowed it to become, in many ways, the largest purveyor of ways in which people share content or communicate with each other across the world.

Not only has this radically changed the way we communicate with friends, family, social acquaintances, and even colleagues, it has also created a system of amplification for the worst tendencies of human beings — be it bullying, hate speech, spreading malicious rumours (sometimes euphemistically referred to as fake news), or misogyny. The Cambridge Analytica scandal showed that Facebook had allowed the harvesting of personal data of up to 87 million users without their consent. It brought into focus exactly how much power companies, such as Facebook, wield. And how easy it is for someone to manipulate public opinion using social media.

The crux of the matter is that Facebook — and indeed Google and Twitter and Uber and Amazon — are not merely companies that connect people. They are centres of an advertising marketplace, in which you, the user, is the product being sold to the advertisers. Make no mistake, the goal is still to make you buy things — be they in-game purchases of boosters for your sword, a politician’s position on important political matters, or a new brand of toothpaste — but in a way that allows these companies to know a lot more about you than you may want (or choose to tell them). As he faced American lawmakers, Zuckerberg was asked how Facebook made money, and he answered, simply, “we run ads”. What he chose to not mention was that these ads are targeted to individual users based on not just what they share or say on Facebook, but by collecting data about their behaviour across the internet.

Fifteen years ago, it would have been unthinkable that a Silicon Valley tech company was being blamed for everything, from a teenager’s suicide in the UK to ethnic violence in Myanmar, according to the UN. But that is the world that Facebook built for us as it became the world’s largest social media site; and one that we must now learn to live and survive in.

The way forward from here must, therefore, necessarily be one of regulation of technology giants through forward-thinking digital policies that will create safeguards for users of platforms such as Facebook. India has made a good beginning by creating one of the world’s most robust net neutrality laws. Europe’s General Data Protection regulation (GDPR) is another step in the right direction. But far more needs to be done in order to regulate the manner in which technology companies control the world. The onus, however, is not just on governments. As users, we must demand the right to own our data and know how it is used and by who — be it Facebook, or even our elected governments.

Vidya Subramanian is a post doctoral research fellow at the Centre for Policy Studies, IIT Bombay

Soothing Sufiana

 Sufism is a mystical dimension of Islam, transcending all religions. It is a way of experiencing truth and Self-realisation and, in the process, takes the seeker on a path of serenity, piety and divinity by means of love and devotion to God. Truth is the substance. Truth is the courage, it is the power of flight; some fly and some remain in the garden, some go beyond the stars. Sufi music is evolved and illuminated. It is the enchanting outcome of the interface between Hinduism and Islam. The word ‘sufi’ comes from the Arabic word ‘suf ’ that means pure. Sufi music is all about the relationship between the moods of the lover-poet-saint and the beloved. Sufism originated with the foundation of the Chishti order in Khorasam, Persia. Sufi compositions contain effusive verses with an esoteric dimension written in an ornate language. Dargah Sharif at Ajmer — resting place of Saint Khwaja Moinuddin Chishti — is renowned for its qawwals and is a popular pilgrimage destination. It is where one can intensely feel the Sufi experience. Particularly on Thursdays, the entire area of the Dargah Sharif is suffused with spirituality. Qawwalis, raga-based compositions, are sung in tandem with the combination of harmonium and tabla. Sufism transcends all boundaries of language and religion. Sufi music has the power to heal and its philosophy has a soothing effect. Qawwali is an expression of love between the lover and the beloved that elevates the spirit, bringing God and performer together. In such exaltations, the listener could slip into a mystical trance.

Source: Economic Times, 7/02/2019

India’s Youth Suicide Binge

Younger people, and married women, are more prone to suicide in India

In most countries suicide mortality increases with age. In India, the opposite happens. The suicide rate among young adults aged 15-29 is more than three times the national average. This makes us a country with one of the highest suicide rates among youth in the world. What explains this oddity? The answer lies in yet another oddity: India has a relatively high suicide rate among young adult women. Globally, suicide is much commoner among men than women. The battle to reduce suicide has also been more successful for women than men. Across nations, suicide rates for men are three to seven times as high as for women. The same pattern prevails in India across most age groups, though here the gender gap is less sharp. The oddity is among young adults for whom the gender gap virtually vanishes, and in certain locations, suicide is higher among women. One study published in the Lancet a few years ago found that suicide rate of girls aged 15-19 around Vellore, Tamil Nadu, was 148 per lakh, almost thrice the rate for similarly aged boys. The gender gap in suicide gets worse after marriage. Here is another oddity. In most Western countries, married women are less likely to commit suicide than formerly married women. India is an outlier: married women are more likely to commit suicide than divorced, widowed and separated women, according to the Million Death study, a research project based on a nationally representative mortality survey on the causes of death occurring in 1.1million homes in 6,671areas chosen randomly across the country. Science does not tell us much about the exact cause of suicide. Broadly, we know that biological, environmental and cultural factors make certain populations more vulnerable than others. High suicide rates for young married women in India could flow from a combination of these factors. It is tempting to interpret this high rate as the result of psychological and physical torture from husbands and in-laws, that is common in India. Curiously, a geographic element weakens the gender explanation of high suicide rates among young married women. South Indian states, well-known for better gender relations and female empowerment than north Indian states, have much higher youth mortality. Neighbouring Sri Lanka, with excellent social indicators and higher women’s empowerment, also has a high youth female suicide rate. This could simply reflect greater sociocultural tolerance of suicide as a way out of mental stress. In India, we have a tendency to link suicides with income or economic distress. Farmers have captured all the recent attention on suicides. Suicide among farmers is considered evidence of exceptionally high economic distress among them. Public discourse is politically motivated, highly charged, generally irreverent of facts, and substantially non-serious. In fact the suicide rate is lower for farmers than nonfarmers.
Most extant research does not associate poverty with suicide mortality. Indeed, suicide mortality in India is higher among the more educated, who are typically better off than the less educated. Crosscountry comparisons also reject a link between poverty and suicide. Among well-off OECD countries, Japan has the highest suicide rate at 20 per lakh population, followed by Switzerland at 14 per lakh. Much-poorer India’s suicide rate is 11 per lakh population. Data across Indian states lead to the same conclusion. Suicide rates are up to 10 times higher in richer southern states than in poorer northern states. Now, economic or other shocks can push the vulnerable over the edge. The collapse of the Soviet Union, for instance, sharply increased the suicide rate there. What matters is a relative worsening of economic conditions, not the absolute level of incomes. While the exact causes of suicide remain obscure, the good news is that, globally, the battle against suicides has been a successful one. Since 1994, suicide rates have fallen by more than a third globally. The sharpest decline has been in Russia, South Korea and Japan – the three countries that also have among the highest rates in the world. As in many dimensions of well-being, China has been a leader in the battle against suicide. Its rate has fallen to 7 per lakh in recent years. Like India, China used to have high suicide rates for young women, but that rate has fallen by 90% since the mid-1990s. A contributing factor is urbanisation that granted women greater freedom of work; opportunities to leave violent husbands and in-laws; and live relatively stress-free lives in cities. Means restriction is one of the most effective strategies. In Britain, simply repackaging of painkillers from bottles to blister packs reduced suicide death from overdose of paracetamol by 44%. Limiting access to guns in Australia and restricting alcohol distribution in Russia lowered suicides. In India, toxic pesticides are often used to end life. Better packaging and restricted access of pesticides could reduce the risk of suicide in rural areas. Globally, a major factor contributing towards reduced suicide is better diagnosis and treatment of mental illnesses. Anti-depressants, psychiatric help, access to suicide lifelines, and just the availability of somebody to talk to sympathetically can curb suicides. It would have to be a societal effort and not just something left to the government. This requires compassion and caring towards a targeted vulnerable population, and cannot be simply addressed with buckets of money. Farm loan waiver, every politician’s favourite policy choice to tackle suicide, is extremely blunt, leaky and wasteful. Imagine the chance that a state or nation-wide loan waiver will reach the 0.008% of farmers who are at risk of committing suicide?

 The writer is Professor of Social Policy at Columbia University

Source: Times of India, 7/02/2019

Focus on the positive, not the negative

As clichéd as it sounds, looking at the positives, rather than negatives, does help

I was casually chatting with a friend of mine, a medical practitioner, a doctor, when he was approached by a senior gentleman. The elder was complaining about his apparent ill health.

The gentleman had lived a healthy existence for most of his life, and now owing to his having grown old, seemed to suffer mild infirmities.

He asked my friend as he shared his plight, ‘why me’?

My friend recounted an incident from the life of the legendary Arthur Ashe, the tennis player, which struck me as significant.

Ashe was diagnosed with terminal illness owing to the poor blood transfusion he had been subjected to. Several of his well-wishers came to commiserate with him and one asked “why should you have got this?” Ashe with equanimity responded, “I did not ask ‘Why me?’ when I won the Wimbledon, why should I therefore now ask ‘Why me?’”

When joy envelops us we accept it without thanks many times, yet when we are overcome with sadness we ask ‘why me?’

My friend then suggested to the ageing gentleman, “Look back on all the good times you have had, and in doing so, the suffering you are currently undergoing will be less daunting.”

This I thought was true for me. If I can remember with thanks and recall the good times in my life, the pain of what I may be going through currently may distract me less and I can then re-direct my energy to focus on possibilities rather than paucity.

The writer is an organisational and behavioural consultant.

Source: The Hindu, 4/02/2019