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Indian Express Editorial Analysis

23-April-2024

1. The cost of health

Topic: GS2 – Governance – Government policies – Issues arising out of their design & implementation

This topic is relevant for both Prelims and Mains as the analysis delves into the role of the judiciary, specifically the Supreme Court, in addressing societal issues such as healthcare accessibility and affordability.

 

Context:
  • In the contemporary landscape of healthcare, a dire scenario unfolds where individuals face not only the threat of illness but also the looming specter of financial ruin due to exorbitant medical costs.
  • This situation, vividly painted through a narrative lens, underscores the urgency of addressing healthcare affordability and accessibility.
  • Amidst this backdrop, the intervention of the Supreme Court in India resonates as a potential beacon of hope, albeit amidst complex challenges and entrenched interests.

 

The Supreme Court’s Intervention:

  • The recent pronouncement by the Supreme Court of India regarding healthcare costs reflects a significant judicial response to the pervasive issue of medical expenses.
  • The Court’s stance, triggered by a public interest litigation (PIL) urging for standardized charges under the Clinical Establishment Act, signifies a pivotal moment in the discourse on healthcare affordability.
  • By threatening to enforce Central Government Health Scheme (CGHS) rates, the Court aims to confront the mounting burden of healthcare costs faced by patients and their families.

Challenges and Opportunities:

  • However, the Court’s intervention raises pertinent questions regarding its effectiveness in a domain traditionally governed by governmental policies.
  • Can judicial directives effectively fill the void left by governmental inaction? What complexities does the Court navigate in wading into the realm of healthcare economics.

The Imperative of Universal Healthcare:

  • At the heart of this debate lies the imperative of universal healthcare, a policy prescription resonating globally as a means to ensure equitable access to medical services.
  • The concept advocates for publicly funded healthcare systems, thereby eliminating financial barriers to treatment based on social class or economic status.
  • Through taxation, such systems redistribute the costs of healthcare, ensuring that the affluent subsidize the medical needs of the less privileged.

The Evolution of India’s Healthcare Landscape:

  • Tracing India’s journey in healthcare provision reveals a trajectory marked by a shift towards privatization, driven by a combination of neglectful state policies and the emergence of a lucrative private healthcare sector.
  • Post-independence aspirations for universal healthcare gradually gave way to the proliferation of private hospitals catering to the needs of the elite.
  • This privatization trend accelerated post-liberalization, with for-profit hospital chains capitalizing on global investments and technological advancements.

Challenges of Private Healthcare in India:

  • Private healthcare in India, characterized by a lack of regulation and a profit-driven ethos, poses formidable challenges to equitable healthcare delivery.
  • The absence of oversight allows for irrational treatments and financial exploitation, exacerbating the plight of patients.
  • Moreover, the co-option of medical professionals into profit-oriented practices creates inherent conflicts of interest, compromising the integrity of care delivery.

Governmental Response and Policy Dilemmas:

  • Faced with the daunting task of addressing healthcare disparities, successive governments in India have adopted a patchwork approach, oscillating between efforts to revitalize public healthcare infrastructure and resorting to mass insurance schemes for the economically marginalized.
  • The introduction of the Clinical Establishment Act in 2010 aimed to bring order to the chaotic healthcare landscape, yet encountered resistance from state governments and industry stakeholders.

The Role of the Supreme Court: A Critical Juncture

  • As the Supreme Court steps into the fray, its intervention signifies a critical juncture in the quest for affordable healthcare.
  • Yet, the Court’s efficacy in tackling entrenched interests and systemic deficiencies remains uncertain.
  • While capping costs may offer temporary relief, addressing fundamental issues of state investment in healthcare infrastructure requires broader systemic reforms.

Conclusion:

  • Amidst the cacophony of electoral politics, the imperative of healthcare reform risks being overshadowed by more immediate concerns.
  • However, the plight of millions grappling with inadequate healthcare demands urgent attention.
  • As the nation stands at the crossroads of governance, the burden on the judiciary to address systemic inequities in healthcare provision looms large, underscoring the imperative of political will in effecting lasting change.
Challenges Related to Right to Health in India

Inadequate Healthcare Infrastructure:

  • Despite recent improvements, India’s healthcare infrastructure remains inadequate, particularly in rural areas.
  • India has 1.4 beds per 1,000 people, 1 doctor per 1,445 people, and 1.7 nurses per 1,000 people.
  • Over 75% of the healthcare infrastructure is concentrated in metro cities, where only 27% of the total population resides—the rest 73% of the Indian population lack even basic medical facilities.
  • High Disease Burden:
  • India has a high burden of communicable and non-communicable diseases, including tuberculosis, HIV/AIDS, malaria, and diabetes.
  • Addressing these diseases requires significant investment in healthcare infrastructure and resources.
  • According to a report by Frontiers in Public Health, more than 33% of the individuals are still suffering from infectious diseases out of the total ailing population in India.
  • The per capita out-of-pocket (OOP) expenditure on infectious diseases is INR 7.28 and INR 29.38 in inpatient and outpatient care, respectively.
  • Gender Disparities:
  • Women in India face significant health disparities, including limited access to healthcare, higher rates of maternal mortality, and gender-based violence.
  • According to the World Economic Forum 2021, India consistently ranks among the five worst countries in the world for the health and survival of females.
  • Women from poor households account for over 2,25,000 lesser hospital visits than men between 2017 and 2019 for nephrology, cardiology, and oncology services alone,
  • Limited Health Financing:
  •  India’s health financing system is limited, with low levels of public spending on healthcare.
  • This limits the government’s ability to invest in healthcare infrastructure and resources, and it can lead to inadequate healthcare services for individuals.
  • Government of India spent 2.1% of GDP on healthcare in FY23. This is much lower than the average health spending share of the GDP — at around 5.2% — of the Lower- and Middle-Income Countries (LMIC).

 

PYQ: “Besides being a moral imperative of a Welfare State, primary health structure is a necessary precondition for sustainable development.” Analyse. (150 words/10m) (UPSC CSE (M) GS-2 2021)
Practice Question:  Discuss the challenges faced by individuals in accessing affordable healthcare in India. How can the government and other stakeholders address these challenges to ensure healthcare affordability for all citizens? (250 words/15 m)

 

2. PAYING THEIR FAIR SHARE

Topic: GS2 – International Relations – Bilateral Relations

This topic is relevant for both Prelims and Mains as the analysis explores the dynamics of international agreements and their influence on bilateral relations between countries. It provides insights into how nations negotiate treaties to attract investments and protect their tax interests, reflecting broader diplomatic and economic strategies.

 

Context:
  • Tax treaties serve as crucial instruments in regulating the treatment of income arising in one country for residents of another, shaping cross-border investment relations.
  • However, these treaties are not merely technical agreements; they reflect underlying power dynamics between nations.
  • Developing countries often negotiate treaties that grant greater taxing rights, hoping to attract higher investments.
  • Yet, the legitimacy of third countries benefiting from such arrangements, known as treaty shopping, remains a contentious issue.

Evolution of Legal Frameworks: From Treaty Shopping to BEPS:

  • Over the past two decades, the landscape of tax treaties has undergone significant transformations.
  • Initiatives like the Base Erosion and Profit Shifting (BEPS) program aimed to curb tax avoidance through low-tax jurisdictions, prompting the OECD to develop best practices.
  • The introduction of the Multilateral Instrument (MLI) allowed countries to swiftly amend treaties and provisions, garnering wide support.

Reforms Introduced by the MLI:

  • One of the key reforms initiated by the MLI was the inclusion of a provision for the prevention of treaty abuse, along with amendments to treaty preambles.
  • These changes aimed to prevent tax evasion, including treaty-shopping arrangements, and introduced anti-abuse rules to deny treaty benefits in certain circumstances.
  • More than 1,100 treaties now incorporate broad anti-avoidance rules or principal purpose tests (PPTs).

Impact of Amendments to India-Mauritius Treaty:

  • Recent amendments to the India-Mauritius treaty signal India’s commitment to closing tax loopholes.
  • The amended protocol seeks to deny treaty benefits when obtaining them is one of the principal purposes of a transaction.
  • This move addresses concerns about taxpayers routing investments through Mauritius and ensures that tax administrations can probe transactions based on intent.

Challenges and Implications:

  • Courts often grapple with determining whether a tax residence certificate is sufficient to grant treaty benefits.
  • Legal changes are necessary to assess the purpose of a transaction comprehensively.
  • With 16% of FDI inflows originating from Mauritius, reforms to the treaty will impact investment flows, as observed after previous amendments in 2017.

Looking Ahead: The Global Minimum Tax and Policy Shifts:

  • The global minimum tax proposal, including the subject-to-tax rule (STTR), signifies a broader shift in international tax law.
  • STTR aims to tax low-tax intra-group transactions, potentially altering current practices of treaty utilization.
  • As India revises its tax treaties, these amendments demonstrate the evolving landscape of tax policy, emphasizing the broader considerations beyond tax in investment decisions.

Conclusion:

  • Tax treaties play a pivotal role in shaping cross-border investments, reflecting evolving legal frameworks and policy objectives.
  • The recent amendments to the India-Mauritius treaty underscore India’s commitment to closing tax loopholes and ensuring fair taxation.
  • As international tax law undergoes significant changes, the focus shifts towards broader policy considerations, highlighting the need for balanced and equitable tax regimes.
About DTAA Between India and Mauritius

About:

  •  In 1983, the Government of India and the Government of Mauritius came to a unanimous decision regarding the avoidance of double taxation called the DTAA.
  • Following is a list of benefits that residents of both the contracting states will get:
  • It offers relief by exempting tax on income in the resident country that residents earn in another nation.
  •  Lower withholding tax rates for taxpayers, so they have to pay lower TDS on incomes like interest, dividends, and royalties in India.
  • This agreement ensures that contracting states follow specific rules to apply taxes on the international income of residents of contracting states.
  • This agreement offers an anti-abuse provision that ensures that the benefits of this convention are only applicable to genuine residents of both countries.
  • In some cases, residents of contracting nations get tax at concessions rates.
  • This agreement ultimately makes both countries attractive for investment by offering a chance to avoid double taxation along with other tax benefits.
  • In short, taxpayers can get multiple benefits under the DTAA, and the agreement will help prevent financial evasion in regard to income earned and capital gains.
  • Significance of the DTAA Between India and Mauritius:
  • The DTAA was a major reason for a large number of foreign portfolio investors (FPI) and foreign entities to route their investments in India through Mauritius.
  • Mauritius remains India’s 4th largest source of Foreign Portfolio Investments (FPI), after the US, Singapore and Luxembourg.
  • FPI investment from Mauritius stood at Rs 4.19 lakh crore at the end of March 2024, which is 6% of the total FPI investment of Rs 69.54 lakh crore in India.

 

Practice Question:  Explain the significance of tax treaties in international relations and their impact on India’s economy. Discuss recent reforms aimed at preventing tax avoidance and treaty abuse, and evaluate their effectiveness in ensuring fair taxation and promoting economic development. (250 words/15 m)

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