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-Rajeev Kumar (Editor-in-chief)

Showing posts with label The Economic Times. Show all posts
Showing posts with label The Economic Times. Show all posts

Friday, November 13, 2020

Joe Biden, Buy Out Covid Vaccine IPR

In his conversation with leaders of close allies from Europe, President-Elect Joe Biden has made it clear that the US would reverse course from his predecessor’s America-first isolationism. ‘We’re going to be back in the game,’ he said. May we suggest that there would be no better gesture to demonstrate US commitment to the world at large than for the US government to buy out the intellectual property rights (IPRs) to up-and-coming coronavirus vaccines and waive any licence fee for developers around the world. If he were to offer to buy out the IP of American vaccine developers, that would, perhaps, set a model for the EU to buy out the IP of Europe-based vaccine developers and render vaccines free of expensive licence fees for capable vaccine producers to mass-produce the vaccine at minimal cost.

As it is, vaccine distribution could prove quite expensive for most developing countries, as messenger RNA-based vaccines need to be stored at –70° C. To free the vaccines of the cost of IP would lower the cost of achieving mass vaccination. The reality is that while rich countries have bought up large volumes of the initial batches of promising vaccines for their citizens, they can stay secure from the virus only when the rest of the world is vaccinated. After all, in the modern world, avoiding contact with the rest of the world is next to impossible. Vaccinating at least 60% of the world’s population calls for very large numbers of vaccine doses. India and South Africa have called for waiver of the IP rights on vaccines for Covid, as have other individuals and leaders.

Lowering the cost of vaccines by shaving the cost of IP licences from the price of vaccines is one of the surest ways for the Biden administration to demonstrate how different it is from the Trump administration, which walked out of the World Health Organisation, instead of leading it to greater global public health action. It would be high-visibility global leadership that serves as enlightened self-interest. Go for it, President-Elect Biden.

Courtesy - The Economic Times.


Wednesday, November 11, 2020

For Greater Startup Use of DVR Shares

The National Payments Corporation of India’s (NPCI) nod to WhatsApp to offer payment services using the Unified Payments Interface (UPI) will make the market for payment services more competitive. This is welcome. Google Pay, Flipkart (Walmart)-owned PhonePe and Paytm are among the largest UPI payment apps. It is ironic that the share of Indian companies in the payments space is smaller than that of foreign companies. Blame India’s delay in permitting and encouraging the use of differential voting-right (DVR) shares by startup founders to retain control even while drawing in capital from abroad.

A product of the application programming interfaces (APIs) dubbed IndiaStack, meant to make use of Aadhaar, and the NPCI’s infrastructure for interbank transfer of funds, UPI has revolutionised the digital payment system by onboarding most banks and a rapidly growing customer base. UPI allows funds transfer at any time of the day from one bank account to another bank account linked to a phone number and Aadhaar, bringing down the use of cash, simplifying merchant payments and lowering costs. Paytm did most to popularise UPI payments and has Indian entrepreneurs at the helm, but is substantially owned by foreign capital. The concern is that when Indian entrepreneurs access foreign-controlled pools of funds, they could end up losing control over their companies.

While the rules around DVR shares have been liberalised recently, the choice before Indian startups was either to bootstrap themselves or potentially lose control by accepting foreign capital. It would be useful to have a larger supply of Indian venture capital as well, including from Indian pension funds, who need to diversify their asset classes.

Courtesy - The Economic Times.


Bihar Shakes Off Its Old Normal

So, the insurance that NDA had sought to counter the anti-incumbency sentiment of the 15-year-old Nitish Kumar government — PM Narendra Modi — worked. In a see-saw battle that clearly makes Bihar the new ‘swing state’ of elections, BJP now is the net winner: both in terms of being on the winning combine, as well as being the leading turbine of the winning NDA combine for the first time in Bihar. The gambit of using the prime minister as a ‘neelkanth’ — soaking up the toxins of not just anti-incumbency, but also the anger against the Kumar-led government resulting from perceptions of how it has handled the Covid pandemic, especially returning migrant workers — also shows that Modi remains the best electoral tool in the NDA bag, six years since he became PM.

The other winner is Rashtriya Janata Dal’s Tejashwi Yadav, who nearly managed to put a spanner in the work of BJP/NDA. RJD emerged as the single-largest party in the contest. On its part, it was Congress that showed its genius to effortlessly turn itself into a millstone around yet another alliance partner’s neck. Clearly, Bihar has a new set of contestants in BJP and RJD. As a result, what one hopes will be the ‘new normal’ in Bihar is a healthy mixture of politics that addresses both economic and social (read: governance and law and order) concerns.

The tight fight in Bihar, in a way, is an auto-corrective — shaking off NDA’s dependency on a perceived ‘past its sell-by’ Nitish Kumar regime. Competitive politics now allows both Yadav or the next NDA government (even if it is nominally ‘chief ministered’ by Kumar) to take development and governance in Bihar to its next logical and logistical level. The poll has also shaken off the ‘Ghost of Hamlet’s father’ carried by Tejashwi — Lalu and Rabri Pvt Ltd — allowing the young leader to hone RJD into a modern electoral fighting machine. And fight another day. Despite the nail-biting finish and ding-dong through the day, one can very well describe Bihar entering a new phase in a continued glide path out its old ‘Bimaru’ state.

Courtesy - The Economic Times.


Monday, November 9, 2020

Haryana private job reservation: Wrong on political, economic grounds

The Haryana government’s decision to reserve 75% of private sector jobs that pay less than Rs 50,000 a month is plain wrong and the Centre must advise the President to withhold his consent to the state Bill when the governor refers it to him. If necessary, the governor must be advised by the President’s office to refer the Bill to the Centre.

The law can kill off industrial and economic growth in one of the country’s thriving manufacturing and service sector hubs. At an operational level, the quota prevents industry from hiring the best talent that offers itself to fill any job vacancy — it must settle for the third, fourth or nth best to hire a local candidate, spend time and money verifying the local claim.

Further, the law calls for tedious compliance requirements and gives civil servants extraordinary discretionary powers to exempt a company’s hiring from the ‘vocal for local’ quota mandate. This is likely to degenerate into palm grease for quota exemption mess.

Gurugram’s thriving IT and IT-enabled services industries are likely to migrate to Greater Noida or even Pune, if the law is enforced.

Quota for locals violates the spirit of the Constitution of India that seeks to build a unified nation out of the land’s extreme diversity. It can spawn similar moves elsewhere, fragmenting the polity and the economy further.

Haryana is, with its new job quota law, contributing its mite to fissiparous tendencies in the country. The quota for locals violates Article 14’s guarantee of equality, Article 15’s guarantee against non-discrimination based on place of birth, and Article 19’s guarantee of the right to work anywhere in the country. The Haryana government must withdraw the Bill. If not, the Centre must advise the President to quash the Bill.

Courtesy - The Economic Times.


A tough clean-up act for Biden-Harris

Joe Biden has achieved his goal. As President Donald Trump spent his time raising unfounded allegations of voter fraud and intimidation of Republican Party poll observers at counting stations, votes cast by Americans in key battleground states kept adding, as they got counted, slowly but surely, to Biden’s tally, to give him and Senator Kamala Harris the 270 electoral votes they need to make theirs the fourth-ever presidential campaign to oust an incumbent president. But President Trump has left a legacy that will not disappear in a hurry.

Over 47% of Americans voted to re-elect Trump, whose conduct in office should have discredited him in the eyes of anyone with a democratic sensibility. Civility, basic honesty and competence and a capacity to give voice to the nation’s conscience and empathy in times of suffering and assert moral purpose in times of disarray — these are minimal expectations from the nation’s leader. Trump failed on these counts, repeatedly, sought to deepen divisions and profit politically at the expense of a section’s hurt.

Mismanagement of the Covid pandemic, appeals to nativist passions in the face of racial tensions, wanton willingness to feed global warming to pander to the fossil fuel industry, readiness to disparage long-standing US allies and curry favour with dictatorial opponents and use international ties to further re-election chances — all these did not deter nearly half of America from rallying behind Trump. This defines the size of the challenge before President Biden, to fix the flaws of America’s polity, economy and geopolitical positions.

India can expect steady improvement of bilateral relations and for more coherent opposition to China, under a US president who can marshal allies — President Trump had antagonised them. India must engage the Biden team to persuade the US to hasten slowly on withdrawing from Afghanistan.

US re-entry into the Paris Agreement on climate change, the World Health Organisation and the Iran nuclear deal would be welcome, as would US steps to re-energise the World Trade Organisation.

Courtesy - The Economic Times.


Saturday, November 7, 2020

Ant Bite Dragon, Dragon Swat Ant

The Ant stumbled as the fiddling grasshopper changed his tune. What was slated to be the world’s largest initial public offering (IPO) turned into an embarrassment for China’s tech champion, Alibaba founder Jack Ma, as his Ant Group IPO was suspended days before its scheduled date.

However, it is a bigger loss of face for the Chinese politico-economic system, in the eyes of the global investor community. Ant Group’s last-minute postponement of its vaunted mega-IPO signals not regulatory prudence or consumer protection but the fickle arbitrariness of Communist Party mandarins, who hold sway over matters big and small in China.

India’s regulatory system is stable and predictable, by comparison. On the face of it, the Ant Group IPO schedule overlapped with the introduction of new regulatory norms for consumer loan companies; new rules notified are open for comment and will be finalised only on December 2, and it made sense for the Ant Group IPO to proceed only after it had complied with the new norms.

Ant, at present, utilises its technological prowess to analyse 3,000 data points to arrive at a decision on an application for credit and collects a fee from the bank that actually makes the loan.

It carries on its own books only 2% of its 2.1 trillion yuan value of its loans to consumers and small businesses, the bulk being outsourced to banks or securitised and sold.

New regulations propose that lenders will have to hold 30% of their credit on their own books. Plus, Ant will need to apply for new licences and raise additional capital.

Since such detailed regulatory proposals do not clump together in a moment of regulatory epiphany and must have been a work in progress when Ant was taking approvals for its mega IPO, it is rather strange that the regulators did not tell a national champion to hold his IPO till the rules were out and compliance achieved.

Jack Ma criticised regulators for their archaic approach towards tomorrow’s tech, in the presence of senior party officials, on October 24. No one is above the party, shows Ant’s pulled IPO.

Courtesy - The Economic Times.


Friday, November 6, 2020

As Biden Bides, Trumpism Lives On

Joe Biden was six short of the 270 electoral college votes a candidate needs to win the US presidential election, at the time of writing this, and those were well within sight from just one of the five states whose results had not been called by a major news outlet. Wherever the counting has been prolonged, that has been on account of the mail-in or early-voting ballots that are counted, except in some states, only after the election-day votes have been. Since Democrats have been taking Covid precautions seriously, they constitute the preponderant majority of the mailin and early-voting contingent, and the chances of the votes still being counted going to Biden are high. What would a Biden presidency do?

Biden is not Trump and that is saying a lot. However, Trumpism is far from being vanquished. Despite the 2.34 lakh toll of lives resulting from the Trump administration’s mismanagement of Covid, there has been no mass revolt against the Republicans. The Republicans retain control of the Senate. Two freshly elected Republican members of Congress are champions of the QAnon, a movement that believes Trump is up againsta deep State committed to Satan worship and paedophilia. Widespread belief in this conspiracy theory is proof of the complete breakdown of a shared public discourse, which is the basis of democracy. In today’s America, there is no piece of information that everyone could accept as fact; there is only news that is fake, from one partisan perspective or the other. The sway of social media, which had, till recently, abdicated the responsibility of a publisher of news to verify the authenticity of the information that it purveys to millions of viewers, and the division of mainstream media into partisan camps, have, in the US, made the job of finding common democratic ground hard for the newly elected president.

Biden would be less erratic than Trump in rallying allies to hem in an expansionist China and more inclined towards a rules-based world order. This suits India, even as bilateral relations will stay steady

Courtesy - The Economic Times.


Worst Over for the Economy, Not Covid

Green shoots in the economy do not mean that the pandemic is a thing of the past. It is even more necessary to take measures to avoid endangering this nascent economic recovery. The ongoing festival season and the onset of winter are critical moments — failing to take adequate precaution could lead to increase in Covid cases. Already, the number of infections is on the rise — on Wednesday, the country reported 50,209 fresh cases, the highest one-day jump in two weeks.

Tackling Covid effectively requires preventive and proactive measures at every level. It is critical that individuals strictly observe precautionary behaviour: using masks, maintaining social distancing, and handwashing. Local authorities and state governments need to focus on collective efforts such as improved waste collection and management, avoiding unnecessary construction, ensuring adequate medical facilities, availability of doctors and other healthcare personnel, and medicines. Pollution control is another critical area, especially in north India where the winter months are marked by high levels of pollution. Studies have demonstrated that prolonged exposure to poor air quality increases vulnerability to Covid. Differences in opinion notwithstanding, the adverse health impact of prolonged exposure to dirty air make people susceptible to respiratory tract infections. Rather than indulge in blame games, state governments must focus on controlling pollution in their jurisdictions.

The Centre, too, has a role. It must continue to provide assistance to states when required, provide oversight and focus on issues such as vaccine development and rollout. Controlling the pandemic is the responsibility of each and everyone, individually and collectively.

Courtesy - The Economic Times.


For light-touch regulation of AIFs

The recent move by capital markets regulator Sebi to tighten oversight norms for Alternative Investment Funds (AIF) seems excessive, unwarranted and more likely to affect fund governance. The members of investment committees (IC) of AIFs are now mandated to ‘be equally responsible as the manager for investment decisions’. The implications are onerous. What constitutes an investment decision has been left undefined, and so can include making an investment, its ongoing asset management or disinvestment, as pointed out by Tejesh Chitlangi on this page on Tuesday.

A lighter-touch regulation is surely called for. AIFs are privately pooled investment vehicles, and their investment managers follow a predetermined investment strategy, akin to private equity, venture capital or for investment in public debt and equity markets. Further, ICs are typically set up by AIFs’ fund managers to review and approve investment proposals. The practice is for the managers to appoint independent experts to ICs, to shore up governance standards of their funds. Typically, members of ICs merely vet and okay investment proposals, which are then sourced, evaluated and executed by the fund managers. For, despite independent assessment by ICs on a good faith basis, the overall control of an AIF would clearly rest with concerned managers.

The Sebi move to make IC members jointly and severally responsible for AIFs’ investment decisions seems an act of regulatory overreach. After all, no institutional investor or external professional on an IC would like to be taken to task in regulatory proceedings or, worse, taken to court by a dissatisfied investor. The new rules would only deter independent experts from accepting IC appointments.

Courtesy - The Economic Times.


Wednesday, November 4, 2020

More than commission to check air pollution

Air pollution is a serious problem with environmental, public health and economic dimensions. Tackling it requires concerted, consistent, science- and evidence-based solutions. Focusing on its most visible aspects might help score some brownie points but will not help people breathe clean air. The Commission for Air Quality Management in National Capital Region and Adjoining Areas has the potential to address this problem but an institution by itself is not a solution.

An impediment to improving air quality has been the inability and unwillingness of the authorities, particularly state governments, to address the issues outside of emergency situations or seasonal spikes. Thus, the focus is on solutions that promise, often falsely, immediate relief — hence the Rs 20 crore smog tower, switching off engines at red lights, or talk of cloud seeding. Interventions by the judiciary have exacerbated this penchant for quick fixes. The predilection for high-visibility solutions has been underwritten by the public, who, too, are reluctant to accept that they have to modify their conduct for sustainable solutions. All this, together with poor implementation of existing regulations, has resulted in a crisis. Given this context, the commission, set up through an Ordinance, is likely to be of little avail — unless it serves as a platform to bring together the stakeholders, including state governments, relevant institutions, public representatives and civil society, and prepare society for sustained effort to change the way they live and work, informed by science.

Air pollution costs lives, impacts productivity and cognitive abilities, and makes people more susceptible to disease, exacting a huge economic cost. It must be checked.

Courtesy - The Economic Times.


Tuesday, November 3, 2020

Proposed rights issue norms make sense

It is welcome that capital markets regulator Sebi has proactively liberalised rights issue norms — twice — this year, to make fundraising easier, faster and cost-effective during the pandemic and beyond.

It has duly rationalised eligibility criteria and disclosure requirements for companies to raise capital to fast-forward recovery.

We indeed have an efficient market for equities; the way ahead, surely, is to policy-induce an active and vibrant market for corporate bonds, for transparent debt funding of long-gestation projects.

Sebi has now changed the long-standing minimum subscription requirement in rights issues. Henceforth, the 90% minimum subscription would not be applicable (conditions apply), provided the promoters and promoter group of the issuer undertake to subscribe fully to their portion of rights entitlement.

Note that, in most cases, promoters do commit to subscribe to additional rights in case there is under-subscription; it does raise underwriting and attendant costs.

The minimum subscription requirement for a rights issue to be considered successful has now been relaxed to 75%, with conditions.

A company that has been listed for 18 months, down from three years earlier, can raise funds by way of a rights issue. Further, the eligibility criteria of average market capitalisation of public shareholding of the issuer has been relaxed to `100 crore from `250 crore.

A company can fast-track a rights issue in response to, say, adjudication, legal orders and audit qualifications.

Truncated disclosures are also okay, provided the company has been filing reports and complying with listing requirements for the last one year, instead of three years, as earlier, which, again, is sensible. The new norms, on the whole, make sense.

Courtesy - The Economic Times.


Unasked questions in the power sector

At the recent India Energy Forum meet, Prime Minister Modi rightly emphasised energy access, affordability, reliability and responsible pricing of crude oil in the global market.

But what he left unsaid is even more notable. We do not mean just the problem of rampant giveaways and even reckless populism in power nationally, which has led to bankrupt distribution utilities that do not pay generation companies, transmit their financial stress like a disease not just to gencos but also to the state governments that own them.

India is set to nearly double its energy consumption over the long term, PM Modi added. India’s large addition to renewable power capacity is impressive but it would be sub-optimal sans integration with conventional power and grid security.

Where is the costing of the expense on such integration in the cost of renewable power? If you back down thermal power to feed in solar or wind power, you have to pay the thermal plants for their available capacity, even if you draw zero power from them. What about R&D in long-distance transmission?

Can the recently identified method of producing superconductivity at ambient temperatures, even if under high pressure, be utilised to transport solar power generated in Western Sahara at 3pm for consumption in India at 7.30pm, when local solar generation has stopped?

What is the economics of undersea cables for bulk power transmission? What is the progress in coal gasification, to ease India’s path to an intermediate, low-carbon future? What holds back further progress in India’s own thorium-based nuclear power generation programme? How much are our nuclear scientists leveraging the access gained to fusion research, in the wake of the Indo-US nuclear deal? These questions call for answers.

Courtesy - The Economic Times.


Lower tax rates for higher collections

GST collections stood at `1.05 lakh crore in October, marking a 10% growth over October 2019. The is excellent news from a recovery point of view, but dismal from the point of view of realising India’s tax potential.

The goal should be to more than double the current tax-GDP ratio of about 17% (Centre and states) combined. Time to overhaul GST, learning from three years’ experience of implementing it.

Higher GST collections should be achieved by moving to a simple tax system, rationalising rates, broadening the base, data analytics and better tax administration.

The peak 28% rate is way too high. Fewer rates — in effect, a central rate of 12% for a vast majority of goods, a merit rate and a demerit rate — will minimise classification disputes, raise compliance and shore up tax buoyancy. Exemptions break the GST chain and must be eschewed.

A few items could be zero rated — just as exports — to keep the GST chain unbroken. Revenue authorities must briskly pursue audit trails in the income and production chain to track sources of funds.

Data analytics should be deployed to track the physical volumes of critical raw materials used in the manufacture of tax-evaded goods so as to tap the potential direct and indirect tax base.

Taxes such as electricity and petro-fuel duties, which are embedded in domestically manufactured products, make domestic products expensive. The GST Council must bring all goods and services, including alcohol and real estate, under GST to raise efficiency.

All indirect taxes subsumed under GST are estimated to net about 10% of GDP. The same amount of tax would be collected if every unit of non-agricultural value added were to bear GST at the rate of 11.5%.

A 12% universal rate, with some lower rates and some higher, with some added cesses not eligible for input tax credit on sin goods thrown in, should fetch us the same level of indirect taxes and audit trails to a treasure trove of income that today escapes tax.

Also, to improve collections should one agency collect GST and apportion revenues to the states?

Courtesy - The Economic Times.


Wednesday, October 28, 2020

Bihar’s ‘vocal for local, or…’ Test

Starting today, Bihar steps out to test the ‘Vocal for local’ model that has been pitched so far outside the electoral context. In the process, the state will also choose its next government.

With chief minister Nitish Kumar administration reportedly facing the drag of anti-incumbency, BJP seems to have decided to maintain more than just social distancing with its ruling ally Janata Dal (United).

Going by NDA posters dotting Bihar’s skylines, it’s Prime Minister Narendra Modi whom the voter should be voting for. Except, of course, the PM can’t be CM. Which leaves the Opposition branding local boy, Rashtriya Janata Dal’s (RJD) Tejashwi Yadav as the challenger.

Both strategies have their advantages and disadvantages. For NDA, building a hotline with the Modi government in Patna is the USP, especially with unemployment and underemployment now a live wire electoral issue among post-lockdown-returned migrants to the state.

While the desire for an alternative to Kumar may be palpable, to have someone smacking of the ancien Lalu-Rabri régime — with its ‘legacy issues’ of corruption, and absence of development and governance — could be a gamble.

Which is why on his part, Tejashwi has been maintaining social distancing of his own from his (literally) parent party — so that he doesn’t end up ‘doing an Akhilesh Yadav’. Of course, ‘local’ or ‘national’ are just perceived pipelines for better delivery of what Bihar needs: development, governance, and law and order.

Unlike in the past, Bihar’s voters are no longer presented with the false binary of communal harmony and lack of development, or communal polarisation and progress. And, over the next couple of weeks, Bihar’s voters know that, as they decide the outcome of the election two weeks from today

Courtesy - The Economic Times.


Indo-US Ties: Beyond specific leaders

The third India-US 2+2 dialogue strengthens the partnership between the two countries that ranges from the political and the military to trade, technology and energy.

This partnership is critical as India begins its term as a nonpermanent member of the UN Security Council in January. The India-US partnership is not tied to the administration of the day or personalities in office but rooted in mutual interests and shared values.

The signing of the long-inthe-making Basic Exchange and Cooperation Agreement (BECA) for geospatial cooperation encapsulates this. The BECA is the most critical outcome of the current round as it gives India access to extremely accurate geospatial data.

The US stressed on the importance of countering China and the threat it poses to democracy, rule of law and transparency. At the same time, the India-US partnership is about a whole lot more than countervailing an overbearing China.

It is a crucial part of securing stability, distinct from stasis, as the world leaves the unipolar moment behind and embraces multipolar existence. The strengthening of the Quad, comprising Japan and Australia, besides India and the US, is part of this.

Being effective calls for not just advanced weaponry but also the sharing of vital information and the ability to coordinate and cooperate in an efficient manner.

Advances in artificial intelligence (AI), satellite surveillance, cybersecurity, robotics and materials are integral parts of emerging strategic capability. Equipping powers that are committed to acommon goal in all areas of strategic capability is an integral goal of continuing, multifaceted dialogue between countries such as India and the US.

While the core of the dialogue focuses on political and military engagement, healthcare and the efforts to tackle Covid were another strand of the dialogue. As was the issue of terrorism and India’s willingness to contribute to security and stability in Afghanistan. From the immediate to the strategic, the scope for cooperation is wide, and it calls for effort.

Courtesy - The Economic Times.


Tuesday, October 27, 2020

Lee Kun-hee: Passing Of a Corporate Titan

With the passing of Lee Kun-hee, a vital chapter of the transformation of the Samsung Group into one of the world’s powerhouses of technology and innovation comes to an end.

The chapter did not begin in 1987 when he succeeded his father as chairman, but in 1993, when he convened a meeting of his senior-most executives in Frankfurt to announce a quality revolution at the company — no more shoddy stuff that sold at a grudging pace and required constant servicing afterwards.

In 1995, he made his staff watch a bonfire of 150,000 pieces of the company’s electronic equipment, mostly mobile phones, that did not meet his expectation of quality.

Thanks to his leadership, Samsung today is one of the world’s largest corporate spenders on R&D. Days before he died, Samsung and Stanford University announced the development of an OLED display that carries more than 10,000 pixels per square inch, more than 20 times the pixel density available in a flagship phone screen today.

This paves the way for better virtual and augmented reality kit. The short point is that in two generations of visionary leadership, a company that sold dry fish and other grocery in a South Korean town became the world’s largest producer of mobile phones and memory chips, and is a driving force of the South Korean economy, the world’s 12th largest, although its population is smaller than Tamil Nadu’s.

Ambition, commitment and hard work are not anyone’s monopoly. The Samsung model is up for grabs — for Indian companies, as well.

South Korea’s policy of forcing its companies to compete with the best in the world helped, apart from management will to excel. India chooses to shelter its companies from foreign competition.

This, too, much change, for a Samsung to emerge here.

Courtesy - The Economic Times.


If Delhi Metro can, why can’t the rest?

A report by the ministry of statistics and programme implementation highlights the tardy pace of project implementation in the country. Of the total 1,661 infrastructure projects in the central sector, each of which costs at least Rs 150 crore, 441 projects are faced with cost overruns as on September 1, 2020.

This is mainly due to delays in land acquisition, green clearance and law and order problems. With the expected contraction of the economy this fiscal, averting project delays and expeditious execution are more important than ever as these projects can add to economic recovery.

A major problem that impedes infrastructure development is land acquisition. Anyone who has to give up land must be compensated for its growing valuation over time.

A viable option would be through leasing or an annuity-based system as practised in some states. The rest of the clearances should be given expeditiously.

There is no reason why green clearances cannot be given within a reasonable time frame after an environmental assessment impact. Project financing should be tied up expeditiously and funds released when required. Monitoring must be rigorous, and open to scrutiny by any interested party.

The total cost of implementation of 1,661 projects is estimated at about Rs 25.26 lakh crore against the original cost of Rs 20.9 lakh crore, reflecting a cost overrun of 20.81%. The highest number of delayed projects are in Railways, followed by road transport, highways and petroleum.

Delays lengthen gestation periods, depressing output per unit of capital invested. Nine projects (original cost of `16,106 crore) are ahead of schedule and 206 projects (original cost `5.09 lakh crore) are on schedule.

This is welcome. Both government agencies involved in project approvals and the private party involved in implementing the project should be held to account for delays at their end. The government should also act to remove the fear of criminal intent being discovered behind any exercise of discretion, to speed up project implementation, and boost the economy.

Courtesy - The Economic Times.


Monday, October 26, 2020

Fiscal Rectitude Can Mean Larger Deficit

The Reserve Bank of India governor Shaktikanta Das is right to seek a roadmap to fiscal prudence. Persistent high fiscal deficits can cause macroeconomic stress, manifesting as inflation and a widening current account deficit. However, fiscal rectitude does not always mean a smaller deficit. In a situation such as the present one, the right policy is to have a significantly larger deficit, so as to give a major push to economic growth and elevate it to a high trajectory.

India’s direct fiscal stimulus, at less than 2% of GDP, has been underwhelming. Of course, increasing the size of the stimulus would mean a higher fiscal deficit, given the sharp slide in revenue collections. This, in turn, would push up the public debt-to-GDP ratio in the near term, but also accelerate the rate of economic growth. Whereas a low increase in the fiscal deficit (due to a smaller stimulus) would nudge up debt/GDP only by a bit, it would effect only moderate force to the economic impulse. So, it makes sense to have a larger and swifter stimulus than a smaller one.

A higher growth trajectory would lead to falling debt/GDP over the years, whereas low growth would lead to rising debt/ GDP. Of course, all the additional investment needed to boost growth need not come from the exchequer. A lot of investment can be catalysed by the government through policy and guarantees that result only in the addition of contingent liabilities.

Offering an acceptable rate of return will boost the flow of global capital, helping the completion of projects such as the Delhi-Mumbai Industrial Corridor. To support fiscal consolidation, the government needs to improve its tax analytics and collections. States must also rigorously collect user charges and avoid taking on subsidy burdens.

Courtesy - The Economic Times.


Try Governance, Not More Govt Jobs

Bihar is abuzz with electioneering. Promises and taller tales of opponent infamy fill the air, quite apart from that tiny virus that has brought the world to its knees. Indians are inured to the charm of poll promises — those that are not fulfilled can be explained away as election jumla, or ploy. However, if no effort is made to implement some, at least, of those promises, it can invite popular wrath, especially those with the plausibility and appeal of government jobs and waiver of loans.

The Rashtriya Janata Dal (RJD) has promised to provide one million government jobs to the people of Bihar, if the people vote it to power. This is the kind of populism that can disempower the government even further. Ever since the government of Bihar implemented the Sixth Pay Commission award for its employees, the state has been in a state of perpetual fiscal stress. Bihar is at the bottom of most statewise rankings of economic and social development indicators. Given its low base of economic development, it has been possible for Bihar to notch up fast growth in several years; still, it remains one of the least developed parts of the country.

It needs to spend on health centres, hospital beds, schools, teachers, courts, police stations, roads and other infrastructure. Even more, it needs the spending to deliver governance. It does not need to devote a still larger share of its funds on government personnel. Bihar has managed to present several revenue-surplus budgets in a row.

That has not taken Bihar out of its rut. The Narendra Modi government had promised several mega packages for Bihar, which had sounded good but have made little difference on the ground. Bihar needs better governance, whose absence holds back progress. With law and order, sugar factories could come up in Bihar.

With factories nearby, sugarcane cultivation can realise its innate, enormous potential and make Bihar India’s sugar capital. That is the kind of change parties need to promise, not to splurge more money on personnel the state can neither afford nor productively administer.

Courtesy - The Economic Times.


Saturday, October 24, 2020

Air Quality Calls for Year-Round Effort : ET Editorials

Air quality in India is poor, and takes a toll on human health — 1.67 million deaths in India, according to the latest State of the Air Report. It erodes health and the economy.

The damage to cardio-pulmonary health takes on added importance given the Covid pandemic. Little of this is new. What is new is US President Donald Trump’s ‘Look at India [along with China and Russia]. The air is filthy’ comment to defend his climate-change denial during the course of a presidential debate. The adverse impacts of poor air quality are irrefutable. It is time to act for a longterm solution to this problem.

The central government has stepped up air quality effort, moving from emergency response to proactive efforts through the National Clean Air Plan (NCAP). There are clear goals, financial allocations and collaborative effort between the environment ministry and the Central Pollution Control Board and cities with high pollution levels. The NCAP is not perfect but it is a good beginning. More can be done, such as enforcing stricter emission norms for thermal power stations.

The real reason for the lack of progress is that at the operational level of state governments, the approach continues to be a seasonal one. The unwillingness to address pollution problem as systemic problem requiring year round consistent effort makes tackling pollution akin to ER triage, with state governments, and even the public, demonstrating a predilection for silver bullets. So, Delhi’s smog towers or the ‘shut off engines at red lights’ campaign are flashy but not really effective in terms of ensuring better air quality all through the year. Blaming crop residue burning for the city’s poor air quality does not help — on some days during the ‘season’, crop burning accounts for under 10% of the pollution.

Acting decisively will require taking multiple measures — tackling pollution at source, such as through improved public transport for reducing vehicular emission, better planning of green cover to reduce dust, better regulation of construction and, most importantly, better implementation of norms.

Courtesy - The Economic Times.

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