Economic Highlight

New Delhi, 9 March 2020

Pro-crony Policies

POOR LOSE, POWERFUL GAIN

By Shivaji Sarkar

India’s aspiration to become a $5 trillion economy depends critically on promoting “pro-business” policy that enhances market competition negating the “pro-crony” policies that favour powerful private interests, says the Economic Survey 2019-20. Such policies have robbed the people in road sector, particularly Pradhan Mantri Gram Sadak Yojana (PMGSY), natural resources allocation and banking through wilful default of over Rs 1.4 lakh crore.

India is a classic case of rise in pro-crony business policies, observes the survey, which hurts markets. It cites global evidence that political connections lead to rent extraction. A recent World Bank study of cronyism in Ukraine finds that the country would grow one to two per cent faster if all political connections were eliminated. The political connections help firms pay lower taxes and extract other favours in China, Thailand, Indonesia, Malaysia, Vietnam, the survey says.

It also blames the government intervention hurting the market’s capacity to generate wealth. Price regulation of drugs in 2013 increase drug prices and have done precious little to the high prices charged by hospitals. This pro-crony move is contrary to pro-business policies that increase competition, correct market failures or enforce business accountability, the survey says.

“Such policies may promote narrow business interests and may hurt social welfare because what crony businesses may want may be at odds with the same. For example, crony businesses may lobby the government to limit competition in their industry, restrict imports or competing goods or reduce regulatory oversight enhancing lobbying by crony groups to enhance their income and hurt market and welfare”.

The 1991 market “reforms” has caused more “creative destruction” as per the stock market trends, the survey analyses. “Before liberalisation, a Sensex firm was expected to stay in it for 60 years. It has decreased to 12 years post-1991”.

“Pro-crony has destroyed value in the economy”. It cites example of an equity index of politically connected firms. It outperformed the market by 7 per cent a year from 2007 to 2010, reflecting abnormal profits extracted at common citizen’s expense. The index, in contrast, underperforms by 7.5 per cent in 2011, “reflecting the inefficiency and value destruction inherent in such firms”. The Sensex, it observes, represents a process of creative destruction rather than dynamism. It is uncanny about galloping rises index during the recent years.

Pro-crony has hit the discretionary allocation of natural resources till 2011. “It led to rent-seeking by beneficiaries while competitive allocation of the resources post-2014 checked it” The survey finds the rise of the forces of creative destruction in the Indian economy leading to the rise of new sectors such as financial and information technology. Some of the recent UN reports have stated that financialisation and finance firms have grown with the fall in global economy.

The share market players need to understand that they cannot be long-term investors in a firm. These remain dominant for only one-fifth of the time than their pre-liberalisation firms did. New sectors are emerging and difference between the sizes of the largest and smallest firms are rapidly shrinking.

The survey finds that political clout and preferential allocation of contracts has paid in road construction in India since 2001. Lehne, Shaprio & Eynde (LHY) examined bidding data on 88,000 rural roads built under PMGSY and juxtaposed data with election results. It finds that after close election victories, contractors affiliated to the winning politicians are more likely to be awarded road projects.

A comparison with Census 2011 data finds that several village roads recorded complete in PMGSY monitoring data are missing from the Census, “suggesting that these roads were never actually built or completed”. Around 26 per cent of the roads listed as completed are missing from the Census data.

The LHY study finds that preferential allocation accounts for 497 missing roads that could have benefitted 8.6 lakh people. It indicates that politically influenced PMGSY projects lead to sub-optimal economic outcomes. Allocations that started with Rs 3000 crore in 2000 have swelled to Rs 80,250 crore in 2019-20.

The LHY finds irregularities in coal and other natural resource allocations to unlisted foreign individuals, domestic or foreign enterprises. It also detected evidence of one-time payments to directors like commissions, perquisites and consulting expenses through the discretionary allocations. Though the companies’ salary expenses do not rise, director commissions increase by 12 per cent, perquisites by 5.7 per cent and other consulting expenses by 7.6 per cent.

The market share of firms declined between 1993 and 2011. But the committee-based allocations saw windfall gain from discretionary allocation. The total firm incomes declined by 54.9 per cent, expenses came down by 58.7 per cent and profit after tax 37.8 per cent. Total assets reduced by 76.2 per cent, land and building reduced by 48.2 per cent and plant and machinery by 51.1 per cent.

The competitive auctions, however, do not decline. Overall the evidence suggests that discretionary allocations of natural resources by a committee provide avenues for rent-seeking. Similarly crony lending led to wilful default by many Indian firms causing a loss of Rs 1.4 lakh crore to the lenders. The Reserve Bank of India says that these firms do not repay despite having capacity to honour obligations. Every rupee lent to such firms causes erosion of wealth.

The value of pledged shares falls when the firm is in distress. As the promoters have no personal liability beyond their pledged shares, they care little. Any reduction in their wealth is offset by rents they already extracted. Even they are least bothered about losing control of the company as they have extracted rents before the share price collapse.

Another way is to give loans to related parties. These are secured for them and help the company go into losses. Had the money thus siphoned away stayed in the economy it could have doubled the allocation towards health, education, rural development or MGNREGA.

Such defaulters pledge almost 50 per cent of their shareholding to lenders (banks) whose actual value had eroded. The cost is borne by the public sector banks funded by the common man. The survey says that rich businesses that want to get richer use wilful default as an instrument to redistribute (steal) the wealth away from the poor.

In Indian scenario, adverse selection may force genuine borrowers to exit the market altogether, leaving cronies in the market and resulting in a market failure that slows economic growth, employment and wealth creation capacity. ---INFA

(Copyright, India News & Feature Alliance)

Political Diary

New Delhi, 2 June 2020

Serenading Success Or Ruing Failure

THE BUCK STOPS AT MODI’s DOOR

By Poonam I Kaushish

If you can’t dazzle them with brilliance battle them with bull. A truism which comes to mind as the Modi Sarkar rolls out its first year report card nee facts, figures, data and statistics of 2.0, no matter statistics are unreliable facts from reliable figures.

Sure, the Prime Minister can overwhelm with his speaking skills and optics continuing to ride the wings of glory and fame for a new order of aache din. The message must be resounding and messianic. If his first tenure was about ‘Swachch Bharat’ to ‘Make in India’, now it’s Aatma Nirbhar, and ‘Go vocal on local.’ Namo’s progress is a study in chutzpah and grandeur.

Certainly, he's the smartest politician since Indira Gandhi, has won two full majorities, projects himself as protector and father figure and has contempt for the Lutyens lobby and Khan Market Gang. His macho “56 inch ke chhathi” persona is built on his oratory skills, decisiveness and his connect and identity with the aam aadmi.

Perhaps, that explains his perceived arrogance running a one-man rock band albeit concentrating power in the PMO. A one-way street full of staccato monologue, no dialogue and questions are a strict no-no. He uses Modisque 'direct marketing' format and delivers a speech every 1.9 days (45.6 hours) and counting.

He has destroyed all Opposition which is in shambles, fragmented, leaderless and directionless in its elusive quest for a coherent narrative to take on the BJP defines Modi's first year of 2.0 in office. He has saturated airwaves, social and digital media with his relentless onslaught of ushering in change.

Yet when one draws up the balance-sheet of his Government, can the Prime Minister brush under the carpet the fact that the situation sadly continues to remain stagnant ---status quo ante? Has Modi walked his talk of Saath Hai, Vishwaas Hai…Ho Raha Vikas Hai and delivered? Has he brought about inclusiveness, made minorities comfortable and won their confidence? And where are the jobs, the promised development, infrastructure, quality education even Aache Din? Or, should one believe his detractors who see Modi as a filibuster of a “fundamentalist Party”?

As the BJP Government marks its first anniversary 2.0, the year is likely to be celebrated, though subdued, for fulfillment of its decades-old “core” ideological Hindutva demands of building a Ram temple at Ayodhya (judicial order) and nullification of Article 370, which gave the erstwhile State of Jammu and Kashmir special status.

Two other achievements were criminalising the practice of instant divorce among Muslim men and successfully pushing through the contentious Citizenship (Amendment) Act which seeks to grant citizenship to Hindu, Jain, Sikh, Christian and Parsi from Muslim majority Pakistan, Afghanistan and Bangladesh on the ground of religious persecution,

Politically, while the BJP juggernaut rolls on, the electoral rewards show the Party wanting, whereby it underperformed in 5 State Assembly polls compared to its massive  303 MPs Lok Sabha win. With the NaMo factor absent the Party performed below par in Maharashtra, where its traditional ally Shiv Sena joined hands with the Opposition NCP and Congress to form the Government and in Haryana it was forced to ally with Chautala’s JJP to rule.  

The Party suffered a big defeat in Jharkhand where it lost power and fared poorly in Delhi. It however, managed to turn tables in Karnataka and Madhya Pradesh as defections from the JD(S) and Congress saw veteran saffron warhorses Yediyurappa and SS Chouhan as Chief Ministers.

Undeniably, as the heart-wrenching migrant crisis continues to unfold it exposes the Government floundering and dithering. Stories abound of men and pregnant women carrying mal-nourished children begging for water and food, driven by hunger and joblessness, pushed around by police as they trudge slowly back home on foot or packed in container trucks; run over by goods trains and speeding trucks on highways or falling dead out of exhaustion.

It's been nine weeks since this exodus began, and no one from the Government has reached out to these millions with even empty sympathy. Instead, they preen around reeling figures of the Shramik trains, money deposited under various schemes like the Garib Kalyan Yojana.  Yet the urban and rural poor continue to suffer.

It took the pandemic to showcase that India is grappling with catastrophic suffering on two fronts: Health and economic. On both counts the level of Government preparedness is as non-existent now as it was earlier. We barely have a health infrastructure which is plagued by heartlessness, lethargy, corruption and bereft of cure and consolation. At best it is rickety. Think. Public investment in health is barely 1% of the GDP? Consequently, public health is in the ICU despite, Government’s cut throat projections and assertions of ‘all’s good.’

Appallingly, the country is crippled by shortage of over 600,000 doctors and two million nurses. there is only one allopathic doctor per 10,189 people, one hospital bed per 2046 persons and one State-run hospital per 90,343 people, one million allopathic doctors for 1.3 billion people of which only 10% work in public health sector and 700 million have no access to specialist care as 80% of specialists live in urban areas.

Startlingly, Modi has still to address key developmental issues that continue to exercise people: employment, enforcing basic state functions like law and order, preventing crime against women and children, inflation, illiteracy and ill-health which are the touchstone of the much-hyped and illusionary deal of roti, kapada aur makan. Look at the irony. Cellphones go abegging, yet people continue to beg for food.

The most notable failure of the Government is that its catchy slogan of minimum government, maximum governance touted as a new power paradigm of providing baggage-free good governance to unshackle moribund laws and State has come to bite him and how! Today, alas, the Government has its fingers in all economic and social policies for change. Down to deciding if people should eat meat and drink.

Moreover, there is political disquiet over Modi’s failure to curb his fringe rabid Hindutva brigands who espouse communal polarization. This has corroded inter-community relations, to an extent where discrimination against the minority community seems to be par for the course. Less said the better about allegations of Saffronisation of education.

What next? Politically, can Modi change India? Certainly, he is no magician who can cure India of its over 70 years ills expediently, despite his brand of politics. Towards that end he needs to relive what he ad nauseum chants, “The real meaning of politics is not power but service.” He needs to invigorate the system and fortify democratic institutions.

There is no gainsaying that NaMo and his Hindutva cahoots can no longer afford to be complacent or traditional as the young voters do not have the patience for inane diatribe, they demand a better deal for their tomorrow. He can enhance his Government’s performance by addressing weak areas and can covert threats into opportunities.

Time now to stop being smug, ostrich-like cocooned in the misconception that ‘all is well’ as it reels of statistics, umpteen yojnas and continues to pat itself for a job well done.  Milking ‘Go vocal on Atmanirbhar’ will not fill malnourished hungry stomachs. People need roti, kapada, makaan and naukri. Besides, Saath and Vishwas alone about Vikas will not usher Achhe Din.

All in all, the task is cumbersome and steep. The clock continues to tick as shrewd Modi continues his promises juggernaut. He has to live up to huge expectations generated by his 3D media campaign on twitter, U tube, social networking sites and Man ki baat.  

Certainly he has redefined politics and promises further change. Importantly, can and will Modi be able to reconstruct the language of democracy. Remember, leaders don’t build democracies; people do. ----- INFA

(Copyright, India News & Feature Alliance)

Economic Highlight

New Delhi, 1 June 2020

Poor & Atmanirbharata

INDIA’S DISTORTED VISION

By Shivaji Sarkar

The long march of crores of migrant workers might have become a political issue, but in the Indian context there is nothing new, except that COVID-19 has brought to the fore a crisis simmering for long. The erstwhile Planning Commission had discussed the issue way back in 2011 and the United Nations and other organisations have been highlighting it intermittently.

The issue of internal displacement (IDP) never flared up the way it has now, but even in 1950s as the nascent development process of building dams, be it the Bhakra or various Damodar Valley Projects (DVC), caused displacements of tribals and other people in various parts of the country. The political dispensation treated it as a non-issue. In the recent past, the Tehri and Narmada dams also displaced large numbers. Many, including former Lt Governor of Delhi, averred that people had to pay a cost for a “better life”.

In 1953, DVC acquired huge tracts of land, mostly from tribals in Dhanbad, Jamtara in Jharkhand; Purulia and Burdwan in West Bengal displacing 70,000 people and depriving them of land and livelihood. Reports state that only 350 such persons received compensation and jobs, others were given nothing. So the agitation for “justice” continues and had taken volatile shape in 2012.

The Hindi movie Hum Hindustani in 1960 with a young actor Sunil Dutt portrayed a new India for writing a new “kahani” (Story). Alas, that was possibly the beginning of abysmal deprivation that the nation is groping with today. No wonder the largest number of migrants in the long march belong to Jharkhand, Bihar and West Bengal. The biggest state, Uttar Pradesh is not far behind.

In 2016, the United Nations noted that 2.4 million are internally displaced in this country. The Indian Social Institute says during the same period the development induced IDPs were 21.3 million – 16.4 million due to dams, 2.55 million due to mining activities, 1.25 million because of industrial development and 60,000 by wildlife sanctuaries or national parks.

These may be huge numbers, but it does not explain how at least 4 crore started trekking across the nation no sooner the lockdown was imposed on March 24, bringing the nation’s productivity to a grinding halt. Between May 1 and 6, the Railways ferried one lakh migrants to their homes by 115 Shramik Specials to Bihar, UP, Rajasthan and Kerala. Trains were inefficiently run and completing 40 hour journeys in four days in some cases. At least seven persons lost their lives in these journeys and over 400 are said to have died of hunger, fatigue, crushed under rail wheels or road accidents.

The tragedy is grim. Free India’s first Prime Minister, Pt Jawaharlal Nehru’s dream of “enshrining the economy as that part of the nation which stands for the whole” made  banner headlines as the Panchet dam was opened in December 1959. Few could believe then that this perhaps would not have been the appropriate prescription.

But at least President Rajendra Prasad had doubts, as reported in The Statesman on 28 December 1959. Addressing IIT, Kharagpur’s convocation, Prasad warned against neglecting the call of duty. In 1999, Planning Commission former Secretary NC Saxena is quoted by World Commission on Dams that about 5 crore (50 million) were displaced by big projects in 50 years of Independence. During Janata Party rule in 1977, a Labour Ministry Committee sought regulating inter-State migrant workers’ employment as they were exploited and paid wages lower than agreed upon.

The miseries of these people were not unknown. It’s just that nobody cared, specially across the political spectrum. Unfortunately, whosoever it may be and however powerful sees the reverse migration of being back in the emotional security of their village, as a bid to malign their regimes, be it in Rajasthan, Punjab, Maharashtra, UP, Andhra, Karnataka or anywhere.

Strangely enough, the middle class, precariously perched on the edge of poverty line, has been most critical of this cross-country trek of labourers in extreme summer with bare minimum clothing and over half of them with chappals or even bare feet. This only reflects the apathy of the nation’s policy planners, rulers and elected representatives. It reminds many of people like Sundar Lal Bahuguna or Medha Patkar or Aruna Roy, who tried to raise their voice against the plight of the neglected millions. The nation certainly hasn’t come out with glory for making supposed economic strides while pushing down 81 crore officially stated poor in the wake of lockdown.

A newly-born nation in 1950s apparently had no vision as the poor multiplied, moved out of villages to eke out a living in shanties of metros, amidst promises of utopian progress like fertilizers, self-sufficiency in steel and rising needs of engineers in second or third Five Year Plans in official reports through 1950s and 1960s.

Displacement and deprivation has been constant. Policy bodies like Planning Commission were not unaware. The Budget documents do not reveal much for solving the burgeoning problem. Displacement has become the norm for any public project, ostensibly for prosperity, but actually for depriving those whose lands are acquired. It is stressing and straining millions of lives because for most it meant loss of home and livelihood. Prof AM Khusro was concerned about the rising number of poor in absolute, not percentage terms in 1999.

The present reverse migration has disturbed comfort levels of many – the industry, builders, diamond-cutters and all businesses. Political parties may show apparent calm but they are shaken. Perhaps, they are yet to realise the magnitude of the crisis. Most of the labourers jolted by treatments meted out to them in different States by their employers, police and administration are in a quandary. For the next six months they may not go back. And yes, conflicts in calm rural India may also rise.

The Supreme Court’s recent concern for their food and travel is a small recognition of the problem despite Solicitor General Tushar Mehta telling the judges “labour exodus was due to local instigation”.

It is no secret that Governments everywhere abdicated their duties for decades. The various free ration and other benefits announced now would neither be easy to sustain nor will it be a solution. The poor have to be self-reliant. There is need for a massive policy shake-up, integration of the poor in deciding future course, reorienting the economy, cut in taxes and overall lifestyle improvement. ‘Atmanirbharata’ (self-reliance) will not be that easy if the nation continues to choose to ignore 60 per cent of its population. ---INFA

(Copyright, India News & Feature Alliance)

Round The States

New Delhi, 30 May 2020

SC On Migrant Workers

APPLIES BALM, WILL IT HEAL?

By Insaf

The Supreme Court finally applies the balm. Noticing “several lapses” in dealing with the migrant workers crisis, the court did yield the stick and put a structure for Centre to follow. In no uncertain terms, it ordered: No fare either by train or bus shall be charged from the migrant labourers (it should be shared by States); the originating State should provide meal and water at the station, while Railways will provide the same during the journey; those who are stranded should be provided food by States concerned at places, which shall be publicized/notified for the period they are waiting their turn; those found walking on roads, immediately be taken to shelters and provided food and all facilities; the State shall oversee their registration and ensure they are made to board train/bus at an early date; Railways needs to provide trains as and when State governments put in a request and when a migrant worker wishes to go to a State, no State can say that we will not take you. The specifics from a three-judge bench came after taking suo moto notice of ‘unfortunate and miserable conditions of migrant labourers’ walking on foot and cycles from long distances,” as reported in media. A welcome change for two weeks ago, the apex court had observed hearing a PIL that it couldn’t be expected to stop migrants from taking the hard, life-threatening option of trekking thousands of miles to their villages amid the lockdown! The big question is will orders be followed? Should there be hope for India’s unfortunate?      

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High Alert In Ladakh

Ladakh has put both North and South Block on high alert. Chinese incursions on the Line of Actual Control (LAC) in eastern Ladakh have been on the rise. In fact, while its normal to witness continued incidents of ceasefire violations and infiltration attempts on Line of Control with Pakistan, this summer the LAC has been unusually active. Both Indian and Chinese troops are said to have come to blows on the banks of Pangong Tso on May 5-6 with matters coming to a head when Chinese incursions were detected at three locations along the LAC on Wednesday last. The Chinese have a huge build up that includes upcoming military-style bunkers, new upcoming permanent structures, military trucks, road-building equipment and even a warehouse! Army Chief General Naravane has given an operational review of the situation on the ground on Wednesday last, and has deployed reinforcements at the four standoff points without halting work on the border infrastructure work. The Ministry of External Affairs is firm “India will defend its territorial integrity and sovereignty.” And while the Chinese flex their muscles, New Delhi is confident of taming the dragon, even if it means a long haul. 

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Locusts Storm  

 ‘Locust warning alert’ has been sounded off in five States--Rajasthan, Madhya Pradesh, Punjab, Gujarat and Maharashtra. Active swarms of desert locusts have already wreaked havoc in Rajasthan and MP, forcing the Centre to step in. “89 fire brigades for pesticide spray; 120 survey vehicles; 47 control vehicles with spray equipment and 810 tractor-mounted sprayers have been deployed, says the Union Agriculture Ministry. While 11 districts in Vidarbha and four in north Maharashtra are gearing up for bigger assault, Odisha government has issued guidelines for a possible attack asking farmers to take preventive steps. As is known, locust swarms can devastate crops and cause major agricultural damage, which can lead to famine and starvation. However, a lot depends on which way the winds blow. This time though these are in different directions. In the past, most of the locust attacks, since 1993 had been localised to Rajasthan alone. Obviously, fear is mounting. Already plagued by an economic slowdown and Covid-19 lockdown, the country can ill-afford an agrarian crisis. Fingers must be kept crossed. 

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Himachal’s Blot  

Himachal Pradesh may well open a can of worms. Rather, it may turn out there could be many more cans if only anti-corruption bureaus across the country get cracking during the pandemic. Wednesday last, the ruling-BJP was left red faced as its State party chief Rajeev Bindal put in his papers following investigation into procurement of medical supplies by the government for Covid-19 since February. Bindal is alleged to be part of an audio clip, under probe by the vigilance and anti-corruption bureau, in which two men are purportedly heard discussing handover of Rs 5 lakh “bribe.” One of them, Director, health services Dr A K Gupta was arrested last week, giving the Opposition ammunition to target the government by claiming the person heard “offering the bribe” is a “ruling party leader”. Bindal denies any link, but resigned on “high moral grounds”, so the probe is “not influenced in any way”. Be that as it may, the incident should put State governments and vigilance departments on alert to stem the rot that has seeped in, even in the times of corona.

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TN Sound Advice

Governments can learn a lesson or two from Madras High Court’s judgement. Dealing with an ordinance by ruling AIADMK to take temporary possession of Veda Nilayam, former Chief Minister Late Jayalalithaa’s Poes Garden residence in Chennai, to establish the Puratchi Thalaivi Dr J Jayalalithaa Memorial Foundation, a division bench expressed strong reservations. “When there are so many essential amenities which are yet to be provided by the welfare state, public money cannot be wasted for purpose of constructing memorials. The real tribute to any leader should be paid by following his/her principles and working for people’s benefit and development of society,” it said on Wednesday last. Further, it declared Jayalalithaa’s niece and nephew as Class II legal heirs of her property, and that the government can’t acquire the property without their consent. The two could be administrators for utilising half-acre property, worth over Rs 100 crore, as Chief Minister’s official residence and convert a portion into a memorial. This way, the two won’t have to be compensated for acquiring land and government could use the amount for ‘developmental purposes such as building infrastructure, providing potable drinking water, cleaning of water bodies etc…” Sound advice indeed.

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Flyover Outrage

Sparks are flying over naming of a flyover in Karnataka’s capital Bengaluru. On Thursday last, the civic body cancelled the inauguration by Chief Minister Yediyurappa of “Veer Savarkar” flyover, named after Hindutva ideologue/freedom fighter, on his birthday, citing the lockdown. Not really true. Both Congress and JD(S) have vociferously opposed the name saying: it’s an “insult to freedom fighters from Karnataka’s soil… the hasty decision is proof the administration isn’t run by elected government but by those behind the scene.” Ruling-BJP has hit back: “Naming circles, buildings, infrastructure after Nehru and fake Gandhis are the ‘naamdar’ party’s honour to freedom fighters.” In this tu-tu-mein-mein there’s another voice -- pro-Kannada activists, who have questioned all parties about “contributions during their rules”. Thus, Twitter users have started social media movement #DontWantSavarkarName. Their justification: National parties name projects after their political leaders to get High Command’s attention! They are hopeful of a victory as in 2009 movement-- the airport was eventually named Kempegowda (Bengaluru’s founder) International Airport. Who said what’s in a name? ---INFA

(Copyright, India News & Feature Alliance)