Economic Highlights

New Delhi, 30 September 2019

  Induced Inflation

POLICY OVERHAUL CRITICAL

By Shivaji Sarkar

India needs to look at its falling demand, rising bank, power and fuel charges, high tax and toll rates. This is an induced inflation, whatever the indices might say, amid perceptible slowdown. The nation forgets that commodity prices are on the rise, incomes are falling and policies like the new MV Act, atrocious banking policies and transport tariff, whatever the officials may say are adding to the aggravating situation.

The rising power charges in States like Uttar Pradesh are causing price rise and slowdown, even in agriculture. The non-banking NBFCs, key lenders to MSME are in a crunch owing to massive loan default by the road toll collectors of IL&FS. Officially it lost Rs 91,000 crore in 2018. Though this is less discussed it has severely affected many micro-financing institutions.

The latest PMC bank virtual closure exposes the cooperative sector as well. The modus operandi is almost similar to the IL&FS. The latest Asian Development Bank assessment further brings down the growth rate to 6.5 per cent against the official estimates of 7 per cent. In the last quarter it touched 5 per cent, lowest in six years.

Prime Minister Narendra Modi is trying hard with the US CEOs and others to lure investment. It is taking time to get translated on the ground. Even the nation’s richest are melting, according to Hurun India Rich List 2019. Their cumulating wealth dropped by Rs 3,72, 800 crore. It says 344 individuals or almost a third witnessed wealth reduction and another 112 could not meet the cut-off of Rs 1,000 crore, about half of last year.

It finds the richest Ambani rising by 3 per cent and upcoming Adani by 33 per cent. Shanghavi of Sun Pharmaceutical lost 20 per cent wealth. LN Mittal of Arcelor Mittal lost 6 per cent. Eight other super rich also saw decline in wealth. The list indicates tough competition among the rich as also that they are hit by the slowdown. This also indicates that their overall decline is the result of the industries they are having. In short, the slowdown is more encompassing.

The Finance Minister despite defending policies agrees to cut corporate tax rates from 35 per cent to 25 per cent. It is welcome but a bit too late. In fact, it is admission of a faux pas. With depreciation and other adjustments, the corporate for the last over two decades have not been paying more than 22.5 per cent in income-tax.

The supposed relief of Rs 1.45 lakh crore is mere academics. Overall the Indian corporate had been paying 48.3 per cent taxes, according to OECD, including tax on dividends it pays to its shareholders, who also pay another tax on it. This is tax on tax and it continues.

Only 18 countries of the 94 in OECD database in 2018 have rates over 30 per cent. It was 58 in 2000. Indian corporate despite present cut would pay over 38 per cent as taxes. They were paying 48.3 per cent now.

The problem is that individuals still have the highest rate of 42.5 per cent. With other indirect taxes, even after GST, an individual pays over 70 per cent of their income as taxes. Could the economy do better with less than 30 per cent of earnings citizens are left with?

Atrocious tolls, parking charges, passenger taxes add to the woes. There are also extortions on the road -- it is by the insurgents in Nagaland and some other North-Eastern States or “suvidha shulk” by law enforcing authorities in other places. Somewhere the country is unable to understand its economics. The government expenditures increase and business gasps for its inability to recover the basic cost.

Despite easing of norms, no poor can dare do a simple business unless he can create the warmth for the law enforcers -- municipal, panchayat or State. This is despite efforts being made by Modi to root it out. The sufferers say that his stringency has only led to rise in rates as “risk for perpetrators grow”. Even the corporate or even small businesses or educational institutions are not free from it.

Naturally the crisis continues. The latest RBI annual report 2018-19 (FY 19) confirms the difficult path. The GDP growth rate has slipped to 5 per cent in the April-June first quarter. The collapse of automobile, textile and diamond industry, thaw in IT sector, rising NPAs, tightening of banking charges and norms, failing manufacturing sector and sluggish consumer demand lead to deceleration.

There is cash crunch and it is affecting the rural, farm and wholesale sectors. The forced government rules of transacting through banks is delaying deals and adding to the cash crunch. India does not learn from either European or the US sub-prime crash of 2007-8. When we move through banks, simply loans, perceptible volume increases but actual suffer as there is no cash quantification, which is fast as well as check on hyped up transactions.

The system needs cash lubrication, which in the wake of demonetisation has been drying up. The Chief Economist of Yes Bank Subhada Rao recently says that people need to have cash for the supply-side changes to yield benefits. She says that spree of job losses and high unemployment has led to the demand fall. It is a key reason for the slowdown.

As eight core sector growth slows to 2.1 per cent, the wage losses have increased. The farm sector, MSME, transport and jewellery and retail also thaw. Low demand for trucks has made life difficult for about two crore workers. Small jewellery sector in Surat employs 66,000, MSME about 11 crore and farm sector over 54 per cent of total workers. The solution is not in rate cut but deciding a floor interest rate of 9 per cent for depositors.

Expecting a demand boost in such a scenario is a dream. It requires a mix of short and long-term measures for demand pick up. The mix has to include easing of taxes as also a discussion with all stakeholders, including the Opposition and the common man. The only risk is the Opposition and particularly the Left, who have little understanding of the economics and crisis. Mere government bashing would not do.

The NITI Ayog has to take a lead in generating new thoughts and formulate a people-oriented policy. If it forms a group its Member Secretary should be from the industry to reflect the actual deliberations. The situation is difficult. But it should be the bottom. Deliberations and proper not euphoric, publicity-oriented actions may begin the trajectory for growth.---INFA

(Copyright, India News & Feature Alliance)

Round The World

New Delhi, 28 September 2019

Modi In America

COUNTING LOSSES & GAINS

By Dr D.K. Giri

(Prof. International Politics, JMI)

Prime Minister Modi’s Houston Rally, called ‘Howdy Modi’, has been hailed by BJP supporters, Modi bhakts and most of the media as a historic moment in India’s foreign policy, touching the zenith of India’s standing in the world. The critics and some independent observers say, the event was stage-managed by BJP’s PR machinery and the proceedings in the rally left an unappealing legacy.

It is not unusual to have multiple perspectives on any issue or event in democratic politics. Also each political action will have positive and negative consequences. Good managers minimise the negatives and build on the positives gains. From such a premise, let us count the gains and losses in Modi’s mega event in Houston and his bilateral summits with Donald Trump. Rest of the tour is routine affair of a speech in the UNGA and bilateral meetings with heads of States on the fringe.

By any stretch of imagination and evaluation, the Houston event was great optics of diplomacy from India’s point of view showing the power of India Diaspora. Donald Trump had to come to the event to garner support from 50,000 American Indians gathered in Houston and 4-plus million living in the United States. It is no secret that Indian-Americans tend to support the Democrats in the US, and Trump would need every vote including those of 4 million-strong Americans of Indian origin to reclaim the mandate in 2020.

At the same time, many observers would suggest that the event revealed the statesmanship and diplomatic acumen of Prime Minister Modi. But did it really? Was it not more his PR capacity than statesmanship? By canvassing for Trump for 2020 presidential elections, Modi proved that he is merely a politician, not a statesman. The American theologian and author made this deep distinction when he said, “a politician looks at next election, but a statesman thinks of next generation”.

On the gains, for Modi, as well as India, it was great to have the President of the US, the most powerful country in the world, on the side of the Indian Prime Minister in a rally organised in his honour. The Houston rally also reiterated the growing closeness between the two countries. Discounting the encomiums heaped on each other, what was of grave importance to India was the US openly standing by India. This is critical for India as it faces the combined hostility from ChinPak (China and Pakistan). Having got the goodwill support of Russia on India-Pakistan relations where China is the main irritant, New Delhi can count on the backing of Americans.

Second, many discerning observers say that Trump is building up the counter-China alliance with Japan, India and Australia. Japan is solidly with the US, Australia is warming up to India and the US; that makes the Quad active and effective. So the Rally also endorsed the India-America strategic Alliance.

Third, there were some trade differences. Trump, much touted as transactional, had withdrawn the GSP offer to India, and there were other restrictions and tariffs etc. Most of these differences appear to have been ironed out, and both countries are ready to sign a new Trade treaty. This will be eased by Modi announcing to invest $2.5 billion in US oil and gas sector. From the reports, it seems India’s private sector company Petronet LNG was already inking a pact with Tellurian, Inc, Texas. Given the uncertainty of supplies from the Middle East, especially after half of Saudi Arabia’s production was disrupted by the recent drone attacks, for India, this investment would ensure some energy security at fixed rated with oil and gas supplies from US in future. The production of fossil fuel in US has surpluses looking for overseas markets. So it is win win-win situation for both.

Fourth, investment from India in US market is completing the circle of time. A developing country makes investment in the most powerful economy is something to cheer about. Donald Trump mentioned this as a big step. He said, “It is good that India is investing in our country. It is reciprocal as we are doing the same in India”.  In international political terms, this reciprocity in a way takes India to symmetric relations with US.

Fifth, Houston rally was an event that marked a historic occasion for the two big democracies coming together publicly. Attempts were made in the past to draw India close to US, but the offer was negated by Nehru who was wary of “neo-imperial ambitions” of US and was obsessed with getting China the due recognition in the world. However, Prime Ministers PV Narshimha Rao, Atal Behari Vajpayee, Manmohan Singh worked diligently to correct the historical fault lines, undid Nehru’s crypto-communist approach and restored the natural proximity with US. Modi is taking it forward.

On the losses India has to suffer from Modi’s grand rally in Houston, there are quite a few. We may not realise it now. The negative consequences of an action take time to manifest that is why the leaders do not realise it as they commit an amoral or unprincipled act. The best way to avoid such repercussions is to stick to the principles and political correctness.

Modi endorsed Trump as the next presidential candidate in 2020. It is politically incorrect for a head of one sovereign country to campaign for a candidate in another. We have country-to- country relations. Supposing Democrats came to power in 2020, what should be their attitude to India and Modi? It is all right for BJP to go and campaign for Republicans, but it is not OK for the Prime Minister of India to campaign for a party candidate.

Second, Trump is inconsistent and a maverick. He is likely to face impeachment for using the President of Ukraine to malign his rival from the Democratic Party. To hook India-American relations to an unstable and unpredictable person like Trump is not wise. He said, “Modi has done wonderful things in India, and is a like Father of the country”. Even in BJP, people will find it hard to stomach. Some would argue that Trump is smartly using both Modi and Imran Khan of Pakistan to shore up his sagging image. Should we fall into his trap?

Moreover, Modi should have used this occasion to sign a security Treaty with US to the effect that whenever India’s security is threatened US will come to its aid. This could have been done in lieu of offering the US the emerging market of India, and a countervailing force to China. 

Modi missed the chance of binding US to India’s security. Once that is done, India could have used its resources for development and growth not on defense purchases. If Trump is transactional, so should have been Modi. He should have made it between India and US, not him and Trump, although personal warmth and equations do help cement things.

However, at the end of the day, India’s talents and American technology, Indian market and American resources, India’s principles and America’s prowess would augur well for the world. So let us say that the two big democracies, two big diversities should come together for a better world. India’s democracy, demography and demand should prompt the US to hug the Union of India. Can India make US realise this reality? ---INFA

(Copyright, India News & Feature Alliance)

Spotlight

New Delhi, 27 September 2019

Doval Rubs It In

NETAJI NOT CONG HURRIED EXIT

By Proloy Bagchi

NSA Ajit Doval’s repeated reiteration of Netaji’s role in hastening British exit from India is an attempt at appropriation of Subhash Chandra Bose and his legacy for the BJP. He has dug into history and repeated what Clement Atlee, Prime Minister of Great Britain at the time of India’s Independence had revealed during his visit to India in 1956. Earl Atlee had told the then acting Governor of Bengal that the British departure from the country was hastened by the activities of the INA and the nationalist fervor it injected into the Armed forces.

It seems, Clement Atlee who was Prime Minister of Great Britain when India became independent came on a visit to Kolkata in 1956 and stayed there for two days as guest of Governor West Bengal. The Governor at that time was Phani Bhushan Chakravarti, the first Indian Chief Justice of Bengal who was at that time acting against the post. He had a lengthy conversation with Atlee during which he happened to have asked the latter what was the reason for the uncalled-for haste for the British exit from India, particularly when there was no compelling ground. There was no anti-British movement and the last one, the Quit India Movement, had petered out.

That is when Atlee told him there were numerous reasons, but the most important one was Netaji’s activities, the INA and its fight against the British besides the nationalism that it evoked in the British Indian Armed forces. Atlee had in mind the naval mutiny of Karachi and Bombay, the Army rebellion of Jabalpur and stray rebellious incidents in the Royal Indian Air Force. His contention was that with the erosion of the loyalty of the Indian Armed forces for the British Crown, it was felt, it would be difficult to keep the country within the Empire.

Asked whether the non-violent resistance led by Mahatma Gandhi had anything to do with the hasty withdrawal of British from the country, Atlee replied, pronouncing each syllable separately with a disdainful smile, “minimal”. If one goes by what Atlee is reported to have told the then acting Governor of Bengal it was in no way the Indian National Congress’s non-violent resistance led by Mahatma Gandhi that forced the British to withdraw from India.

By making a mention of Late Earl Atlee’s statement Ajit Doval was only responding to the repeated claims of Rahul Gandhi that if the Congress could win independence from the British it could certainly take on the BJP at the 2019 elections which was then yet to take place. The results of it, however, were so dismal for the Congress that Rahul had to give up his President’s post. In any case, it is somewhat like coming from the horse’s mouth that it was the INA that forced the British to let go of the “jewel in the crown”.

Ever since independence, the Congress has cornered all the glory magnifying its role in the freedom movement to the exclusion of all others, including that of Netaji Subhash Chandra Bose. Its claim of winning freedom for the country by means that were non-violent in nature was a fraud that was spun and perpetrated by the leaders of the Congress. As it turns out with the statement of Atlee, it was Bose’s daring efforts to throw out the British by combining with the Axis Powers, though held controversial by many, proved to be the nemesis for British imperialism.

Not only was India freed of the British yoke, India’s independence resulted in freedom of many small and big nations right around the world. The sun, which had stopped setting over the British Empire a century or so ago, started setting over it again. The seed for this was sown by Netaji and his Indian National Army. The INA became idol for the men in the British Indian forces who were very unhappy on account of the post-War INA Trials at the Red Fort. The rebellions in the British Indian forces were because of their discomfiture as they were always told that they could win wars only when led by the British. In the INA they were led by their own countrymen acquitting themselves very creditably.

The leaders of the Congress were always antipathetic towards Subhash Chandra Bose even though he was popular among the Party’s rank and file. While Bose wanted firmer actions against the ruling British his opponents in the Congress believed in compromises. In fact, when he found that his efforts were being stymied by his opponents he escaped from confinement and went to Germany to meet Hitler to seek help for India’s independence. INA followed as a corollary and that seems to have worked against the British.

Even in his death, controversy did not leave Netaji alone. There were quite a few theories about his disappearance after he left Saigon for Tokyo. Many believed that he wanted to go into the custody of Russians after the surrender of Japan and had therefore proceeded to Manchuria, which was close to being annexed by Russia from Japan. Many considered the ashes kept at Renkoji temple as fake. Even in India, a large section of people believed that there was no plane crash and that Netaji had come back to India to live incognito as a saint. First, it was a saint of Shoulmari who was considered by many as Netaji. Later, another saint living in Faizabad, UP, was widely believed to be Netaji. Intermittently reports would appear of his close connections with members of the Bose family who, along with some of his friends, were reported to have visited him.

After his death in 1985 a large number of documents, including photographs of the Bose family, were recovered from the ashram of the Baba who used to be called Gumnami. Various items of personal effects, like his silver rimmed spectacles and a gold Rolex wrist watch were also found in his ashram after the Baba’s death. Recently, a report appeared in the newspapers indicating that American handwriting experts have certified that the handwriting of Bose and the Baba had very strong similarities. Other physical features of the two also happened to tally.

In view of Atlee’s statement on the British withdrawal many historians have said that the time has now come to re-appraise the role of Subhash Bose in the freedom struggle. Hitherto, written history has extolled only the roles of Mahatma Gandhi and Jawaharlal Nehru in it. That is from where Rahul Gandhi got his wrong notions about the Congress winning freedom for the country. But as many feel, a time now has come to reassess the roles of leaders like Netaji in the fight for freedom, particularly when they had been moved to and kept in the margins all these years by the hegemon that was the Indian National Congress. ---INFA

(Copyright, India News & Feature Alliance)

Open Forum

New Delhi, 26 September 2019

Banning Plastics

TOUGH, BUT DOABLE

By Dhurjati Mukherjee

Plastics have become inseparable in our lives as most items we use in our daily lives are plastic products. There has for long been demands for use only of thick quality plastics and keeping in view the concerns of adverse effects of plastics, the Modi Government declared a ban on single use plastics like bags, cups, plates, small bottles and certain types of sachets with effect from 2 October though no definition and identification of products has yet been done.

It is being presumed that the Government is bent on proving its concern for the environment through this measure though experts feel that a lot of work is necessary before announcing the ban. But economists fear and quite rightly, that at a time of economic slowdown the challenge to the plastic industry, which is worth over Rs three lakhs would indisputably deepen the gloom in the coming days.

Besides, the decision has been taken without conducting either any scientific or economic assessment of the fallouts of plastic ban. Several Opposition leaders have stated that this is another conspiracy to harm small traders and shopkeepers who heavily rely on plastic for packaging. Moreover, vegetable vendors will suffer but this ban, if implemented, will have virtually no effect on big and even medium-level corporates who will easily shift to other packaging material.

It is well-known that the plastic industry employs lakhs of people and loss of jobs in this sector has to be kept in mind before taking any decision. Food processing, packaged water, pharma products, agriculture and education are among the key sectors that depend on plastic products. The packaged mineral water is a Rs 40,000 crores industry in the country and it would be affected by this decision.

Questions the Indian Plastics Federation: Is the country fit enough to make the transition now? Stating it was with the Government vis-a-vis putting a waste management system in place and recycling should be promoted in a big way. Obviously there is need to improve collection of plastic waste which, in turn, will promote recycling. Under the Plastic Waste Management Rules, States and local bodies have to play a key role in collecting plastic waste and sending them to recycling units.

Think. India generates about 9.4 million tonnes of plastic wastes a year and recycles 60% of it. According to the World Economic Forum study on plastic pollution around the world, oceans will have more plastics than fish by 2050, if plastic pollution continues to rise. India’s contribution to plastic waste that is dumped into the world’s oceans every year is a massive 60%. True, the country’s recycling record is impressive when measured by the global average. However, the challenge before India is the incremental accumulation of single use plastic waste

Apart from the rampant prevalence of single use plastics in the country coming largely from common consumerism, there is another source of plastics making its way to India. According to reliable sources, 25 countries (including Pakistan and Bangladesh) dumped 121,000 metric tonnes of plastic waste in the country after recycling companies imported it.

Meanwhile, the Confederation of All India Traders (CAIT) has in a letter stated that traders were the last mile connect with 130 crores people of the country and as such can play a major role in extending the call down the line through more than seven crores shopping outlets. The association observed that 98% of single use plastic was used by multinational companies, corporate manufacturers and big retailers either in their production line or packaging of finished goods.

However, it is good to hear that the Indian Railways has taken the lead in enforcing a ban on single use plastics in trains and its premises from 2 October. Additionally, 1853 plastic water bottle crushing machines are to be installed at 360 major stations in the first phase and the Indian Railways Catering & Tourism Development Corporation (IRCTC) has been asked to implement the return of plastic drinking bottles as part of extended producer responsibility. A general guideline relevant for all is to encourage vendors from refraining from using plastic bags.  

In such a scenario, the issue of plastic pollution has become the subject of much discussion and debate across the country. Meanwhile France, China and Ireland as also other countries have taken a lead in banning plastics. As is well known, dumping of plastic waste not recycled requires enormous land, not quite available in urban centres specially in India as plastic takes around 500 to 1000 years to degrade.

In the interim India lacks an organized system for management of plastic waste, leading to widespread littering across towns and cities as is evident. The present ban on the six items of single use plastics will clip around 8 to 10% from the country’s annual consumption of about 14 million tonnes of plastic according to sources. 

Pertinently, it is necessary for the Government to plan tougher environmental standards for plastic products and insist on recycling. For this, recycling facilities have to be made available in all towns and even in semi-urban areas with the Government’s zilla parishads at the district level taking the lead. The private sector should also be encouraged to set up recycling machines down to the sub-divisional levels.

Apart from all this, e-commerce companies have to cut back on plastic packaging that makes up nearly 40% of India’s annual consumption. Cheap smart phones and a surge in the number of internet users have boosted orders for such companies but the packahing of their wares has to change.

In sum, the road to sustainability is not straightforward, simple or quick. Every stakeholder in society has a proactive role to play. Most of the time, an individual’s efforts may seem trivial. For instance, a person using approximately 5-6 toothbrushes a year may think that their actions will not have any detrimental environmental consequences, but it does. As regards small companies who use low cost plastic packaging, they would have to change and preferably opt for things that are recyclable. ----- INFA

(Copyright, India News & Feature Alliance)