8 ISSUES AND INSIGHTS MUMBAI | THURSDAY 11 APRIL 2019 >

the electorate, that is supposed to be > CHINESE WHISPERS informed about the election promises Making a mockery of a vital electoral activity all in one place, can be said to truly care about it. Perhaps a more truthful depic- tion of reality would be to abandon elec- Correct budget Thanks to the lackadaisical approach of the regulator and the ignorant masses, the electiontion manifestos altogether. However, do Former finance picture telling the capital market regu- minister manifesto of a political party has been reduced to something no one really cares about lator that no investor reads a prospectus P Chidambaram in any case and therefore one must not (pictured) had cess borders on being a farce. piece of the public promise that lies at manifesto even pays lip service to the get carried away by the role of a prospec- accompanied his A fundamental element of a public the core of elections has resulted in fact that regardless of contents, if politi- tus. If you were to indeed believe in this son Karti, who was contract is that the promise and recip- piquant and unacceptable outcomes. cal expediency so demands, the party statement, it would mean you truly speaking at in rocal promises that create the contract It is in this year, at the fag end of the may prune, truncate or even abandon believe that Sahara did not deserve an election rally, to are clearly understood, well communi- seventh decade of the Republic that the the promises set out in the manifesto. In iota of the treatment meted out. The Sivaganga district. cated, and that the general public is EC has imposed a 48-hour cut off for a nutshell, at the threshold, the mani- foundation of the case against Sahara Party workers, many women among able to take an “informed decision”. release of the election manifesto. While festo means nothing. Election mani- was the non-issuance of a prospectus for them, had gathered at the event and When a company raises public money this is lauded as a reform, it also means festos have never had caveats about raising funds from investors through some 100 plastic chairs were through an initial public offering of that, according to the EC, 48 hours is potential “common minimum pro- issue of securities. arranged for them to sit on. When he securities, for example, it must write a all the time necessary for a voter to read grammes”. If a company were to say in The story lies in the mockery that elec- saw the arrangement, Chidambaram “prospectus” that states what the com- an election manifesto, appreciate its its prospectus that it is raising money for tion manifestos have been reduced to. asked the volunteers to remove the pany does, what it plans to do with the contents, and take an informed deci- a certain purpose, but later uses the And indeed, in the lackadaisical approach chairs as they might add to the event WITHOUT CONTEMPT money raised and explains the risks sion about whether to vote for that par- money for something else, there will be of the regulator, and the attitude of the expenses and it would be difficult to associated with what is on offer. ty. Regulators with far lesser powers hell to pay. ignorant masses in the marketplace for explain to the expenditure observers SOMASEKHAR SUNDARESAN Yet, when it comes to the mother of than the EC enforce far longer periods No election manifesto has any con- votes. That some political parties are tak- appointed by the Election all public contracts — elections that of time for appreciation of promises tent that shows in a single comparative ing pains to engage in widespread public Commission if they visited the venue. decide who we put into government to made in public offering documents. In chart or table, how the party in power consultation to come up with a manifesto, The chairs were removed e are the world’s largest rule our destiny (“serve us”, for the polit- a securities offering, the draft prospec- performed as against its promises in the is heartening. It would be abject apathy if immediately and the women were democracy. We pride our- ically correct) — the regulation of the doc- tus has to be posted online for the pub- previous manifesto. A promise-versus- the parties were to stop caring about even made to sit on old flex banners. As W selves on having substantial- ument equivalent of the “prospectus” is lic to see what is being worked on. performance narrative is an integral an ostensible manifesto. Yet, that day is the meeting got underway, the ly “free and fair” elections term after pathetic. Elections are regulated by the Whatever be the promise in an elec- part of every regulatory environment not far, unless the umpire wakes up to the expenditure observers happened to term. Typically, every year there is most-extremely empowered regulator in tion manifesto, after the election results other than the regulation of elections. need to regulate this important piece of drop by, as the veteran politician had some election somewhere in the the nation — the Election Commission are announced, there is nothing in the In short, the election manifesto is a electoral activity. rightly predicted. The former finance nation. Yet, something as fundamental of India (EC), a constitutional func- election manifesto that the party called ritualistic document that no one really minister's calculations turned correct as an election manifesto is so poorly tionary. Yet, the light-touch and hands- to account for — except for a potential cares about. Neither the regulator, which The author is an advocate and independent when they went away after satisfying regulated that the entire electoral pro- off approach to regulating such a vital denial of a vote at the next election. No only fixes timelines for its release, nor counsel. Tweets @SomasekharS themselves that the party meet hadn't overshot the budget.

turing and supply chain ecosystem. About chor and chowkidar Chinese suppliers are now experts in Congress hardware design, software and user President Rahul Call drop by Indian handset firms interface integration. They have built a Gandhi filed his robust original design manufacturer nomination (ODM) and supplier network”, he said. from the Amethi How domestic manufacturers lost their status as DISCONNECTED Further, the Chinese brands have Lok Sabha Share of Indian brands fell below 10% in 2018 also been aggressive in terms of their constituency on feisty challengers to multinationals device launches and capturing key mar- Wednesday. keting trends to offer well-designed Accompanying 11.0 n CY2016 n CY2017 n CY2018 Figures in % ARNAB DUTTA the Registrar of Companies – from a peak products at competitive price points with him were his of over ~10,000 crore in 2014-15. And its 9.1 clever marketing and robust channel mother Sonia Gandhi, sister Priyanka n mid-2016, Keshav Bansal, then 24 share in the country’s bustling smart- 6.7 strategies. Also, factors like big war Gandhi Vadra, brother-in-law Robert and a director at India’s third-largest phone market has come down to less 5.4 chests of Chinese players that are mostly Vadra and their children. Congress I smartphone firm Intex than five per cent in 2018 from a high of 4.7 having the advantage of ‘economies of supporters came out in significant Technologies, was gung-ho about the 18 per cent in early-2014. In fact, it 4.0 3.5 scale’, years of expertise in product numbers to cheer them on. While the firm’s future. Sitting in his luxurious fam- remains the only Indian brand to cross 2.3 2.2 2.5 2.3 design, backing of strong research and Congress president and other family ily residence in Delhi’s Sainik Farms, the respective marks in revenue and 1.9 development capabilities and marketing members travelled in an open-top 1.2 Bansal was revealing his plans on taking market share ever. 0.5 0.5 budgets have only acted against the local vehicle, some party leaders walked the company public soon. Also in focus Since its heydays in the handset mar- players, analyst point out. alongside it. Several of them later was his effort to make his newly acquired ket, when it used to challenge the mighty Micromax Lava Intex Karbonn Other Despite their decimation by Chinese found that their phones and wallets franchise rights for the Indian Premier multinational market leaders Nokia and Indian brands rivals, the big four Indian brands still have had been stolen. The episode gave League team Gujarat Lions finally join Samsung between 2010 and 2014, Source: Counterpoint Research, Registrar of Companies & Industry a chance to bounce back, says, Prabhu the Bharatiya Janata Party social “the big league”. Micromax, like Intex, has tried its hand Ram, head-industry intelligence group, media supporters a good reason to Bansal, freshly returned from the at other businesses too. Both of them Panasonic. Further, brands like VU, turned the competitive dynamics at the CyberMedia Research. “If these four ridicule the Congress for its slogan UK’s Alliance Manchester Business entered the low-margin white goods Thomson, Kodak and Iffalcon from TCL, lower end of the handset market from brands are able to come-up with attrac- "chowkidar chor hai". School, was yet to anticipate the road- business by 2016. But success in their nipped the dreams of Micromax and price to value. From being fringe players tive product offerings, with the latest blocks to his ambitions. Close new endeavour has been Intex in the bud. offering inexpensive phones to price- specs and the right pricing and promo- to three years later, both his hard to spot. Both managed The fortunes of the other two major sensitive consumers, Chinese handset tions, they can recover some lost ground”. dreams, of taking Intex public to come out with competi- Indian handset brands — Lava and firms have risen to dizzying heights, The wide offline retail network, set up by Only snakes, no ladders and crowning his team with tively priced air conditioners Karbonn — together the big four of the shedding their humble image to corner the Indian brands years ago, can also be Candidates canvassing for votes ahead of an IPL trophy, remain in the and washing machines, but Indian handset industry — have run on an unprecedented 60 per cent share of leveraged to reach the hinterlands. an election are known to do strange realm of aspiration. And they never made it to the top similar lines. Together, share of these the smartphone market in 2018. And that Lava is putting innovation at the front things to sway voters. One simply decided Intex Technologies’ fortunes five brands. In fact, their four and other Indian brands’ fell below has come at the expense of Indian firms. and centre of its plans. "We are investing to groove to Bollywood music. And hoped have since dwindled in its most ambitious venture — to 10 per cent in 2018 — for the first time According to Karn Chauhan, research in product design and R&D and bringing his moves would move voters to choose own field — the local smart- foray into the fast-growing since 2010. In 2018, the share of Indian analyst at Counterpoint Research, component manufacturers on baord to him. Karnataka Housing Minister MTB phone market. The compa- smart LED television market brands in smartphone market stood at Indian brands could not match the inno- increase the extent of local value addi- Nagaraj of the Congress broke into a ny’s sales have more than — was fiercely challenged by 9.1 per cent from a peak of over 45 per vation that their Chinese counterparts tion. Currently, 25-30 per cent of the com- "nagindance" much to the amusement halved between 2015-16 and new entrants. cent in 2014. While, investment propos- brought in in recent years. Their failure ponents used in our phones are sourced of the people gathered at his rally in 2017-18 (see table). Xiaomi — the current als to the tune of thousands of crores to to adopt to the fast-changing market locally," says Sunil Raina, president and Hoskote, 25-odd km from Bengaluru. As Intex Technologies' fortunes was no leader in the local smartphone market ramp up the local manufacturing base realities played an important role too. business head, Lava International. the live band that was following the exception among the Indian handset and a Chinese brand with a diverse con- and upgrade their respective portfolio “The growth of Chinese brands and Relatively down-market overseas minister's convoy started playing a makers that once offered some feisty sumer electronic portfolio — rattled the were made in recent years, none of the the slow adoption of industry trends led regions such as Africa and Eastern famous song from the 1954 hit movie competition in a fast-growing market. entire TV market with its low-cost smart four have managed to increase their to this decline. One of the key reasons Europe also offer a glimmer of hope to Nagin, Nagaraj, 67, couldn't stop himself Micromax Informatics, the poster boy of TV sets. After entering the local market clout over India’s handset market since for the growth of Chinese brands is their these companies. “For Lava and from dancing. Translated into English, local handset industry during the early in early-2018, it not only decimated the the slide began in 2015. affordable offerings with stand-out fea- Micromax, it makes sense to exploit the minister's name stood for king cobra, years of the decade, is in no better shape. fringe players but is also challenging the Why did they lose market share so tures including strong design language and leverage such opportunities. It a Congress worker proffered helpfully. The Gurgaon-headquartered firm’s sales very dominance of the top four of India’s quickly? Principally because the Chinese and their ability to leverage deeper would complement their domestic have shrunk, according to filings with TV market — Samsung, LG, Sony and outdid them in the price game and access to the Shenzhen-based manufac- focus,” says Ram.

INSIGHT > LETTERS

Hats off, NG Alarming state of Jet been waved off, income tax rebate has also increased up to ~5 lakh. The govern- Apropos to the various reports in ment has failed to improve the Fitch rat- Jet’s ousted chairman has successfully Business Standard about many bidders ing from 'BBB' stable outlook, though it who might show interest in the sinking implemented transformative reforms transferred the headache of reviving his airline Jet Airways, I have serious doubts that have led to the stabilisation in the on the valuation that's going to be fixed reforms rating. This stable rating will airline to SBI and the government for a stake sale especially with the huge affect the election results too. To improve amount of debts payable by the airline it, the government must attain the fiscal having a formidable new competitor. to lessers, vendors, employees, oil com- deficit target, generate more employ- This ridiculous caveat — not per- panies and so on. I wonder what's stop- ment and strengthen the fiscal position mitting foreign airline investment even ping the law from taking action against of the economy by increasing revenue as cement, power or telecom compa- the original promoter of Jet who has mis- and decreasing expenditure. nies could freely invest in a domestic managed the accounts. The law here is Shubham Sharma Bathinda airline — stayed in place for 16 years acting differently with promoters of right up to September 2012, when the Kingfisher and Jet. While the govern- A correction government issued new guidelines ment is doing everything to extradite the allowing automatic investment of up Kingfisher promoter who too defaulted “Why manifestos lose credibility”, pub- to 49 per cent by a foreign airline in a on loans provided by the banks, the same lished on April 10, had erroneously ANJULI BHARGAVA domestic carrier. It also permitted banks are dealing with the Jet promoter mentioned that the government's capi- holding of up to 100 per cent by a non- did give Vistara and Air Asia India per- most rivals. It pays more than rivals for with a velvet glove. It raises suspicion on tal expenditure and internal and extra- resident Indian (read: Naresh Goyal). mission — although they were not almost all services it outsources. It buys the behaviour of the banks and the gov- budgetary spending by public sector ven as Naresh Goyal, the recently The new guidelines conveniently existing Indian carriers — to come in its aircraft at a higher price. It has high- ernment. Aren’t rules meant to be the enterprises were estimated at ~6 trillion ousted chairman of Jet Airways, came into place a bit late to help with SIA and Air Asia Berhard respec- er sales and distribution costs than same for everyone? in 2013-14. The correct figure is ~4.5 tril- E opens his bottle of wine at his Kingfisher Airlines (KFA). KFA, which tively, a matter that reached the courts rivals and has steadily been paying Sachin Nair via email lion. Consequently, the average annual home in London, he must look back on started flying in 2005, was on a down- and remains pending. commissions to JetAir Pvt Ltd, owned growth of this expenditure during the the last 25 years with great satisfaction. ward spiral by 2010. By October 2012, A second rule whose timing worked by NG. Naturally, it is broke. Stable Fitch rating five years of the Modi government Let me explain why. In 1994, Jet Directorate General of Civil Aviation in Jet’s favour was the 5/20 introduced Now with close to $4 billion of dues would be 16 per cent, and not 10 per Airways was owned 60 per cent by (DGCA) suspended KFA’s licence. in 2004, just before Jet Airways went on its head, timing is on his side yet For the past 13 years, the Fitch sovereign cent. The BJP manifesto, therefore, Goyal, 20 per cent each was held by However, in 2012, after the KFA international (its first international again. The most crucial general elec- rating of India hasn't improved. The promises a little less than a four-fold Gulf Air and Kuwait Airways. demise, the government policy was flight was May 2005). This prevented tion is staring the present government main reason behind this is the fiscal increase in the growth rate in five years. Government policy at the time permit- changed to allow foreign airlines to new domestic airlines from going inter- and nobody wants Jet to go under right weakness of the country. The govern- The errors are regretted. ted investment in domestic airlines by invest up to 49 per cent through the national unless they had been in oper- now. So, NG has left the entire mess in ment budgeted fiscal deficit of ~6.24 tril- a foreign carrier and Goyal took full automatic route in an existing Indian ation for five years or had 20 aircraft the hands of SBI Chairman Rajnish lion or 3.3 per cent of GDP in the financial Letters can be mailed, faxed or e-mailed to: advantage of it. carrier, making Jet the first airline to in their fleet. The rule stayed till Kumar & Co. It is the ministry and year 2019 but up to November 2019, it The Editor, Business Standard In 1996, the Tata group wanted to take advantage of the new rules. In October 2016. Kumar who are promising to get more will be ~7.14 lakh crore. Now, in the finan- Nehru House, 4 Bahadur Shah Zafar Marg New Delhi 110 002 set up a new domestic airline with 2013, Etihad bought 24 per cent stake Smaller policy diktats also tended aircraft in the air to save the airline cial year 2020 also, our country’s fiscal Fax: (011) 23720201 · E-mail: [email protected] Singapore Airlines (SIA) in a joint hold- in Jet Airways for $379 million. Had to be on his side. In 1998, sensing an from bankruptcy and trying to find position is going to be weak because of All letters must have a postal address and telephone ing. To prevent competition, Goyal sin- the same new guidelines come into opportunity, Jet decided to introduce someone to buy it. As one rival airline direct cash transfer. Farmers’ loans have number glehandedly manipulated government force just one or two years before it the ATR72-500 for certain regional CEO put it, “The villain of the piece policy to ensure that foreign airline actually did, KFA may have survived routes. Miraculously, policy again now is Rajnish Kumar.” > investment in domestic carriers was or at least survived a bit longer. But favoured NG: Landing and parking Even as the writing is on the wall, HAMBONE forbidden. New Foreign Investment timing is everything and in this case charges for aircraft of less than 80 seats Goyal can, if he so wishes, spend his Promotion Board (FIPB) guidelines too timing was on NG’s side. was waived at airports across the coun- days freely in London or Dubai where, were issued that prevented “foreign air- Interestingly, the new guidelines try and ATF was taxed at 4 per cent. by all accounts, he leads quite a com- line” investment in a domestic carrier. issued in late 2012 or early 2013 speci- On October 15, 1999, Jet introduced its fortable life. He’s not a fugitive, has no As a result, the Tata group could not fied “existing Indian carrier” to prevent first ATR flight on Delhi-Jaipur- dues on his head directly and can partner SIA. Goyal too had to ensure foreign airline investment coming into Udaipur sector. watch the show in peace from a safe that Kuwait Airways and Gulf Air a new domestic airline at the time. All through these years, the airline distance. Mallya and others can learn divested their stake in Jet Airways, a Perhaps realising the absurdity of this, has operated with costs far higher than a lesson or two from this gentleman. minor inconvenience in comparison to the government of the day and FIPB most rivals. It pays higher salaries than Hats off to NG! OPINION 9 > STAY INFORMED THROUGH THE DAY @ WWW.BUSINESS-STANDARD.COM

Volume XXIII Number 170 ILLUSTRATION: BINAY SINHA

MUMBAI | THURSDAY, 11 APRIL 2019 investment, anaemic exports and vulnerable exter- nal imbalances, a stressed financial system, mount- ing fiscal pr e ssures (including high government debt-to-GDP ratios) and an exceptionally bad Headwinds for growth employment situation. In this context, it would be easy for any government Deeper reforms needed to put India on a high-growth path to agree on the objectives of macroeconomic policy. It would want faster growth of GDP and employment, he International Monetary Fund (IMF) has revised downwards its esti- continuation of low consumer inflation, lower external mates of growth in India’s gross domestic product (GDP) by 20 basis deficits and a stronger financial system. The difficult points for both 2019-20 and 2020-21. The IMF now sees GDP growth challenge is in devising and implementing a consistent coming in at 7.3 per cent in the ongoing fiscal year and at 7.5 per cent in and politically acceptable set of policies to attain these T objectives. Accordingly, I suggest the following priority the year to come. The IMF is the third multilateral agency to revise growth forecasts areas for macroeconomic policy: downwards in recent days. Last week, the World Bank and the Asian Development n Accelerate the growth of exports through: reduc- Bank both set a lower forecast for India’s GDP growth in 2019-20. They, as well as Macroeconomic tion in the current over-valuation of the rupee; the Reserve Bank of India (RBI), estimated it would be 7.2 per cent, also 20 basis reforms in GST systems and procedures to closely points lower than their earlier forecast. The Central Statistics Office of the gov- approximate the textbook zero-rating of exports; ernment estimated in February that growth in 2018-19 would be 7 per cent — standstill (and then rollback) of customs duty increas- es, which typically operate as taxes on exports; proac- down from the 7.2 per cent it had released earlier. There has thus been some priorities for new govt tive efforts to successfully finalise the Regional downgrading of India’s growth momentum all round. Comprehensive Economic Partnership agreement, It is worth noting that the multilateral agencies’ expectations of a moderate It will have to contend with some key challenges that do not which is necessary to secure our trading opportuni- pickup in GDP growth over the next two years — from about 7 to about 7.4 or 7.5 per ties in fast growing Asian trade; and a serious efforts cent — are dependent upon looser fiscal and monetary policy and some revival in figure in the election manifestos on trade facilitation. Faster export growth would be demand, and not upon a resurgence in private investment. This reflects the RBI’s thrice-blessed by increases in GDP and employment ith the National Democratic Alliance (NDA) per cent in 2018-19 (although “core inflation” has re- (remember 35-40 per cent of our exports come from recent relaxation of monetary policy and its two successive cuts in the headline government completing its five-year term mained above 5 per cent), helped by moderate energy small-scale producers), reduction in our large trade interest rate. But there is limited fiscal headroom for the RBI to stimulate growth, Wand elections under way, it is a good time prices and declines in agricultural commodity prices. and current account deficits, and deeper engagement given that government borrowing has not been reduced sufficiently. The IMF to outline what should be some of the macroeco- n On the other hand, external finances are under with our trading partners. argues, in its outlook for the Indian economy, that the build-up of debt will have to nomic priorities for the new government, whether stress, with the current account deficit in the balance n Reduce the central government’s fiscal and revenue be reduced. This is correct, since it is serving as a drag on private sector borrowing NDA (as seems likely) or some Congress-centred of payments averaging an uncomfortable 2.6 per cent deficits (yes, that old chestnut) through some difficult and investment. India will also face global headwinds, as the agencies have cut coalition. The economic record of the last five years of GDP in April-December 2018. This is particularly decisions on both the expenditure and revenue sides has been mixed, ending on a somewhat weak note worrisome against the background of merchandise of the budget. That too will be thrice-blessed by lower their estimates for global growth for 2019 by 20 basis points to 3.3 per cent — the and entailing substantial challenges for the incoming exports suffering unprecedented stagnation around real interest rates for medium- and long-term funds lowest since the financial crisis in 2008 —blaming trade tensions between the US government, especially in the context of a weakening $300 billion a year since 2011-12, bringing the ratio for private investment, higher public savings to and China, loss of momentum in Europe and uncertainty surrounding Brexit. Of global economic environment. to GDP down from 17 per cent in that year to about accommodate a lower trade deficit in the national course, the future path of crude oil prices will also play a major role. Consider the following : 12 per cent in 2018-19. Causes include: an over-valued macro balance, and a gradual reduction in our near It is clear that for sustainable growth going forward, business-as-usual from n Even the official 2011-12 base national income data exchange rate; our failure to gain from relocation of 70 per cent government debt-to-GDP ratio. the next government will not be enough. At best, India will, if the current slow (which has suffered its due share low-end manufacturing from n Build on the major economic reforms of the past of professional questioning) show China (in sharp contrast to five years, notably the GST and the Insolvency and momentum of reform is maintained, stabilise growth at around 7.5 per cent a growth slowdown in the past two Vietnam and Bangladesh) or to Bankruptcy Code (IBC). The GST rate structure needs according to the new series of GDP. This is clearly not enough. The need is to raise years, with GDP growth decelerat- successfully plug into global value to be simplified, perhaps with a modal rate of 15-16 India’s potential GDP growth considerably. This can only happen if deeper struc- ing from 8.2 per cent in 2016-17 to chains; our ill-advised lurch per cent, a concessional rate of 8-10 per cent and a tural reforms are carried out as a priority. Unfortunately, few of these appear to be 7 per cent in 2018-19. Quarterly towards higher customs duties in high rate around 25-30 per cent on “sin” items and a on the agenda of either national political party at the moment. Labour and land growth rates have come down from the past two years; persisting neg- limited set of consumer luxuries. Exports need to be law need to be re-examined to see where the bottlenecks are for private investment above 8 per cent in 2017-18 Q4 to ative effects of demonetisation and zero-rated effectively. The information technology 6.5 per cent in 2018-19 Q4. This GST transition (especially on system, registration/reporting requirements and at the moment. It is also clear that state-driven growth — through spending on slowdown is also reflected in high small-scale exporters); and a still compliance procedures need periodic review and infrastructure, for example — has lost its ability to drive India’s growth over 8 per frequency information such as the pervasive lack of “ease of doing reform. The IBC system is under constant and serious cent a year. Nor has this spending been able to “crowd in” private investment to Index of Industrial Production, business” in exporting. attacks from the promoter and other vested interests the degree earlier thought. It is essential to ensure that the government now trade statistics, corporate earnings A PIECE OF MY MIND n Above all, our employment sit- of delinquent firms. To preserve and strengthen this borrows less so that private investment, which is more productive and growth- results, Purchasing Managers’ uation has become quite dire major reform will entail continuous review and enhancing, can take up some of the slack and restore growth to a higher trajectory. Indices, major sectoral indicators SHANKAR ACHARYA because of long standing weak- improvements of the extant legislative and institu- and so forth. On current trends and nesses in education, skilling and tional framework. policies, GDP growth could drop to 6-6.5 per cent in health, and an exceptionally anti-employment edi- n And if we are serious about reviving employment- 2019-20. Main causes include: slowdown in global fice of labour laws and regulations. Data from the intensive manufacturing, we have to undertake major growth and trade; continued stagnation in India’s as yet unreleased, “draft” Periodic Labour Force reforms of labour and land laws. Our goal should be The risk factor exports; weak private investment because of crowd- Survey conducted by the National Sample Survey to compete effectively with Vietnam and Bangladesh ing out by high fiscal deficits (centre plus states run- Office in 2017-18 show: Unemployment above 6 per to attract and nurture much more of the low-end, Cautious stand needed on commodity derivatives ning close to 7 per cent of GDP and a Public Sector cent; youth (age 15-29) unemployment rates at dan- labour-using industries shifting out of China. Borrowing Rate of about 8.5 per cent ) and associated gerously high 27 per cent for urban females and 19 These priorities may not figure much in election he Securities and Exchange Board of India (Sebi) will be well-advised to high real interest rates, balance sheet stresses as well per cent for urban males; and labour participation manifestos, but they remain critical for faster growth revisit its plan to allow mutual funds and portfolio managers to deal in as subdued “animal spirits”; persisting high stress rates (the proportion of working age population of national output and employment, the bedrock of commodity derivatives following the misgivings expressed by the finance in the financial system (including both banks and actually in the labour force) at below 50 per cent sustained economic and social development. ministry about this move. The Sebi board had approved the move to non-banks); and the lack of major reforms in agri- overall, a tragically low 23 per cent for females and T culture, electric power, land and labour markets. a disastrous 16 per cent for female youth. The writer is Honorary Professor at ICRIER and former offer investors additional tools to hedge against inflation and facilitate efficient On the plus side, the rate of headline CPI inflation In sum, the new government will have to con- Chief Economic Adviser to the Government of India. price discovery in a transparent manner. However, the economic affairs department n has come down below 3 per cent, averaging about 3 tend with slowing economic growth, weak private Views are personal. of the finance ministry thinks otherwise. It is wary of opening up the commodities market to institutions that have no direct exposure to underlying commodities. The danger is that this could lead to speculative bids, thus, heightening the risks for the investors. The price volatility may actually accentuate if these institutions Trump’s most worrisome legacy use their financial muscle for manipulative trading instead of hedging — which may often be the case. irstjen Nielsen’s forced resignation as US classic 1776 book The Wealth of Nations. For centuries, foundational values like individual liberty and justice Such apprehensions are, in fact, shared by some independent analysts as well. Secretary of Homeland Security is no reason Smith noted, standards of living had been stagnant; for all, are more likely to produce good and fair deci- Agricultural goods, being seasonal and perishable in nature and innately prone to K to celebrate. Yes, she presided over the forced then, toward the end of the 18th century, incomes sions. These institutions may not be perfect, but they unforeseeable price fluctuations, are particularly vulnerable to exploitation by separation of families at the US border, notoriously start to soar. Why? have been designed so that it is more likely that flaws speculators. The proponents of institutional involvement in the commodities housing young children in wire cages. But Nielsen’s Smith himself was a leading light of the great will be uncovered and eventually corrected. sector, on the other hand, argue that their presence would lend greater liquidity departure is not likely to bring any improvement, as intellectual movement known as the Scottish That process of experimentation, learning, and President Donald Trump wants to replace her with Enlightenment. The questioning of established adaptation, however, requires a commitment to and depth to this market and provide more avenues of safe investment, especially someone who will carry out his anti-immigrant poli- authority that followed the earlier Reformation in ascertaining the truth. Americans owe much of their for retail investors. This plea rests on the assumption that the institutional investors cies even more ruthlessly. Europe forced society to ask: How do we know the economic success to a rich set of truth-telling, truth- would undertake well-informed and research-based trading for more credible price Trump’s immigration policies are appalling in truth? How can we learn about the world around us? discovering, and truth-verifying institutions. Central discovery. However, this may not happen all the time. almost every aspect. And yet they may not be the And how can and should we organise our society? among them are freedom of expression and inde- Sebi’s decision on the liberalisation of the commodity derivatives market was, worst feature of his administration. Indeed, identify- From the search for answers to these questions pendent media. Like all people, journalists are fallible; actually, based on the counsel of its Commodity Derivatives Advisory Committee, ing its foulest aspects has become arose a new epistemology, based on but, as part of a robust system of checks and balances a popular American parlour game. the empiricism and scepticism of on those in positions of power, they have traditionally wh ich had mooted phased induction of domestic and foreign institutional investors Yes, he has called immigrants crim- science, which came to prevail over provided an essential public good. into this sector. In the first phase, which is currently under way, specified types of inals, rapists, and animals. But the forces of religion, tradition, and Since Smith’s day, it has been shown that a nation’s alternative investment funds, portfolio managers, mutual funds and foreign portfolio what about his deep misogyny or superstition. Over time, universities wealth depends on the creativity and productivity of investors are to be permitted to operate through commodities bourses. In fact, a few his boundless vulgarity and cruel- and other research institutions were its people, which can be advanced only by embracing foreign entities, especially those having some association with the Indian commodity ty? Or his winking support of white established to help us judge truth the spirit of scientific discovery and technological markets, and selected alternative investment funds (category III) are already active supremacists? Or his withdrawal and discover the nature of our world. innovation. And it depends on steady improvements from the Paris climate accord, the Much of what we take for granted in social, political, and economic organisation, dis- on these platforms. With the entry of the mutual funds and portfolio manag e rs, the Iran nuclear deal, and the today — from electricity, transistors, covered through reasoned public discourse. first phase would be complete. Other institutions such as banks, insurance and rein- Intermediate-Range Nuclear and computers to lasers, modern The attack by Trump and his administration on surance companies are slated to be roped in during the subsequent phases. Forces Treaty? And, of course, there JOSEPH E STIGLITZ medicine, and smartphones — is every one of the pillars of American society — and Though the futures trading in commodities resumed in India after nearly a is his war on the environment, on the result of this new disposition, his especially aggressive vilification of the country’s 40-year hiatus way back in 2003, this form of commerce for all practical purposes health care, and on the rules-based undergirded by basic scientific truth-seeking institutions — jeopardises its continued international system. research (most of it financed by government). prosperity and very ability to function as a democracy. is still in its infancy. Its track record in price discovery and price risk management This morbid game never ends, of course, because The absence of royal or ecclesiastical authority to Nor do there appear to be checks on corporate giants’ has been quite indifferent thanks largely to rampant malpractices and ineffective new contenders for the title emerge almost daily. dictate how society should be organised to ensure efforts to capture the institutions — the courts, legis- supervision. The former commodities regulator, the Forward Markets Commission Trump is a disrupting personality, and after he’s gone, that things worked out well, or as well as they could, latures, regulatory agencies, and major media outlets (FMC), was a toothless body which, being an appendage of the finance ministry, we may well reflect on how such a deranged and moral- meant that society had to figure it out for itself. But — that are supposed to prevent them from exploiting could not take any independent decisions. Though the present regulator, Sebi, is ly challenged person could have been elected president devising the institutions that would ensure society’s workers and consumers. A dystopia previously imag- relatively more powerful and autonomous than the FMC, it, too, has yet to prove of the world’s most powerful country in the first place. wellbeing was a more complicated matter than dis- ined only by science fiction writers is emerging before But what concerns me most is Trump’s disruption covering the truths of nature. In general, one couldn’t our eyes. It should give us chills to think of who “wins” its worth as a commodities sector watchdog. A vigilant and strong regulator can of the institutions that are necessary for the func- conduct controlled experiments. in this world, and who or what we might become, just stave off speculation-driven price aberrations by changing margin requirements, tioning of society. Trump’s “MAGA” (Make America A close study of past experience could, however, in the struggle to survive. capping investments and prices, or halting the trade if the situation so warrants. In Great Again) agenda is, of course, not about restoring be informative. One had to rely on reasoning and dis- any case, it is imperative to tread cautiously and put adequate safeguards in place the moral leadership of the United States. It embodies course — recognising that no individual had a The writer is Professor at Columbia University and the 2001 before allowing institutional investors with deep pockets an open access to the and celebrates unbridled selfishness and self-absorp- monopoly on our understandings of social organisa- recipient of the Nobel Prize in Economics. His new book, price-sensitive commodity derivatives sector. tion. MAGA is about economics. But that forces us tion. Out of this process emerged an appreciation that People, Power, and Profits: Progressive Capitalism for an Age to ask: What is the basis of America’s wealth? governance institutions based on the rule of law, due of Discontent, will be published this month by W W Norton Adam Smith tried to provide an answer in his process, and checks and balances, and supported by and Allen Lane. ©2019 Project Syndicate

their policies worsened the impact of unprecedented consumption of ground security since the 1970s — but for how droughts and famines that became a mis- water, tapped through the humble tube long?” Readers might feel compelled to Taming India’s waters erably regular feature at the time. In fact, well. New power centres emerged in the also ask — if not groundwater, what else? it was when famines and droughts came once-arid regions of north-west and The fact is that there is a crying need for torical quest to tame water and weather dens but also in their architecture. British to be viewed as damning indictments of south-east India, which were now irrigat- us to develop a plan to harness the plan- to the present condition of the sub-conti- colonial rule took hydraulic ambition to administrative practices that anger against ed by these mega dams and had emerged et’s water resources sustainably. nent. A MacArthur fellow, he has spent new heights. The British were the first to the British began to build up. Even a Raj as hubs of agricultural growth. Mr Amrith offers an indirect solution eight years chatting with Tamil fishermen study the linkages between monsoons loyalist like Dadabhai Naoroji criticised Through all this tumultuous, breath- though, when he makes the case that and internationally-known meteorolo- and dry spells; famines and droughts. the government’s inability to create less “development”, few paused to think rivers, oceans and the weather should be gists and traversing dusty British archives The canals they built, notably the Ganges drought-resistant water infrastructure of the consequences of this mastery over issues that transcend national bound- BOOK REVIEWGEETANJALI KRISHNA as well as the sub-continent to research canal, were not just great feats of engi- even as it levied heavy taxes on Indians. rivers and ground water. The author esti- aries. As should the issues of climate this book. neering, they were monuments to impe- The quest to harness natural water mates that since independence, 40 mil- change, pollution and carbon emissions. Last week, when private weather forecast-Unruly Waters begins with the argu- rial power; of England’s ascendancy over resources picked up pace after lion have been displaced by dams in India. He writes: “Climate change creates prob- ing agency Skymet predicted thatment the that the Himalayas and the rivers India and its erratic monsoon, cyclones Independence. As Mr Amrith writes, the Most of these have been Adivasi, tribals, lems of distance — between the source monsoon could be below normal thisthat year, originate from them control the and unruly rivers. concept of development became synony- who have not received any form of com- of pollution and its consequences — but the country went into a tizzy. Givenweather, that not just of the sub-continent but As British maritime power pushed fur- mous with the taming of its water pensation. The environmental conse- it also creates new forms of proximity in Indian agriculture continues to dependindeed, the entire world. Consequently, ther inland into the subcontinent, the resources. Nehru famously referred to quences of large dams have been equally the form of shared risks and interdepen- largely on rains for irrigation, a poorthis mon- region’s quest for mastery over water Gangetic plain became the power axis, dams like Bhakra Nangal and Hirakud as huge: forests drowned, soil, rivers blocked, dence.” This is what makes Unruly Waters soon augurs everything from farmerhas dis- planet-wide implications. To argue with vast quantities of cotton, tobacco, the new temples of modern India. Mega deltas starved of silt, natural drainage hin- a thought-provoking read. At a time when tress and rising food prices to sluggishhis thesis, Mr Amrith takes the reader on indigo, gunpowder and opium shipped by dams and multi-purpose projects came dered and worse. The present-day sce- our planetary commons, so to speak, are markets and higher food imports. aThis sometimes is engaging, sometimes aca- river to Calcutta. Early on, the British to be seen as ways to improve agricultural nario is dire from the environmental per- under such grave stress, the book offers why Sunil Amrith’s Unruly Watersdemic is a trip in history. realised that much of their commerce output. They could magically address the spective, as pollution, climate change and a critical understanding of the politics of timely book. As climate change is causingMuch of the sub-continent’s history depended on the capricious monsoon, inequalities of nature by greening vast accelerating glacial melt have added to water that could shape the fate of increasingly more erratic monsoonshas and been driven by, what he calls unruly rivers and unpredictable storms tracts of land hitherto not irrigated by the sub-continent’s water woes. mankind in the years ahead. more extreme weather phenomena“hydraulic than ambition”. Long before Babar that the sub-continent saw with such reg- any rivers. The control of water became Although Mr Amrith offers a critical ever before, his painstakingly researchedarrived, rulers and the ruled were both ularity. Their efforts to tame these forces a source of power; its absence, a source analysis well-backed by environmental UNRULY WATERS treatise establishes a link betweendriven the by their interest in water. For the of nature were aimed more at improving of enduring exclusion. In the seventies, science, he offers no alternative plan. For his- Mughals, water was both an ornament their own fortunes rather than those of the the subcontinent’s quest for food security example, he writes: “Groundwater has Sunil Amrith and necessity, not just in their formal gar- populace they governed. Consequently, led to the Green Revolution and an been the cornerstone of Indian food Allen Lane; 379 pages, ~799