India did the right thing in backing out of the RCEP

India’s decision to back out of the Regional Comprehensive Economic Partnership (RCEP) with Prime Minister Narendra Modi stating that Indian concerns were not addressed in the agreement received mixed reactions—with the vast majority across the spectrum backing the Government decision.

The main opposition parties led by the Indian National Congress, some of the powerful influencers of the ruling Government including the Rashtriya Swayamsevak Sangh-affiliated Swadeshi Jagran Manch, and some of the leading farmers and traders unions with significant electoral clout were all vocally against the mega free trade agreement (FTA).

The proposed agreement was to be between the ten-member ASEAN countries (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, Vietnam) and its six FTA partners of India, China, Japan, South Korea, Australia and New Zealand. The agreement if materialized could have covered over half the world’s population and 30 % of the global GDP. All the countries except India have agreed to the terms of this mega deal.

Development, Economy, National, Opinion, Politics

By Anil K Antony

November 5, 2019

A Curious Case of Billionaire Promoters and Insolvent Companies

India may hold the third position on the list of countries with the highest number of family-owned business, after China and the United States, but not many of its family-managed public firms are as clean as their counterparts in most other large economies. The Credit Suisse Family 1000 report, last year, based on a study of 1015 companies of $250 million or more in market capitalisation each, listed 111 of such companies in India. Most of these companies are stock-exchange listed and controlled by family promoters. Among top 50 profitable companies globally, 24 were from Asia, with a total market capitalisation of $748 billion, of which 12 were Indian family-owned companies valued at $192.2 billion, the report said. However, these Indian companies are more of an exception than representing a normal trend. There are little to talk about thousands of India’s family-run public companies as the daily stock exchange list would suggest.

Therefore, the Credit Suisse list may be somewhat misleading. There are about 5,000 listed firms on the Bombay Stock Exchange (BSE) and National Stock Exchange (NSE), both based in the country’s financial capital of Mumbai. There are many common stocks between the two bourses. Although an overwhelming number of these companies is family controlled, only a few hundreds seem to be doing well. On the other hand, most family promoters seem to have built more personal assets than clean assets for their public companies. Forensic audit of over 200 companies facing corporate insolvency resolution action under the Insolvency and Bankruptcy Code (IBC) has revealed irregularities of over Rs one lakh crore, including possible diversion of funds. Almost all of them are family controlled.

The ministry of corporate affairs, which is responsible for implementation of IBC, is expected to initiate action against the promoters, directors and even auditors in some cases, although the ministry is stretched for manpower and resources. Apart from siphoning of funds, instances of transactions with related parties and several other irregularities are noticed, including involvement of large commercial banks. Forensic audit refers to an independent evaluation of an entity’s accounts and transactions to detect data and evidence of fraud and financial irregularities.

Economy

By Nantoo Banerjee

November 5, 2019

Depoliticisation of the Economy is the need of the Hour

Much has already been said about the economic slowdown. Some important facts about the matter are: India is experiencing a growth slowdown where the GDP continues to grow, albeit at a falling pace. A slowdown is not the same as a recession in which case there is negative growth or a net reduction. Even while a negative GDP growth is highly unlikely in developing nations like ours due to our vast economic potential, in the situation where an economy continues to experience a slowdown for two or more quarters, the odds of it falling into a recession are heightened. Among other early signs of a recession are: increasing unemployment, rise in the number of non-performing assets (NPAs) and a sharp decline in revenue and demand. As per these indicators, a recession is on the horizon.

As a consequence, a few urgent questions come to mind: What ails our economic system? And, what can we possibly do about it? These are also rather big questions and I hope to advance simple suggestions–ones that do not require a deep engagement with statistics or an expertise in economics for two obvious reasons. First, often it is the simpler ideas that resolve complex issues and second, arguments for a better economy should be debatable and comprehensible by everyone, not just experts.

I began my search for simple answers by exploring the intellectual history of the subject. Economics, presently considered the ‘science of everything’ was originally referred to as Political Economics. The older name is far more telling and accurate about the workings of the subject, since it is mostly about the political management of economic matters. It was–and to an extent, still is–commonly acknowledged that politics is at the heart of economic policies. In the present context, this is manifest in the ongoing US-China trade war, which was motivated largely by Donald Trump’s promise of ‘getting America a fair deal’. Naturally, when two of the world’s biggest economies limit trading, there are serious repercussions. Today, markets everywhere, including India, are suffering in some shape or form because Trump’s aggressive politics of nationalism and protectionism has infiltrated US foreign policy and trade. In India, a fine example of economic policy gone awry is the demonetisation of high value currency notes in 2016, motivated purely by political logic and proving catastrophic for the economy.

Economy

By Saud Amin Khan

October 31, 2019

A Debt Trap called Educational Loans

Educational loans have caught large sections of South Indian youth in a debt trap and the problem is so acute that even if the recipients manage to repay the loans, they suffer life-long consequences, from which there is no easy escape.

The problem is particularly bad in the case of Kerala, with its high rate of literacy, where the aspirational value of education as a means of securing a better life is much stronger compared to many other states. Kerala also is one of the most exemplary examples of how education and certain professions have lifted whole communities out of the social and economic hierarchy.

It is no wonder, therefore, that Kerala accounts for the largest disbursement of educational loans by banks and financial institutions for any single state. Over half of total educational loans in India are disbursed in South India, according to rating agency Care Ratings; and Kerala and Tamil Nadu together account for 36 percent of all outstanding educational loans in the country, which gives an idea about the high dependence on bank finance for education in the two states. About 95 percent of the loans are provided by the public sector banks under priority lending, with State Bank of India leading the pack by far.

Economy, Education

By K Raveendran

October 22, 2019

A Critique of Randomised Control Trials in Poverty Alleviation

Last week, Michael Kremer, Abhijit Banerjee and Esther Duflo received the Nobel for Economics for their “experimental approach to alleviating global poverty” and for addressing “smaller, more manageable questions,” rather than big ideas.

This experimental approach is based on the so-called ‘Randomised Control Trials’ (RCT). Simply put, in such experiments, a randomly selected group of individuals (randomization is a method of removing bias) receive an intervention whose efficacy is tested. Changes that result in the conditions of this random experiment group is compared with those in another ‘similar’ group of individuals (referred to as a ‘control group’) that was not provided the intervention. The difference in outcomes is directly attributed to the intervention.

The RCT as a scientific research method is primarily widely practiced in clinical research to test the efficacy and safety of new pharmaceutical products/treatments. RCT is a pre-requisite for the regulatory approval of a new drug or vaccine. Evidence from such experiments have to confirm both internal validity (are the results of the study reliable?) as well as external validity (are the conclusions universally applicable to other population groups/locations?). Once a treatment/product is so approved, it is made available for general use.

Development, Economy, Opinion

By Mona Mishra

October 21, 2019

Nirmala Sitharaman: A Clueless Finance Minister

If press statements had the power to lift an economy, Nirmala Sitharaman would have proved herself to be India’s best finance minister. Unfortunately, statements can conjure no such miracles and Sitharaman continues to be what she is: a minister who is completely clueless about the state of the economy.

Her stimulus programme, coming initially in ‘Equated Weekly Instalments’, and now with lesser frequency, has failed to make any mark and the economy continues to suffer from a persistent lack of demand.

In her much-fancied series of announcements, her primary focus remains presenting a rosy picture of the economy—and that is where the problem actually begins. The finance minister is in a perpetual state of denial. The first step to solve a problem is the recognition that the problem exists but Sitharaman refuses to accept that the economy is in deep trouble.

Economy

By K Raveendran

October 14, 2019

Enslavement of Rural Women through Exploitation of Time

In the Indian economic context, one of the most elusive parameters on the rural poor is the exploitation of ‘time’.

It is not the same as ‘investment of time,’ where the individual spends time on activities by choice and not doing so will not adversely affect his or her living conditions. On the other hand, the ‘exploitation of time’ devalues time of the poor, which requires them to work for longer hours, just to make ends meet.

Time as a resource is appropriated by the system from the poor and maintains them in a steady or deteriorating state of poverty. As a result, they must work harder and spend more time but remain poor. This is even more pronounced in the case of women.

Development, Economy, Employment, Features, Opinion

By Kota Neelima

October 10, 2019

Wayanad needs Urgent Solutions to coexist with Environment

While going through a petition seeking the lifting of night traffic regulations on the Bandipur National Park stretch of Kozhikode-Kollegal National Highway 766, the Supreme Court made a chance observation that an alternative route be explored, facilitating permanent closure of the national park stretch. This evoked huge protests in the northern hill district of Wayanad in Kerala—the largest protest the district has ever witnessed. True this: devoid of any rail link and located close to Mysore in Karnataka and Nilgiris in Tamil Nadu and accessible from the rest of Kerala only through ghat roads, it is a lifeline for Wayanad.

A hunger strike was organised in Sulthan Bathery Town by various youth organisations with the backing of all major political parties and Rahul Gandhi flew down from Delhi to express his solidarity. Thousands took part in the mega rallies held in various parts of the district. The protestors shouted slogans against a few local environmentalists, who according to them, had tried to mislead the Supreme Court and its learned judges. Kerala Chief Minister Pinarayi Vijayan rushed to Delhi to seek the intervention of the Centre in convincing the Supreme Court about the implications of such a ban on the hill district, affecting tourism and normal life.

Though the hunger strike was called off following assurances from the Centre and Karnataka that no plan for permanent closure of the route was under consideration, the real issue continues to remain unaddressed. At one level, a few self-proclaimed environmentalists with unrealistic goals are making the issue complex by engaging in a prolonged process of litigation. They seek more travel regulations on the route without factoring in that the road had existed for centuries facilitating trade, commerce and other interactions between the Kannadigas and the Malayalis.

Development, Economy, Environment, Features, Kerala, Life, People, Politics

By K A Shaji

October 4, 2019

Ni Hao 你好 Chinese Traveller! Kerala Beckons

Tourism in India has generated around Rs 16.91 lakh crore ($240 billion), which is 9.2 percent of India’s Gross Domestic Product (GDP) in 2018. And about 12 per cent of Kerala’s GDP comes from this sector. The state has rebounded quickly from the devastating floods and the Nipah scare in 2018, and received a large inflow of both international and domestic tourists. According to an Economic Times report, Kerala recorded a 6 per cent growth in tourist arrivals in 2018 as against the previous year. The growth in the first quarter of this year has been impressive too, with a 12.36 growth in foreign and 20 per cent increase in domestic tourists.

Kerala Tourism is now looking East trying to tap the Chinese market—targeting the young travellers—as it registers a high number of young, educated and resource-rich travel lovers. But India is yet to figure in their list of top eight destinations for the Chinese travellers. And Kerala sees very few Chinese travellers and in 2018, less than 10,000 arrived—still a significant jump from the previous year.

At the recently concluded third edition of International Conference on Tourism Technology organised by Association of Tourism Trade Organisations (ATTOI), India in collaboration with Kerala Tourism, Beijing-based tourism expert Richard Matuzevich of the World Tourism Cities Federation, who presented a session on ‘How to do Social Media Tourism Promotion to get Chinese Tourists’ stated that India can woo high-spending Chinese tourists by improving basic infrastructure and by providing exceptional service. “Chinese travellers are boosting the tourism sector all over the world and with the opening up of the market, it holds a huge market potential in India.”

Economy, Kerala, People, Society, Tourism, Travel

By Geetha Jayaraman

September 25, 2019

Aarey! The City and the Forest must Coexist

The United Nations (UN) is debating and discussing climate change in New York this week, with an emphasis on sustainable development goals. Prime Minister Narendra Modi also made a strong pitch for India’s leading role in this. India’s UN office, as part of the celebrations of 150 years of the Mahatma, has included a book on Mahatma Gandhi’s teachings on the environment. India has also gifted solar panels to the UN, in a clear indication that India stands strongly for the environment and finding solutions for a cleaner and greener earth for our future generations to inherit.

16 year-old Greta Thunberg has caught the imagination of the world with her hard-hitting speeches on how the world needs to wake up to the dangers of climate change. However, back home in Mumbai, we have to fight to save our environment from the authorities. The decision of the Mumbai Metro Rail Corporation Ltd (MMRCL) to cut down more than 2700 trees in Aarey to set up the Metro car shed has seen widespread protests across the city.

In a show of solidarity, people across the country have also urged the agency to rethink its decision. It is heartbreaking and heartening at the same time to see young children join the protests to urge the development authorities to save Aarey Forests, Mumbai’s largest green lung and also a thriving ecosystem that houses various species of animals and wildlife. Only two cities in the world can boast of having wildlife exist in the precincts of a bustling and busy city—one is Mumbai, the other is Los Angeles in the United States of America.

Development, Economy, Environment, Features, Opinion

By Priyanka Chaturvedi

September 24, 2019

The Rich have Benefited Even in an Economic Crisis

The country is facing one of the worst economic crises in history. According to the Vice-Chairman of the Niti Aayog, this crisis is the worst in seventy years since Independence. Now, the question is, how did this crisis occur? Who is bearing the brunt of the crisis? And, at what cost is the Modi government trying to overcome this crisis?

The root cause of this economic crisis is the neo-liberal policies pursued by various governments since 1991 and, aggressively pushed by the Modi government ever since it assumed office in 2014. In addition, the twin devastating blows of demonetisation and GST aggravated the economic situation that was already showing signs of slowdown. Demonetisation caused large-scale joblessness and millions of people lost their livelihoods, income and purchasing power. This, along with the untimely and shoddily-implemented GST led to widespread destruction of small businesses resulting in further loss of income and purchasing power.

All surveys have shown the prevalence of massive unemployment and job losses in the country. Centre for Monitoring Indian Economy (CMIE) had estimated a loss of 11 million jobs in 2017-18 as a consequence of demonetisation. And according to the National Sample Survey Organisation (NSSO), unemployment level in the country is at its highest in 45 years.

Economy, National, Opinion, Politics

By MB Rajesh

September 19, 2019

The Jury is still Out on Bank Mergers

A sound, robust and resilient financial system is a prerequisite for a modern economy. Weeks ago, the Modi government announced the mega merger of 10 Public Sector Banks (PSBs) into four, in a bid to consolidate and create stronger banking entities. Meanwhile, India’s growth rate has decelerated for five straight quarters to its weakest level since 2013, and the economy is crying out for reforms.

Reforms are an on-going process. This year marks the 50th anniversary of bank nationalisation, arguably the biggest structural reform introduced in the financial sector during the post-Independence period.

Evolution of banking in India

Economy, Jobs

By Meera Venugopalan