Make growth sustainable and equitable

Thought for the day

"The clearest way into the Universe is through a forest wilderness."

Word for the day

Synesthesia (n)

A sensation produced in one modality when a stimulus is applied to another modality, as when the hearing of a certain sound induces the visualization of a certain color.

Malice towards none

Violence, be it in J&K or in Chhattisgarh, needs to stop. Immediately.

First random thought this morning

Indian equity market scaled new peak yesterday in a typical frenzied fashion. The panic amongst investors and traders who were waiting for a correction to buy is palpable. The common refrain now is "buy whatever has not gone up".

The junk is therefore on the move at a scorching pace.

In all this, a sane friend reminded, quoting Howard Marks “When there’s nothing clever to do, it’s a mistake to try to be clever.”

Make growth sustainable and equitable

Last year, the central government told the Supreme Court that over 330mn Indians are facing acute water shortages due to drought conditions.

I am not sure what my readers in metro cities having no direct connection to the affected areas made out of this admission by the government. But trust me (a) this is much more serious than you could possibly imagine; and (b) the government was only partially right in its statement.

It is true that over one fourth of Indian population is suffering from serious water crisis. But it is not completely true that this is some temporary problem caused by two consecutive drought years and rains this monsoon season will resolve the problem.

In many parts of the country, including many metro cities like Delhi, Bengaluru, Mumbai, Indore, Madurai etc., water shortages are perennial. People, mostly female members of the household, have to walk long distances and wait for hours to fetch few liters of water barely sufficient to meet their sustenance needs.

Large parts of central and south India, Rajasthan, Gujarat and Maharashtra are parched since decades now.

The current drought conditions have obstructed industrial production in affected area, damaged crops, and adversely impacted animal husbandry. But this is not the worst part.

Last year, our trips to Bundelkhand and Vidharbha regions, taught us that acute water scarcities is severely damaging (a) the basic fabric of the society; (b) peoples' faith in the constitutional institutions; (c) the survival instinct of people; and (d) psyche of the people.

The rate of crime is rising. Even bigger problem is that the acceptance of crime as a way of life is rising; affording a certain degree of legitimacy and respect to the criminals. Child traffickers, organ thieves, pimps and rapists are not amongst the most hated. Police, district administrators, bureaucrats, and politicians enjoy that distinction. This mistrust of people in the establishment was one major reason for disastrous performance of SP in last UP elections.

On economic side, the country is witnessing humongous productivity loss. A large number of children and youth are missing school and work to go in search of water. Mothers are not getting enough time to feed their newborn. The business of dirty water is growing much bigger than the bottled water and so is the business of water borne diseases.

The government and policy advisors need to accept that higher and faster growth is not sufficient. We would need to make the growth much more sustainable and equitable. I have been writing on this subject consistently for past many years. 

Water & electricity

Thought for the day

"The world, we are told, was made especially for man - a presumption not supported by all the facts. A numerous class of men are painfully astonished whenever they find anything, living or dead, in all God's universe, which they cannot eat or render in some way what they call useful to themselves."

Word for the day

Lacuna (n)

A gap or missing part, as in a manuscript, series, or logical argument; hiatus.

Malice towards none

Last Sunday, the people in South Delhi were so engrossed in French elections, that they forgot to vote in MCD election.

First random thought this morning

There are stark similarities between the relationship of ruling party & opposition today and the relationship of ruling party & opposition in 1970s.

The incumbent government perhaps also enjoys the public support, similar to what Mrs. Gandhi enjoyed post 1971 war to liberate Bangladesh.

The key ponderable is — whether this re-release of history show continue for next 10yr or a new era shall begin soon!

Water & electricity

Water and electricity have traditionally constricted India's economic growth in a significant manner.

The electricity supply conditions have improved materially in past 10years, as the effort to engage private sector in generation and distribution of electricity have started to show results. From a total installed generation capacity of 1,05,046MW in 2002, the capacity had grown ~3x to 3,19,606 MW by the end of FY17. Out of this almost one third capacity is non-thermal (Nuclear, Hydro and Renewable).

During March 2017, on all India basis, the country suffered a peak demand deficit of only 1.6%, where this deficit used to be normally in the range of 11-15% just a decade ago. Most of the current deficit lies in northern region.

Similarly, the electrification of villages has gathered speed. Technically over 98% of the total 6lakh odd inhabitations have now been connected to the national grid. Though the regional disparities do exist, and not all homes in the claimed electrified villages get electricity, but still it is a big leap in past 10years. The spread of rooftop of solar panel in rural areas is also showing good results.

The current merchant power rate of rs2.5/unit and average plant load factor of 60%, suggests that presently there is no shortage of electricity for industry in the country.

The size of consumer durable (appliances etc.) market in India has grown almost 5x in past 15years, and it is still considered to be one of the most underpenetrated markets amongst peers.

Availability of adequate electricity supply (quantity and quality) adds materially to the productivity at all levels - industry, household and individual. These gains we have already seen beginning to accrue. There is sufficient evidence that the rate of accrual of these gains shall accelerate exponentially in next decade or so.

However, unfortunately, the same cannot be said about the water.

The per capita availability of water is diminishing almost every year. The average annual per capita availability of water in the country, taking into consideration the population of the country as per the 2001 census, was 1816 cubic meters which decreased to1545 cubic meters as per the 2011 census. The ground tables of water are receding at alarming pace. Even a well irrigated state like Punjab is witnessing severe water crisis. Many regions in southern and central India are facing frequent droughts.

From my personal experience I know that in rural areas of developed states like Maharashtra, people spend 4-5hours a day to fetch drinking water from far away sources. Many children, mostly girls, cannot go to school or study properly, because they need to fetch water for the family. To make the matter worst, the water they get is mostly contaminated and inflict serious diseases on the family.

The most impactful reform is therefore needed in the area of water...to continue

Well begun, but little done.

Thought for the day

" Marriage is like putting your hand into a bag of snakes in the hope of pulling out an eel."

—Leonardo da Vinci (Italian, 1452-1519)

Word for the day

Kerfuffle (n)

A fuss; commotion.

Malice towards none

Assuming the Babri trial will get completed in next two years.

Then what?

It will take another 10-12years in Allahabad High Court and then in Supreme Court.

Whom are we fooling, in the name of justice?

First random thought this morning

Got the opportunity to attend a fat Delhi wedding.

At the entrance to the party venue there were some white (apparently east European) girls standing (just standing not doing anything) dressed as peacock. I am told, it's a common practice these days. While many guests choose to ignore their presence, there were some whose red eyes were gnawing them rather conspicuously.

The party was attended by some politicians and politically connected people. No one appeared bothered about the humiliation of these girls or human rights. No one also appeared concerned whether these girls have work permit.

I will share my thoughts on Delhi fat wedding and its economic implications some time later.

Well begun, but little done.

My numerous travels through the vast lands of India, often remind me of the famous Anton Chekov's short story "The Malefactor". Most of youth and middle age people we interacted with, behaved like Denis Grigoryev the protagonist in the story.

"Denis Grigoryev!" the magistrate begins. "Come nearer, and answer my questions. On the seventh of this July the railway watchman, Ivan Semyonovitch Akinfov, going along the line in the morning, found you at the hundred-and-forty-first mile engaged in unscrewing a nut by which the rails are made fast to the sleepers. Here it is, the nut!. With the aforesaid nut he detained you. Was that so?"

"If I hadn't wanted it I shouldn't have unscrewed it," croaks Denis, looking at the ceiling.

"What did you want that nut for?"

"The nut? We make weights out of those nuts for our lines."

"Who is 'we'?"

"We, people.... The Klimovo peasants, that is."

For once everyone appears to be a free spirit – as if no rule of law exists. They would do whatever suits them – some would do it sheepishly, but most would be audacious in their defiance of rules.“Don’t bother…yahan sab chalta hai” almost appeared to be the national anthem.

On probing a little deeper, one would discover that these are billion people who are in great rush to move forward. The youth in particular is very diligent and eager to grow out of the perennial constraints that have afflicted the country since independence.

In my view, this defiance and consequent non-compliance has traditionally come from three major sources, viz., (a) Distrust in political establishment; (b) inequalities in opportunities; and (c) unreliable law and order machinery.

There is adequate empirical to show that this habitual defiance and non-compliance has impeded the economic growth of country to a significant extent. For example consider the following—

(a)   Non-payment of statutory dues and taxes, non-payment for utility services like electricity and water has led to severe fiscal constraints and mismanagement; fall in standards of public services; frequent defaults; civic unrest and prolonged litigation.

(b)   Non-compliance (theft) by electricity consumers has resulted in perennial problem of T&D losses and sickness of public utilities.

(c)    Unauthorized construction and encroachment of public land has resulted huge congestion, environment degradation, non-payment of taxes, and protracted litigation.

(d)   Non-compliance by norms by pharmacies has resulted in epidemic of self medication, causing serious risk to health of citizens.

(e)    Non-compliance by the norms for use of underground waters, flow effluents in public water bodies, like rivers, etc. has landed us in a situation that could spell disaster of epic proportion for the economy.

(f)    Non-compliance with road safety & safe driving norms leads to thousands of deaths and serious disabilities every year.

The incumbent government has taken some commendable initiatives in improving the compliance standards. For example—

1.    National Cleanliness mission has been launched to make the country open defecation free, and inculcate the habit of cleanliness amongst citizen.

2.    Tax administration has been made easier to use and penalties for non-compliance have been made stringent to encourage voluntary compliance. Many other measures like abolition of currency notes, implementation of GST, and better (wider and deeper) use of technology etc. shall also improve compliance with tax laws.

3.    Restructuring of state electricity boards and public electricity utilities and making state government accountable for T&D losses will likely improve compliance level materially.

4.    Material amendments in the Motor Vehicle act to promote road safety.

5.    Use of Aadhar and digital platforms for more and more public services, entitlements and subsidies shall definitely plug the leakages and improve the compliance standards.

While many notable initiatives have been made to improve the general compliance standards in the socio-economic sphere of the country.

Though we still have a long way to go to achieve a satisfactory level of compliance, nonetheless the beginning is encouraging.

I personally see many impediment to growth being removed in next decade or so, insofar as habitual non-compliance is concerned.

Non Compliance - impediment to growth

Thought for the day

"I have found that, in the composition of the human body as compared with the bodies of animals, the organs of sense are duller and coarser. Thus, it is composed of less ingenious instruments, and of spaces less capacious for receiving the faculties of sense."

—Leonardo da Vinci (Italian, 1452-1519)

Word for the day

Avarice (n)

Insatiable greed for riches; inordinate, miserly desire to gain and hoard wealth.

Malice towards none

BJP and Congress are the same side of the same coin.

It is just that BJP is currently in its Indira Gandhi (1971) phase, and Congress is BJP of 1984.

I just dread to imagine "what would be the Ram Temple" for Congress revival?

First random thought this morning

In spite of all the reforms in energy sector, and massive reduction in petroleum product subsidies, and high dividend policy, ONGC stock price is down about ~30% from its 2014 highs.

At the same time with all its attendant problems of low growth and high NPLs, SBI is just 15% lower from its all time high seen in 2010.

Is it an anomaly in pricing or collective wisdom of market is telling to go short on energy stocks like ONGC and Coal India.

Non Compliance - impediment to growth

When you see these pictures, what comes to your mind first.

Are these funny? Are these worth appreciating? Do they highlight the quintessential Indian character? Do you care?

Now tell me—

·         Have you heard of anyone protesting or suing Amir Khan for openly desecrating the historic Red Fort, a heritage building in movie PK?

·         Did you find engineering students drinking alcohol in college campus in 3 Idiot, acceptable?

·         Did you find Amir Khan riding a scooter in the critical care ward of a Hospital acceptable?

·         Did you noticed that Salman Khan is romancing on a motorbike without wearing a helmet?

·         Did you find this overloaded lorry in Fevicol advertisement impressive or funny?

·         Did you ever thought of complaining about the famous and celebrated Mumbai Dabbawallahs blocking traffic, causing inconvenience to passengers in local trains, or you find it regular or rather part of a great service to the nation?

·         Does the latest TV advertisements of Sporto sportswear and CEAT tyres, that describes Indians as incorrigibly non-compliant, offend you, or you would just laugh it off?

Last week I sent these photographs to 50 people, randomly selected from my contact list, for their comments on these pictures. The mail was sent without any preamble. The results of a second survey on Whatsapp are awaited.

No surprises there. None of the respondents pointed out any problems with these pictures.

28 respondents just found the pictures funny and answered in LoL emojis. 3 respondents said, Amir Khan is any day better than Salman Khan. 5 respondents have asked who is the actor jumping the road divider and dancing in front of the motorbike. Two of them also wanted to check whether there is Govinda amongst the Dabbawallas' group seen in the given picture.

14 respondents have answered with just "???"

The respondents include professionals working with MNC banks, large IT firms, infra developers, exporters and Indians working in foreign countries as senior managers. 20 are women. All are in 35-50yr age bracket.

The point in case is that "compliance" does not appear to be high on priority agenda of even most educated, wealthy and responsible citizens.

In my view, this indifference towards civic and regulatory non-compliance, and admiration for "Jugaad" is one of the top impediments to achieving sustainable high economic growth in India.

The current government should be credited with identifying the problems and taking some baby steps in direction of their resolution....to continue.

First piece in place

Thought for the day

"Just as courage imperils life, fear protects it."

—Leonardo da Vinci (Italian, 1452-1519)

Word for the day

Smattering (n)

A slight, superficial, or introductory knowledge of something.

Smattering (adj)

Slight or superficial.

Malice towards none

Besides being an efficient administrator, PM Modi is inarguably the biggest showman in Indian politics, after Mahatma Gandhi.

First random thought this morning

The way start ups and ecommerce service providers are burning money, globally, it appears that this business model is the replacement of traditional Communist State.

These enterprises are collecting money (capital) from the rich and indulgent across the globe and spending it on providing decent jobs to thousands of people from lower middle class; paying taxes to the governments; subsidizing goods and services for millions of consumers (mostly middle and lower middle class); besides sustaining many small businesses whose produce they sell or consume.

Unfortunately, just like the communist state, this business model may also not survive for more than few decades.

First piece in place

Financial inclusion unarguably has been the single largest reform focus in India, in past 5 decades.

Beginning with nationalization of banks in 1969, the government policy has always been biased towards providing credit to poor. Setting priority sector (farm, MSME and BPL) lending targets for banks and creating specialized institutions such as cooperative banks and regional rural banks (RRBs) were two primary medium used to achieve the success.

These efforts did not yield much success, till a few years ago, as the policy focus excluded the other aspects like building a deposit base, promoting savings culture, or extending the payment network.

In past one decade a paradigm shift has taken place in India's financial inclusion agenda. The concerns over structural macroeconomic lacunae and governance shortcomings, e.g., massive leakage in delivery of public services and subsidies; consistently falling household savings rates; rise in physical savings, especially in gold etc., have forced the measures like direct cash transfer of subsidies (DBT), push to digital payments, expansion of banking network, through new banks, small banks, payment banks, and banking correspondents, expansion of well regulated MFI institutions, etc.

The banking outlets in villages grew 9 fold in six years from a total of 67,694 in March 2010 to 5,86,307 by March 2016.

Hitherto financially excluded household and MSME were forced to deal in cash, and therefore had limited options for building assets of saving for future financial security. This also made them susceptible to exploitation by moneylenders, scrupulous operators of sham schemes and touts.

In past three years, in particular, this drive has gained tremendous momentum, the effect of which can be seen with naked eyes. Humongous drive to open bank accounts (Jan Dhan); promotion of NPS by removing anomalies; launch of crop insurance and personal insurance; bringing more and more subsidies under DBT scheme; giving UIDAI a statutory status and making it an effective KYC document has certainly helped. The move to replace 86% of currency in circulation and thereby forcibly inculcating the habits of digital and banking transactions amongst masses has provided tremendous push to the financial inclusion efforts.

In my view, this piece of the faster growth is now at the right place. In next decade or so we may see material improvement in the household debt to GDP (presently ~9% compared to Thailand 83% and China 37%) ratio. We shall also see significant rise in savings of household, which have been declining since past couple of decades.

To put things in perspective, the household savings have declined from a high of 33% in 1990s to below 20% in 2016. The share of net financial savings in this is around 7.5%, whereas the rest is physical saving.

The deployment of financial savings in corporate shares and debentures was less than 1% in March 2016, against a peak of over 10% in mid 1990s.

I am therefore quite optimistic from the side of supply of growth capital, regardless of the trends in global flows.

Growth is a collective, consistent and continuous effort

Thought for the day

"Nothing strengthens authority so much as silence."

—Leonardo da Vinci (Italian, 1452-1519)

Word for the day

Sententious (adj)

Given to excessive moralizing; self-righteous.

Malice towards none

The pendulum has definitely swung to the other extreme.

We have reached at a point where even blatant rights violation by men in uniform will have to go unchallenged.

Anyone daring to challenge will be trolled down to hell.

What is right and what is wrong - who knows, and frankly who cares!

 

First random thought this morning

Some ancient Hindu scriptures describe the desirable body figure of a woman, to judge her health (fertility). Even today, millions of men in South India apply talcum powder on their face to appear less dark. Many North Indian middle class people almost mourn if a dark girl is born in their families. I have seen some rich Bania families in Delhi, who happen to have inherited dark skins, willing to forgo dowry, if their sons could attract a fair skinned Punjabi girl so that they could have fair skinned grandchild.

So what the hell are we protesting on social media and why are we threatening to arrest a book publisher, who might have unwittingly printed the truths of our society.

Growth is a collective, consistent and continuous effort

·         North Eastern Development Finance Corporation Ltd. (NEDFi), a development bank for the North Eastern States of India.

·         The target under Indira Awas Yojna doubled from 4 lakh units annually to 10 lakh units annually.

·         A National Social Assistance Scheme is been proposed to provide — (a) minimum old age pension of Rs.75 per month to BPL people above 65 years; (b) Rs5000 lump-sum survivor benefits to poor households, on the death of the primary bread earner; (c) sustenance for pre-natal and post-natal maternity care to women belonging to poor households for the first two births. The social assistance package will be complemented by a new Group Life Insurance Scheme of the LIC which will be implemented by Panchayats in rural areas.

·         Mid day meal scheme being run by some state governments has a beneficial impact on child health and attendance. Central government should participate in expansion of mid day meal scheme.

·         Tenth Finance Commission (TFC) recommends a substantial increase in transfers to the States. Despite the severe constraint on the Centre’s resources, the Government has accepted the recommendations.

·         Establishment of IRDA is proposed.

·         Proposal to introduce legislation to establish central depositories.

(Some of the proposals made in the budget speech of Dr Manmohan in March 1995)

The setting up of the Unique Identification Authority of India (UIDAI) is a major step in improving governance with regard to delivery of public services. This project is very close to my heart. I am happy to note that this project also marks the beginning of an era where the top private sector talent in India steps forward to take the responsibility for implementing projects of vital national importance. The UIDAI will set up an online data base with identity and biometric details of Indian residents and provide enrolment and verification services across the country. The first set of unique identity numbers will be rolled out in 12 to 18 months. I have proposed a provision of Rs.120 crore for this project.

(Proposal made by Sh. Pranab Mukherjee in his budget speech February 2009)

An effective tax administration and financial governance system calls for creation of IT projects which are reliable, secure and efficient. IT projects like Tax Information Network, New Pension Scheme, National Treasury Management Agency, Expenditure Information Network, Goods and Service Tax, are in different stages of roll out. To look into various technological and systemic issues, I propose to set up a Technology Advisory Group for Unique Projects under the Chairmanship of Shri Nandan Nilekani.

(Proposal made by Sh. Pranab Mukherjee in his budget speech February 2010)

In my last budget speech I had advised Banks to provide banking facilities to habitations having a population of over 2000 by March, 2012.  The Banks have identified about 73,000 such habitations for providing banking facilities using appropriate technologies. A multi-media campaign, “Swabhimaan”, has been launched to inform, educate and motivate people to open bank accounts. During this year, banks will cover 20,000 villages. Remaining will be covered during 2011-12.

(Proposal made by Sh. Pranab Mukherjee in his budget speech February 2011)

·         Government has initiated an ambitious IT driven project to modernise the postal network at a cost of `4,909 crore. Post offices will become part of the core banking solution and offer real time banking services. I propose to provide `532 crore for the project in 2013-14.

·         A comprehensive and integrated social security package for the unorganised sector is a measure that will benefit the poorest and most vulnerable sections of society. The package should include life-cum-disability cover, health cover, maternity assistance and pension benefits. The present schemes such as AABY, JSBY, RSBY, JSY and IGMSY are run by different ministries and departments. I propose to facilitate convergence among the various stakeholder ministries/departments so that we can evolve a comprehensive social security package.

·         It is proposed to start a fund for urban housing to mitigate the huge shortage of houses in urban areas. I propose to ask National Housing Bank to set up the Urban Housing Fund and, in consultation with RBI.

·         All scheduled commercial banks and all RRBs are on core banking solution (CBS) and on the electronic payment systems (NEFT and RTGS). We are working with RBI and NABARD to bring all other banks, including some cooperative banks, on CBS and e-payment systems by 31.12.2013. Public sector banks have assured me that all their branches will have an ATM in place by 31.3.2014.

(Proposal made by Sh. P. Chidambaram in his budget speech February 2013)

You would be wondering why I am reproducing excerpts from the budget speeches made by various finance ministers from the Congress Party in past 22years.

Well, I just want to highlight three things:

1.    Financial Inclusion is the single largest reform that is taking place in India in past 25years.

2.    This reform is taking place irrespective of the form (minority or majority) and constitution (single party or multi party alliance) of the government.

3.    The current regime has achieved remarkable success in implementing the programs. The government has very ably demonstrated that intent is not sufficient. It needs to be supplemented by strong execution capabilities. But, it cannot be denied that the vision is collective, consistent and continuous, and this fact nourishes the hope...to continue tomorrow