Thursday, June 4, 2020

Bits and pieces policy changes may not yield desired results



The government has announced a spate of policy measures to put the economy back on the growth path. The measures and intent to encourage manufacturing in the country is however the most publicized and discussed about policy initiative. It is a clear departure from the extant policy of global cooperation and using bilateral and multilateral trade agreements to benefit from the resources and manufacturing prowess of partner countries ,
So far, we have not seen a comprehensive policy framework for the policy initiative. The basic principle of management would guide that to execute such a major policy intuitive, which may have significant impact on the lives of 140cr people, the planners must first lay down a detailed conceptual framework, which defines in very unambiguous terms, at least the following:
(a)   The need for such policy initiative; especially the circumstances that have necessaitated the significant change in the policy direction and intent;
(b)   The objectives of the proposed policy initiative, especially specifying how the various stakeholders would specifically benefit fro the change;
(c)    The deliverable goals of the policy initiatives, clearly defining the quantitative and qualitative target and timeframe for achieving the specified targets;
(d)   Strategy to meet the objectives and goals, clearly defining the legal, regulatory, administrative, procedural, social and behavioral changes that would be prerequisite and/or desirable for achieving the objectives and goals of the policy initiatives; how the government proposes to implement these changes and what could be the hindrances in implementing these changes, etc.
(e)    The programs that would be implemented for achieving the objectives & goals; the budget for these programs, executing and controlling authorities and review mechanism;
(f)    The cost and benefit analysis of the proposed policy shift; specifically outlining the exit conditions and costs should the changes are found to be not working as planned.
The incumbent government had initially proposed the policy change to promote local manufacturing under its "Make in India" initiative in 2014. In six years, the government has not presented any comprehensive conceptual framework for it; though the NITI Aayog has issued some broad vision documents. There have been many scattered efforts to encourage investment in manufacturing sector, ) most prominent being the restructuring of corporate tax rates), and cluster development; we have not seen any a coordinated effort that would be usually needed for such a massive policy paradigm shift. To the contrary there have been many disparate actions by different organs of the government, defeating the very purpose of the policy itself.
The recently issued draft directive to ban production, transport sale and import of 27 popular agro chemicals is just one point in case. Significant capacities for these chemicals have been built in past few years only. The totally arbitrary decision to suddenly put a blanket ban on these products does not augur well for the policy intent of the government. Similarly, recently a circular was issued to ban sale of 1026 products which are imported in Semi Knocked Unit (SKU) condition in the police and para military canteens. The circular was withdrawn in couple of days. Apparently, two departments of the same ministry were not talking to each other on important policy issue.
Various organs of the government are giving different explanation of the policy intent itself. "make in India"; "Make for India", Make in India for the World", Self Reliance"; "India as a hub of Global Supply Chain" are some of the popular connotations. This does not show that we are going to have a paradigm shift in policy; may be just few bits and pieces here and there.

Wednesday, June 3, 2020

Investment strategy for Pataal Lok



Pataal Lok (the Under World), a new series released last month on Amazon Prime, seems to have ruffled many feathers. There is a spate of criminal complaints against the producers of this series, alleging racists, sexist and communal bias in the story line and depiction. On the other side, there has been abundance accolade for the intensity of plot and brave presentation. Intrigued by the diverse opinions, I decided to watch the series and decide for myself. My take is as follows.
The readers may note that I find it materially relevant for my investment strategy. In my view, it involves some of the most critical lacunae of our system including communities, political establishment, administration, law enforcement & crime investigation, justice and criminal reform system, which have a strong bearing on the economic growth and development. I strongly believe that these lacunae have materially hindered our growth potential and there is little to suggest that the things are changing in any significant manner. Any assumption regarding India becoming a middle income economy in the long term investment strategy must be critical evaluated in this light.
For its cinematic value - tight plot, sharp script, engaging dialogues, and perfect acting - Pataal Lok is a treat to watch. However, if someone is not a usual audience (watch, enjoy and forget) and like to critically analyze a piece of art for its social impact, it raises some serious questions and answers almost none. For example, consider the following five points:
(a)   The protagonist, who is a frustrated police officer, discovers that the cartel of media, Police, CBI and politicians have staged a fake murder attempt and terror plot for vested interest (remember 1997 Hollywood flick "Wag the Dog"). When he confronts his seniors, he is advised to close his eyes or face the consequences of disobedience. He is told that there are no lacunae in the system. It is well oiled and all the wrong doing are well planned and executed.
The series suddenly refreshes the memories of many infamous cases like Jessica Lal murder case, Aryushi murder case, Batla House encounter case, BMW accident case, Salman Khan accident case, etc., and how the investigating agencies and police did multiple flip flops in the investigation and prosecution; and how media played the tune.
The plot may strengthened the belief of the unscrupulous that everything is manageable in the country; while giving a glimmer of hope to the righteous that with perseverance the culprits may be brought to justice even if takes extraordinary amount of time and effort.
The question it leaves for the audience is "whether to believe in the system which is so well organized with all its wheels well oiled; or stop having whatever trust they have left in the system?" In my view it raises the level of audiences' cynicism by a few degrees.
The fact that while many people and social organizations have raised objections to the story line, the administration, media, police and investigating agencies have not take any objection to their derogatory depiction; might further hurt the belief of the people in the system.
(b)   The series depicts two instances of gang rape. In one case young girls are raped by their first cousins, as the girls' father could not repay the debt in time. In the second case a middle age lower caste woman is brutally gang raped by upper caste strongmen, to avenge the crime of her son. Her son, unable to bear the persistence tormenting and physical abuse by the upper caste youth, had killed one of the upper caste youth and ran away.
Incest, sexual exploitation of borrower by money lenders and landlords, and rape as a means of revenge have been depicted in many movies in past 70yrs. It is a common knowledge that these phenomenon are not limited to movies and are regular practices in our country. In that sense, the series does show us a clean mirror.
However, nowhere in the series, which has media as one of the key constituent of plot, any whisper is heard raising concern over these issues. These instances are used as convenient sub plots to balance the anger against the brutal killers. The audience is not provoked or motivated to spare any thought for the deep rooted malaise widely prevalent in our society. Unfortunately, no human rights or women rights organization has raised objection on this.
The series thus raises the question, "do we actually care for the rising instances of crime against women, or our conscious just stirs a little bit whenever a case of rape gets higher TRP in the media?"
(c)    In a sub plot, again conveniently incorporated to balance the angst against the group of criminals, an abandoned child is sodomized by a trafficker. After years of exploitation, the child grows to be a transgender. He cross dresses as a woman and provides miscellaneous services to various criminals.
Police mistaking this man as female is one of the few mistakes in the plot; but no "child rights" activist expressing concern over this issue can certainly not be a mistake. The audience again is left with almost no disgust for child trafficking and sexual exploitation.
The question it raises is "with so much of insensitivity of administration, police, media, and common people, how would we solve this very serious problem prevalent in our society? Has struggle ended with decriminalization of Section 377 of IPC?
(d)   The series has a group of four hardened criminals, who are engaged by a politician to stage a fake murder of a star news anchor. Police, administrators, media barrens, hawala operators and investigating agencies are accomplice in the plan.
Four sub plots are narrated to show how four innocent people transformed into hardened criminals. The idea behind sub plots is to invoke some sympathy for these criminals to balance the feelings of audience.
The question that the series leaves for audience is "why no effort is shown for the reformation of these criminals who were innocent youth before they took to the path of crime?"
To the contrary, these criminals are shown as tools in the hands of politicians and police for carrying out their malevolent objectives. A critical inference is that it is an attempt to generate sympathy for the criminals and mistrust and disgust for the system per se, without offering any solution or leaving any scope for debate.
(e)    The protagonist police inspector somehow manages to get his son migrated to a prestigious private school in Delhi from the government school where he was studying before. He is not able to tolerate the cultural shock. He is also not accepted by the upper middle class and rich students of the private school. He is subjected to constant ridicule and bantering. He develops rebellious tendencies - hates the father, joins the company of petty criminals etc. and almost kills one of his classmates.
The behavioral development of this teenager at this point in the story bears some similarity to the gang of four criminals. Thankfully, timely intervention by the father saves the boy from slipping into the underworld.
The question which is still bothering me is that "why people are not rising to demand the "right to uniform education" for their child?" People come on streets for all miscellaneous issues, but they do not demand good education which is pre-requisite for poverty alleviation and inclusion.
The system of caste and religion based reservation can never succeed till the wide gap between the public and private education is bridged. I believe this disparity in the education system has been intentionally introduced to defeat the purposes of reservation. It suits the system (politicians and elite) very well. The disparity was there in pre Mandal era, but it seems to have increased tremendously post 1989.
Unfortunately, it seems not to have bothered many.
Readers' views are welcome at vijaygaba.investrekk@gmail.com

Tuesday, June 2, 2020

Growth trajectory slips further

The 4QFY20 economic data has again highlighted the points, I have been emphasizing for past many quarters, which is-


(i)    The economic growth in India has been declining structurally since the global financial crisis (GFC) of 2008-09. For couple of year, monetary and fiscal stimulus given by the extant government to mitigate the impact of global crisis supported the growth. However, post FY13, the growth trajectory never looked like retracing to pre GFC levels. A strong number in FY22 would be purely a base effect.
 
(ii)   The long term growth curve in India has shifted down. The potential growth in India is no longer 8% plus. The pivot is somewhere close to 6%.

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(iii)  The global deflationary pressures are causing the nominal growth curve to shift down even more than the real growth. It is pertinent to note that a sustained fall in nominal growth would be new phenomenon for Indian policy makers and population alike.
The government's budget, revenue and expenditure targets, sectoral allocations, and all allocation for all social and development programs is usually based on the nominal growth numbers. The benign inflation post GFC has resulted in a faster decline in nominal GDP growth as compared to the real GDP growth. However, now the nominal growth has reached the level where a decline would directly result in lower wages, lower rental and lower returns on savings.
A sustained downward trend in nominal growth may result in some dramatic adjustments in socio-economic structure. The effective rate of taxation may have to be raised considerably to meet the social development targets. The household savings that have been a traditional source of safe and steady funding for both corporate and government may decline widening the gap for fiscal and corporate funding. The socio-economic inequalities may rise materially as the poor and middle classes become sustenance households (earning just to meet the expenses, just like developed economies) without any material social security benefit.


As RBI recently highlighted in its monetary policy statement the inflation trajectory is most likely to remain benign, except for few cyclical spikes in food inflation. This essentially means, the policy makers, administrators, businesses, workers, consumers, savers and farmers all might need to reset their plans, policies, aspirations and expectations.