In these hectic days, where social media has become the country’s principal pre-occupation, the time for physical exercise is shockingly scanty.&nbsp;

No surprise then that there is an outbreak of lifestyle diseases such as heart ailments, diabetes and obesity that plague the country’s middle-aged population across the economic divide, a trend that was once only the prerogative of the rich and super-rich.

Oscar Wilde’s epigrammatic expression of treating all trivial things very seriously and all serious things of life with sincere and studied triviality, applies to India of today more than anywhere else.

In the ongoing Parliament session, when a question was asked in the Lok Sabha by BJP MP, Rathva Gitaben Vajesingbhai, as to whether the incidence of obesity is increasing among not only among the middle-aged, but also the youth in urban areas, the minister of state of health and family welfare, Ashwini Kumar Choubey, revealed some eye-popping details.&nbsp;

Citing the Indian Council of Medical Research (ICMR) report on the health of the nation’s states, he said that the contribution of high body mass index (BMI) in total disability-adjusted life year (DALY) of India has increased from 0.8 per cent in 1990 to 3.6 per cent in 2016.

As per the National Family Health Survey (NHFS)-4 (2015-16), there has been a spurt in obesity in both males (from 9.3 per cent to 18.6 per cent) and females (from 12.6 per cent to 20.7 per cent) in the age group 15-49 years in comparison to NFHS-3.

Three years since then, the situation on the ground appears grim as the age-group caught in the obesity syndrome ranges between 15 to 49, the most active and productive years in the life of an individual. &nbsp;&nbsp;

Questions have been asked as to whether being obese is one’s fate or a genetic defect or eating disorder triggered by binge hogging and irregular work schedule or inability to maintain work-life balance through healthy habits.&nbsp;

Whatever the reason, the result is often fatal if the root cause is not diagnosed quickly and remedial measures put in place before it develops into a complicated chain reaction that affects the functioning of a human being’s vital organs and the physical system.

A practicing bariatric surgeon in the United Kingdom, Dr Kamal Mahawar, who has done a dissertation on “Fight With Fat”, recently told this author that India is the third most obese country in the world with 3.8% of Indian men and 4.2% of Indian women wrestling with over-weight issues that affect their physical and psychical wellness.&nbsp;

He blames the entry and entrenchment of fast-food outlets — both desi and videshi — as responsible for the swell in obesity numbers across the country and suggests that fast food products churned out by multinationals and the processed food industry, be taxed heavily. &nbsp;

For the desi shops, dishing out such ready-to-eat heavily-layered masala food items, Mahawar advocates food labeling with mandatory display of calorie count as well as carbohydrate, fat and protein ingredients in granular detail, so that consumers have an informed option before going on a binge on unwholesome food stuff that becomes addictive over time.&nbsp;

Ramming home some native wisdom and home truths on desirable dietary habits, the doctor contends that raw food typically releases calories slowly into the system, while processed and cooked food leads to abrupt surges in the release and absorption of calories by the body. Fending off the obesity epidemic is feasible, if one does not ignore traditional Indian culinary practices and consumption patterns, which has benefitted the human system.&nbsp;

Be that as it may, the bugle on bulge and the battle ahead to fight the fat as raised by Dr Mahawar and the concerned MP in the country’s Parliament have not come a day too soon. India’s goal of reaching the $5-trillion dollar economy mark before long would sound like a pipe dream if the dietary habits of its productive and robust population do not change for the better to raise the total productivity of the economy.&nbsp;

No doubt, the Modi-2 government has its tasks cut out in this battle of the bulge. It has already set in motion the National Programme for Prevention and Control of Cancer, Diabetes, Cardiovascular Diseases and Strokes (NPCDCS), which is implemented for interventions up to district level under the National Health Mission (NHM).&nbsp;

NPCDCS stresses on awareness creation for behaviour and lifestyle changes, alongside early diagnosis, treatment and follow-up of non-communicable diseases, including cardiovascular diseases and diabetes, for which obesity constitutes a major risk factor.&nbsp;

Considering the staggering shortfall in infrastructure and human resources, including the number of doctors for taking up primary health needs of the vast population and perennially under-funding in rural health infrastructure, the awareness campaign to take the fight against fat is faced with stark ground realities.&nbsp;

With diabetes and obesity melding in a seamless manner, Dr Mahawar cautions against the outbreak of ‘diabesity’ to focus attention on the dismal lack of support system for innumerable poor patients who suffer from these twin ailments.&nbsp;

It is time the authorities woke up to the menace of obesity, not only in urban but also in rural areas, so that preventive and curative measures could be initiated on a war-footing to ensure India’s tryst with a mega-sized economy tag. 
 
(This article was originally published on The DNA. Read the <a href="https://www.dnaindia.com/analysis/column-india-s-big-battle-of-the-bulge-2776726">original article</a>)

(Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL.)

In these hectic days, where social media has become the country’s principal pre-occupation, the time for physical exercise is shockingly scanty. No surprise then that there is an outbreak of lifestyle diseases such as heart ailments, diabetes and obesity that plague the country’s middle-aged population across the economic divide, a trend that was once only the prerogative of the rich and super-rich.

In these hectic days, where social media has become the country’s principal pre-occupation, the time for physical exercise is shockingly scanty. No surprise then that there is an outbreak of lifestyle diseases such as heart ailments, diabetes and obesity that plague the country’s middle-aged population across the economic divide, a trend that was once only the prerogative of the rich and super-rich. Oscar Wilde’s epigrammatic expression of treating all trivial things very seriously and all serious things of life with sincere and studied triviality, applies to India of today more than anywhere else. In the ongoing Parliament session, when a question was asked in the Lok Sabha by BJP MP, Rathva Gitaben Vajesingbhai, as to whether the incidence of obesity is increasing among not only among the middle-aged, but also the youth in urban areas, the minister of state of health and family welfare, Ashwini Kumar Choubey, revealed some eye-popping details. Citing the Indian Council of Medical Research (ICMR) report on the health of the nation’s states, he said that the contribution of high body mass index (BMI) in total disability-adjusted life year (DALY) of India has increased from 0.8 per cent in 1990 to 3.6 per cent in 2016. As per the National Family Health Survey (NHFS)-4 (2015-16), there has been a spurt in obesity in both males (from 9.3 per cent to 18.6 per cent) and females (from 12.6 per cent to 20.7 per cent) in the age group 15-49 years in comparison to NFHS-3. Three years since then, the situation on the ground appears grim as the age-group caught in the obesity syndrome ranges between 15 to 49, the most active and productive years in the life of an individual. Questions have been asked as to whether being obese is one’s fate or a genetic defect or eating disorder triggered by binge hogging and irregular work schedule or inability to maintain work-life balance through healthy habits. Whatever the reason, the result is often fatal if the root cause is not diagnosed quickly and remedial measures put in place before it develops into a complicated chain reaction that affects the functioning of a human being’s vital organs and the physical system. A practicing bariatric surgeon in the United Kingdom, Dr Kamal Mahawar, who has done a dissertation on “Fight With Fat”, recently told this author that India is the third most obese country in the world with 3.8% of Indian men and 4.2% of Indian women wrestling with over-weight issues that affect their physical and psychical wellness. He blames the entry and entrenchment of fast-food outlets — both desi and videshi — as responsible for the swell in obesity numbers across the country and suggests that fast food products churned out by multinationals and the processed food industry, be taxed heavily. For the desi shops, dishing out such ready-to-eat heavily-layered masala food items, Mahawar advocates food labeling with mandatory display of calorie count as well as carbohydrate, fat and protein ingredients in granular detail, so that consumers have an informed option before going on a binge on unwholesome food stuff that becomes addictive over time. Ramming home some native wisdom and home truths on desirable dietary habits, the doctor contends that raw food typically releases calories slowly into the system, while processed and cooked food leads to abrupt surges in the release and absorption of calories by the body. Fending off the obesity epidemic is feasible, if one does not ignore traditional Indian culinary practices and consumption patterns, which has benefitted the human system. Be that as it may, the bugle on bulge and the battle ahead to fight the fat as raised by Dr Mahawar and the concerned MP in the country’s Parliament have not come a day too soon. India’s goal of reaching the $5-trillion dollar economy mark before long would sound like a pipe dream if the dietary habits of its productive and robust population do not change for the better to raise the total productivity of the economy. No doubt, the Modi-2 government has its tasks cut out in this battle of the bulge. It has already set in motion the National Programme for Prevention and Control of Cancer, Diabetes, Cardiovascular Diseases and Strokes (NPCDCS), which is implemented for interventions up to district level under the National Health Mission (NHM). NPCDCS stresses on awareness creation for behaviour and lifestyle changes, alongside early diagnosis, treatment and follow-up of non-communicable diseases, including cardiovascular diseases and diabetes, for which obesity constitutes a major risk factor. Considering the staggering shortfall in infrastructure and human resources, including the number of doctors for taking up primary health needs of the vast population and perennially under-funding in rural health infrastructure, the awareness campaign to take the fight against fat is faced with stark ground realities. With diabetes and obesity melding in a seamless manner, Dr Mahawar cautions against the outbreak of ‘diabesity’ to focus attention on the dismal lack of support system for innumerable poor patients who suffer from these twin ailments. It is time the authorities woke up to the menace of obesity, not only in urban but also in rural areas, so that preventive and curative measures could be initiated on a war-footing to ensure India’s tryst with a mega-sized economy tag. (This article was originally published on The DNA. Read the original article) (Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL.)

It is time authorities woke up to the menace of obesity

The central bank for all the world’s central banks - the Bank for International Settlements (BIS) - has gone on the offensive against unjustified criticism that a head-strong monetary policy of central banks was responsible for the global economic slowdown.

In its just-published annual report, Basel-based BIS contends that following the gains from a decade of extraordinary monetary policies that helped to restore global growth, there has been a slowdown in the pace of expansion since the last year.&nbsp;

For the world economy to stay on course, other policies need to play a bigger role. Policy wonks must take a longer-term view, it suggests bluntly, lamenting that monetary policy alone could not do the heavy-lifting.&nbsp;

BIS general manager, Agustin Carsten, put it candidly when he said that a better mix is needed between monetary policy, fiscal policy, macro-prudential measures and structural reforms. Macro-prudential tools range from system-wide stress tests and counter-cyclical capital requirements to maximum loan-to-value and debt-to-income ratios.

Stating that monetary policy alone cannot become the engine of higher sustainable economic growth as it works better as a backstop, Carsten picturesquely said that to look past the clouds to spot the blue sky, a plane cannot only fly on a single-engine!&nbsp;

Amplifying this point, the report says that while authorities can help where space is available, fiscal policy needs to be used judiciously to boost sustainable growth, supporting aggregate demand. It believes that the composition of spending needs to be growth-friendlier, especially by boosting well-chosen infrastructure investments.&nbsp;

In the process, it is crucial to preclude the trap of carrying out pro-cyclical policies. It is, however, best to undertake structural fiscal reforms like reducing the bias of tax systems in favour of debt. Nirmala Sitharaman, presenting her maiden Union Budget in a couple of days, may benefit from this advice. She must persuade her officers in the North Block not to view Mint Street officials as adversaries. &nbsp;&nbsp;

Referring to operations of the financial system, the report maintains that all over the world, banks face the challenge to improve profitability. Costs remain stubbornly high, relative to income. Business models have yet to be restructured on a sustainable basis—in particular, adapting to a lower and flatter yield curve.&nbsp;

Banks are also facing increasing competition from non-traditional players such as big techs, who are taking advantage of digital innovation.&nbsp;

There is also the negative impact that historically low interest rates in advanced countries may have on financial intermediation and credit supply. Over the longer term, low rates tend to sap interest margins, profits and hence banks’ ability to build up capital, which is essential for their lending to the productive economy. &nbsp;&nbsp;

The report singles out praise for inflation targeting frameworks in emerging market economies, including India, which have generally been successful. These frameworks have been combined with varying degrees of foreign exchange intervention, coupled with the active use of macro-prudential tools.

Interestingly, the BIS report focusses especially on the entry of large technology companies such as Facebook, Amazon, Alibaba, Google and Tencent, into financial services. These firms have already established platforms in their respective businesses, such as in e-commerce or special networking.&nbsp;

The business model of big tech firms rests on enabling direct interactions among a large number of users. An essential byproduct of their business is the stock of user data. The data is then utilised as input to offer a range of services that exploit natural networks, generating further user activity, which then completes the circle, as it generates yet more data. Big techs can glean additional data from their own ecosystems in social networking, search engines and e-commerce that are outside the financial services they operate.&nbsp;

Since data has increasing returns to scope and scale, big techs will be able to make far more effective use of any incremental data. It is small wonder that Facebook recently outlined its intent to upend the financial system through the launch of Libra, a ‘global digital currency’.&nbsp;

FB has touted Libra as a means to improve financial inclusion for the world’s 1.7 billion people without access to bank accounts. Amazon, which lends to companies, contends that it wants to fill the gap left by banks increasingly reluctant to lend to small businesses.

While acknowledging the potential benefits of big techs entering the financial system with their superior customer data and efficient decision-making, which lowers barriers to the provision of financial services to the unbanked and bypassed sections of society, BIS has also raised concerns over the potential misuse of that data. This it said, would spawn, ‘adverse, economic and welfare effects”. Firms could, for example, exclude high-risk groups from socially desirable insurance markets by working out the maximum rate a borrower would be willing to pay for a loan.&nbsp;

Finally, the report is right when it argues that wide access to data could, in principle, be beneficial. Digital data can be used by many, including competitors, without loss of content. Besides, since data is obtained at zero marginal cost as a byproduct of big techs’ services, it would be socially desirable to share them freely. &nbsp;Provided that markets are competitive, open access to data can help to lower the switching costs for customers, alleviate hold-up problems and generally foster competition and financial inclusion. &nbsp;

This is easier said than done and in the face of the rapid and global digitisation of the economy, coordination 
 
(This article was originally published on The DNA. Read the <a href="https://www.dnaindia.com/analysis/column-monetary-policy-not-enough-2767466">original article</a>)

(Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL.)&nbsp;

&nbsp;

The central bank for all the world’s central banks - the Bank for International Settlements (BIS) - has gone on the offensive against unjustified criticism that a head-strong monetary policy of central banks was responsible for the global economic slowdown.

The central bank for all the world’s central banks - the Bank for International Settlements (BIS) - has gone on the offensive against unjustified criticism that a head-strong monetary policy of central banks was responsible for the global economic slowdown. In its just-published annual report, Basel-based BIS contends that following the gains from a decade of extraordinary monetary policies that helped to restore global growth, there has been a slowdown in the pace of expansion since the last year. For the world economy to stay on course, other policies need to play a bigger role. Policy wonks must take a longer-term view, it suggests bluntly, lamenting that monetary policy alone could not do the heavy-lifting. BIS general manager, Agustin Carsten, put it candidly when he said that a better mix is needed between monetary policy, fiscal policy, macro-prudential measures and structural reforms. Macro-prudential tools range from system-wide stress tests and counter-cyclical capital requirements to maximum loan-to-value and debt-to-income ratios. Stating that monetary policy alone cannot become the engine of higher sustainable economic growth as it works better as a backstop, Carsten picturesquely said that to look past the clouds to spot the blue sky, a plane cannot only fly on a single-engine! Amplifying this point, the report says that while authorities can help where space is available, fiscal policy needs to be used judiciously to boost sustainable growth, supporting aggregate demand. It believes that the composition of spending needs to be growth-friendlier, especially by boosting well-chosen infrastructure investments. In the process, it is crucial to preclude the trap of carrying out pro-cyclical policies. It is, however, best to undertake structural fiscal reforms like reducing the bias of tax systems in favour of debt. Nirmala Sitharaman, presenting her maiden Union Budget in a couple of days, may benefit from this advice. She must persuade her officers in the North Block not to view Mint Street officials as adversaries. Referring to operations of the financial system, the report maintains that all over the world, banks face the challenge to improve profitability. Costs remain stubbornly high, relative to income. Business models have yet to be restructured on a sustainable basis—in particular, adapting to a lower and flatter yield curve. Banks are also facing increasing competition from non-traditional players such as big techs, who are taking advantage of digital innovation. There is also the negative impact that historically low interest rates in advanced countries may have on financial intermediation and credit supply. Over the longer term, low rates tend to sap interest margins, profits and hence banks’ ability to build up capital, which is essential for their lending to the productive economy. The report singles out praise for inflation targeting frameworks in emerging market economies, including India, which have generally been successful. These frameworks have been combined with varying degrees of foreign exchange intervention, coupled with the active use of macro-prudential tools. Interestingly, the BIS report focusses especially on the entry of large technology companies such as Facebook, Amazon, Alibaba, Google and Tencent, into financial services. These firms have already established platforms in their respective businesses, such as in e-commerce or special networking. The business model of big tech firms rests on enabling direct interactions among a large number of users. An essential byproduct of their business is the stock of user data. The data is then utilised as input to offer a range of services that exploit natural networks, generating further user activity, which then completes the circle, as it generates yet more data. Big techs can glean additional data from their own ecosystems in social networking, search engines and e-commerce that are outside the financial services they operate. Since data has increasing returns to scope and scale, big techs will be able to make far more effective use of any incremental data. It is small wonder that Facebook recently outlined its intent to upend the financial system through the launch of Libra, a ‘global digital currency’. FB has touted Libra as a means to improve financial inclusion for the world’s 1.7 billion people without access to bank accounts. Amazon, which lends to companies, contends that it wants to fill the gap left by banks increasingly reluctant to lend to small businesses. While acknowledging the potential benefits of big techs entering the financial system with their superior customer data and efficient decision-making, which lowers barriers to the provision of financial services to the unbanked and bypassed sections of society, BIS has also raised concerns over the potential misuse of that data. This it said, would spawn, ‘adverse, economic and welfare effects”. Firms could, for example, exclude high-risk groups from socially desirable insurance markets by working out the maximum rate a borrower would be willing to pay for a loan. Finally, the report is right when it argues that wide access to data could, in principle, be beneficial. Digital data can be used by many, including competitors, without loss of content. Besides, since data is obtained at zero marginal cost as a byproduct of big techs’ services, it would be socially desirable to share them freely. Provided that markets are competitive, open access to data can help to lower the switching costs for customers, alleviate hold-up problems and generally foster competition and financial inclusion. This is easier said than done and in the face of the rapid and global digitisation of the economy, coordination (This article was originally published on The DNA. Read the original article) (Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL.)

Union Budget 2019: Monetary policy not enough

With the National Democratic Alliance (NDA) romping home easily for another five-year tenure, the first test is barely a few weeks away.&nbsp;

Having steered choppy economic waters during its first term, the none-too-rosy state of the economy was seldom a binding constraint since security issues in the aftermath of Pulmawa, trumped bread-and-butter issues, including agrarian distress and lack of employment.

The scattered opposition parties failed to galvanise themselves on any major economic issue, other than beating about the bush on the alleged corruption in the purchase of advanced aircraft, Rafale.&nbsp;

Now that Prime Minister Narendra Modi has proved beyond a pale of doubt that he is a past-master in outmanoeuvring opponents at their own game, he will now have to devote time and energy in reviving the domestic economy and stoking demand so that the core sectors get kick-started to realise their optimal potential. No sooner has the new Finance Minister Nirmala Sitharaman assumed office, problems have come knocking at her door.

With the Central Statistics Office’s (CSO) revealing that the economy lost further momentum to grow just by 5.8 per cent in the fourth quarter (Jan-Mar), the country’s gross domestic product (GDP) growth for fiscal 2018-19 at 6.8 per cent has understandably undershot even sanguine forecasts.&nbsp;

To boot, the unaudited/interim accounts of the central government for 2018-19, also released alongside, presented the obverse and adverse side of the economic slowdown.&nbsp;

Thus, the Centre compassed Rs 16,66,055 crore (91.40 per cent of corresponding revised estimate 2018-19 of total receipts) during 2018-19, comprising Rs 13,16,951 crore as tax revenue (net to Centre), Rs 2,46,219 crore of non-tax revenue and Rs 1,02,885 crore as non-debt capital receipts, which consists recovery of loans (Rs 17,840 crore) and disinvestment of public sector undertakings at Rs 85,045 crore.

Against the receipts, the total expenditure incurred by the Centre was Rs 23,11,422 crore (94.07 per cent of the corresponding revised estimate of 2018-19) out of which Rs 20,08,463 crore was on revenue account and Rs 3,02,959 crore on capital account.&nbsp;

What is particularly noteworthy is that out of the total revenue expenditure, as much as Rs 5,82,675 crore was on account of interest payments of past debt and Rs 1,97,066 crore on major subsidies.&nbsp;

In a nutshell, the gap between revenue and expenditure is not only widening, but also the quality of expenditure, particularly capital expenditure available, is too tiny to make a discernible dent on development.&nbsp;

Interestingly, even as the interim estimates were lower than the Budgeted estimates — euphemistically described as revised estimates — the interim Budget (2019-20) presented by the NDA government on February 1, before the poll bugle was sounded, assumed a leap of faith increase in total receipts for the current fiscal that began on April 1.

Now that the BJP government is back in the saddle and is to present a full-fledged Budget on July 5, the new finance minister must find ways and means to raise resources to match the pre-poll estimated surge in receipts.

This is especially daunting when the economy has lost the mojo to fire on all cylinders, what with both agriculture and manufacturing performing poorly.&nbsp;

Many reputed economists had argued that both tight monetary and fiscal policies fashioned simultaneously by the NDA authorities, when they had to institute inflation-targeting goal for the apex bank and also clean up the banking system that was stymied by whopping non-performing loans (assets), led to a growth slowdown in the recent past.

No doubt, there is merit in clearing the backlog so that the financial system can operate on a clean slate, but the need to keep the banks recapitalised so that they can resume their lending activities to productive segments at affordable rates of interest, should not be lost sight of.&nbsp;

The government could not infuse adequate capital to re-energise the banks from undertaking their core dharma, though it ostentatiously put in place a recapitalisation plan in phases.

As the Modi-1 government was preoccupied with economic experiments like demonetisation that kept the banking system busy, financial institutions parked their funds with the apex bank rather than lend, lest they should get compelled to handle potential problems of loan defaults over and above what they are already exposed to!&nbsp;

Simultaneous pursuit of austerity when growth slowdown is visible and financial stress escalating has proved to be a lethal cocktail.&nbsp;

As the private sector is proverbially slow to initiate steps on its own in the absence of affordable capital, it is time that the authorities disabuse themselves of the notion that more funds to lubricate the engines of the economy should flow from the coffers of the government only.&nbsp;

A modest cut in the cash reserve ratio (CRR) will help banks to augment their credit flow to industry and the non-banking finance companies (NBFCs), which are in dire straits today for want of wherewithal to help small industries and housing sectors to find alternative finance.

Much is expected of the finance minister to revive growth sentiments in the economy, push up public expenditure in both physical and social infrastructure and help find finances for private investment to restart with dynamism.&nbsp;

As prudence is a virtue mostly attributed to women than men, one may hope Nirmala Sitharaman will balance growth and inflation without the associated trauma of trade-off in her maiden Budget. &nbsp; 
&nbsp;

(This article was originally published on The DNA. Read the <a href="https://www.dnaindia.com/analysis/column-tough-calls-on-budget-day-2758999">original article)</a>

(Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL.)&nbsp;

With the National Democratic Alliance (NDA) romping home easily for another five-year tenure, the first test is barely a few weeks away. Having steered choppy economic waters during its first term, the none-too-rosy state of the economy was seldom a binding constraint since security issues in the aftermath of Pulmawa, trumped bread-and-butter issues, including agrarian distress and lack of employment.

With the National Democratic Alliance (NDA) romping home easily for another five-year tenure, the first test is barely a few weeks away. Having steered choppy economic waters during its first term, the none-too-rosy state of the economy was seldom a binding constraint since security issues in the aftermath of Pulmawa, trumped bread-and-butter issues, including agrarian distress and lack of employment. The scattered opposition parties failed to galvanise themselves on any major economic issue, other than beating about the bush on the alleged corruption in the purchase of advanced aircraft, Rafale. Now that Prime Minister Narendra Modi has proved beyond a pale of doubt that he is a past-master in outmanoeuvring opponents at their own game, he will now have to devote time and energy in reviving the domestic economy and stoking demand so that the core sectors get kick-started to realise their optimal potential. No sooner has the new Finance Minister Nirmala Sitharaman assumed office, problems have come knocking at her door. With the Central Statistics Office’s (CSO) revealing that the economy lost further momentum to grow just by 5.8 per cent in the fourth quarter (Jan-Mar), the country’s gross domestic product (GDP) growth for fiscal 2018-19 at 6.8 per cent has understandably undershot even sanguine forecasts. To boot, the unaudited/interim accounts of the central government for 2018-19, also released alongside, presented the obverse and adverse side of the economic slowdown. Thus, the Centre compassed Rs 16,66,055 crore (91.40 per cent of corresponding revised estimate 2018-19 of total receipts) during 2018-19, comprising Rs 13,16,951 crore as tax revenue (net to Centre), Rs 2,46,219 crore of non-tax revenue and Rs 1,02,885 crore as non-debt capital receipts, which consists recovery of loans (Rs 17,840 crore) and disinvestment of public sector undertakings at Rs 85,045 crore. Against the receipts, the total expenditure incurred by the Centre was Rs 23,11,422 crore (94.07 per cent of the corresponding revised estimate of 2018-19) out of which Rs 20,08,463 crore was on revenue account and Rs 3,02,959 crore on capital account. What is particularly noteworthy is that out of the total revenue expenditure, as much as Rs 5,82,675 crore was on account of interest payments of past debt and Rs 1,97,066 crore on major subsidies. In a nutshell, the gap between revenue and expenditure is not only widening, but also the quality of expenditure, particularly capital expenditure available, is too tiny to make a discernible dent on development. Interestingly, even as the interim estimates were lower than the Budgeted estimates — euphemistically described as revised estimates — the interim Budget (2019-20) presented by the NDA government on February 1, before the poll bugle was sounded, assumed a leap of faith increase in total receipts for the current fiscal that began on April 1. Now that the BJP government is back in the saddle and is to present a full-fledged Budget on July 5, the new finance minister must find ways and means to raise resources to match the pre-poll estimated surge in receipts. This is especially daunting when the economy has lost the mojo to fire on all cylinders, what with both agriculture and manufacturing performing poorly. Many reputed economists had argued that both tight monetary and fiscal policies fashioned simultaneously by the NDA authorities, when they had to institute inflation-targeting goal for the apex bank and also clean up the banking system that was stymied by whopping non-performing loans (assets), led to a growth slowdown in the recent past. No doubt, there is merit in clearing the backlog so that the financial system can operate on a clean slate, but the need to keep the banks recapitalised so that they can resume their lending activities to productive segments at affordable rates of interest, should not be lost sight of. The government could not infuse adequate capital to re-energise the banks from undertaking their core dharma, though it ostentatiously put in place a recapitalisation plan in phases. As the Modi-1 government was preoccupied with economic experiments like demonetisation that kept the banking system busy, financial institutions parked their funds with the apex bank rather than lend, lest they should get compelled to handle potential problems of loan defaults over and above what they are already exposed to! Simultaneous pursuit of austerity when growth slowdown is visible and financial stress escalating has proved to be a lethal cocktail. As the private sector is proverbially slow to initiate steps on its own in the absence of affordable capital, it is time that the authorities disabuse themselves of the notion that more funds to lubricate the engines of the economy should flow from the coffers of the government only. A modest cut in the cash reserve ratio (CRR) will help banks to augment their credit flow to industry and the non-banking finance companies (NBFCs), which are in dire straits today for want of wherewithal to help small industries and housing sectors to find alternative finance. Much is expected of the finance minister to revive growth sentiments in the economy, push up public expenditure in both physical and social infrastructure and help find finances for private investment to restart with dynamism. As prudence is a virtue mostly attributed to women than men, one may hope Nirmala Sitharaman will balance growth and inflation without the associated trauma of trade-off in her maiden Budget. (This article was originally published on The DNA. Read the original article) (Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL.)

Much is expected of finance minister Nirmala Sitharaman to revive economic growth

The sale of fake or counterfeit goods the world over has seldom been as brisk as today, with the proliferation&nbsp;of digital platforms through e-commerce.

It has made transactions easier and free from the clutches of customs, crossing borders without any difficulty.&nbsp;

It is no surprise that the US President signed a memo earlier this month seeing details on how the country could better track the growth of spurious goods across the world. According to estimates, the value of counterfeit goods may touch the $500-billion-a-year mark with about 20 per cent of this trade violating US intellectual property.

Although no precise figures about the sale of such trade in fake goods exist, Paris-based intergovernmental think tank, the Organisation for Economic Cooperation and Development (OECD), undertakes a periodic study in concert with the European Union Intellectual Property Organisation (EU-IPO) to arrive at credible numbers.&nbsp;

Based on 2016 data, an updated report jointly released in the third week of March, estimated that the volume of global trade in counterfeit and pirated products could amount to as much as a whopping $509 billion. Even as this constitutes up to 3.3 per cent of world trade, it excludes domestically produced and consumed counterfeit and pirated products or pirated digital products being distributed via the Internet.

The previous OECD/EU-IPO study estimated that in 2013, up to 2.5 per cent of global trade worth $461 billion was in counterfeit and pirated goods. The point to note is that between 2013 and 2016, the share of global trade in counterfeit and pirated goods grew very significantly, even when world trade logged a relative slowdown!&nbsp;

The joint study warns about the rise in the intensity of counterfeiting and piracy, “with significant and potential risk for intellectual property (IP) in the knowledge-based open and globalised economy”. Interestingly, the study traces the dramatic sale of counterfeit and pirated goods from virtually all economies in all continents, with China and Hong Kong as the biggest conduits.&nbsp;

In addition, several Asian economies, including India are also important suppliers of counterfeit products, despite a role that is significantly lesser than China’s.

The key transit points for ten main sectors that are particularly vulnerable to counterfeit, span a wide range of IP-intense, tradable items - from fast-moving consumer goods such as foodstuff or cosmetics to business-to-business products such as spare parts and computer chips.

Sadly, fake products such as contact lenses, pharmaceuticals or baby formulas are continuously being fed to markets through multiple channels, including digital platform vendors at a volume unmatched by offline outfits.&nbsp;

It is equally sad that the degree of consumer deception is still the highest for these classes of products, posing a peril to the personal health and safety of consumers. Fake goods are dispatched in large quantities in containers and in small parcels by post or courier services. The report listed several West Asian economies - Saudi Arabia, the United Arab Emirates and Yemen -- as important transit points for sending counterfeit goods to Africa.&nbsp;

Four other transit points -- Albania, Egypt, Morocco and Ukraine -- are of particular significance for redistributing fake goods in the EU, while Panama is a vital conduit for fakes to the USA.&nbsp;

Highlighting the shortcomings, OECD said lamentable gaps in governance, especially high levels of corruption and lacunae in IP rights enforcement, boosts trade in counterfeits.&nbsp; It singles out the existence and proliferation of free trade zones (FTZs) or special economic zones (SEZs), which give a strong impetus to this parallel trade in economies with weak governance, high corruption levels and a lack of intellectual property rights enforcement.

China and India have plumped for such exclusive enclaves in recent years! Though these special zones are designed to benefit trade in general, such as good logistics facilities, it is the misuse of these amenities that could result in higher flows of trade in fake goods.&nbsp;

Rightly, the study cautioned that as the lightly regulated zones are lucrative for parties in illegal and criminal activities, the continued growth of such zones makes an important context and an alibi for such nefarious activities. As for India, the study mentions it is also emerging along with other Asian neighbours, as an important producer of counterfeit goods.&nbsp;

Trouble is such a dubious reputation affects domestic consumers too.&nbsp;A perfunctory click of the mouse shows that metro cities including Delhi, Mumbai, Bengaluru, Kolkata and Chennai throb with spurious goods, where replicas of luxury goods are available at one-fourth of the price! For the hapless consumers, counterfeit is dangerous to health, safety and privacy, besides lowering consumer satisfaction, particularly when low-grade fake goods are purchased unknowingly.

For right-holders and their authorised vendors, rising fakes aggravates revenue losses, while trademark infringements continuously erode brand values.&nbsp; For governments, counterfeiting entails a loss of tax revenues, higher unemployment and greater expenditure incurred --&nbsp;both to ensure compliance with anti-counterfeiting legislation and to react to public safety threats and labour market distortions.

The existing legal provisions from the Trademark Act and Copyrights Act in India are not sufficient deterrent to the band of organised counterfeit racketeers. The punishment for contravention of the rules of the game ought to be cognizable and non-bailable, as enshrined in the provisions of the Indian Penal Code.&nbsp;

(This article was originally published on The DNA. Read the <a href="https://www.dnaindia.com/analysis/column-going-through-the-roof-2741567">original article</a>)

(Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL.)&nbsp;

The sale of fake or counterfeit goods the world over has seldom been as brisk as today, with the proliferation of digital platforms through e-commerce. It has made transactions easier and free from the clutches of customs, crossing borders without any difficulty.

The sale of fake or counterfeit goods the world over has seldom been as brisk as today, with the proliferation of digital platforms through e-commerce. It has made transactions easier and free from the clutches of customs, crossing borders without any difficulty. It is no surprise that the US President signed a memo earlier this month seeing details on how the country could better track the growth of spurious goods across the world. According to estimates, the value of counterfeit goods may touch the $500-billion-a-year mark with about 20 per cent of this trade violating US intellectual property. Although no precise figures about the sale of such trade in fake goods exist, Paris-based intergovernmental think tank, the Organisation for Economic Cooperation and Development (OECD), undertakes a periodic study in concert with the European Union Intellectual Property Organisation (EU-IPO) to arrive at credible numbers. Based on 2016 data, an updated report jointly released in the third week of March, estimated that the volume of global trade in counterfeit and pirated products could amount to as much as a whopping $509 billion. Even as this constitutes up to 3.3 per cent of world trade, it excludes domestically produced and consumed counterfeit and pirated products or pirated digital products being distributed via the Internet. The previous OECD/EU-IPO study estimated that in 2013, up to 2.5 per cent of global trade worth $461 billion was in counterfeit and pirated goods. The point to note is that between 2013 and 2016, the share of global trade in counterfeit and pirated goods grew very significantly, even when world trade logged a relative slowdown! The joint study warns about the rise in the intensity of counterfeiting and piracy, “with significant and potential risk for intellectual property (IP) in the knowledge-based open and globalised economy”. Interestingly, the study traces the dramatic sale of counterfeit and pirated goods from virtually all economies in all continents, with China and Hong Kong as the biggest conduits. In addition, several Asian economies, including India are also important suppliers of counterfeit products, despite a role that is significantly lesser than China’s. The key transit points for ten main sectors that are particularly vulnerable to counterfeit, span a wide range of IP-intense, tradable items - from fast-moving consumer goods such as foodstuff or cosmetics to business-to-business products such as spare parts and computer chips. Sadly, fake products such as contact lenses, pharmaceuticals or baby formulas are continuously being fed to markets through multiple channels, including digital platform vendors at a volume unmatched by offline outfits. It is equally sad that the degree of consumer deception is still the highest for these classes of products, posing a peril to the personal health and safety of consumers. Fake goods are dispatched in large quantities in containers and in small parcels by post or courier services. The report listed several West Asian economies - Saudi Arabia, the United Arab Emirates and Yemen -- as important transit points for sending counterfeit goods to Africa. Four other transit points -- Albania, Egypt, Morocco and Ukraine -- are of particular significance for redistributing fake goods in the EU, while Panama is a vital conduit for fakes to the USA. Highlighting the shortcomings, OECD said lamentable gaps in governance, especially high levels of corruption and lacunae in IP rights enforcement, boosts trade in counterfeits. It singles out the existence and proliferation of free trade zones (FTZs) or special economic zones (SEZs), which give a strong impetus to this parallel trade in economies with weak governance, high corruption levels and a lack of intellectual property rights enforcement. China and India have plumped for such exclusive enclaves in recent years! Though these special zones are designed to benefit trade in general, such as good logistics facilities, it is the misuse of these amenities that could result in higher flows of trade in fake goods. Rightly, the study cautioned that as the lightly regulated zones are lucrative for parties in illegal and criminal activities, the continued growth of such zones makes an important context and an alibi for such nefarious activities. As for India, the study mentions it is also emerging along with other Asian neighbours, as an important producer of counterfeit goods. Trouble is such a dubious reputation affects domestic consumers too. A perfunctory click of the mouse shows that metro cities including Delhi, Mumbai, Bengaluru, Kolkata and Chennai throb with spurious goods, where replicas of luxury goods are available at one-fourth of the price! For the hapless consumers, counterfeit is dangerous to health, safety and privacy, besides lowering consumer satisfaction, particularly when low-grade fake goods are purchased unknowingly. For right-holders and their authorised vendors, rising fakes aggravates revenue losses, while trademark infringements continuously erode brand values. For governments, counterfeiting entails a loss of tax revenues, higher unemployment and greater expenditure incurred -- both to ensure compliance with anti-counterfeiting legislation and to react to public safety threats and labour market distortions. The existing legal provisions from the Trademark Act and Copyrights Act in India are not sufficient deterrent to the band of organised counterfeit racketeers. The punishment for contravention of the rules of the game ought to be cognizable and non-bailable, as enshrined in the provisions of the Indian Penal Code. (This article was originally published on The DNA. Read the original article) (Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL.)

India is emerging as an important producer of counterfeit goods

The NDA government’s tweaks in the retail policy for electronic commerce (e-commerce) are to placate its largest constituency of dookandars, small traders and shop-owners who were badly bruised by the twin blows of demonetisation in 2016 and Goods and Services Tax (GST) in July 2017. So, the Department of Industrial Policy and Promotion (DIPP), meant to design policy and promote industrial development, including inviting foreign direct investment (FDI), unveiled a policy to restrict the activities of foreign mega retail giants such as Amazon and Flipkart and enable domestic retail outlets and the rest of the vast universe of mom-and-pop shops to breathe easier.

E-commerce is defined as the ‘production, distribution, marketing, sale or delivery of goods and services by electronic means’. An e-commerce transaction can be between enterprises, households, individuals, governments and other public or private bodies. The DIPP clarifications or amendments to the extant press note on the subject on December 23 focus on the provision that vendors with any stake owned by an e-commerce company cannot sell their products on the e-commerce company’s portal. 
 
This is meant to whittle down their competitive strength and aggressive marketing techniques that at times border on excessive bombardment of hapless consumers with tokenism like deep discounts, door delivery in amazing speed which a small shop-owner is at his wits end to match! This is particularly so as large e-commerce firms such as Flipkart and Amazon, not owing inventory themselves, have been extending a platform for their group companies such as WS Retail and CloudTail respectively. In a way, the new policy adjustment is to mollify the anguish and agony among offline retailers over massive discounts and the concomitant leap in e-commerce sales.

Yet another provision postulates any vendor which purchases 25 per cent or more of its inventory from an e-commerce group company is deemed to be controlled by that e-commerce company and thereby barred from selling on its portal. This is to put an end to anti-competitive practices in the absence of a domain regulator for e-commerce transactions, which the government conceded in a written response to a query in the Rajya Sabha on December 13 that “there is no proposal at present for setting up a regulator for e-commerce”.

What the DIPP amendments to extant rules seek to achieve is to deny control by such big retail behemoths as Amazon and Flipkart over vendors. The third principal provision clearly notes that the e-commerce firm must not sway the price of a product sold on its portal by extending spurs/freebies to particular vendors to keep them on or get them hooked permanently! Officials seeking anonymity maintain that these clarifications to the policy were designed to address “anti-competitive” proclivities by e-commerce players as these online market places were egregiously subsidizing products putting at a big disadvantage small retailers across the nation.

The other side of the argument is that India has become a huge playground for Amazon and Wal-Mart as they have committed a combined 21 billion US dollars to this middle-class and aspiring youthful populace using the purchase of goods services digitally. Amazon, for instance, has multiple joint ventures, including Cloudtail and Appario, that might be hit by the restrictions on sales by related parties. Flipkart has exclusive partnership with smartphone brands like Xiamoi and Oppo that could also encounter a formidable hurdle on exclusive deals for products by the latest tweak in policy. 
 
It is no brainer that both offer promotional schemes such as cash-backs and expeditious delivery which are now construed discriminatory/ predatory! Besides, as these companies come under the Foreign Exchange Management Act (FEMA) they must perforce have to provide minutiae to the RBI annually, adding yet another layer to compliance and monitoring of the e-commerce industry. This also attenuates India’s audacious claim that it has improved on the ease of doing business for investors, both domestic and overseas, the latter in particular for the FDI it brings in the form of best managerial practices, modern technology and opportunities of integration into global markets contributing to accelerated domestic growth and job creation in the country.

It is small wonder that the US-India Strategic Partnership Forum (USISPF) termed the tweaks in policy as regressive, taking the alibi of the move being detrimental to the welfare and interests of consumers who benefit by inexpensive goods American retailers have been providing ever since the FDI in e-commerce was allowed 100 per cent in single-brand retailing and other policy support placed from time to time.

Considering the fact that the country’s e-commerce market is now close to 39 billion US dollars, growing at a healthy double-digit rate, thanks to the demographic dividend of youthful populace splurging their income through digital-commerce by the click of a mouse, the government ought to have been wary of upsetting the apple-cart by taking part in the foreign versus domestic turf war. 
 
(This article was originally published on DNA. Read the <a href="https://www.dnaindia.com/analysis/column-a-breather-for-small-retailers-punched-hard-by-e-commerce-giants-2703511">original article</a>)

(Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL) 
&nbsp;

The NDA government’s tweaks in the retail policy for electronic commerce (e-commerce) are to placate its largest constituency of dookandars, small traders and shop-owners who were badly bruised by the twin blows of demonetisation in 2016 and Goods and Services Tax (GST) in July 2017.

The NDA government’s tweaks in the retail policy for electronic commerce (e-commerce) are to placate its largest constituency of dookandars, small traders and shop-owners who were badly bruised by the twin blows of demonetisation in 2016 and Goods and Services Tax (GST) in July 2017. So, the Department of Industrial Policy and Promotion (DIPP), meant to design policy and promote industrial development, including inviting foreign direct investment (FDI), unveiled a policy to restrict the activities of foreign mega retail giants such as Amazon and Flipkart and enable domestic retail outlets and the rest of the vast universe of mom-and-pop shops to breathe easier. E-commerce is defined as the ‘production, distribution, marketing, sale or delivery of goods and services by electronic means’. An e-commerce transaction can be between enterprises, households, individuals, governments and other public or private bodies. The DIPP clarifications or amendments to the extant press note on the subject on December 23 focus on the provision that vendors with any stake owned by an e-commerce company cannot sell their products on the e-commerce company’s portal. This is meant to whittle down their competitive strength and aggressive marketing techniques that at times border on excessive bombardment of hapless consumers with tokenism like deep discounts, door delivery in amazing speed which a small shop-owner is at his wits end to match! This is particularly so as large e-commerce firms such as Flipkart and Amazon, not owing inventory themselves, have been extending a platform for their group companies such as WS Retail and CloudTail respectively. In a way, the new policy adjustment is to mollify the anguish and agony among offline retailers over massive discounts and the concomitant leap in e-commerce sales. Yet another provision postulates any vendor which purchases 25 per cent or more of its inventory from an e-commerce group company is deemed to be controlled by that e-commerce company and thereby barred from selling on its portal. This is to put an end to anti-competitive practices in the absence of a domain regulator for e-commerce transactions, which the government conceded in a written response to a query in the Rajya Sabha on December 13 that “there is no proposal at present for setting up a regulator for e-commerce”. What the DIPP amendments to extant rules seek to achieve is to deny control by such big retail behemoths as Amazon and Flipkart over vendors. The third principal provision clearly notes that the e-commerce firm must not sway the price of a product sold on its portal by extending spurs/freebies to particular vendors to keep them on or get them hooked permanently! Officials seeking anonymity maintain that these clarifications to the policy were designed to address “anti-competitive” proclivities by e-commerce players as these online market places were egregiously subsidizing products putting at a big disadvantage small retailers across the nation. The other side of the argument is that India has become a huge playground for Amazon and Wal-Mart as they have committed a combined 21 billion US dollars to this middle-class and aspiring youthful populace using the purchase of goods services digitally. Amazon, for instance, has multiple joint ventures, including Cloudtail and Appario, that might be hit by the restrictions on sales by related parties. Flipkart has exclusive partnership with smartphone brands like Xiamoi and Oppo that could also encounter a formidable hurdle on exclusive deals for products by the latest tweak in policy. It is no brainer that both offer promotional schemes such as cash-backs and expeditious delivery which are now construed discriminatory/ predatory! Besides, as these companies come under the Foreign Exchange Management Act (FEMA) they must perforce have to provide minutiae to the RBI annually, adding yet another layer to compliance and monitoring of the e-commerce industry. This also attenuates India’s audacious claim that it has improved on the ease of doing business for investors, both domestic and overseas, the latter in particular for the FDI it brings in the form of best managerial practices, modern technology and opportunities of integration into global markets contributing to accelerated domestic growth and job creation in the country. It is small wonder that the US-India Strategic Partnership Forum (USISPF) termed the tweaks in policy as regressive, taking the alibi of the move being detrimental to the welfare and interests of consumers who benefit by inexpensive goods American retailers have been providing ever since the FDI in e-commerce was allowed 100 per cent in single-brand retailing and other policy support placed from time to time. Considering the fact that the country’s e-commerce market is now close to 39 billion US dollars, growing at a healthy double-digit rate, thanks to the demographic dividend of youthful populace splurging their income through digital-commerce by the click of a mouse, the government ought to have been wary of upsetting the apple-cart by taking part in the foreign versus domestic turf war. (This article was originally published on DNA. Read the original article) (Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL)

A breather for small retailers punched hard by e-commerce giants

The outgoing year marks a watershed in the annals of the country’s apex bank as the Reserve Bank of India (RBI) turned out to be a tussling ground for its governor and the government.

The denouement came when the soft, scholarly and self-effacing twenty-fourth governor of the central bank, Urjit Patel, called it quits on December 10 and the government lost little time in filling the vacancy with a retired career bureaucrat and Member Fifteenth Finance Commission, Shaktikanta Das.

In a written reply to a query, Minister of State for Finance Shiv Pratap Shukla, conceded in the Lok Sabha on December 14 that the “government asked RBI for a review of its Economic Capital Framework (ECF) adopted in 2016… the board has decided to constitute an Expert Committee to examine the ECF, the membership of the terms of reference of which will be jointly determined by the government and the RBI”.&nbsp;

It needs to be noted that the erstwhile governor Patel stuck to his guns in not yielding an inch in the governing structure and economic policy framework that would translate into more access to the government to RBI’s surplus reserves of Rs 9.3 lakh crore.

This is all the more so when the RBI has the big mandate to keep inflation at four per cent within a band of plus/minus one per cent. So any leeway or access to the surplus funds parked with the banking regulator being extended to the government especially at a time when the nation is going to the mega polls in 2019, is bound to goad it to splurge on goodies and other populist schemes that would only stoke and fuel inflationary fires before long. &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;

Though other weighty issues such as credit and liquidity being made reasonably available to the real sectors of the economy and at an affordable cost, the central bank is seized of the problems and is taking steps to ensure that credit delivery to the vital sectors is ensured through various ongoing measures it had kept unveiling from time to time.&nbsp;

RBI data reveals that the banking system’s non-food credit growth, which touched a nadir to 7-8 per cent in the three years to October 2017 (when the RBI cracked the whip to cleanse the stable of sore NPAs), returned to double-digit growth between October 2017 to October 2018 at 13 per cent.

The arrival of a bureaucrat to the RBI as its top man is coterminous with the efforts of the BJP-led NDA government to revive the fortunes of the slowing economy. For Shaktikanta Das, who was instrumental in altering the industrial landscape of Tamil Nadu as the Industries Secretary in two spells, his elevation to the corner office of the central bank is bound to be keenly watched by wonks. He had worked in the Finance Ministry at various levels and was representing the government side in framing the inflation-targeting as the supreme remit of the RBI, besides being a vocal supporter of the controversial demonetisation policy of the government.

He has plates full of priority issues that range from RBI governance, transfer of RBI reserves to the government, systemic liquidity encompassing a window for distressed finance companies, relaxation of the February 12 circular, which hardened the norms for non-performing loans to allowing banks that are in the Prompt Corrective Action (PCA) category, to resume lending.&nbsp;

The first board meeting he presided over on December 14 was shorn of drama/trauma, confined to less than an hour by resolving to examine the issues further, review liquidity, credit delivery and economic situation.

As its next board meeting is in January 2019, Das must perforce have to balance his new avatar as a central banker with his quondam position as one from the other side of the ring, so that he is seen not abandoning the quest of his predecessor bureaucrat-turned RBI governors such as YV Reddy and D Subba Rao, who strove to ensure the autonomy, credibility and independence of the RBI even by demurring with their Finance Ministers in their own unobtrusive ways.

(This article was originally published on DNA. Read the <a href="https://www.dnaindia.com/analysis/column-shaktikanta-das-has-a-job-cut-out-for-himself-at-rbi-2699553">original article</a>)

(Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL)

The outgoing year marks a watershed in the annals of the country’s apex bank as the Reserve Bank of India (RBI) turned out to be a tussling ground for its governor and the government.

The outgoing year marks a watershed in the annals of the country’s apex bank as the Reserve Bank of India (RBI) turned out to be a tussling ground for its governor and the government. The denouement came when the soft, scholarly and self-effacing twenty-fourth governor of the central bank, Urjit Patel, called it quits on December 10 and the government lost little time in filling the vacancy with a retired career bureaucrat and Member Fifteenth Finance Commission, Shaktikanta Das. In a written reply to a query, Minister of State for Finance Shiv Pratap Shukla, conceded in the Lok Sabha on December 14 that the “government asked RBI for a review of its Economic Capital Framework (ECF) adopted in 2016… the board has decided to constitute an Expert Committee to examine the ECF, the membership of the terms of reference of which will be jointly determined by the government and the RBI”. It needs to be noted that the erstwhile governor Patel stuck to his guns in not yielding an inch in the governing structure and economic policy framework that would translate into more access to the government to RBI’s surplus reserves of Rs 9.3 lakh crore. This is all the more so when the RBI has the big mandate to keep inflation at four per cent within a band of plus/minus one per cent. So any leeway or access to the surplus funds parked with the banking regulator being extended to the government especially at a time when the nation is going to the mega polls in 2019, is bound to goad it to splurge on goodies and other populist schemes that would only stoke and fuel inflationary fires before long. Though other weighty issues such as credit and liquidity being made reasonably available to the real sectors of the economy and at an affordable cost, the central bank is seized of the problems and is taking steps to ensure that credit delivery to the vital sectors is ensured through various ongoing measures it had kept unveiling from time to time. RBI data reveals that the banking system’s non-food credit growth, which touched a nadir to 7-8 per cent in the three years to October 2017 (when the RBI cracked the whip to cleanse the stable of sore NPAs), returned to double-digit growth between October 2017 to October 2018 at 13 per cent. The arrival of a bureaucrat to the RBI as its top man is coterminous with the efforts of the BJP-led NDA government to revive the fortunes of the slowing economy. For Shaktikanta Das, who was instrumental in altering the industrial landscape of Tamil Nadu as the Industries Secretary in two spells, his elevation to the corner office of the central bank is bound to be keenly watched by wonks. He had worked in the Finance Ministry at various levels and was representing the government side in framing the inflation-targeting as the supreme remit of the RBI, besides being a vocal supporter of the controversial demonetisation policy of the government. He has plates full of priority issues that range from RBI governance, transfer of RBI reserves to the government, systemic liquidity encompassing a window for distressed finance companies, relaxation of the February 12 circular, which hardened the norms for non-performing loans to allowing banks that are in the Prompt Corrective Action (PCA) category, to resume lending. The first board meeting he presided over on December 14 was shorn of drama/trauma, confined to less than an hour by resolving to examine the issues further, review liquidity, credit delivery and economic situation. As its next board meeting is in January 2019, Das must perforce have to balance his new avatar as a central banker with his quondam position as one from the other side of the ring, so that he is seen not abandoning the quest of his predecessor bureaucrat-turned RBI governors such as YV Reddy and D Subba Rao, who strove to ensure the autonomy, credibility and independence of the RBI even by demurring with their Finance Ministers in their own unobtrusive ways. (This article was originally published on DNA. Read the original article) (Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL)

Shaktikanta Das has a job cut out for himself at RBI

A modern, comprehensive and mutually beneficial economic partnership agreement for an open trade and investment milieu in the Asia-Pacific region is the core objective of the Regional Comprehensive Economic Partnership (RCEP). &nbsp;

Countries, in diverse stages of development, from Australia, China, Japan and India to the 10 members of the Association of South East Nations (ASEAN) are part of the RCEP, besides South Korea and New Zealand.&nbsp;

Once wrapped up, RCEP would foster the largest regional trading bloc, making up 25 per cent of global GDP, 30 per cent of world trade and 26 per cent of cross-country foreign direct investment (FDI) flows the world over.

While 'substantial progress’ has been claimed by India in negotiations in 2018, a closer look is needed. So far, as many as seven chapters in RCEP encompassing economic and technical cooperation, amongst others, have been concluded. But the crucial one on market negotiations bristle with Indian reservations, as it is not prepared to let its domestic industry smothered by the deluge of cheap goods from the other members, particularly China.&nbsp;

Interestingly, the erstwhile tiger economies of ASEAN want India to eliminate tariffs or customs duties on about 90-92 per cent items that it trades with the countries with which India has a Free Trade Agreement (FTA). These include ASEAN and Japan.&nbsp;

With the non-FTA partners—Australia, New Zealand and China, discussions are on for removing duties on 80 per cent of traded products. New Delhi has asked for a 20-year deadline to end the duties, but with China, it seeks more time for removal of tariffs. &nbsp;

The need for seeking a protracted liberalisation phase with China is based on ground realities. A House Panel report on the impact of Chinese goods on Indian industry, tabled in the monsoon session of Parliament, vehemently argued that “the impact of Chinese imports has been such that India is threatened to become a country of importers and traders with domestic factories either cutting down their production or shutting down completely…”

From raw material to components to final product assembly, the competitive strength of the Middle Kingdom is proven beyond a pale of doubt and that too across several sectors in which the competitive strength of Indian products are ironically, at a disadvantage.

According to the report, the annual year-on-year growth in Chinese imports was about 9 per cent in 2013-14, which had soared to 20 per cent in 2017-18. The trade deficit with China at $63 billion constitutes more than 40 per cent of India’s aggregate trade deficit.&nbsp;

The Chinese goods itself constitute about one-sixth of all imports in terms of quantum in India. In the decade 2007-08 to 2017-18, there has been an increase in India’s exports to China by $2.5 billion only while its imports from China have zoomed by $50 billion during this period. &nbsp; &nbsp; &nbsp;

With sobering statistics such as these, Indian trade envoys are naturally demanding that China should give more and we, in turn, would give China lower concessions and take a longer staging period, given the gargantuan trade deficit with Beijing.

As the core of the marathon talks zero in on market access for goods, services and investment with the deadline deferred to 2019, India might have earned a reprieve from immediate danger to its cocooned domestic sectors.&nbsp;

But as 2019 is an election year in India, the outcome of which will determine whether the proposed RCEP would be wrapped up by the incumbent dispensation or a new one, the fact remains that India must perforce have to undertake structural reforms, including correction of the much-delayed inverted duty structure, liberalisation of the mining sector to spur domestic manufacturing and markedly cut down import of steel, coal, oil and a plethora of other minerals.&nbsp;

The urgent need to be in a mega trading bloc is nowhere crucial than at this juncture when the World Trade Organisation (WTO), is faced with an existential crisis.&nbsp;

The numerous multilateral trade deals under its charge have come to a halt over the past decade. A slew of few trading nations have naturally pitched for regional or preferential free trade agreements (FTAs) among compact number of participants to exchange concessions and move ahead with gains accruing from such liberalised trade.&nbsp;

For India, which has not been in any meaningful regional trading arrangement, but attempted to latch on to a few FTAs that had only brought resentment from local industries, the enduring benefits of trade remain elusive!&nbsp;

To compound the cup of mercantile misery, there is an ongoing trade war between majors, the United States and China, which began slapping retaliatory measures, fouling up the global trading atmosphere and generating a sort of psychosis among others as to how to wade in the choppy waters of overseas markets that have abruptly become protectionist and impermeable. In this dismal scenario, the time to fix the roof can no longer be deferred. 
&nbsp;

(This article was originally published on DNA. Read the&nbsp;<a href="https://www.dnaindia.com/analysis/column-much-rests-on-china-for-rcep-s-rollout-on-schedule-2691979">original article</a>)

(Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL)

&nbsp;

A modern, comprehensive and mutually beneficial economic partnership agreement for an open trade and investment milieu in the Asia-Pacific region is the core objective of the Regional Comprehensive Economic Partnership (RCEP).

A modern, comprehensive and mutually beneficial economic partnership agreement for an open trade and investment milieu in the Asia-Pacific region is the core objective of the Regional Comprehensive Economic Partnership (RCEP). Countries, in diverse stages of development, from Australia, China, Japan and India to the 10 members of the Association of South East Nations (ASEAN) are part of the RCEP, besides South Korea and New Zealand. Once wrapped up, RCEP would foster the largest regional trading bloc, making up 25 per cent of global GDP, 30 per cent of world trade and 26 per cent of cross-country foreign direct investment (FDI) flows the world over. While 'substantial progress’ has been claimed by India in negotiations in 2018, a closer look is needed. So far, as many as seven chapters in RCEP encompassing economic and technical cooperation, amongst others, have been concluded. But the crucial one on market negotiations bristle with Indian reservations, as it is not prepared to let its domestic industry smothered by the deluge of cheap goods from the other members, particularly China. Interestingly, the erstwhile tiger economies of ASEAN want India to eliminate tariffs or customs duties on about 90-92 per cent items that it trades with the countries with which India has a Free Trade Agreement (FTA). These include ASEAN and Japan. With the non-FTA partners—Australia, New Zealand and China, discussions are on for removing duties on 80 per cent of traded products. New Delhi has asked for a 20-year deadline to end the duties, but with China, it seeks more time for removal of tariffs. The need for seeking a protracted liberalisation phase with China is based on ground realities. A House Panel report on the impact of Chinese goods on Indian industry, tabled in the monsoon session of Parliament, vehemently argued that “the impact of Chinese imports has been such that India is threatened to become a country of importers and traders with domestic factories either cutting down their production or shutting down completely…” From raw material to components to final product assembly, the competitive strength of the Middle Kingdom is proven beyond a pale of doubt and that too across several sectors in which the competitive strength of Indian products are ironically, at a disadvantage. According to the report, the annual year-on-year growth in Chinese imports was about 9 per cent in 2013-14, which had soared to 20 per cent in 2017-18. The trade deficit with China at $63 billion constitutes more than 40 per cent of India’s aggregate trade deficit. The Chinese goods itself constitute about one-sixth of all imports in terms of quantum in India. In the decade 2007-08 to 2017-18, there has been an increase in India’s exports to China by $2.5 billion only while its imports from China have zoomed by $50 billion during this period. With sobering statistics such as these, Indian trade envoys are naturally demanding that China should give more and we, in turn, would give China lower concessions and take a longer staging period, given the gargantuan trade deficit with Beijing. As the core of the marathon talks zero in on market access for goods, services and investment with the deadline deferred to 2019, India might have earned a reprieve from immediate danger to its cocooned domestic sectors. But as 2019 is an election year in India, the outcome of which will determine whether the proposed RCEP would be wrapped up by the incumbent dispensation or a new one, the fact remains that India must perforce have to undertake structural reforms, including correction of the much-delayed inverted duty structure, liberalisation of the mining sector to spur domestic manufacturing and markedly cut down import of steel, coal, oil and a plethora of other minerals. The urgent need to be in a mega trading bloc is nowhere crucial than at this juncture when the World Trade Organisation (WTO), is faced with an existential crisis. The numerous multilateral trade deals under its charge have come to a halt over the past decade. A slew of few trading nations have naturally pitched for regional or preferential free trade agreements (FTAs) among compact number of participants to exchange concessions and move ahead with gains accruing from such liberalised trade. For India, which has not been in any meaningful regional trading arrangement, but attempted to latch on to a few FTAs that had only brought resentment from local industries, the enduring benefits of trade remain elusive! To compound the cup of mercantile misery, there is an ongoing trade war between majors, the United States and China, which began slapping retaliatory measures, fouling up the global trading atmosphere and generating a sort of psychosis among others as to how to wade in the choppy waters of overseas markets that have abruptly become protectionist and impermeable. In this dismal scenario, the time to fix the roof can no longer be deferred. (This article was originally published on DNA. Read the original article) (Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL)

Much rests on China for RCEP’s rollout on schedule

India’s data localisation policy has come under the rich world’s scanner. Ironically, while holding monopolistic power on data, rich nations have audaciously termed India’s policy as being perverse for an emerging economy out to damage its lucrative successful export sectors built on its software supremacy.

The trigger for this tirade of being protectionist stems from a spate of proposals and potential laws on data localisation declared by Indian authorities recently.

The draft e-commerce policy placing a ban on the global transfer of data generated by Indian e-commerce users demonstrate and reinforce the authorities’ resolve to keep data close to their chest.

It is not just India that alone is an outlier in this gambit as such localisation policies have been in vogue in developed and developing countries since the inception of the Internet.

To boot there are genuinely solid and valid reasons for impeding the free flow of data, the principal one being obsessive concerns and dread over privacy.

Even as some of the fiercest restrictions on data movements are in paranoid-about-personal liberty and freedom States such as Russia and China, 22 out of the 27 nations of the European Union (EU) too follow data localisation measures.

In its latest Trade &amp; Development Report (TDR), 2018, Geneva-based UN Conference on Trade and Development (UNCTAD) contends many governments are using data localisation measures, akin to what they deployed when they designed their foreign direct investment policies.

This was sought to be purported to goad domestic linkages of foreign investments and to foster domestic digital capacities and infrastructure to upgrade value chains.

In this context, localisation steps encompass requirements such as locating servers and/or computing facilities within national boundaries which can encourage foreign firms to invest in domestic digital infrastructure and allow local authorities to enforce national laws.

It is small wonder that many analysts have dubbed data the “new oil”, not only because they have to be extracted and processed from an initially unrefined and raw state, but presumably because processed data could invest its owners with monopolistic powers.

Unlike oil, however, data is not a finite resource with the ability to exclude competitors from access, thereby building even more monopoly muscles and rent-seeking proclivity.

The primordial and prime-mover gains commanded by digital giants such as Amazon, Alibaba, Google, Facebook in amassing data have allowed them to avail of big data analytics to outfox rivals, considered minnows or even obstruct potential ones from contesting the heft and might of a few at the top of the heap.

This has also practically nullified and rendered nugatory any established competition or anti-trust policies that are incongruent to digital economy management.

According to UNCTAD, the exponential growth and operation of Uber — the world’s biggest taxi service provider that owns no taxis but remote-controls cab aggregators effectively put paid to local taxi operators such as the eponymous TSR in Delhi, which had to fold up from a big scale operation to skeletal one now with Uber and small platform service providers dominating the landscape.

In pitching for the priority need to retain their data sovereignty to build their digital skills and preclude rules, which restrict their ability to monitor the flow of their national data, UNCTAD maintains that classification of data into personal and non-personal data and designing respective data policies are crucial steps in building digital infrastructure.

Even as India’s draft e-commerce policy is pilloried for making Indian consumer data to be held locally, UNCTAD has rightly argued the need for recognising the associated risks when domestic producers and consumers linked to e-commerce platforms are made international.

By willfully or unwarily bearing such risks, not only do countries unnecessarily expose their consumers to new products and producers, but also risk reducing domestic market shares of their indigenous producers and in the process, lose out on valuable data that is generated by the transactions of consumers and producers.

This is so because the “network effects” of these platforms permit them to glean gargantuan data of connected economies, which can then be used by these global monopoly platforms to foresee market trends, inundate the consumers with products associated to their tastes and preferences based on personal data analytics.

This would also help them effectively reorganise and refocus national production and sales. Wisely, UNCTAD sounded out the bugle that many of the proposals in the World Trade Organization (WTO), if accepted, would not allow governments to restrict the outflow of the data of their producers and consumers in the future.

That is the reason why India stoutly opposed new issues at the Buenos Aires (Argentina) meeting of the WTO in December 2017, when the leader of the Indian delegation and Union Commerce Minister, Suresh Prabhu, rejected bringing in new issues such as e-commerce into negotiations as “extremely divisive”.&nbsp;

India’s view was that gains from e-commerce must not be confused with gains from negotiating binding rules in this domain. That is also the reason why it supports the continuation of the 1998 Work Programme with a non-negotiating mandate.

In the end, gains from e-commerce now emerging as a big fancy among the demographically dynamic youth of the country can become a reality only if domestic authorities encourage national e-commerce platforms, nurture and protect them with the objective of improving domestic and global market access of their producers.

(This article was originally published on DNA. Read the <a href="https://www.dnaindia.com/analysis/column-gains-of-domestic-data-mining-2683052">original article</a>)

(Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL)

India’s data localisation policy has come under the rich world’s scanner. Ironically, while holding monopolistic power on data, rich nations have audaciously termed India’s policy as being perverse for an emerging economy out to damage its lucrative successful export sectors built on its software supremacy.

India’s data localisation policy has come under the rich world’s scanner. Ironically, while holding monopolistic power on data, rich nations have audaciously termed India’s policy as being perverse for an emerging economy out to damage its lucrative successful export sectors built on its software supremacy. The trigger for this tirade of being protectionist stems from a spate of proposals and potential laws on data localisation declared by Indian authorities recently. The draft e-commerce policy placing a ban on the global transfer of data generated by Indian e-commerce users demonstrate and reinforce the authorities’ resolve to keep data close to their chest. It is not just India that alone is an outlier in this gambit as such localisation policies have been in vogue in developed and developing countries since the inception of the Internet. To boot there are genuinely solid and valid reasons for impeding the free flow of data, the principal one being obsessive concerns and dread over privacy. Even as some of the fiercest restrictions on data movements are in paranoid-about-personal liberty and freedom States such as Russia and China, 22 out of the 27 nations of the European Union (EU) too follow data localisation measures. In its latest Trade & Development Report (TDR), 2018, Geneva-based UN Conference on Trade and Development (UNCTAD) contends many governments are using data localisation measures, akin to what they deployed when they designed their foreign direct investment policies. This was sought to be purported to goad domestic linkages of foreign investments and to foster domestic digital capacities and infrastructure to upgrade value chains. In this context, localisation steps encompass requirements such as locating servers and/or computing facilities within national boundaries which can encourage foreign firms to invest in domestic digital infrastructure and allow local authorities to enforce national laws. It is small wonder that many analysts have dubbed data the “new oil”, not only because they have to be extracted and processed from an initially unrefined and raw state, but presumably because processed data could invest its owners with monopolistic powers. Unlike oil, however, data is not a finite resource with the ability to exclude competitors from access, thereby building even more monopoly muscles and rent-seeking proclivity. The primordial and prime-mover gains commanded by digital giants such as Amazon, Alibaba, Google, Facebook in amassing data have allowed them to avail of big data analytics to outfox rivals, considered minnows or even obstruct potential ones from contesting the heft and might of a few at the top of the heap. This has also practically nullified and rendered nugatory any established competition or anti-trust policies that are incongruent to digital economy management. According to UNCTAD, the exponential growth and operation of Uber — the world’s biggest taxi service provider that owns no taxis but remote-controls cab aggregators effectively put paid to local taxi operators such as the eponymous TSR in Delhi, which had to fold up from a big scale operation to skeletal one now with Uber and small platform service providers dominating the landscape. In pitching for the priority need to retain their data sovereignty to build their digital skills and preclude rules, which restrict their ability to monitor the flow of their national data, UNCTAD maintains that classification of data into personal and non-personal data and designing respective data policies are crucial steps in building digital infrastructure. Even as India’s draft e-commerce policy is pilloried for making Indian consumer data to be held locally, UNCTAD has rightly argued the need for recognising the associated risks when domestic producers and consumers linked to e-commerce platforms are made international. By willfully or unwarily bearing such risks, not only do countries unnecessarily expose their consumers to new products and producers, but also risk reducing domestic market shares of their indigenous producers and in the process, lose out on valuable data that is generated by the transactions of consumers and producers. This is so because the “network effects” of these platforms permit them to glean gargantuan data of connected economies, which can then be used by these global monopoly platforms to foresee market trends, inundate the consumers with products associated to their tastes and preferences based on personal data analytics. This would also help them effectively reorganise and refocus national production and sales. Wisely, UNCTAD sounded out the bugle that many of the proposals in the World Trade Organization (WTO), if accepted, would not allow governments to restrict the outflow of the data of their producers and consumers in the future. That is the reason why India stoutly opposed new issues at the Buenos Aires (Argentina) meeting of the WTO in December 2017, when the leader of the Indian delegation and Union Commerce Minister, Suresh Prabhu, rejected bringing in new issues such as e-commerce into negotiations as “extremely divisive”. India’s view was that gains from e-commerce must not be confused with gains from negotiating binding rules in this domain. That is also the reason why it supports the continuation of the 1998 Work Programme with a non-negotiating mandate. In the end, gains from e-commerce now emerging as a big fancy among the demographically dynamic youth of the country can become a reality only if domestic authorities encourage national e-commerce platforms, nurture and protect them with the objective of improving domestic and global market access of their producers. (This article was originally published on DNA. Read the original article) (Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL)

Gains of domestic data mining

The excise duty cut declared by the Centre on petrol and diesel from the midnight of October 4 by Rs 2.50 per litre, with the Centre bearing Rs 1.50 and the oil marketing companies (OMCs) the balance one rupee in a litre of the fuel sold, seems to be a desperate bid to soothe the frayed feelings of consumers.

The central government, which had been unrelenting in enhancing excise duty as many times as it could when the global crude prices were on the wane during the last couple of years, could no longer resort to this tack when the prices began soaring in recent months, putting into trouble every user of this vital input for mobility.

Finance minister Arun Jaitley, who reaped the excise duty-driven oil bonanza to bring down fiscal deficit, is now in an unenviable predicament because on the one hand, the soaring cost of imported crude would drive the trade deficit to dizzying levels, with imports accounting for more than 80 per cent of domestic consumption. On the other, the threat of expensive imported oil could wreak havoc on the cost-push front on all other items. It is a fact to reckon that India remains the world’s third largest oil consumer with little to show by way of conservation or shift to alternative fuels to cut its inordinate dependence on imported oil.

But inevitably, inflation is the cruellest form of taxation and the finance minister’s position in the penultimate year before the general election to rein in price rise would mostly make or mar the prospects of his government’s return to power.

It is rather ironic that the finance minister who claimed with braggadocio that the NDA government was true to the letter and spirit of promoting cooperative federalism by providing 40 per cent of devolution of funds to the Centre, is now appealing to the states to match the Centre’s gesture in cutting fuel prices through their value-added tax (VAT).

No doubt a few BJP-ruled states have immediately complied with his request, but a majority of them remained indifferent to his appeal as they have limited options to tax, unlike the Centre with its armoury of additional resources mobilisation measures to tap round the year. &nbsp;

For the Centre, which is garnering more than Rs two lakh crore purely from excise levy on fuels, a sacrifice of Rs 21,000 crore may not materially alter its fiscal position, unlike the states that do not have the luxury of shifting taxes to other items to make up for the cut in VAT on fuels.

Hence governments sit over the appeal lest they lose their ability to pamper people with pet-free schemes in an effort to garner valuable votes to remain in power — be they farm loan waivers, free distribution of goats, cycles or grinders or any other trinkets to make them believe they are being governed by a more caring government.

In politics, optics count and nobody is concerned about the cost of lost growth, mediocre wages and lower tax receipts as a fall-out of a lax fiscal policy, with most of them being in a make-believe world in the absence of any qualitative governing class.

Did Prime Minister Narendra Modi not claim the other day that the Indian economy was “progressing rapidly”, that it would soon overtake the United Kingdom? But Britain, caught as it is under the agonising spell of Brexit, with no tangible plan to stay competitive, has once again deferred the planned Pound 2 per litre rise in fuel duty, which has remained frozen since 2011-12.

Comparisons may be odious but to reject tax revenue for electoral considerations is not a sane course and to persuade states to follow suit is folly compounded. There were reports that the Prime Minister held a meeting after a week when the government announced a gratuitous small tax cut on auto fuels, but that was mostly to focus on how to make do with the likely fall-out of continuing imports from Iran, a country blacklisted by the permanently petulant Donald Trump beyond November 1, when the latter’s formal sanctions against Iran kicks in.

Another point to ponder is that prices of petrol and diesel were made market-determined by the government effective from 2010 and 2014 respectively with the OMCs being accorded the leeway for taking the all important pricing decision based on market trends. But being a majority shareholder, the government has not given up its penchant to intervene selectively to ask them to defer price rise during elections to state assemblies or appealing to them to share its burden whenever prices hit the roof.

Meddling with market mechanism, even occasionally, has the risk of bringing down the value of these blue chip companies because market discipline does not respect authority’s appeal or intervention, going as it does by its own ineluctable logic.

It’s time the authorities learnt some hard lessons from fluctuating fuel prices and conduct forward planning without fostering any distortions, which have a nasty habit of entrenching themselves, much to the detriment of the declared market economy model the country has been pursuing in other sectors to bring about competition and to get the real price and value for the ultimate consumers.

At the end of the day, without laying out alternative plans to conserve fuels, it is important to encourage more public transport by citizens and make available other sources of non-conventional energy to run the arterial transport system smoothly.

(This article was originally published on DNA. Read the <a href="https://www.dnaindia.com/analysis/column-cosmetic-changes-won-t-help-2675379">original article</a>)

(Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL)

The excise duty cut declared by the Centre on petrol and diesel from the midnight of October 4 by Rs 2.50 per litre, with the Centre bearing Rs 1.50 and the oil marketing companies (OMCs) the balance one rupee in a litre of the fuel sold, seems to be a desperate bid to soothe the frayed feelings of consumers.

The excise duty cut declared by the Centre on petrol and diesel from the midnight of October 4 by Rs 2.50 per litre, with the Centre bearing Rs 1.50 and the oil marketing companies (OMCs) the balance one rupee in a litre of the fuel sold, seems to be a desperate bid to soothe the frayed feelings of consumers. The central government, which had been unrelenting in enhancing excise duty as many times as it could when the global crude prices were on the wane during the last couple of years, could no longer resort to this tack when the prices began soaring in recent months, putting into trouble every user of this vital input for mobility. Finance minister Arun Jaitley, who reaped the excise duty-driven oil bonanza to bring down fiscal deficit, is now in an unenviable predicament because on the one hand, the soaring cost of imported crude would drive the trade deficit to dizzying levels, with imports accounting for more than 80 per cent of domestic consumption. On the other, the threat of expensive imported oil could wreak havoc on the cost-push front on all other items. It is a fact to reckon that India remains the world’s third largest oil consumer with little to show by way of conservation or shift to alternative fuels to cut its inordinate dependence on imported oil. But inevitably, inflation is the cruellest form of taxation and the finance minister’s position in the penultimate year before the general election to rein in price rise would mostly make or mar the prospects of his government’s return to power. It is rather ironic that the finance minister who claimed with braggadocio that the NDA government was true to the letter and spirit of promoting cooperative federalism by providing 40 per cent of devolution of funds to the Centre, is now appealing to the states to match the Centre’s gesture in cutting fuel prices through their value-added tax (VAT). No doubt a few BJP-ruled states have immediately complied with his request, but a majority of them remained indifferent to his appeal as they have limited options to tax, unlike the Centre with its armoury of additional resources mobilisation measures to tap round the year. For the Centre, which is garnering more than Rs two lakh crore purely from excise levy on fuels, a sacrifice of Rs 21,000 crore may not materially alter its fiscal position, unlike the states that do not have the luxury of shifting taxes to other items to make up for the cut in VAT on fuels. Hence governments sit over the appeal lest they lose their ability to pamper people with pet-free schemes in an effort to garner valuable votes to remain in power — be they farm loan waivers, free distribution of goats, cycles or grinders or any other trinkets to make them believe they are being governed by a more caring government. In politics, optics count and nobody is concerned about the cost of lost growth, mediocre wages and lower tax receipts as a fall-out of a lax fiscal policy, with most of them being in a make-believe world in the absence of any qualitative governing class. Did Prime Minister Narendra Modi not claim the other day that the Indian economy was “progressing rapidly”, that it would soon overtake the United Kingdom? But Britain, caught as it is under the agonising spell of Brexit, with no tangible plan to stay competitive, has once again deferred the planned Pound 2 per litre rise in fuel duty, which has remained frozen since 2011-12. Comparisons may be odious but to reject tax revenue for electoral considerations is not a sane course and to persuade states to follow suit is folly compounded. There were reports that the Prime Minister held a meeting after a week when the government announced a gratuitous small tax cut on auto fuels, but that was mostly to focus on how to make do with the likely fall-out of continuing imports from Iran, a country blacklisted by the permanently petulant Donald Trump beyond November 1, when the latter’s formal sanctions against Iran kicks in. Another point to ponder is that prices of petrol and diesel were made market-determined by the government effective from 2010 and 2014 respectively with the OMCs being accorded the leeway for taking the all important pricing decision based on market trends. But being a majority shareholder, the government has not given up its penchant to intervene selectively to ask them to defer price rise during elections to state assemblies or appealing to them to share its burden whenever prices hit the roof. Meddling with market mechanism, even occasionally, has the risk of bringing down the value of these blue chip companies because market discipline does not respect authority’s appeal or intervention, going as it does by its own ineluctable logic. It’s time the authorities learnt some hard lessons from fluctuating fuel prices and conduct forward planning without fostering any distortions, which have a nasty habit of entrenching themselves, much to the detriment of the declared market economy model the country has been pursuing in other sectors to bring about competition and to get the real price and value for the ultimate consumers. At the end of the day, without laying out alternative plans to conserve fuels, it is important to encourage more public transport by citizens and make available other sources of non-conventional energy to run the arterial transport system smoothly. (This article was originally published on DNA. Read the original article) (Disclaimer: The opinions expressed above are the personal views of the author and do not reflect the views of ZMCL)

Rising fuel prices: Cosmetic changes won’t help

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Zee News Rajasthan

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G Srinivasan

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