Readable - 2/10/12 - Indian edition

How Sonia Gandhi was persuaded to back reforms - Reuters. Two problems here, one is whether one can really call these steps reforms. Second, if the head of India's largest political party needs to be taught basic economics a decade and a half after taking charge, what does that say about our country?

More skepticism about further reforms, first from Vivek Kaul in Firstpost, and then from Swapan Dasgupta in The Telegraph.

Ashok Malik hopes for bipartisanship in favour of reforms in Tehelka.

Do NOT read this. Terrible piece from Prem Shankar Jha in Tehelka. Jha tries very hard to criticize the

Readable - 23/09/12 - International edition

How Germany can avoid wealth losses if the Eurozone breaks up - Paul De Grauwe and Yuemei Ji / VoxEU. Well, perhaps the authors should say how Germany can avoid ADDITIONAL wealth losses, or how they can minimize losses. Also, there will be many practical issues with restricting the conversion of Euros into Marks to just German residents.

Japan, the next panic - Peter Boone and Simon Johnson / The Atlantic. It is pretty obvious that Japan will face its day of reckoning, probably after we get some sort of a resolution to the Euro crisis.
Excerpt from the article:
'Bankers and politicians seem to enable the worst characteristics and behaviors of the other. The past few

Readable - 23/09/12 - Indian edition

Not reform vs populism - Pratap Bhanu Mehta / The Indian Express. Some very good points here, but the writer perhaps fails to adequately convey the fact that opposition to reforms nowadays is hardly about ideology, it is about political opportunism. It is fashionable these days to fanatically oppose any policy moves, regardless of whether they are in the interest of the nation.

Some (well-founded) skepticism on the supposedly 'Big-Bang' reforms, plus some ideas for the real thing, first from V. Anantha Nageswaran in Mint, and then from R. Jagannathan in Firstpost. I would recommend Nandan Nilekani's book Imagining India for those looking for detailed reform ideas (although Nilekani inexplicably fails to mention reforms in the judiciary in his book).

Again from Firstpost (which has really taken the UPA to the cleaners over bad economics in the last year or

Debunking myths on FDI in retail

There are three kinds of lies: lies, damned lies and statistics. - Mark Twain

Here is a test. Read Himanshu's article in Mint about FDI in retail, and try to spot the multiple holes in his narrative.

Himanshu is an assistant professor at Jawaharlal Nehru University. He cleverly uses statistics to make his point that the benefits of retail FDI are non-existent/exaggerated. Does he succeed?

He lists all the alleged benefits of allowing FDI in retail in his third paragraph, and at the beginning of his fourth, he makes the sweeping claim:

'So why should one oppose FDI in retail? Primarily, because none of the above assertions (benefits of retail FDI) are based on facts and is nothing more than wishful thinking.'

Really? Not even a little?

But lets move on.

'The US is the best place to analyse the role of retail giants on farm produce prices (the prices received by the farmers) and retail prices (prices paid by the consumers).'

Why is the US the best place? There is no explanation here, so let's assume that reliable data to measure the effects of retail giants exists only in the US. By the way, is there no existing data on this in India? After all, (local) retail giants have existed here since many years.

Anyway, now is when Himanshu uses selected statistics from a US study to prove his point. The statistics themselves are not a problem, of course (assuming they are accurate). Himanshu's (sometimes implicit) interpretation of the data, however, is.

'The average value of farm share (the share of total retail price received by farmers) declined from 41% in the 1950s to around 35% in the 1970s, and then declined sharply after the 1980s to only 18.5% in 2006. That is, for every dollar worth of food bought by the consumers, only 18.5 cents were received by farmers. The rest was accounted for by advertisements, marketing, profits and so on.     .......     For rice and wheat, the price received by farmers was only 19 cents for every dollar worth of these commodities sold in supermarkets. For the record, an Indian farmer gets anywhere between 60% and 70% of the retail price for rice and wheat.'

Reduction in the farm share percentage is very normal as an economy becomes more developed and urbanised. Note that the reduction in the US happened over decades, not over years. Marketing expenses and profits, which supposedly accounted for the difference, are apparently resented by Himanshu, who perhaps only cares for the farmers, and not the marketing industry people, or the shareholders of the retail giants. But when it comes to policy, should the government favour one class of people over the rest, or should it look at the overall benefit to the economy? The answer is obvious.

Even at the most fundamental level, Himanshu's narrative falls apart. According to Himanshu's stat about the declining farm share percentage, the giants are not adequately compensating the farmers for their produce (the alternative theory, that the giants are fleecing their customers with high prices, is obviously flawed [given that they are often competing with other retailers, both big and small] and can be safely discarded).

But is anyone forcing the farmers to sell to the giants? If the farmers are selling, it means that that is the best deal they are getting.

But, you argue, they have no alternative. The giants (note the plural) are the only buyers.

Even if that is true, it can only be because the giants are so efficient and competitive that they have forced the smaller stores out of business and have captured a large share of the market (again, this would happen over decades, if at all). If so, such efficiency should be celebrated. After all, at the most fundamental level, it is getting more for less that drives growth.

And remember, it is not the case that there isn't any competition between the giants, so there is no exploitative monopoly here. The farmers can hardly complain that they are forced to sell at non-remunerative prices to a monopoly buyer.

In the Indian context, a giant retailer won't be able to buy farm produce (wheat and rice in Himanshu's stat, for example) at a lower price than what the existing traders/wholesalers/kirana shops/local giants are paying the farmer. So what is Himanshu so worried about? What is there for farmers to lose if they have extra buyers for their goods in the market? Common sense tells us they only have to gain.

'In real 1982-84 dollars, the total spending by consumers on food increased by almost four times. But the total income received by farmers declined in real terms after reaching a peak in the mid-1970s. So where did the increased spending go? It went to the retail chains as profits.'

The last sentence is almost surely false. Surely not all of the difference was accounted for by profits at the retail giants. A lot of it must have gone towards higher expenditure.

After all, if easy, super-normal profits were on the table, what is to stop new stores (big or small) springing up (in the medium term) to take advantage of a highly profitable business and make easy money? Were there any regulatory barriers which disadvantaged new entrants? Note that small Mom N Pop stores were the first-movers in the industry, and if anyone was at an advantage, it was them. If the giants have eclipsed the smaller stores, they must have done something right.

And even if the retail chains did somehow enjoy super-normal profits in the US, why begrudge them their dues? Perhaps Himanshu would have a different view on the issue if he held Walmart shares.

'In those markets where the concentration of market power is very high among the retail giants, the markets also exhibit a trend of downward price stickiness (that is, prices adjust upwards, but do not come down even if farm prices come down). So what was the impact of such retail chains on inflation? Data from the Food and Agriculture Organization on food prices does not suggest any evidence that countries with higher penetration of retail giants did any better than those without it. Food prices rose in almost all countries, including the US and Europe.'

The study suggests that there is no evidence that countries with higher penetration of retail giants did any better than those without it, but we can also assume (since Himanshu is silent on this) they did not do any worse either. But remember, inflation is calculated on some recent base, usually year-on-year. So what if the base itself is lower (or higher) in countries with more retail giants? There is no mention of this very important point in Himashu's piece.

'What about their potential effect on employment in India? An ICRIER study in 2008 estimated the Indian retail market to be close to $409 billion. Compare that with Wal-Mart’s revenue of $405 billion. While for the same revenue, the Indian retail sector employed close to 40 million workers, Wal-Mart employed only 2.1 million workers. The total employment of the top five retail giants together was less than four million, close to 10% of the total employment in the retail sector in India. While it is sure that the total employment created by these retail giants will not be close to 10 million as the government has been claiming, it will certainly destroy livelihoods of millions of workers currently engaged in the sector.'

Firstly, retail giants entering the India market would definitely employ many more people per dollar of revenue than most other countries, because of cheaper labour. If our labour laws weren't so out-dated, they would employ even more.

Secondly, if the giants opt for more mechanization at the expense of labour, then (apart from the obvious productivity benefits) there would be more employment among people associated with manufacturing and servicing those machines, a fact Himanshu chooses to ignore. He also ignores other indirect/ancillary jobs that would be created. Also note that the direct jobs lost, if any, would be over decades, giving people time to find new jobs, and adjust to the newer, more efficient economy.

Thirdly, should policies be decided on how much employment is likely to be gained/lost? Isn't that only one of the many factors that go into making a decision? After all, if employment generation is the only agenda, the government should pay people to dig ditches and fill them up again. Or pay them to do nothing. Utopia!

Actually, I should just have quoted Tyler Cowen, who (very elegantly) wrote this in December:

'Fewer jobs are precisely the point. What India needs is fewer jobs; fewer jobs in retail, fewer jobs in apparel and, most of all, fewer jobs in farming. India cannot become even a middle income country if most of its workers, for example, are farmers. To improve its standard of living, India must use fewer people to produce more agricultural output.

Fewer workers in farming (or retail) means more workers producing more goods in other industries. The same basic lesson holds throughout an economy, it is the declining sectors that allow other sectors to advance. Instantaneously? Immediately? With higher wages for every worker? No. Transitions always involve some pain; creation always involves some destruction; growth always involves change. The alternative, however, is stagnation.

The politics of growth are difficult because those who lose from change are always present and are often more numerous and perhaps even more deserving than the present winners, the capitalists, the business people, the international mega corps; but today’s losses and gains are fleeting, the permanent winners are the workers and consumers of the future who will know only the benefits of productivity.'

There. Case closed. Perhaps Himanshu's column should be named 'Farm Half-truths'.

But wait, Himanshu has more:

'The evidence is hardly conclusive on the lofty promises made in favour of FDI in retail. But more than that, these claims seek to divert attention from real issues of reform required in the agricultural sector. The short cut to containing inflation is not in bringing FDI in retail but in our own existing policies of food-supply chains and archaic laws that govern our markets for agricultural products.'

This is where Himanshu begins to make sense. The benefits of FDI (at least the direct ones) in retail are probably over-stated, especially when you consider that retail giants already exist in our country. And he is right that smart agricultural reforms will benefit India far, far more than any foreign retailer ever could. Unfortunately, they are nowhere on the agenda at the moment. To make things worse (or is it better?), our agriculture minister goes missing right bang in the middle of an emerging drought.

Yikes!

Readable - 22/07/12 - Indian edition

Gross domestic product in India is now expected to grow 6.3% during the fiscal year 2012/2013 and by 7% next fiscal, down from 7.1% and 8%, respectively, expected in the last survey in April. Growth of 6.3% would be slackest pace of expansion for Asia's third-largest economy since 2002-2003, when it grew 4%. - Reuters poll


(Because of the below average monsoon) we estimate agriculture and GDP growth in FY13 (2012-13) at 1.8% and 5.8% respectively. The consequences would be much worse if the monsoon fails. The agriculture sector could contract 1.5%, bringing growth in 2012-13 down to 5.4%. Worse still, the food inflation could touch 18% and WPI inflation 10% by December this year. - Anand Rathi Financial Services


There is a huge discrepancy between our balance of payments (BoP) and GDP data. My analysis suggests that in 2009-10 and 2010- 11, the negative contribution of net exports was around Rs. 50,000 crore less in the GDP data than the number in the BoP data (goods and services). The gap has jumped to Rs. 120,000 crore in 2011-12, with the fourth quarter reporting a positive contribution of net exports to GDP. - A V Rajwade


The overall picture that emerges is that Team Manmohan may well be able to show some revival of growth by the last quarter of 2012 from an investment stimulus. But their chances of success on other policy fronts like infrastructure, fiscal and balance of payments management and inflation control are less than even. I am afraid 9 per cent growth is becoming a distant dream. - Nitin Desai


After the collapse of investment, consumption has been the engine of growth for the Indian economy. This creates a formidable policy problem: any fiscal compression now is likely to depress consumption and, in turn, growth. Any fiscal correction now, such as a reduction in fertilizer subsidy and a correction in the price of diesel—especially when there is agrarian distress—is bound to create problems. - The Mint



Corporations are sitting on a lot of cash, and there is a real possibility of a sharp increase in investment demand if projects that have been put on a back-burner are revived. But for this to happen, apart from convincing companies that growth — and with it demand — will revive, a variety of regulatory bottlenecks and decision delays have to be resolved. Many of the regulatory bottlenecks are at the state level, where a new type of crony capitalism is taking root. Many of these regulatory hurdles are not the product of socialist enthusiasm but simply one businessman using political contacts to screw another. With all the posturing and money-raising that is inevitable before elections, the PM’s team of non-political technicians may face some real difficulties in resolving these state-level problems. - Nitin Desai



FDI in retail wasn’t going to be easy. When it had been proposed in the winter of 2011, it was not just Opposition parties and smaller UPA partners like the Trinamool Congress that had criticised the idea, but influential sections of the Congress itself had sabotaged it. No doubt they would attempt that again. What would be their excuse?
This past week, US President Barack Obama may just have provided it. In telling an interviewer that “in too many sectors, such as retail, India limits or prohibits the foreign investment that is necessary to create jobs in both our countries, and which is necessary for India to continue to grow”, the man in the White House may have in effect killed chances of a quick opening up of retail.
To the naysayers in the Congress — and the party is packed with old-style statists who have never had a kind word for liberalisation and deregulation — this provides a heaven-sent opportunity. Hostility to economic reform and protection of discretionary powers of the political class can now be dressed up as principled protest against American imperialism. In this happy and self-serving universe, MGNREGA is presumably the highest form of non-alignment and the pursuit of a high fiscal deficit the best exemplar of an independent foreign policy. - Ashok Malik

Welfare considerations suggest (at least according to me) that higher absolute growth for the poor, with greater inequality, is much preferable to substantially lower growth for the poor, and considerably less inequality. - Surjit S Bhalla

Most of us generally expect that mainstream attitudes in India would be quite left-wing, pro-State, anti-market, etc. The evidence does not seem to support these preconceptions. - Ajay Shah, citing PEW Global Attitudes Project research


The sourcing rule for single brand retailers currently stipulates that local suppliers must not have more than $1 million invested in plant and machinery. The rule was designed to ensure that India’s manufacturing sector, which pales next to China’s, benefits from foreign money rather than being muscled aside by imports. But it represents a headache for retailers looking for scale and reliable, high quality suppliers.   .....
.....   the government is also rethinking what to do if a supplier grows beyond its original size. According to a policy document in November, an Indian company would be disqualified from supplying a foreign firm if it grew beyond its original $1 million investment.
“I would call it penalising success,” said Devangshu Dutta of Third Eyesight, a retail consultancy.
“If you are successful in actually helping small companies grow, they would be penalised because they would not be able to supply you any more. And you would be penalised for helping them grow.” - Reuters

On the fiscal front, the figures for the first two months, when the deficit was about 27 per cent of what it was planned to be over 12 months, are not very promising. As of now, the Budget’s goals for the deficit look rather distant. The problem here is again political. The targets for the deficit cannot be met without reducing the burden of subsidies. Since food subsidies cannot be touched with the commitment on food security, the adjustment has to be in the petroleum subsidy. Though there is a lot of brave talk, one doubts whether Team Manmohan has political backing for the substantial increases in diesel and LPG prices that will be needed. The deficit will be under further pressure if the monsoon plays truant. Hence, something has to be done soon, given the expectations that have been aroused, if we are to avoid a downgrade by some international rating agency — which would add to our woes. - Nitin Desai


The budget provided Rs 43,580 crore for oil subsidies, but as at the end of April, this money has been cleaned out. It was used to pay for last year’s dues (Rs 38,500 crore) and the remaining amount would have been barely enough to pay for April’s subsidies.
This leaves Manmohan Singh with no option but to raise diesel prices steeply. In the April-June quarter, oil marketing companies (OMCs) reported under-recoveries (losses) of Rs 47,811 crore, and oil prices have begun rising again. Whole-year losses could top Rs 1,50,000 crore, and the PM has no money for it. - R Jagannathan

On the eve of his resignation, Mukherjee cleared about Rs 20,000 crore in compensation dues to state governments in lieu of their phasing out the central sales tax (CST), one of the key steps in the move towards the goods & services tax (GST) regime that aims to replace a plethora of central and state indirect taxes with a single nationwide levy     .....     But Mukherjee had only allocated a sum of Rs 300 crore towards this head in the budget for 2012-13, which means that his successor— Prime Minister Manmohan Singh, who holds charge of the finance ministry now—will have to figure out how to rustle up the remainder to make good the promise at a time the government's fiscal position is already very stretched. - The Economic Times

During NDA rule, the BJP was a votary of the GST. Now it has become the defender of the bogus states’ rights argument. Quite simply, the BJP leaders seem to be willing to thwart any proposal of their political opponents. And they call themselves patriots. - Jaithrith Rao


While these anti-growth, anti-poor tax policies were piling up, we created, by administrative fiat, one of the worst features of our tax system. We completely forgot the principle of the “goose that lays the golden egg”. Rather than tell our tax collectors that it was their job to humanely and rationally collect taxes from citizens without destroying the creators of wealth, our government set ‘targets’ for its tax officials and signalled to them that it was perfectly in order for these officials to harass taxpayers by making inordinate, unreasonable and sometimes even illegal demands. Setting “tax collection targets” is both immoral and economically injurious. We now have a situation where tax officials send out notices and insist on garnering payments that they know will not stand the scrutiny of tribunals and courts. The official does not care if he or she is overruled after 10 years, as long as the current year’s targets are met and one’s promotion is assured. In this fundamentally tyrannical course of action, these tax officials receive support from the highest levels of the executive branch, where the finance minister’s concern is to meet the current year’s revenue projection, for who knows who will be the finance minister in 10 years’ time when the refunds are due? - Jaithrith Rao

Income tax disputes hit 4.37 trillion rupees ($76 billion) in the year ending December 2011, almost double the year before. - Wall Street Journal

The government might have to announce a drought within a fortnight. - Mala Das, NDTV on 20th July

All its Herculean labour notwithstanding, the IMD has never foretold a looming weather disaster. It typically weighs in after a heat or cold wave, thunderstorm, flood or cyclone and warns us of more to come when the worst is already over. Its record of providing information for what it calls “nation-building activities”, such as agriculture and irrigation, is worse. Most recently, it failed to predict the 2009 drought and continued to mislead policy makers into believing that it was only a “rainfall deficit” well into August! - Shreekant Sambrani

The lack of rains is being felt across the country in different ways. Scrap gold sales are gaining momentum as farmers, distressed at the poor monsoon, prefer to sell their gold at a time when gold prices are skyrocketing. In fact, this trend has picked up in urban areas, too, where a cash crunch is forcing people at large to take advantage of rising gold prices. - Rashme Sehgal, Deccan Chronicle

The prospects for inflation will depend on the weather, which, right now, is giving some cause for worry. The rice and wheat markets can be managed given the stocks available. The real worry is panic reactions under political pressure if a sudden supply crisis leads to a spike in some other food item. So Team Manmohan better keep a watch on the usual suspects like edible oils, onions, potatoes and tomatoes. - Nitin Desai

h/t Equitymaster

h/t Deepak Shenoy

Today, people enter politics mainly to make money. The emergence of political dynasties should surprise nobody: they are business dynasties by another name. - SA Aiyar

When Khurshid was quoted as saying Rahul had only put in a “cameo appearance”, he was actually saying on record what others say off it. Short of any real-time info on members of the dynasty, there are only intelligent guesses (from individuals who are usually right) that Rahul will not be posited at the front of a ship that is expected to sink by 2014. - Saba Naqvi

(On guessing Rahul Gandhi's choice of ministry) That leaves the Food Ministry, current held by KV Thomas of the Congress. Now consider how this may work best for Rahul Gandhi.

For 2014, Congress needs a vote winner. The Food Security Bill is the next big idea of the UPA, and the cabinet has just decided to cover 70 percent of the population under this Bill. It is UPA-2’s NREGA.

Giving food away for cheap in a drought or bad monsoon year is an angel’s job. Enter Rahul Gandhi. There is little downside to the ministry, provided it is given a carte blanche to spend money like water – which should not be a problem for Rahul Gandhi. - R Jagannathan

As President, after he takes his oath of office on Wednesday, Pranab Mukherjee will be on stern test to see that he has in fact stopped being a Congressman in the conduct of his official duties. His long years as Mr Fix-It for the Congress party may have helped him get to the highest office in the land. In the next few years, he will repeatedly be called upon to put country before the Congress. It is a test he has failed in the past. - Venky Vembu

Nearly 900 million Indians now have the power to call for some critical information about the candidates contesting from their respective constituencies prior to an election.

Nearly 900 million Indians are now tantalizingly close to accessing vital information, access to which can make an impact on the quality of elected representatives who lord over us in the parliament and state assemblies ; information that is, not inexplicably, withheld from us by those who gain the most by withholding such information.

All you need is intent and a mobile phone.

How?

Do you know the pin-code of the area where you are registered as a voter?

Yes?

We are good to go…..

SMS MYNETA to 56070  or to 92465-56070.

Here is what I got when I sent that text: “Lok Sabha constituency XXXXX, MP YYYY, Party-name ZZZZ, Criminal cases – Yes(1), Assets Rs. 5.4 crore, Liabilities Rs. 3.3 crore, Education 12th Pass”

During elections, the voters can retrieve this basic information on the criminal background, the financial summary and the educational qualifications of the contesting candidates. During non-election period, citizens will be able to access complete background information of sitting MP and MLA of their area. - Shining Path, Firstpost

With 1.25 million infant deaths annually and 42 percent of the kids being underweight, India has slipped in the area of child well-being in the last 15 years, according to a report released on Thursday.

The Child Development Index (CDI) released by NGO Save the Children showed that Japan is the best place in the world to be a child while Somalia is the worst.

The report noted that while many countries in the world made remarkable progress in child health, education and nutrition – the three premises that form the basis of this report – India slipped by 12 ranks between 1995 and 2010. - Firstpost

CNN-IBN had accessed documents last year that showed that the Bhopal Memorial Hospital and Research Centre had been carrying out clinical trials on humans. The documents showed that at least 80 per cent of the patients on whom trials were conducted, were victims of the Bhopal gas tragedy.     .....     What was suspected and had been alleged was confirmed. The multi-specialty hospital set up for gas victims conducted unethical drug trials on 279 patients of whom 215 were gas victims. - CNN-IBN

(On Satyamev Jayate) I had spotted Bezwada Wilson in the audience, and I was waiting to see if this leader of the Safai Karamchari Andolan—a man who had pioneered the demolition of dry latrines across India—would salvage the morning. He too was asked to narrate his early life, and he too shed tears. As did Khan with practised ease.

The next day I called Wilson and told him I was annoyed that even he did not bother to mention Ambedkar and Reservation. Wilson clarified that he indeed had. It had been edited out, as was his rant against the Supreme Court and Parliament—since both institutions had been dragging their feet on the issue of manual scavenging. Then he revealed something that shocked me. He said he had not been in the audience when Kaushal Panwar was being interviewed by Khan. I countered saying I had seen him ‘reacting’ to what Kaushal said on stage. “Even I saw myself in the audience and hence was shocked,” said Wilson. He said Kaushal had been interviewed in total isolation, in an empty studio. And yet on Sunday we saw, every once in a while, close-ups of fretful, anxious, pained and agonised faces of members of the studio audience as Kaushal was narrating her story. They even clapped on cue, like when Khan asked Kaushal her heroic father’s name. Clearly, all this had been manipulated and faked—with clever editing and splicing of shots. - S Anand

(On falling media standards) Today, many Indians live with this dismaying sense of news as theatre. Every day, viewers are treated to a summer storm — a sense that something of tremendous magnitude is happening. The next day, it is gone. - Shoma Chaudhury

(On the Guwahati molestation case) If proven true, this would perhaps be the first incident in which a media house has had a frighteningly complicit role in a despicable crime against a woman. While it is almost sure that this is our News Of The World moment, media houses, especially electronic media, need to rethink their priorities: higher TRPs or news ethic. Until that happens, the spectacle will continue. - Ratnadip Choudhury

(On internet policing) A more worrying development regarding ISP actions came to light at the end of May, when the activist group Anonymous India hacked into the servers of one provider, Reliance Communication, and released a list of 434 web addresses that had been blocked. Among these were 45 addresses that Reliance had not been asked to block by either government or the courts—all of them related to an accused in the 2G scam, Satish Seth, a group managing director at its parent company, Reliance ADA Group (R-ADAG). The 45 addresses were soon unblocked. (For the record, an R-ADAG executive denied in an email that their servers had been compromised by Anonymous India, and said they had not blocked any web pages unless asked to do so by the government or the courts.)

All this adds up to what can be called private censorship, as distinguished from government censorship. But whereas acts of censorship ordered by the government can be challenged by citizens through Right to Information applications or appeals to elected officials, it seems virtually impossible for customers to hold ISPs, entertainment companies or copyright lawyers accountable for their acts of censorship. Going to court seems to be the only option, but many experts and activists who work on Internet freedom in India are wary of taking this route; the consensus among advocates is that Indian courts are unable (or unwilling) to appreciate the complex issues involved in regulating or blocking Internet sites. 

It did not encourage them when in January, a one-judge bench of the Delhi High Court told Google and Facebook, “Like China, we too can block such websites.” Shivam Vij, Caravan Magazine

Pranab-da has left more ticking bombs for Manmohan - R Jagannathan, Firstpost

To reform or not to reform in the monsoon session? - Business Standard

Team Manmohan's chances - Nitin Desai, Business Standard

Sharad Pawar, the sound policy-maker - S A Aiyar

Incredibly cynical piece on Rahul Gandhi's choice of ministry - R Jagannathan, Firstpost

The dysfunctional tax regime - Jaithrith Rao, Tehelka

How to use an SMS to know the secrets of our netas - Shining Path, Firstpost

Is a proportional representation based electoral system better? - Jayaprakash Narayan, Outlook

How true is Satyamev Jayate? - S Anand, Outlook

Tehelka's investigation into the Guwahati molestation case - Ratnadip Choudhury, Tehelka

On India's receding internet freedoms - Shivam Vij, Caravan Magazine

Readable - 26/01/12 - Indian edition

I am not an admirer of Ayn Rand, the high priestess of unrestrained individualism and laissez faire economics (Alan Greenspan was a chela). But I am tempted to quote her on our neta-babu raj. “When you know that in order to produce, you need to obtain permission from men who produce nothing, when you see that money is flowing to those who deal not in goods but in favours, when you see that men get rich more easily by graft rather than by work, and your laws no longer protect you against them but protect them against you, you know that your society is doomed.” What could be the tipping point for a crisis? BoP? Fisc? Inflation? - A. V. Rajwade

India's extra borrowing this year is almost equal to the total borrowing of the government of India in 2007-08. And with it the Centre’s total borrowing for this year will be over Rs 5,10,000 crore. This is more than a four-fold increase in the government’s borrowing in four years. - Senthil Chengalvarayan

Nobody in the political system realises that the historical window of opportunity for putting in lasting changes is very small. In our case, it is 10 to 15 years given our demography. If we don’t lay the foundation for wealth and prosperity in the next 15 years, then the India story is gone forever. You will then grow old, before you grow rich. - Pratap Bhanu Mehta

In many ways, a global slowdown/recession will be extremely useful for our political masters as the domestic problems can be attributed to that phenomenon over which we obviously have no control. The fact, however, is that most of the problems are home-grown. - A. V. Rajwade

The irony of all this is that 2011 was a milestone year that marked the 20th anniversary of the first wave of economic reforms of 1991 that Manmohan Singh, then finance minister in the PV Narasimha Rao government, unveiled. With firmness of manner that is uncharacteristic of him, Singh had said in his budget speech of that year: “Let the whole world hear it loud and clear: India is now wide awake.” Twenty years later, sadly, India’s policymakers are asleep at the wheel – and the opposition and even some allies of the ruling party are so cussed as to reflexively work for a stalemate on every move. The results of this are manifest in every aspect of the economic slowdown and the political polarisation. 2011 was, in every way, the year in which India lost its nerve. And, from the looks of things, the next year brings no certainty that things will get any better. - Venky Vembu

Professor Ian Little who was the PM’s teacher at Oxford, once advanced the idea that reform cycles in Indian politics got exhausted within five years. The radicalism of the Mahalanobis Plan did not survive the 1950s. Indira Gandhi ran out of steam before she had five years in power and resorted to repression. Rajiv Gandhi got derailed thanks to Bofors, and the NDA thanks to Tehelka. This time the Indian Miracle has been killed. When and if India regains its growth momentum is anyone’s guess. In the meantime, welcome back, the Hindu rate of growth. - Meghnad Desai

Unlike the Asian authoritarian political regimes that favoured political openness after becoming economically open, India is moving ahead with the reverse combination, and with the additional liability of weak coalition governments. To be sure, unlike Deng Xiaoping in China, Lee Kuan Yew in Singapore or Mahathir Mohamad in Malaysia, India has no effective visionary reformist-politicians who can ably negotiate political consensus on reforms. Prime Minister Manmohan Singh, who is in office but does not seem to be in power, appears to be an accidental reformer at best. - Rajeev Malik

You will see a different set of guidelines and difference in speed at which decisions are taken after February. You will see that. I am very hopeful, I am very optimistic that prime minister and his team have taken a view, have taken a decision, 'we will not let 2011 continue'. - Deepak Parekh

My thinking is that there are four inputs to budget. First one is revenues which are well below target. The budget itself had an estimation of some 18% growth which is supposedly some 8%, the expenditure growth which was supposed to be 3.5% is 10%, and the divestment proceeds were supposed to be Rs 40,000 crore, they are Rs 1000 crore not to forget subsidy that is out of control. So when you are making next year's budget; the last quarter's run rate for revenue growth is only 8%; then the government itself will not do what they project at 14-15% revenue growth. They will have to somewhere ballpark, if off the last quarter's trend and if that is the number of 8-10% revenue growth, divestment let us say is zero this year up to March, then would you allow them to say again Rs 50,000 crore for next year? Basically the four components, all of them are much different from all the expectations- revenue, expenditure, subsidies and divestment, and therefore, when you are making next year's budget, you will have to benchmark off last quarter's trend. If you were to project on that basis and not take numbers out of thin air, you will not be able to come anywhere near the budget number which the market and the government would be comfortable with. Therefore there will have to be some tax increases. Most of the excise of 2% which was still pending will be done, and maybe some corporate tax surcharge or something. In that context, at that time, if you say that you are going to do a few reforms, unless those reforms are done then and there and have a direct co-relation with the market in the short-term, we will not know at that time whether to focus more on the budget and their numbers and if there is a tax increase, or whether be pleased with the fact that reforms have happened or are promised. Hence I think this will take time. Also because the budget is so close to the end of the elections, I think it is completely wrong to think that as soon as the elections are over, government will start doing reforms because by that time, the results will be just out (between 4th and 7th March). The budget is scheduled to start between 10 and 15 March. So it is too close to suddenly change your complete view based on what has happened. And that also assumes it will be a relative victory for Congress so that they will be able to sacrifice mentally at least a Trinamool Congress the same morning and in the afternoon announce things which may not have been done if the results were slightly different. So I think that will take two-three months for them to form new equations and be confident about who is supporting whom at the Centre and whether Samajwadi Party (SP) is there or not. So, all these things cannot be done in the budget because it is too close to the end of the elections. - Samir Arora

Perhaps the Congress is in love with the ‘C’ in its name. Corruption was not enough. It had to become corrupt, casteist, communal and cynical. India’s tragedy is that there is no national level challenger to this party that is diminishing us all. - Pratap Bhanu Mehta

Religious reservations are bizarre. Consider this, one cannot convert his or her caste, but can convert their religion. So, could we see a scenario in the future in which a Hindu boy cannot get a job or college admission, but if he converts to Islam, he can get it under the quota? Are we incentivizing conversion? How can we allow such a policy to be even announced or be put in a manifesto, let alone take effect?        .......            The problem is not with the politicians, who simply mirror and adapt to the environment. The issue is with the Indian electorate, or us. The great Indian mind is filled with prejudice. Centuries of persecution, discrimination even in the present day, and a belief that one's own kind is superior has led to these prejudices. These in turn have led to a haphazard democracy that is more cacophony than consensus. The ruckus we often see in Parliament is nothing but a visualization of the average Indian mind, of chaos and confusion about who we really are.      ......      And until such time that most of us stay prejudiced, we will have the confused and mediocre leadership that we have right now. - Chetan Bhagat

If too many of our citizens believe that all politicians are corrupt (just recall the response Anna Hazare got), the other side is that the election propaganda reminds us that most political parties and their leadership reciprocate the sentiment: the only way they seem to know of getting elected is to “bribe” the voter through reservations, quotas, subsidies and other populist measures. (To be sure, culturally, we have nothing much against corruption: just look at the number of people who offer mannat to the gods for getting a son, a daughter married, or a promotion in job.)        ......       If the voter is so wise as claimed, how is it that he elects criminals; gives the divine right to rule to dynasties; does not see reservations and quotas as bribes aimed at perpetuating differences? - A.V. Rajwade

In India, we have a combination of grinding poverty and a strong democracy, a combination that makes redistributive policies almost a given. - Manas Chakravarty

Subsidies as a percentage of total expenditure in the central government’s budget is now much higher than they used to be even before liberalization.     .....     Central government expenditure on subsidies as a percentage of nominal GDP. For 2009-10, this was 2.3%, just a smidgen below the 2.4% it used to be in 1990-91. - Manas Chakravarty

Indian politics hinge on patronage—the doling out of opportunities to rob one’s countrymen. UID would make this harder. That is why it faces such fierce opposition, and why it could transform India. - The Economist

While it is an excellent policy goal to ensure that no one goes hungry, the manner in which the UPA government is going about food security is dangerous; it will worsen corruption and is quite likely to be counterproductive. The price of overloading the bill of rights will be paid in terms of the state's inability to enforce any of them. The PDS is independent India's biggest and longest-running scam. If implemented, the FSB will worsen the widespread corruption that is involved in the government buying, storing, distributing and retailing foodgrains. The UPA government's ideological blinkers do not allow it to see that there are far simpler methods to ensure food security. Conditional cash transfers are a far more efficient and liberal way of addressing the challenge. - Nitin Pai

The minimum wage in China’s town and village enterprises (TVEs), which account for much of that country’s manufacturing and export prowess, is the equivalent of about 64 cents per hour (it is three times as much in a special economic zone like Shenzhen). For a 200-hour working month, the wage in a TVE is therefore $128, or about Rs 6,600. The minimum wage in parts of India is no lower, and in most manufacturing plants is much higher, though India’s per capita income is less than half China’s (Kunal here - and productivity much lower). Is it any wonder that sectors that China vacates as it moves up the income ladder are being taken up by Vietnam and Bangladesh, more than India?     .....     India’s history of government intervention doesn’t flow from market failure as much as creates it — like excise duty distortions which in the 1980s made this the only country in the world where TV-set assembly was a small-scale business! Research shows that some 85 per cent of the garment factories in India employ fewer than eight people; in China, which is the king of the garment market worldwide, less than 1 per cent of factories are that small. Market distortion has made a volume business into a small-scale business in India; our garment exports have stayed small-scale too. The essence of the reform programme of 1991 was to attack this approach to policy-making, to reduce if not remove the distortions. Twenty years later, however, the ancien regime is back with a vengeance — it was in the name of garibi hatao earlier, now it is in the name of the aam aadmi. - T N Ninan

UPA 2 put forth the Right to Education (RTE) Act under the new HRD Minister Kapil Sibal. Besides enforcing quotas in private schools, RTE has put such draconian restrictions and regulations that many private schools will be forced shut. Study after independent study has shown how India’s poorest have rejected government schools and choose to enroll their children in private schools - but the government has ignored them all and enacted laws that hurt the poor the most. - Live Mint

In the Programme for International Student Assessment (Pisa) international competition for children’s learning, India came 72nd out of 73 countries. The Annual Status of Education Report (Aser 2011) reveals that the proportion of Class 5 children able to read a Class 2 text has fallen from 53.7% in 2010 to 48.2% in 2011. The proportion of Class 3 students able to do simple subtraction sums is down from 36.3% to 29.9%. India is bidding to be a super-dunce rather than superpower. - Swaminathan Aiyar

Gujarat's education department recently conducted teacher aptitude tests for primary, secondary and higher secondary teachers. Only 33% of primary teachers and 48.68% of secondary and higher secondary teachers qualified by securing a minimum 50% marks. And yet, the HRD ministry's Statistics of School Education 2009-10 claims the state has 100% trained teachers at all levels in its schools! - Saira Kurup

Yesterday (23rd Jan), the head of the Maharashtra Anti-Terror Squad announced in Mumbai, to much fanfare and media flourish, that its ace team had cracked the July 2011 bombings in Mumbai, with the arrest of two persons – Naqi Ahmed, 22, and Nadeem Akhtar, 23, from Darbhanga in Bihar.     .....     Mumbai ATS chief Rakesh Maria offered merciless details of the investigations, which took the ATS team to 18 states, led them to interrogate over 12,000 witnesses and review 180 hour of CCTV footage of the blasts.     .....     But barely hours after Maria had finished preening in front of cameras, central intelligence and Delhi Police officials were rubbishing the claims – and saying that in fact the ATS had got the wrong man. How were they so sure? Because, they say, one of the arrested men – Naqi Ahmed – is in fact a Delhi Police informer who was to lead them to the masterminds behind the attack, including two Pakistani nationals. And, they further claim, the premature revelation of the facts of the case by the ATS on Monday had “botched up”” the investigations by alerting the masterminds, who had fled. - Venky Vembu

In a 33-state-and-Union-Territory study of milk samples by the Food Safety Standards Authority of India, 65 per cent of the milk samples from Maharashtra turned out to be adulterated. West Bengal had the worst results with 100 per cent contamination across the samples and Gujarat emerged with 89 per cent adulteration. Goa and Pondicherry had the best results with 100 per cent of the samples conforming to required standards. Water, detergent, fat, skimmed milk powder, urea and glucose were identified as common adulterants. - Times of India

Hazare failed to draw big crowds in Mumbai to witness his fast, and then gave up the fast after a day, a pathetically un-Gandhian performance. His said he had failed to persuade the government to introduce a strong Lokpal Bill, and so the reason for the fast was over.     .....     In UP, campaigning against Congress will, by implication, mean campaigning for the highly corrupt government of Mayawati . What a fall for a Gandhian! - Swaminathan Aiyar

Like frenzied illiterates, Anna’s team members have decided that the job of passing the Bill in Parliament is solely the Congress’s responsibility. - Prashant Panday

The India Against Corruption (IAC) crowd represents a modern, outward-oriented, aspirational generation spawned by the economic liberalisation of the 1980s and 1990s. On the other hand, look at who they have chosen as their leader: Anna Hazare, an anti-modern, moralistic, finger-wagging old man who lives in a time-warp. - R. Jagannathan

Residential prices in Mumbai have risen at an annual average of 14.6% in the last 10 years, according to Merrill Lynch analysts. That is 50% more than the average price rise in the preceding 30 years. This anomaly has to correct to even out the growth rate, they said. - DNA

The World Gold Council estimates India has the largest stock of gold in the world with households accounting for nearly 18,000 tonnes. At current prices, this is valued just a tad less than $1 trillion. - Live Mint


Do-gooder economics and the Lokpal - T N Ninan  (Brilliant, must-read essay on unintended consequences and more)

Lokpal a shortcut that will not work - Amitabha Pande  (I forwarded this link - and the one above - to Arvind Kejriwal's suggestion-seeking email, let us hope someone at IAC took notice)

India nowhere: How we lost the plot in 2011 - Venky Vembu

The UPA and it's 1970s mindset - Anil Padmanabhan

Can the UPA borrow it's way into the high growth club? - Senthil Chengalvarayan

Striking parallels with 1991 - Pramit Bhattacharya

How ‘national’ policies have ended up being anti-national - R. Jagannathan  (Unintended consequences galore)

Fertiliser folly: How to benefit foreigners and shoot ourselves - R. Jagannathan

Manmohan Singh: The reformer who never was - Sadanand Dhume  (Is he even a proper economist? One for future historians to debate, perhaps)

The costs of democracy in India - A. V. Rajwade

Is a banking crisis brewing in India? - Haseeb A. Drabu  (Very pessimistic essay, even by today's standards)

How the US lost out on iPhone work - New York Times  (Many competitiveness lessons for India here)

India's private schools face closure - New York Times  (Here is another ticking time-bomb)

Education in India at the crossroads - Ajay Shah

Why no one ever forgets a good teacher - Saira Kurup

Video: CNN-IBN predicted the disruption in Parliament - CNN-IBN

Stop dreaming of a Lokpal - Venky Vembu

Lokpal may go the Bofors way - Swaminathan Aiyar