📰 Air pollution throws shade on India's solar success
Dust deposited on solar panels impair conversion of energy
•Air pollution is diminishing India's capacity to harness power from the sun, experts say, undermining billions being invested in renewables as the energy-hungry giant emerges as a solar superpower.
•New research has found the smog and dust that sickens millions across India every year is also sapping solar power generation by more than 25 percent, far beyond levels previously thought. In the first study of its kind, U.S. and Indian scientists measured how man-made particles floating in the air and deposited as grime on solar panels combined to seriously impair sunlight from converting to energy.
•This interference causes steep drops in power generation, they found. At present levels in India, it could amount to roughly 3,900 MW of lost energy — six times the capacity of its largest solar farm, a gigantic field of 2.5 million panels. “A simple calculation shows that this is a big amount of energy we are going to lose,” Professor Chinmay Ghoroi, who co-authored the paper, told AFP at the IIT-Gandhinagar. These huge losses will only compound as India realises its grand solar ambitions, experts say.
📰 TRAPPIST-1 planets likely to have water
3 planets within habitable zone of the star
•The Earth-sized planets orbiting the ultracool TRAPPIST-1 dwarf star 40 light-years away may have substantial amounts of water and could be habitable, scientists say.
•An international team of astronomers used the NASA/ESA Hubble Space Telescope to estimate whether there might be water on the seven planets orbiting in the nearby TRAPPIST-1 planetary. The results suggest that the outer planets of the system might still harbour substantial amounts of water.
•This includes the three planets within the habitable zone of the star, lending further weight to the possibility that they may indeed be habitable. In February this year, astronomers had announced the discovery of seven Earth-sized planets orbiting the ultracool dwarf star TRAPPIST-1, 40 light-years away.
•Following up on the discovery, scientists used the Space Telescope Imaging Spectrograph (STIS) on the Hubble telescope to study the amount of ultraviolet radiation received by the individual planets of the system.
📰 Diplomacy must to solve conflicts: Xi
Modi arrives at BRICS summit amid expectations of bilateral talks post-Doklam
•Prime Minister Narendra Modi on Sunday arrived in the coastal city of Xiamen to participate in the ninth BRICS summit amid expectations that a dialogue with Chinese President Xi Jinping could set the tone for a new round of engagement between New Delhi and Beijing.
•Prime Minister Modi and President Xi are expected to hold a one-on-one meeting on Tuesday.
•With military tensions between India and China following the end of a tense face-off at Doklam still fresh in memory, Mr. Xi underscored that the BRICS grouping must uphold the value of diplomacy to resolve “hotspot issues”.
•Without specifying the Doklam crisis, Mr. Xi, speaking at a business forum, stressed that “peace and development” and not “conflict and confrontation” should be the security template of the five emerging countries. “Incessant conflicts in some parts of the world and hotspot issues are opposing challenges to world peace,” Mr. Xi observed. He added: “People around the world want peace and cooperation, not conflict or confrontation.”
•There was an air of expectation in Xiamen ahead of Mr. Modi’s arrival. Around 50 Indians gathered outside the Wyndham Hotel in the coastal city, chanting the Prime Minister’s name as he arrived on a rain-soaked evening.
•On Saturday, Mr. Modi had said he looked forward to a meeting with nine other countries, including BRICS partners, during an Emerging Markets and Developing Countries Dialogue, slated for September 5.
BRICS bank
•Prior to the meeting, Beijing focused on highlighting the maturing of the BRICS institutional architecture.
•On Friday, the New Development Bank (NDB) of the world’s five emerging economies has begun construction of a state-of-the-art headquarters in Shanghai, symbolising the rise of the grouping in revamping the world’s financial architecture.
•The NDB’s headquarters will be housed in a landmark building along Shanghai’s iconic Huangpu River, the traditional gateway of China’s overseas trade.
•During remarks after Friday’s groundbreaking ceremony, K.V. Kamath, NDB’s president underscored the bank’s focus on funding green energy products in tune with the vision of the bank’s founders.
De-linking Belt-Road
•Highly placed sources engaged in the preparations of the summit highlighted that India opposes any formal docking of China’s Belt and Road Initiative with the BRICS as part of an end-of summit document in Xiamen.
•Nevertheless, India would have no problems in supporting individual bankable projects that are not formally declared part of BRI.
•China’s proposal for establishing a BRICS+ arrangement where the host country of the summit is free to invite non-members is likely to be endorsed at Xiamen.
•Sources said considerable convergence has been achieved to form a BRICS rating agency.
•Besides, formation of a BRICS financial institute has also been widely discussed.
📰 Moving to the faster lane
GST will drive efficiencies in the country’s supply chain
•We are in times of outstanding significance and consequence for our nation. The start of the GST era is already upon us with the law coming into effect July 1 onwards. Just a few months earlier, sceptics were actively debating whether the roll-out would happen within the stated timeline, or if it would see administrative delays.
•However, here we are, in a post GST India and the implementation of ‘One Nation, One Tax, One Market’ reform has proven sceptics wrong. GST reform is certain to catalyse conformity in every part of the business chain and to expand the tax base in a transparent and efficient manner. There may be initial hiccups for a few months as organisations, large and small, across industry sectors are adapting to this fundamental change.
•Of course, these pain points will be short lived as companies are expected to settle in rapidly into the new GST era. The introduction of GST tax reforms will have the most far-reaching ramifications in the growth of the logistics sector in India.
Supply chain evolution
•From a macroeconomic perspective, a commonly used metric to assess global economies in terms of supply chain efficiency is the ‘logistics costs as a percentage of national GDP.’ This percentage for India is as high as 14% compared with 8% in developed nations. Digging deeper into the logistics costs percentage and breaking it down into components reveals the actual challenges. Compared with global economies, India has some of the cheapest transportation and warehousing costs. However, our inventory carrying costs and losses (from food wastage), is the highest in the world. The high inventory carrying costs are due to modest physical infrastructure, inadequacy of technology adoption and complicated tax structure. On the issue of complex taxation, recent actions related to the Goods & Service Tax (GST) denote a major legislative milestone in the long-term evolution of efficient logistics in India.
•There are facets of our industry where the GST is undeniably expected to impact. Interstate movement of goods has become easier with reduced procedures and restrictions at state borders. Dismantling of check posts at state borders on July 1 has remarkably reduced transit times by about 18% for organised players as average truck speeds have increased.
•In the long term, GST offers a unique opportunity for customer organisations to eliminate inherent inefficiencies in the location, movement and inventory holding of goods. GST is the trigger for the user industry to migrate from legacy supply chain models designed for optimising tax payouts, to more efficient models, though these are medium- to long-term plans. Tremendous opportunities hence arise for logistics players.
•The logistics industry supports goods movement for numerous end-user verticals, which requires specialised capabilities and product know how. This complex amalgamation of overall goods movement has placed the onus of preparedness post-GST on the logistics players. Moreover, state governments have begun issuing interim transit rules, requiring logistics players to quickly adapt for efficient movement of goods. While these were early hiccups, an anticipated disruption in the medium and long term is the proposed implementation of the e-way bill legislation.
•We believe that the initial draft e-Way bill Rules needed to recognise the process involved in time-sensitive multi-modal transportation. A desirable GST structure will support reduction of bottlenecks. So, we urge regulators to take cognisance of unique features of the logistics industry in formulating final rules.
•The GST is already proving to be a blessing for supply chain costs and lead time to market. At a broader level, numerous initiatives in the area of trade and industry promotion have helped place India favourably in an otherwise volatile global economy. Complemented by this encouraging environment, GST is expected to help unlock much-needed efficiencies in the way domestic businesses operate today. Shifting gears and moving on to a faster lane is a matter of time for the logistics industry.
📰 Investing in the ecosystem
If valued properly, natural capital can maximise the benefits of economic growth and development
•In April 2016, while inaugurating the third Asia ministerial conference on tiger conservation, Prime Minister Narendra Modi paid tribute to nature. Invoking the Buddha, he said, “The forest is a peculiar organism of unlimited kindness. It affords protection to all beings, offering shade even to the axe-man who destroys it.” He went on to emphasise the importance of reimagining the country’s natural ecosystems as its ‘natural capital’ and factoring in the economic, social, cultural and spiritual value of ecosystem services into the calculation of true economic growth and development.
Vast economic contribution
•Natural resources are a critical yet often ignored part of our country’s national infrastructure. Boasting 11% of the world’s floral and faunal species, India is one of the 17 most ecologically diverse countries. Blessed with every major ecosystem, these biomes directly contribute billions of dollars to the Indian economy, annually. The financial value of India’s forests, for example, which encompass economic services such as timber and fuel wood, and ecological services such as carbon sequestration, is estimated to be $1.7 trillion.
•With increasing economic activity, natural capital assets are on the decline, directly affecting the quality of life and potentially giving rise to future inefficiencies in the economy. ‘Earth Overshoot Day’, a figurative calendar date when humanity’s total annual resource consumption for the year overshoots the earth’s capacity to regenerate it, has advanced every year at an alarming rate. This year it was observed on August 2.
•As we approach the limits of natural capital stocks, we need to rethink the cascading effects that this would have on the economy, the environment and society. Scientists have identified nine earth system processes to have boundaries which mark the safe zones, beyond which there is a risk of ‘irreversible and abrupt environmental change’.
•Four of these boundaries have now been crossed — climate change, loss of biosphere integrity, land system change and altered biogeochemical cycles, such as phosphorus and nitrogen cycles. This means that human activity has already altered the balance of a few delicate equilibriums, the effects of which are reflected by changing weather patterns, accelerated extinction events for both flora and fauna, and global warming. This stresses the need for a comprehensive evaluation system that takes these undesirable side-effects of economic activities into account.
•As the biggest contributor to the economy, business needs to consider evaluating its impacts and dependencies as it would have a direct impact on capital assets and wealth. This translates to broadening valuation and risk management to include natural capital, as it is currently not reflected in market prices. In addition to shareholder wealth, holistic development calls for maximising returns from other key areas such as physical capital, human capital, natural capital and social capital.
•If valued properly, natural capital has the potential to optimise resources and thus maximise the net benefits of economic growth and development. There is often a chance of ignoring or undervaluing natural capital, effectively leading to projects with far higher negative externalities compared to the benefits. It is necessary that we are cognisant of the limitations of natural capital and its role as a primary support system for the economy.
•Valuing natural capital would require internalising externalities and taking into account the myriad economic and ecological products and services that natural ecosystems make possible. Undertaking natural capital valuation can offer businesses a number of opportunities.
Risk mitigation
•Natural capital risk is one of many risks that an organisation faces, and a thorough natural capital assessment can help integrate this risk into risk management committee deliberations, legal and reputational risk framework. Projects can be reassessed on the basis of their vulnerability to impacts and dependencies associated with the value chain. Companies can consider environmental stress tests for issues such as natural disasters, air pollution, resource scarcity and climate.
•Natural capital thinking can also create opportunities to innovate and adopt newer, more efficient technologies. One Californian fashion company demonstrated this by developing a unique waterless ozone technology to address water shortage challenges during a four-year-long drought. The company was able to reduce its water use and water bills by 50%, saving at least $1,300 per month.
•While findings from externality assessments are restricted to internal business decision-making, going forward, externality valuation can also contribute towards enhancing organisational transparency by informing stakeholders about the potential future risk to business and preparing proactive responses to these risks.
•Unlike the economic value of goods and services, the intangible nature of natural assets is mostly invisible and hence remains unaccounted for. While it may be difficult to put a price tag on nature, unchecked exploitation of scarce natural resources and an inadequate response to India’s unique climate challenges can be a very costly mistake. Making natural capital thinking the norm requires a strong policy push and the adoption of valuation frameworks such as the Natural Capital Coalition’s Natural Capital Protocol. Integrating natural capital assessment and valuation into our economic system is critical to usher in a truly sustainable future for India.
📰 Economy outlook still cloudy
An immediate stimulus is needed to regain the momentum to get India back to 8% growth
•The government’s move this past week to publish economic data for the April to June quarter of this year needs a look. The real growth of GDP, i.e. after removing the impact of inflation, was only 5.7%, much lower than expected. For the past six consecutive quarters, the growth rate has gone down steadily, from 9.2% at the end of the quarter ending March 2016, to 7.9%, 7.5%, 7.0%, 6.1% and now 5.7% at the end of the June quarter.
•This steady declining trend in the growth rate is all the more troublesome because the economy otherwise enjoys a rather conducive combination of macroeconomic parameters. Inflation has been moderate, and touched a low of 1.5% recently. Both trade and fiscal deficits are moderate and manageable. So they don’t eat up investible resources or precious foreign exchange. Even the interest rate has been cut repeatedly over the past year and a half. The inward rush of dollars is at a peak, both in financial markets (stocks and bonds) and as direct investment. No wonder the stock market index is at an all-time high. Even oil prices, the bane of the Indian economy, have been stable and comfortably low. Finally, the monsoon has been normal. So despite these favourable macro factors, we have not managed to convert them into a higher growth rate.
•As cautioned in the Economic Survey tabled recently in Parliament, it looks as if the growth rate will be below 7% this fiscal year. That would be a potential loss of 1% growth, which we can legitimately aspire for. In nominal terms, one percentage less of growth translates into a loss of Rs. 1.5 lakh crore of national income. This is a notional loss, or is rather what might have been. It also signifies millions of jobs not created.
•If you look closer at the numbers, you find that manufacturing growth at 1.2% is the lowest in the past five years. It’s the lowest since we switched to a new methodology (based on Gross Value Added). Some of this downward movement was caused supposedly by the suspension of manufacturing activity prior to the rollout of the Goods and Services Tax (GST) in July, and consequent de-stocking of inventory. But it is also corroborated by data from commercial banks. From April to August bank credit shrank by 1.8%, i.e. negative growth. This is the lowest it has been for at least 13 years. If you remove retail loans such as housing and other personal loans, credit to industry might actually be shrinking. This was flagged back in April also when the annual credit flow from banking for the previous fiscal year clocked a multi-decadal low. A State Bank of India report said that credit growth for the year ending last March was the lowest in 63 years!
A telling metric
•The GDP is measured in at least two different ways. The first is by looking at the production side while the second is by looking at the spending side. We look at the aggregate of all spending, whether on consumption, or by foreigners buying our exports, or on investments into new factories and projects. In addition we also have government spending. The growth in GDP can be traced to the growth and vigour of each of these components. Investment, which is between 30 and 35% of the total pie, needs to grow at least in double digits. Investment in future capacity creates GDP growth of the future. It needs to be led by the private sector. Currently, that component is barely growing at 1.5%. This is the single most telling metric. As a result, capital formation (the basis of future growth) is steadily declining for several years. Private sector investment has practically come to a standstill. Despite the push for ‘Make in India’, reforms for improving ‘Ease of Doing Business’, increased access to electricity, improvement in infrastructure and private investment are not picking up. This must become the big priority. Initiatives such as Housing For All, Smart Cities and Digital India give room for huge opportunities for private entrepreneurs. Of course the corporate sector and banks have been affected by the twin balance sheet squeeze wherein corporates are over-leveraged, and banks have mounting bad loans. Whether the new insolvency code and regulator and the Reserve Bank of India’s aggressive intervention will crack this puzzle remains to be seen.
Strengthening rupee
•Another significant challenge to the domestic industry is the ever-strengthening rupee. Since January the rupee is 7% stronger compared to the American dollar. It is stronger than its Asian peer currencies too, including China, the Philippines, Indonesia and Thailand. This directly hurts our export prospects. Since last October, our export growth has begun showing positive growth, after a long phase of negative growth for 18 months. But thanks to the strong rupee, this trend is weakening. Indeed our exports are barely up 12% since January, whereas imports are up more than 30%.
•More importantly, the strong rupee hurts the domestic industry since cheaper imports flood the country and eat into the market share of domestic players. The GST regime has given an extra advantage to importer traders since the countervailing duty that they now pay as GST can be offset against other taxes, a concession which was not available earlier. The big jump in imports is also captured in the June quarter of GDP data, which also show a worrying jump in gold imports, again thanks to a strong rupee. It’s no use saying that since India is a net importing country, our exchange rate should be stronger. If we remove gold imports, a large part of which is not for consumption but as store of value, then our trade deficit will be much smaller. Besides most of our other imports are oil or capital goods, both of which are price inelastic. The rupee needs to be weakened or else it will hurt domestic manufacturing even more.
Looking at demonetisation
•Finally, one must not forget the continuing adverse impact of demonetisation. The first half of the last fiscal year, that is the period prior to demonetisation, recorded a real growth of 7.7%. The present April to June quarter’s growth at 5.7% certainly includes the negative impact on the informal and rural economy. Investment and consumption spending which were postponed due to cash shortage might recover. But jobs that are lost are lost forever. Even the Economic Survey warns about the deflationary impact of low agricultural prices. The agriculture sector GDP shows nominal GDP growth to be lower than real GDP, which is very unusual. It means that farmers’ incomes will be depressed, and doubling of farm incomes in five years becomes that much more of a distant dream.
•Perhaps in the coming quarters we may see a rebound. That will crucially depend on a big pick-up in manufacturing and private investment spending. The big structural reforms of GST, the new insolvency code, the new monetary framework and Aadhaar linkage are measures which will show results in the medium to long term. What we need is an immediate stimulus to re-inject the momentum to get us to 8% growth.
📰 And then there were nine
Constitutions are enlarged and strengthened when courts act as brakes against majoritarian authoritarianism
•In early 2014, Fali Nariman said to me in the corridors of the Supreme Court, “A government with an absolute majority will see a conformist judiciary.” Shortly thereafter, India elected a government with an absolute majority in Parliament.
•Mr. Nariman prophesied based on past experiences. During the Emergency, the Supreme Court held in ADM Jabalpur that the fundamental right to life could be taken away or suspended. When asked by Justice H.R. Khanna if the right to life had been suspended during the Emergency, the then Attorney General, Niren De, had replied, “Even if life was taken away illegally, courts are helpless.” Four judges then succumbed to government power and failed to protect the citizen; Justice Khanna was the only dissenter.
•The shame of that surrender has often been invoked against every judge who has subsequently held office. Justices Y.V. Chandrachud and P.N. Bhagwati, who were part of that Bench, apologised for that judgment after demitting office. But, as Salman Rushdie wrote: “Shame is like everything else; live with it for long enough and it becomes part of the furniture.” Judicial pusillanimity in the face of an authoritarian government was not entirely unexpected.
Pattern of retreat
•The last three years have seen a rather conservative Supreme Court, which bears testimony to Mr. Nariman’s aphorism. The court chose to render ineffective challenges to demonetisation by referring the issue to a Constitution Bench. When lawyers beat up former JNU Students’ Union President Kanhaiya Kumar and journalists in the precincts of Patiala House, a mere stone’s throw away from the Supreme Court, the court chose to swallow its wrath. The court’s refusal to investigate the Birla-Sahara diaries, or to allow Harsh Mander’s plea to challenge Amit Shah’s discharge in a criminal case, all fit into this pattern of retreat. Possibly the sole exception was when the court struck down the National Judicial Appointments Commission Act.
•At a time when civil liberties seemed to be again imperilled, people wondered whether the court would firmly stand on the side of the citizens who claimed that their fundamental right to privacy was being taken away by the Aadhaar database.
•In response to the citizens’ challenge, the Supreme Court was told by the government that there existed no fundamental right to privacy. The government’s stand was based on M.P. Sharma (delivered by eight judges in 1954) and Kharak Singh (delivered by six judges in 1962). Both these decisions had seemingly held that there was no fundamental right to privacy in the Constitution. Later decisions of smaller Benches had, however, held and proceeded on the basis that there did exist such a right.
•At least two generations of Indians grew up assuming that a fundamental right to privacy existed. But because of diverse judicial opinions, the matter had to be considered by a Bench of at least nine judges. Assembling nine judges is not an easy task given the abnormal workload and administrative disruption it causes the court. It took nearly two years for a Bench to be constituted, by which time the administration tried to compulsorily impose Aadhaar on every sphere of human activity.
•The government took an extreme stand that no fundamental right to privacy existed and that the later judgments were wrongly decided. It was a submission of the sort characterised by Lord Atkin in his 1948 dissent in Liversidge v. Anderson , as an argument that “might have been addressed acceptably to the Court of King’s Bench in the time of Charles I.” The government lost the argument 9-0.
•The nine-judge Bench has unanimously held that the right to privacy is a fundamental right and clarified years of somewhat uncertain case law on the subject. It has unequivocally held that the doctrinal premise of M.P. Sharma and Kharak Singh stand invalidated. Nearly half of the 547-page judgment has been written by Justice D.Y. Chandrachud who has recognised that “the right to privacy is an element of human dignity”. Perhaps, even more crucially, Justice Chandrachud (joined by all the others on the Bench), has explicitly overruled the ADM Jabalpur judgment to which his father was a party. The judgment is also remarkable for its stinging criticism of the court’s view in Suresh Koushal , which had upheld the validity of Section 377 of the IPC. The challenge to Section 377 is pending before a different Bench.
What the judges held
•Justice J. Chelameswar writes a wonderful enunciation of the rationale behind the Constitution, its Preamble, and the fundamental rights chapter. He points out that provisions purportedly conferring power on the state are, in fact, limitations on the state’s power to infringe on the liberty of citizens. Crucially, after holding that the right to privacy is a fundamental right, he states that the right to privacy includes, among other things, freedom from intrusion into one’s home, the right to choice of food and dress of one’s choice, and the freedom to associate with the people one wants to.
•Justice S.A. Bobde holds that privacy is integral to the several fundamental rights recognised by the Constitution. He holds that in case of infringement, the state must satisfy the tests applicable to whichever one or more of the fundamental rights is/are affected by the interference. He also traces the right to privacy to ancient Indian texts including the Grihya Sutras , the Ramayana and the Arthashastra .
•Tracing the right to privacy to the Preamble and the fundamental rights chapter of the Constitution, Justice A.M. Sapre holds that the right to privacy is born with the human being and stays until death. He also holds that the unity and integrity of the nation can only be ensured when the dignity of every citizen is guaranteed through privacy.
•Justice S.K. Kaul’s opinion makes a strong case for the horizontal application of fundamental rights. He observes that “digital footprints and extensive data can be analysed computationally to reveal patterns, trends, and associations, especially relating to human behaviour and interactions and hence, is valuable information.” He expresses concern over the use of such data to “exercise control over us like the ‘big brother’ state exercised.”
•Justice Rohinton Nariman has rejected the Union’s argument that the right to privacy is not a fundamental right in a developing country where people do not have access to food, shelter and other resources. He holds that the right to privacy is available to the rich and the poor alike: “Fundamental rights, on the other hand, are contained in the Constitution so that there would be rights that the citizens of this country may enjoy despite the governments that they may elect. The recognition of such right in the fundamental rights chapter of the Constitution is only a recognition that such right exists notwithstanding the shifting sands of majority governments.”
•In a mature democracy, conformist judiciaries are not always guaranteed to governments with a popular majority. Constitutions are enlarged and strengthened when courts act as brakes against majoritarian authoritarianism. The larger security of the state lies in the protection of every individual’s freedoms. The judges of the Supreme Court, as sentinels on the qui vive, have stood tall and repelled yet another attack on citizens’ liberties. Fali Nariman and Y.V. Chandrachud’s anxieties and reverses of the Emergency era may just have been put to rest.
