📰 U.S. backs sale of fighters to India
Congress told of strategic importance
•The Trump administration has told the U.S. Congress that it “strongly supports” the sale of F-18 and F-16 fighter planes to India, built by American companies Boeing and Lockheed Martin respectively. Both companies have offered to assemble these planes in India, should New Delhi decide to buy them.
•President Donald Trump is in principle against companies relocating facilities abroad and a written submission to a Congressional subcommittee by Alice Wells, acting Assistant Secretary of State for South and Central Asian Affairs, clarified the administration’s position on the issue.
Enthusiastic backing
•U.S. lawmakers and bureaucrats, in general, have been enthusiastic supporters of proposals to sell these fighters to India, and are now presenting them as deals that could reduce America’s trade deficit with India and create more jobs in America than they relocate — issues that are on top of Mr. Trump’s agenda.
‘Will reduce deficit’
•Ms. Wells mentioned the strategic significance — “defence cooperation with India is so vital to U.S. interests because we need India to be a net security provider in the Indo-Pacific” — but also added that America needs to do more to reduce the deficit. She said exports to India support over 2,60,000 U.S. jobs “across all 50 States.”
•F-16 and Gripen, built by Swedish company Saab, are competing for the proposed single engine fighter acquisition for the IAF. French Rafale and Boeing’s F/A-18 are competing for the contract for the Navy’s twin engine fleet for its aircraft carriers. Lockheed Martin and Tata have formed a joint venture to make F-16, while Saab announced a JV with the Adani group last week for Gripen.
📰 NASA captures images of strong solar flares
Among the most intense this sun cycle
•Two high-intensity solar flares were emitted on Wednesday, the second of which was the most intense recorded since the start of this sun cycle in December 2008, NASA said.
•These radiation flares, which can disrupt communications satellites, GPS and power grids by reaching the upper earth atmosphere, were detected and captured by the US Space Agency’s Solar Dynamics Observatory.
Disrupts radio signals
•According to the Space Weather Prediction Center (SWPC), these so-called category X eruptions disrupted high-frequency radio communications for one hour on the earth’s side facing the sun and low-frequency communications used in navigation. The two eruptions occurred in an active region of the sun where an eruption of average intensity occurred on September 4, scientists said.
•The current cycle of the sun, which began in December 2008, saw the intensity of solar activity decline sharply, opening the way to the “solar minimum”.
Eleven-year period
•Solar cycles last on average eleven years.
•At the end of the active phase, these eruptions become increasingly rare but still can be powerful.
•Solar storms result from an accumulation of magnetic energy in some places.
•These jets of ionized matter are projected — at high speed into and beyond the crown of the sun —hundreds of thousands of kilometres outward.
📰 Debt, project delays worry Bhutan
What concerns us is that the partnership seems to be going backwards, says senior official
•While the Doklam standoff brought a spotlight on India-Bhutan ties, other issues like hydropower project construction need greater focus, said senior Bhutanese experts and officials, flagging concerns during a two-day conference here.
•“Hydropower projects are critical for the Bhutanese economy, and are at the core of Bhutan’s plans for self-reliance ever since the first five-year plans in 1961,” Dasho Karma Ura, president of the Centre for Bhutan Studies and Gross National Happiness (GNH) Research, told The Hindu at the India-Bhutan Dialogue that was attended by delegates from Bhutan and India.
•“It is necessary that the issues that have come up due to debt and delay are addressed at the earliest,” he added.
•In particular, officials involved in the “hydropower committee” set up by the Bhutanese government in May this year spoke about the emerging challenges from the growing debt burden Bhutan carries due to delays in the major hydropower projects.
•As of July 2017, Bhutan’s debt to India for the three major ongoing projects: Mangdechhu, Punatsangchhu 1 and 2 is approximately 12,300 crore which accounts for 77% of the country’s total debt, and is 87% of its GDP.
•While the cost of the 720 MW Mangdechhu project has nearly doubled in the past two years, both Punatsangchhu 1 and 2, each of 1200 MW capacity have trebled in cost and been delayed more than five years over the original completion schedule.
•“What concerns us is that the partnership seems to be going backwards. A decade ago we shifted from doing one project at a time to doing many projects together, in order to reach the goal of 10,000 MW in hydropower by 2020. Maybe we just weren’t ready and should rethink it,” said a senior official of the committee.
•Another issue, the officials said, has been the fact that India is now a power-surplus country, while demand growth has been slower than expected. Added to this is the government’s push for other renewable energies like wind and solar power.
•Meanwhile the interest repayments on projects, that are being financed by India as 30% grant and 70% loan at 10% annual interest, are piling up.
Tough task
•MEA sources told The Hindu that the government is looking at the proposals of the hydropower committee, but accepted that it would be difficult to meet many of them, given India’s own power sector needs to compete in the same area.
•Among the proposals sent from Thimphu was to undertake new projects only after the current ones being executed by the NHPC are commissioned, to move from “run of the river” projects now favoured to only a few major “reservoir” projects, and to undertake only those that come with inter-governmental guarantees rather than joint ventures between Indian and Bhutanese entities.
•“While the [Doklam situation] showed that government to government relations can be strengthened very quickly, it is important that hydropower, which is a key issue for the Bhutanese people also be looked at more quickly,” Mr. Ura said.
📰 State laws repugnant to IBC are void: SC
‘Entrenched managements not allowed to continue if they cannot pay their debts’
•Provisions of State enactments which hinder the country’s new bankruptcy law, the Insolvency and Bankruptcy Code (IBC), meant to protect the interests of shareholders, creditors and workmen against entrenched managements unable to dig their way out of their debts, will be declared void, the Supreme Court held.
•In a judgment heralding the IBC as an effective legal framework aimed at improving ‘Ease of Doing Business’, a Bench of Justices Rohinton Nariman and Sanjay Kishan Kaul held that the erstwhile management of a company cannot represent it in court once insolvency resolution process has been admitted in the National Company Law Tribunal and the management transferred to an insolvency professional.
•“Entrenched managements are no longer allowed to continue in management if they cannot pay their debts,” the court held in its 88-page judgment.
•The judgment dismissed an appeal by Innoventive Industries, represented by senior advocate A.M. Singhvi and advocate Shikhil Suri, against insolvency proceedings under the IBC by lender ICICI Bank.
•The company invoked the Maharashtra Relief Undertakings (Special Provisions Act) of 1958 against the insolvency resolution process under Section 7 of the IBC.
‘Parliament statute’
•Mr. Singhvi said the 1958 Act allowed temporary suspension of any debt recovery against the company and allowed the State to run the company as a measure to mitigate the hardship caused to workers who may be thrown out of employment by its closure.
•In January, the National Company Law Tribunal had already dismissed the plea, saying the Code, a parliamentary statute, would prevail against the Maharashtra Act. The appellate tribunal, National Company Law Appellate Tribunal, had held that Innoventive Industries’ management cannot derive any advantage from the Maharashtra Act to stall proceedings under the Code.
•Appearing for the bank, senior advocate Harish Salve argued that the “old notion of a sick management which cannot pay its financial debts continuing nevertheless in the management seat has been debunked by the Code”.
•He added that the erstwhile management of the company cannot represent its interests once the management was handed over to the insolvency professional.
📰 Must restore banks’ health in months, if not weeks: RBI
‘Lenders should pursue defaulters, not wait for directions’
•Reserve Bank of India’s deputy governor Viral Acharya said a feasible plan was quickly needed to address the massive recapitalisation requirements of public sector banks. The central bank has been pushing to restore the health of these banks in order to facilitate loan offtake — seen as essential in reviving economic growth.
•He expressed surprise that banks were not raising capital at a time when plenty of liquidity was chasing stock markets.
‘Go raise capital’
•“What are the bank chairmen waiting for? The elusive improvement in market-to-book which will happen only with a better capital structure and could get impaired by further growth shocks to the economy in the meantime?” asked Mr. Acharya. He was delivering a speech on the ‘The Unfinished Agenda: Restoring Public Sector Bank Health in India.’ He said banks would need a powerful plan aimed at ‘swift’ revival.
•“The Indradhanush was a good plan, but to end the Indian story differently, we need a much more powerful plan – a Sudarshan Chakra — aimed at swiftly, within months if not weeks, restoring public sector bank health, with the current ownership structure or otherwise,” he said.
•In 2014, the government announced the Indradhanush plan — a blueprint to revive public sector banks, which included capital infusion in these banks over a four-year period.
•Mr. Acharya raised the question as to whether bringing down government’s stake in these banks to 52% was sufficient to restore health, as some of them had incurred huge losses.
•Commenting on the Insolvency and Bankruptcy Code under the new resolution framework, he said banks should not wait for directions to pursue bankruptcy proceedings in the case of defaulting clients.
•RBI has twice directed banks to start insolvency and bankruptcy proceedings against defaulting firms.
•The reason behind mandating a higher provision for accounts brought under the IBC was to “increase banks’ provision coverage ratio”.
📰 All that Gauri Lankesh stood for
Her murder is an attempt to kill an idea
•What killed Gauri Lankesh? This is not the same question as “who killed Gauri Lankesh?” This is deeper and a more rewarding question. In any case, this is the only question we can meaningfully answer in the public domain.
•A murder involves four categories of culpability: those who carry out assassination, those who conspire, those who encourage or benefit from it, and those who are involved in its acquiescence. We must leave the first two for the police to determine. Instead of rushing to conclusions about the assassins and conspirators, let us focus on the larger context that encouraged and acquiesced to, indeed celebrated, her murder.
•This is particularly relevant in the case of Gauri. She was not just a person. She represented an idea. It is reasonable to assume that her assassination is an attempt to shut down that idea. It is also meant to convey a signal to everyone else to shut up, or else. Since these signals are in the public domain, we can and must decode these in order to understand the context that led to her assassination.
•A word about the ‘whodunnit’. So far, we know only a few relevant facts. Gauri Lankesh was a journalist, a fearless editor of an extraordinary paper calledGauri Lankesh Patrike. She had been carrying out a crusade against the Hindutva politics of the Bharatiya Janata Party and its allies through the paper she edited, and organisations like Komu Souharda Vedike. Last year she lost a defamation suit by a BJP leader; her appeal against it was pending. She had received several threats from Sangh Parivar affiliates. As far as we know, there was no personal enmity angle to this murder.
The killing of ideas
•This information is good to draw a reasonable inference: she was killed because of her ideas and her determination to speak her mind. But this information is not adequate to reach a definite conclusion about the identity of the killers and the conspirators. It is only fair that the criminal investigation must not be carried out in TV studios. This is not to say that we must trust the police. Indeed, police investigations in similar cases, whether under the Congress or the BJP regime, have been perfunctory. Still we cannot pre-empt the investigation, even if we scrutinise it later.
•While we do not have evidence of who planned her murder, we have lots of evidence concerning those who celebrated and justified her murder. Social media was abuzz with comments that mocked, abused and blamed a woman who had been killed a few hours ago. Most of them were well-established BJP trolls. Some of them were followed by none other than the Prime Minister. In this context, it was vital for the ruling party to dissociate itself from this campaign. But except Ravi Shankar Prasad, no senior BJP leader spoke unequivocally against such comments. The PM is yet to ‘unfollow’ any of these trolls.
•We also know the eerie pattern that was replicated in three murders prior to hers. The murder of rationalist Narendra Dabholkar in 2013, that of Govind Pansare, another campaigner against superstition, in 2015, and academic M.M. Kalburgi in 2015 followed identical patterns. In each of these cases, unidentified killers shot down intellectual crusaders inimical to the ideology of the Sangh Parivar. These were not murders to avenge any other act of violence. Nor were these attempts to eliminate a political rival. These were aimed at silencing an idea. Let us not forget that these three ‘rationalists’ were not promoting some idiosyncratic idea: cultivation of ‘scientific temper’ is very much our constitutional ideal. They were killed by an ideology inimical to our Constitution. Prima facie, Gauri’s killing fits into this pattern.
From a rooted tradition
•Her ideas were, of course, not the same as the other three. Everyone, supporter as well as detractor, has assumed that she was a ‘leftist’. There has been some loose talk of her being Naxalite. This is not true. Gauri represented an illustrious intellectual tradition of Karnataka that does not fit into any of these categories. As the editor ofGauri Lankesh Patrike, she carried forward the legacy of her father P. Lankesh, the founder ofLankesh Patrikeand one of the three iconic writers of the ‘Navya’ school of Kannada literature. Inspired by Ram Manohar Lohia, these writers from Shimoga — P. Lankesh, Poornachandra Tejaswi and U.R. Ananthamurthy — combined a strident anti-caste stance with the socialist brand of egalitarian politics and culturally rooted secularism. They mentored the next generation of Kannada intellectuals like Devanur Mahadeva, Siddalingaiah and D.R. Nagaraj whose writings have inspired ‘progressive’ activists in Karnataka.
•This socialist tradition is ‘left’ in the sense of being pro-people and egalitarian, but very different from the communist ‘left’ in terms of its cultural orientation. This tradition is rooted in Kannada egalitarian thought that goes back to Basavanna. Although on some issues Gauri was closer to the orthodox left than her father, her secularism was a continuity of this tradition. Like her father, she chose to write in Kannada and in a popular idiom. This form of culturally rooted secularism is in line with the secularism of our freedom struggle. The Sangh Parivar fears this most, as this form of secularism cannot be brushed aside as deracinated, westernised intellectualism.
•Her very name carried a challenge to what is now being presented as Hindutva. This is the time of the year to welcome the arrival of ‘Gauri’ — also known as Durga, Parvathi, Bhavani or Shakti — in many regions of the country. ‘Lankesh’ is, of course, Ravana, the ultimate devotee of Lord Shiva. Her name invokes the tradition of Ravana worship among Shaivites, a practice that upsets the project of homogenous Hindutva.
•Gauri lived a life of ideas. It is unsurprising that she was killed by an ideology — one that stands in opposition to our Constitution, denies the values of our freedom struggle, fears our intellectual traditions and is threatened by the multiple strands of Hinduism. She was killed by the ruling ideology of our times.
📰 Social revolution in a JAM
Equality in the digital space is different from empowering Indians in the bricks-and-mortar world
•In a post on Facebook made on the third anniversary of the Pradhan Mantri Jan Dhan Yojana (PMJDY) last week, the Finance Minister reportedly said: “Just as GST (goods and services tax) created one tax, one market, one India, the PMJDY and the JAM revolution can link all Indians into one common financial, economic, and digital space. No Indian will be outside the mainstream.” The suggestion of equality as a criterion of governance that is conveyed by this is to be welcomed. JAM, deriving from Jan Dhan, Aadhaar and Mobile, combines bank accounts for the poor, who barely had the money to deposit in them, direct transfer of benefits into these accounts and the facility of making financial payments through mobile phones. Aadhaar is the pivot here, allowing the government to ensure that benefits reach the poor and enabling them to make payments through ordinary mobile phones. For furthering the latter the government has devised the Bharat Interface for Money (BHIM) app. The Minister spoke of these developments as a “social revolution”, perhaps alluding to the feature that the poor are the most direct beneficiaries.
Beyond bank accounts
•There is no doubt that eliminating leakage in the transfer of welfare payments and enabling the poor to have bank accounts are worthy objectives, and when achieved should be considered significant. Indeed, it is damning that a largely nationalised banking sector had done very little to extend banking services to the poor till recently, and credit goes to this government that it made this a priority. But claims of having achieved inclusion by operationalising the JAM trinity appear somewhat exaggerated. A financial inclusion, in the sense of everyone having a bank account and access to reliable and free electronic payments system, is not the same as economic inclusion. At its most basic level, inclusion from the economic point of view would entail equal access to opportunities for earning a livelihood. This in turn implies employment opportunities. As the demand for labour is a derived demand, in the sense that it exists only when there is demand for goods and services, a significant element in ensuring inclusion is to maintain, directly or indirectly, the level of demand in the economy. Next, even when the demand for labour exists, potential workers must be endowed with the capabilities to take advantage of the opportunity offered. The potential of the JAM trinity for bringing about either of these conditions for economic inclusion is limited. This is so because JAM functions in the digital space while much of our life is lived in the brick and mortar world. In the latter space we have seen very little improvement, not just recently but since economic reforms were launched over 25 years ago.
•The economic reforms of 1991 were largely in the nature of liberalisation of the policy regime, meant to make it easier for firms to produce while at the same time exposing them to international competition with a view to increasing efficiency in the economy. What a strategy based exclusively on liberalisation overlooks is that an ecosystem of production is constituted not only by the laws and regulations determining the ease of doing business, but also the access that firms have to producer services ranging from water supply to waste management. These producer services require large capital outlay, often deterring private firms. When private entities do provide these producers services they tend to be expensive, deterring their off-take. It is for this reason that globally they are generally provided by governments. In India the case for public provision of producer services, and there is no reason to provide them free of charge, is particularly high as the overwhelming part of employment is in the form of self-employment. These units are scraping the barrel as it is. Even when producer units employ workers they are poorly capitalised, making it almost impossible for them to generate producer services themselves. Thus the public provision of producer services should be an essential part of public policy. Empowerment in the brick and mortar space would require public infrastructure on a gigantic scale compared to what we have now.
Focus on capabilities
•Moving from production to being, JAM cannot even claim equalisation, leave alone empowerment. Amartya Sen effectively settled a longstanding debate on the question of the metric to be used to gauge equality when he proposed that it should be human capabilities. These are the endowments that allow individuals to undertake functionings they value. We would have achieved a social revolution when we have equipped all individuals with the essential capabilities. This happens when a society has, at a minimum, universal health and education infrastructure accessible to all.
•We have in recent weeks witnessed governance failure on a major scale in many parts of the country. In U.P.’s Gorakhpur district children have died due to systemic failure that meant that a district’s only hospital is not able to maintain a steady supply of oxygen. Later a heavy downpour in Mumbai led to a complete shutdown, widespread loss of livelihood and some of life. And most recently, in Delhi’s suburb of Ghazipur a garbage mountain came crashing down, again causing death and disruption. But we would need to turn to Bengaluru to recognise the limits to information technology in solving problems of living. Lakes that are toxic when they haven’t been gobbled up by the real estate mafia, traffic snarls and inadequate sewerage make life less than easy in this IT hub aspiring to play first cousin to Silicon Valley.
•Given the extraordinary challenges faced by India in the provision of public infrastructure ranging from health and education to drainage and sewerage, the claim made for JAM is breathtaking in its simplicity. JAM ensures seamless transfer of welfare payments and facilitates the making payments in real time. Once again, these are worthy objectives, but fall well short of the social revolution the honourable minister claims for them. Our social revolution will arrive when all Indians are empowered through an equality of capabilities. This would require committing resources to building the requisite social and physical infrastructure and investing time to govern its functioning. JAM may have achieved equality in the digital space but is far from having empowered Indians in spheres in which they are severely deprived at present, an empowerment that they clearly value. The government has leveraged IT smartly in operationalising JAM but the possibility of replicating this to transform the ecosystem of production for firms and the ecosystem of living for individuals is limited. The widespread disempowerment faced by the people of this country predates the arrival of Narendra Modi, but his government appears to give false comfort through its claims.
Slip-sliding economy
•In a market economy one of the markers of what the public think of the government’s policies is the response of private investors. Private investment in India has declined steadily over the past few years. Overall growth had however been maintained, partly through the demand generating impact of public investment. But now even growth appears to be stalling. The latest GDP figures from the Central Statistics Office show growth in the first quarter of the current financial year to be lower than the average for 2016-17. Data actually point to a steadily slowing economy with growth having been successively lower in the past five quarters. There appears to be a mismatch between the government’s own assessment of its policies and the private sector’s valuation of their worth. The jubilation over JAM is an instance of this.
📰 Demonetisation: now a proven failure?
If extinguishing black money was the intention of the move, not even 0.01% of that has been achieved
•Demonetisation as a means of tackling the black economy was destined to fail. It was carried out on the incorrect premise that black money means cash. It was thought that if cash was squeezed out, the black economy would be eliminated. But cash is only one component of black wealth: about 1% of it. It has now been confirmed that 98.8% of demonetised currency has come back to the Reserve Bank of India. Further, of the Rs. 16,000 crore that is still out, most of it is accounted for. In brief, not even 0.01% of black money has been extinguished.
•Black money is a result of black income generation. This is produced by various means which are not affected by the one-shot squeezing out of cash. Any black cash squeezed out by demonetisation would then quickly get regenerated. So, there is little impact of demonetisation on the black economy, on either wealth or on incomes.
Changing goalposts
•The government is highly embarrassed, and to cover it up, it has again changed the goalpost. It now argues that it is good that black money has been deposited in the banks because those depositing it can now be caught. But the government had tried to prevent people from depositing demonetised currency by changing rules during the 50-day period. It is now fighting hard in the Supreme Court against giving one more chance to deposit the demonetised notes that may have been left with the old and the infirm.
•The government changed the goalpost earlier in November 2016 when it suggested that the real aim of demonetisation was a cashless society. Now it says that idle money has come into the system, the cash-to-GDP ratio will decline, the tax base will expand, and so on. But none of these required demonetisation and could and should have been implemented independently. Further, anticipating the failure of demonetisation in 2016 itself, the government started saying that demonetisation is only one of the many steps to tackle the black economy.
•The government’s argument that cash coming back to the banks will enable it to catch the generators of black income, and there will be formalisation of the economy, does not hold. Much of the cash in the system is held by the tens of millions of businesses as working capital and by the more than 25 crore households that need it for their day-to-day transactions.
Those who bore the brunt
•So, large deposits by businesses do not automatically become black. The Income Tax department has to prove that the sums deposited resulted from generation of black income. But it does not have the resources for dealing with lakhs of tax payers. According to the Finance Minister, big data analytics would track black money holders who have deposited cash in their bank accounts. During the Income Declaration Scheme in 2016, the same was said. Nothing came of it and demonetisation was announced.
•The big failure of demonetisation is that it was carried out without preparation and caused big losses to the unorganised sector. This has not been factored into the recent data on growth rate, so the loss to the economy would be in lakhs of crores of rupees. Farmers, traders and the youth are all agitating.
•The black economy needs to be tackled, but demonetisation is not the way. The brunt of this move has been borne by those who never had any black money. The note shortage is slowly waning and the long-term economic and social effects are becoming evident.
