📰 India rebalancing ties with Pak. to open path to Eurasia
New Delhi looks to SCO as promising framework in effort to build new bridges
•In a significant gesture, Prime Minister Narendra Modi and Pakistani President Mamnoon Hussain shook hands and exchanged pleasantries after a press conference by the leaders of the Shanghai Cooperation Organisation (SCO) here on Sunday.
•The conciliatory moment came at the end of the media briefing which was addressed by Chinese President Xi Jinping. China is the host and chair of the SCO.
•After engaging with China in Wuhan and Qingdao, India appeared to be rebalancing its ties with Pakistan in order to build bridges with Eurasia, within the framework of the eight-nation SCO.
•Mr. Modi and Mr. Hussain were among the leaders who attended the media briefing after the end of the 18th SCO summit where India and Pakistan participated as full-fledged members.
•The relations between the neighbours have been strained after an attack on an Army camp in Uri in Jammu and Kashmir by Pakistan-based terror organisations in 2016.
•Official sources on Sunday declined to single out Pakistan as a source of international terrorism.
•“Pakistan is not the only country responsible for terrorism,” an Indian official, who did not wish to be named, said. Asked if India’s position on Islamabad had shifted since the September summit in Xiamen, where Pakistan-based groups had been named in the joint BRICS statement, the official said that “the SCO format was very different from BRICS, of which India was a founding member.”
•A diplomatic source told The Hindu that India was exploring the possibility of connectivity to Central Asia through the Pakistan-Afghan corridor, under the SCO framework. “The SCO has been working on connectivity among its member countries. Now that India and Pakistan are both members, it provides New Delhi with a fresh opportunity to reach out to Central Asia across the Pakistani corridor,” the source said.
•An Indian official had earlier told The Hindu that as its full participation neared, the Indian side “seriously began to explore opportunities presented by New Delhi’s participation in the SCO.”
•“The result is an evolving policy towards Eurasia, with a Central Asia core.”
Opposes BRI
•Asserting India’s continued opposition to China’s ambitious Belt and Road Initiative, Mr. Modi said mega connectivity projects must respect the sovereignty and territorial integrity of the countries. However, New Delhi, he said, would support initiatives which ensure inclusivity. Referring to the “unfortunate” example of the effects of terrorism in Afghanistan, he hoped that the steps taken by its President Ashraf Ghani would be respected by all the players in the region.
•A diplomatic source told The Hindu that India was exploring the possibility of connectivity to Central Asia through the Pakistan-Afghan corridor, under the SCO framework. “The SCO has been working on connectivity among its member countries. Now that India and Pakistan are both members, it provides New Delhi with a fresh opportunity to reach out to Central Asia across the Pakistani corridor,” the source said.
•An Indian official had earlier told The Hindu that as its full participation neared, the Indian side “seriously began to explore opportunities presented by New Delhi’s participation in the SCO.” “The result is an evolving policy towards Eurasia, with a Central Asia core.”
•Ahead of the summit, Secretary General of the SCO Rashid Alimov had told the Tass news agency of Russia that SCO member states were working on an agreement on “creation of favourable conditions for international road transport.” Citing experts from the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP), he said it would cover more than 15,000 km of high-speed roads, including a 9000 km corridor that would open out the region’s landlocked countries to new economic opportunities.
•On Saturday, Foreign Secretary, Vijay Gokhale signalled India’s focus on connectivity with Central Asia by pointing out that India and Uzbekistan are set to route their trade through the Iranian port of Chabahar.
•Without referring to Pakistan, Prime Minister Modi, said during his address on Sunday to the SCO’s restricted plenary that connectivity with the neighbouring countries and SCO was India’s top priority.
📰 Ceasing fire: on truce in Afghanistan
The Taliban’s reciprocal truce against Afghan troops provides a glimmer of hope
•The Taliban’s announcement of a three-day ceasefire with Afghan government troops for Eid, two days after President Ashraf Ghani declared an unconditional week-long ceasefire, is a glimmer of hope for a breakthrough in the long-struggling peace process. This is the first time the Taliban has announced a ceasefire in the 17 years since it was removed from power in Kabul. Though it has not acknowledged the government ceasefire, the timing and the public declaration unmistakably point to the reciprocity of the decision. In the past, Mr. Ghani’s government had tried several times to reach out to the Taliban to find a breakthrough in the conflict. In 2015, when both sides were in an advanced stage of talks, it was revealed that the Taliban leader Mullah Omar had died years ago, upending the whole process. In February, Mr. Ghani had invited the Taliban to shun weapons and join peace talks in return for security assurances and passports to militants. But the group shunned the offer after days of uncertainty. The surprise ceasefire declaration during Ramzan is the latest gambit by Mr. Ghani. The war has long entered a stalemate, and something needs to give. The Taliban has made enormous military gains in recent years. It now controls vast swathes of rural, mountainous Afghanistan, while the government retains its grip on the more populated urban centres. The Taliban doesn’t seem to be in a position to capture power by overthrowing the government as long as the U.S. and its allies remain committed to the regime’s security. Equally, Afghan forces are unable to defeat or even check the Taliban’s momentum in rural areas.
•The fact that the government and the Taliban finally accepted a limited ceasefire suggests that the appetite for a political solution is now stronger. But a three-day Taliban ceasefire will not necessarily set the scene for a more productive engagement. The Taliban has said that the truce is applicable only to the “domestic opposition”, which means it will continue to target foreign troops. Also, the announcement came immediately after several attacks over 24 hours left at least 50 security personnel dead, which shows how precarious the situation is. Even for talks to be initiated, there are serious bottlenecks — the Taliban insists that foreign troops be withdrawn, while the government demands that the group accept the Afghan constitution. Despite these challenges, the Taliban’s positive response is a small gesture which could be used by both sides to build confidence before moving to the next step. The U.S. could put pressure on the Taliban through Pakistan to bring them to the table. If not, the war will carry on, with neither side gaining a decisive edge and leaving millions of Afghans in unending misery.
📰 Draw the line for Speakers and Governors
We need to amend the law and forge political consensus to avert subversion of democracy
•Speakers and Governors, acting independently of each other or in concert, can navigate the destiny of State governments. Governors also have the capacity to install governments and give them enough time to manufacture a majority. The Governor’s discretion allows them the necessary elbow room to invite either the leader of the single largest party or the leader of a quick-fix post-poll alliance, engineered through generosity in kind or cash, to form the government and give that leader enough time to iron out the creases to win a trust vote in the Assembly. This is because Speakers and Governors, even after their appointments, continue to be guided by their respective parties’ best interests. The result is that those holding these exalted constitutional offices enjoy little public trust or credibility. Constitutional values are made subservient to political outcomes.
•The provisions of the 10th Schedule of the Constitution, meant to root out defection, are now being misused to protect those who defect. When defections are engineered either to install a government or protect its longevity, the role of the Speaker is critical.
Case studies
•In Tamil Nadu, the Chief Minister owes his continuance in office to the Speaker’s indefensible machinations when dealing with pending proceedings under the 10th Schedule. A petition was presented against the present Deputy Chief Minister and 10 other MLAs of the All India Anna Dravida Munnetra Kazhagam in March 2017 for violating the party whip during the floor test held in February 2017. However, till date the Speaker has not even issued notice to the defecting MLAs. On the other hand, when on August 22, 2017, the T.T.V. Dinakaran group expressed no confidence in the Chief Minister and wrote to the Governor, the Speaker with unusual alacrity issued notices within two days for disqualification against 19 MLAs of the Dinakaran group, on a petition presented by the Chief Government Whip on the ground that their actions amounted to voluntarily giving up membership of the party. The Speaker disqualified 18 MLAs (one MLA shifted his loyalty to the Chief Minister) within three weeks of notices being issued to them. Interestingly, the order for disqualification was passed immediately after a petition was moved by the Dravida Munnetra Kazhagam seeking directions from the High Court for a floor test to be held before the next date of hearing in the said petition. Even after several weeks of the 19 MLAs of the Dinakaran group expressing no confidence in the government and the demands for a floor test, the Governor did not direct a floor test and allowed a minority government to continue to function.
•The Speaker is more loyal to his party and the government than to the Constitution. Both the inaction of the Speaker in one case and the disqualifications of the 18 MLAs in the other case were challenged in the High Court in writ proceedings. Unfortunately, the court has not acted with the judicial sagacity expected of it. In the case where the Speaker did not act, the court, relying on a Supreme Court order, refused to issue a mandamus to the Speaker to decide the disqualification petitions expeditiously. Since the power to issue such a mandamus to the Speaker is referred to a Constitution Bench by the Supreme Court, the court decided to await resolution of the issue by the Supreme Court. Speakers can, therefore, merrily refuse to decide such petitions. On the other hand, the court has not rendered judgment in the case challenging the disqualifications of the 18 MLAs of the Dinakaran group. In case the disqualifications are set aside, the government is likely to fall.
•In Andhra Pradesh, of the 67 legislators belonging to the YSR Congress Party, 21 have defected, making Chief Minister Chandrababu Naidu’s position unassailable. Some of the defectors are Cabinet Ministers. Despite pending petitions questioning the Speaker for not proceeding against the defectors, the Speaker has chosen not to act for obvious reasons. The High Court has also not allowed matters to precipitate stating that with 3.25 lakh pending cases, every matter cannot be heard as a fresh case.
•In Telangana, 12 of 15 Telugu Desam Party (TDP) MLAs defected to the Telangana Rashtra Samithi. Apparently, eight TDP MLAs had initially crossed over, after which four others followed suit. Despite a petition seeking disqualification, the status quo prevails. The balance three TDP MLAs have also crossed over. The Congress’s strength in the Assembly has gone down from 21 to 12 but none of the defectors stands disqualified, thanks to the Speaker.
•In the past too, partisan Speakers have extended the tenure of illegitimate cut-and-paste majorities. The Samajwadi Party did it by creeping defections from the Bahujan Samaj Party to reach the magic 1/3 figure under the unamended 10th Schedule in the early 2000s. That gave legitimacy to the defections. By the time the Supreme Court rendered its verdict challenging the validity of such defections, the term of the Assembly was over. Such situations have replicated themselves in other jurisdictions too.
Flouting guidelines
•Governors too have not come out with flying colours as they unabashedly protect the interests of the party that appointed them. That is why the recommendations of the Sarkaria Commission, and later the Punchhi Commission, had clear guidelines for Governors to act when inviting leaders to be sworn in after the electoral verdict is out. But time and again we see Governors flouting these guidelines. A challenge in courts takes time while the constitutional indiscretions of Governors play havoc with democracy. Verdicts after the event make good law to be flouted once again by future incumbent Governors. Recent events in Karnataka and earlier government installations in Goa, Manipur and Meghalaya are shining examples of political venality initiated by Governors’ actions. Earlier too, the Supreme Court castigated the Arunachal Pradesh Governor’s unconstitutional conduct. In Uttarakhand, the Governor’s recommendation for imposition of President’s Rule was quashed by the High Court.
•The past too has witnessed similar gubernatorial constitutional misdemeanours to be castigated later through court verdicts. Many court verdicts, including the decision of the Supreme Court in S.R. Bommai v. Union of India (1994), have lamented the illegal dismissal of State governments on the manipulated recommendations of Governors at the bidding of the Union government.
•We need to address this aberration. Radical amendment in the law is one way out, especially by amending the 10th Schedule qua the office of the Speaker and the fate of those who defect. We need amendments to the Constitution to circumscribe the Governor’s powers in areas of abuse of discretion. But most of all, we need political consensus to combat subversion of democracy. That is the toughest nut to crack.
📰 Government opens doors to lateral entry
Invites applicants at Joint Secretary-level posts.
•In an apparent bid to bring in expertise from the private sector individuals and infuse talent into the country’s bureaucracy, the BJP-led NDA government has invited “outstanding individuals” to join the government at the joint secretary level at the Centre.
•For starters, the Department of Personnel and Training (DoPT) has invited applications for 10 senior level positions in the Departments of Economic Affairs, Revenue, Commerce and Highways among others.
•The notification issued on Sunday by the DoPT says it is looking for 10 “outstanding individuals”, who are willing to contribute towards nation building.
•As per the notification, the eligibility criteria includes “Individuals working at comparable levels in Private Sector Companies, Consultancy Organisations, International/Multinational Organisations with a minimum of 15 years' experience” besides those working in central public sector undertakings, autonomous bodies, statutory organisations, research bodies and universities.
•According to the DopT, the recruitment will be on contract basis for three to five years. The intake will be made in 10 departments initially but will expand to other categories in the second phase.
•The advertisement from the DoPT says the government wants to fill in 10 joint secretary level positions, which are normally filled by career bureaucrats, who join the service after passing UPSC exam., which prepares merit list and allot the different cadres like IAS, IPS, IFS, IRS as per the marks obtained in the three tier exam.
•The post of joint secretary (JS) is crucial for policy making and implementation of government programmes and schemes, with most crucial decisions in ministries and departments taken by bureaucrats appointed JS.
•Though the idea of lateral entry of private individuals into the administrative framework has been under discussion for some years now, this is the first move towards implementing the idea, which is generating curious debate on the pros and cons of the move.
•The departments for which applicants are sought include Revenue, Financial Services, Economic Affairs, Commerce and Civil Aviation, Agriculture and Cooperation, Highways and Shipping and Environment and Climate Change.
•The notification specifies a minimum age of 40 years and minimum qualification of graduation from a recognised university or institute while higher qualification will be an added advantage.
📰 Shanghai Cooperation Organisation calls for global front to fight terror groups
The group of eight countries, including China, India, Pakistan and Russia, resolve to deepen cooperation to contain terrorism, extremism and separatism.
•The Shanghai Cooperation Organisation (SCO) has resolved to fight terrorism, separatism and extremism with a renewed vigour in the next three years, and called for a unified global counter-terrorism front under the coordination of the U.N.
•The grouping of eight countries, including China, India and Russia, came out with a declaration at the end of its two-day annual summit here on Sunday, with a resolve to deepen cooperation to contain terrorism, extremism and separatism.
•In his address at the summit, Prime Minister Narendra Modi spoke about challenges of terrorism and cited as example its effects in Afghanistan.
•“The member states strongly condemn all forms of terrorism and consider it necessary to make efforts to promote the creation of a unified global counter-terrorism front with the central coordinating role of the UN on the basis of international law, without politicisation or double standards,” the Qingdao declaration said.
•However, the declaration did not mention any terror group.
Peaceful settlement
•It said all the member countries were for reaching a consensus on adopting the UN Comprehensive Convention on International Terrorism, and emphasised the importance of comprehensive measures to reach a peaceful settlement of international and regional conflicts.
•The SCO leaders adopted a Joint Appeal to Youth, in which they asked them not to get influenced by extremist ideologies.
•The declaration said the SCO would work to stop the spread of terrorist ideology and eliminate factors and conditions that facilitated terrorism and extremism, acknowledging that there can be no justification to any act of terrorism or extremism.
•“The member states note that the interference in the domestic affairs of other states under the pretence of combating terrorism and extremism is unacceptable, as well as the use of terrorist, extremist and radical groups for one’s own purposes,” the declaration said.
•The SCO called for “effectively fulfilling” the requirements of specialised UN Security Council resolutions to counter any forms of financing of terrorism and providing material and technical support to it. In relation to the developments in West Asia, the SCO talked about the growing threat from foreign terrorists who returned to their countries or find shelter in third countries to continue their terrorist and extremist activity within the bloc.
•“The member states will work to improve the information exchange mechanisms regarding these people and their movements, and speed up procedures to extradite foreign terrorists in accordance with the national legislation of the SCO member states and boost international cooperation both on the political level and between the security services,” it said.
Three evils
•In the summit, the leaders also talked about the special role of the SCO Regional Anti-Terrorist Structure in the fight against “the three evils” — terrorism, extremism and separatism — to ensure regional security.
•It said a cooperation programme among the member countries to fight terrorism, separatism and extremism would be prioritised in the next three years.
•The SCO members reaffirmed their concern about the risk of weapons of mass destruction ending up in the hands of terrorist groups.
•“The leaders advocate the strengthening of the international legal framework to counter this threat and support the initiative to draft an international convention against chemical and biological terrorist attacks at the Conference on Disarmament,” the declaration said. It said the member states would strengthen their cooperation in combating the spread and propagation of terrorist ideology through the Internet.
•The SCO countries reaffirmed their commitment to improve the mechanism of cooperation within the bloc to combat illegal drug trafficking.
📰 Comprehensive screening for newborns in Kerala soon
To help in early identification and management of all deficits in infants at appropriate ages
•In a first in the country, Kerala will soon introduce a universal Comprehensive Newborn Screening (CNS) programme to assess newborns in public health facilities in the State for birth abnormalities and critical congenital illnesses within 48 hours of birth, to improve the quality of survival of these babies.
•The initiative will help in the early identification and management of all deficits in infants at appropriate ages so that the State’s burden of developmental delays and disabilities can be reduced in the long run.
•This will also help Kerala bring down its infant mortality rate.
•Kerala is currently screening all its newborns in public sector facilities for inherent metabolic disorders (blood test) and hearing deficit (OAE- Oto Acoustic Emissions test).
•Last year, a programme for the early detection and management of congenital heart diseases (Hridyam) was also initiated.
•However, all these programmes remain scattered and the Health Department at present does not have a foolproof mechanism to document or track those infants who needs continuous follow-up treatment.
•“When we are ensuring the survival of premature babies and babies with low birth weight, it is also important that we ensure the quality of their survival. Under CNS initiative, we plan to converge all newborn screening programmes under a single umbrella on a web-based platform, with a unified reporting system and link ups with District Early Intervention Centres (DEICs) so that every infant is tracked,”says M. Sreehari, State Nodal Officer (Child Health), National Health Mission.
•Thus newborns will be assessed under four domains, visible birth defects, functional deficits (hearing issues, congenital cataract or heart diseases), metabolic disorders and neuro developmental issues
•Protocols would be developed for CNS to be followed by all delivery points in public sector.
•Accordingly, all newborns will undergo a comprehensive clinical examination within the first 48 hours to detect any visible birth defects. Before the baby is discharged, all other proposed screening tests would also be performed.
App for documentation
•An android app has been developed for visible birth defect reporting and documentation at all delivery points, which will link every positive case of disability recorded, to the DEIC concerned as well as the field workers in the locality, who will monitor and follow-up the infant.
•The public health facilities are handling only about 1.35 lakh deliveries in the State out of the approximately five lakh deliveries in the State annually.
•The plan is to follow up infants born in the private sector utilising the Health Department’s field workers within the first 28 days of birth and to link them too into the web-based reporting system.
📰 Why no one is worried about MPC’s rate hike
The RBI’s inflation-targeting framework has reduced its flexibility to respond dynamically to other market-driven factors
•Not so long ago, bi-monthly policy meetings of the Monetary Policy Committee (MPC) of the Reserve Bank of India (RBI) entailed nail-biting suspense for market participants, who watched it for cues to the future direction of interest rates. Rate hike decisions by the MPC, that too after a long pause, inevitably roiled the stock and bond markets.
•But the latest meeting saw the tables being turned. When the MPC decided to peg up its repo rate by 25 basis points, signalling a reversal from its cheap money policies of the last three years, traders and investors were unperturbed. The S&P BSE Sensex ended the day with a 275-point gain. The 10-year government security saw its yield rise by a mild 9 basis points. Commentators even congratulated the MPC for putting through a ‘dovish’ hike.
•If you are wondering about this non-reaction, blame Mr. Market for it. The MPC’s recent rate decision has turned out be a non-event because India’s financial markets had already pre-empted it, many moons ago.
Market forces drive rates
•Consider bond markets first. While the MPC has been in pause mode for the last 10 months, the yield on the 10-year government bond, the benchmark for market interest rates, has shot up by 120 basis points from 6.60% to 7.83%.
•Several factors have propelled market interest rates in this period. The most important one is the demand-supply mismatch in government securities (g-secs). Normally, the g-sec supply unleashed by the Centre’s borrowings is promptly mopped up by banks to fulfil their 19.5% SLR (statutory liquidity ratio) requirement. But post-demonetisation, domestic banks were flush with funds and took to parking these surpluses in g-secs, resulting in them holding as much as 30% in SLR securities.
•With credit offtake picking up in recent few months, banks have gone slow with their g-sec purchases, to ensure that they had funds to lend. With the largest buyers in the market stepping back, excess g-sec supply has swamped the market, quelling prices and raising yields.
•Other market forces have aggravated the supply glut. With global interest rates firming up lately, foreign portfolio investors, key players in the bond market, have been in sell mode, withdrawing a massive $6.7 billion between April 1 and June 6, 2018, as per the MPC. Rising rates lead to capital losses for holders of bonds. Therefore, soaring yields have prompted other bond buyers — insurance firms, mutual funds and pension funds — to shy away from long-dated g-secs too.
•Looming inflation risks have impacted rates too. Aware that the monthly Consumer Price Index (CPI) reading is the biggest driver of MPC actions, market participants have been keeping a hawk eye on the inflation numbers. In its April policy review, the MPC had projected an inflation range of 4.7-5.1% for the first half and 4.4% for the second half of the financial year 2018-19. CPI inflation for April, reversing from a three-month decline, had already spiked to 4.58%, with the flare-up in global oil prices looking to push it up further. This has also prompted market players to pre-empt the MPC.
•With all the above factors propping up market interest rates by over 120 basis points in the past year, the mild 25-basis point hike by the MPC proved underwhelming.
•Sovereign bond rates set the floor for all other borrowers in the market. Therefore, this upward spiral in g-sec yields in the last 10 months has been faithfully mirrored by corporate bonds and commercial paper.
•As a result, India Inc has already seen a 100-120 basis point escalation in its borrowing costs from the market in the last 10 months. That is why the stock market wasn’t fazed by the repo rate hike either.
Banks act too
•Indian banks in the past were faithful followers of MPC actions on interest rates. If the MPC stayed on hold, they dutifully followed suit. If it raised them, they would peg up their deposit and lending rates.
•But this time around, even banks have not waited for the MPC’s say-so to hike their rates. With deposit flows slowing down and credit offtake picking up, banks have had to hike their retail and bulk deposit rates by 25-50 basis points over the last six months to woo new depositors.
•Given that the RBI requires banks to peg their lending rates to their incremental cost of funds, higher deposit rates have automatically fed into higher lending rates. The SBI’s MCLR (marginal cost of funds based lending rate) for one-year loans bottomed out at 7.95% in November 2017, but is now at 8.25%.
Losing grip
•This trend of debt market participants not looking to the MPC to decide on interest rates is not a very welcome development for policymakers. If the markets regularly pre-empt MPC moves, its policy rates lose their benchmark status and become a less effective tool to rein in inflation, stimulate growth or stabilise an unruly exchange rate.
•But what can the MPC do to wrest back the controls from Mr. Market? For one, it can improve its forecasting skills. Given that its rate moves are predicated on the CPI, if the MPC proves better than the market at reading the tea leaves on oil prices and emerging inflation, its rate actions can pre-empt the market, instead of following it.
•More importantly, it is worth questioning if the MPC should go back to a multiple-indicator approach to decide on its rate actions. Earlier, the RBI used incoming data on a whole host of factors — inflation, GDP numbers, deficit indicators, foreign flows — as inputs to its rate-setting decisions, so as to balance inflation, growth and stability objectives. As the RBI would assign different weights to these factors at different times, the markets were often kept guessing about RBI actions.
•But after the new inflation-targeting framework adopted by the RBI and the Centre in 2015, the MPC has the single-point agenda of containing CPI inflation at 4-6%. It has thus taken to focussing mainly on the CPI print for its rate decisions. This has reduced its flexibility to respond dynamically to the other market-driven factors, such as demand from banks or foreign flows. Restoring this flexibility may give the MPC a fighting chance at staying ahead of the market.
📰 Open data, open government
The time is now ripe for the government to create a data-driven governance architecture
•The “audacity of hope” for a country of a billion aspirations is yet to bear result. The new wave of a technological revolution will not be from pure data or access to consumer behaviour. The application of data and their assimilation with solving social problems, enabling better governance and powering elected governments to serve their citizens better is ushering in a new revolution. When Artificial Intelligence is coupled with open data, a real paradigm shift begins. With choice and information-sharing now redefining consumer behaviour, every company is looking to embrace or at least look like it is embracing the new paradigm of data-driven innovation.
Privacy and consent
•“Datafication” of businesses has also brought to the fore the criticality of developing data management, storage and privacy laws. The European Union with its General Data Protection Regulation has been a front-runner and other countries, including India, have also adopted a collaborative model to develop privacy laws, which includes deliberations with creators of data (the consumer) and users (corporates).
•While concerns around privacy and consent have been well articulated, open government data is a silent but powerful movement unfolding globally. Over 100 governments have already signed a charter to proactively share data collected by various government departments, for public consumption. Fostering collaboration, enabling creative innovations and collective problem-solving are giving accountability and transparency a shot in the arm.
Underutilised asset
•Open government data means publishing information collected by the government in its entirety, such as government budgets, spending records, health-care measures, climate records, and farming and agricultural produce statistics. If the advent of data-driven business models was a watershed moment, this is the real pot of gold.
•Unfortunately, the potential of this national asset is being grossly underutilised. We need to act on it without further delay for three basic reasons. One, such data collected by governments are for citizen welfare; hence they have an implicit right to benefit from the information. Two, data sets such as government budget usage, welfare schemes and subsidies increase transparency and thereby build trust. Third, and most important, it paves the way to develop technology-led innovations which can unlock massive economic value, thereby benefitting even the poorest of poor, the under-represented and the marginalised.
•For instance, availability of data on yearly produce of crops, soil data health cards and meteorological data sets can help companies develop customised crop insurance solutions with specific risk-based pricing. Data points around progress in literacy rates, demographic data and density of educators can help develop customised solutions for villages. Similarly, information on availability of facilities in public hospitals, current occupancy rates, hospital and demographic data can pave the way for curated health-care applications. The cases are endless and technology can have a multiplier effect.
•Research by PwC in Australia estimated that open data can add an additional 1.5% to the country’s GDP. In the Indian context, this could conservatively translate to about $22 billion. A case in point here is Transport for London, a public utility, which has digitised and shared only about 80 data sets, yet this has led to the creation of multiple technology applications for city transport and maps, unlocking estimated economic benefits and savings for the city to the tune of £130 million.
•The power of open data has hardly been lost on the Indian government. The Ministry of Electronics and Information Technology has made some laudable efforts, including a policy around open data. India currently houses more than 1.6 lakh data resources and has published over 4,015 application programme interfaces (APIs) from across 100-plus departments. As a result, India’s global ranking by the Global Open Data Barometer has jumped.
•This is a good start but not enough. A closer analysis of the Open Data project shows good intent but sporadic execution. Hence, while India publishes data points, very little of it is getting utilised by data consumers, scientists and corporates. Naturally, the socio-economic impact is limited.
Five-point framework
•I have proposed a 5C framework to address the current underlying execution gaps of the Open Data project, and believe it can help India achieve its stated objectives to double farmers’ incomes by 2022 and provide universal health coverage and micro loans to micro, small and medium enterprises among others.
•The first step is to ensure completeness of data stacks opened for use either through machine-readable formats or direct APIs. Completeness would imply a data set. For example, soil data cards will have data on all relevant aspects as well as current emerging technologies such as Blockchain and the Internet of Things to provide the opportunity to automate data collection.
•Comprehensiveness of a data stack or various data sets is essential. For example, a comprehensive agri-data set would have digitised data sets on soil data, rainfall, crop production as well as market rates. Currently, data sets shared in India are somewhat disjointed and not comprehensive.
•Clustering of relevant data sets and APIs would be the next step. This would mean combining data sets which can lead to the creation of applications such as farm insurance from weather, soil and crop cycle/sale data. Therefore, technology developers have a road map of “innovations in focus” for national development.
•The fourth step is building anchor cases or use-cases to encourage data usage. A case in point is Aadhaar/identity data which has seen exponential growth (post identification in e-KYC). Taking the Aadhaar case further, its API has led to the development of market applications, an Aadhaar-enabled payment system, and direct benefit transfers among others which are clearly pushing the “financial inclusion” drive.
•The final step would be setting up a comprehensive governance framework which includes an open data council with cross-sector representation to monitor, regulate and build usage after proportionate oversight.
•The time is now ripe for the government to create a data-driven governance architecture by building digital trust in the economy and its intent.
📰 No easy solutions: on tackling NPAs
A ‘bad bank’ is not a magic bullet; tackling NPAs requires other structural reforms as well
•Union Minister Piyush Goyal, currently in charge of the Finance Ministry, has announced the formation of a committee to assess the idea of special asset reconstruction companies or asset management companies to take over bad loans from banks. The bankers’ panel has been given two weeks to revert. The idea of a ‘bad bank’ is not new. Chief Economic Adviser Arvind Subramanian had suggested the creation of a Public Sector Asset Rehabilitation Agency (PARA) to deal with what he described as India’s “festering twin balance sheet problem”. By this he meant over-leveraged corporates unable to service debt or invest afresh, and banks hit by non-performing assets (NPAs) cagey about fresh lending. This overhang hurts new investments and continues to dent India’s medium-term growth and job creation prospects. A professionally-run PARA, or the so-called ‘bad bank’, could assume custody of the largest and most difficult-to-resolve NPAs from lenders’ balance sheets. This would allow banks to focus on extending fresh credit and supporting the pick-up in growth. More importantly, a bad bank taking tough decisions on borrowers-gone-bad, it was argued, could free bankers from the risks entailed in large loan write-downs.
•But there are good reasons why the Finance Ministry left the bad bank idea in the cold over the past year and a half – among them the fact that the new entity would need a lot of capital support, just as banks do. Some of this was envisaged as coming from the Reserve Bank of India through a complicated transaction. After a long debate within government, under Finance Minister Arun Jaitley, it was noted that setting up a new institution would be very time-consuming and there would be challenges on its ownership structure as well as the pricing of bad loans taken over from banks. In any case, going by the experience of private asset reconstruction companies, a PARA by itself would not be able to deploy dramatically different tools to extract better value from underlying assets and would, at best, amount to window-dressing bank books to attract investors. As former RBI Governor Raghuram Rajan had pointed out, a government-owned bad bank could still face scrutiny from the Comptroller and Auditor General and the Central Vigilance Commissioner. For now, the government is clearly under pressure to demonstrate fresh intent to investors as India Inc believes bank loans are likely to remain sluggish for the next two-three years. Whether or not the knots in the bad bank idea are sorted out, the government should focus on other reforms as well. One, amend the Prevention of Corruption Act to shield bankers and officers from investigative witch-hunts. Two, back bankers to take demonstrable action against wilful defaulters. And three, take a hard look at what ails the Insolvency and Bankruptcy Code.
📰 ‘IT genie, make a printer out of thin air,’ What are IT services firms doing different now from a decade earlier?
What technologies are ruling the roost?
•There is a look of earnestness about Immanuel Kingsley when he asks, “When your product is several tonnes in weight and many feet in breadth and height, how do you simplify your demo, presales and sales processes?”
•Mr. Kingsley, VP and head of innovation at IT services firm Hexaware Technologies, ushers you into his tech lab to demonstrate his work in an area that is still evolving. His team members, who look young enough to have been recent students at university, help you wear a pair of enormous goggles that shuts out the external world. And bingo! Where there was bare floor a moment earlier, you see a large printing machine. You can now power it up and down, open and shut compartments, fiddle around with the printer’s ink combinations… without touching the machine in reality.
‘Most exciting project’
•“This is the most exciting project we are doing right now,” said R. Srikrishna, CEO, Hexaware. The IT service provider’s client, which makes large-scale printers, is using Hexaware’s virtual reality service to cut costs in presales. “My client’s customers want a demo of these large machines at their own site before deciding to purchase, because they want to evaluate how it would fit in with their line of work. They want their people to touch and feel, and use it. We have built a virtual reality [VR] solution for this to make it feel realistic.”
•Capital required even in demo equipment for such products runs into millions of dollars, Mr. Srikrishna said. “A solution like ours quickens the process of a demo; the cost of shipment plummets ... just moving a real machine from inside the room to the exit gate of the factory can cost you ₹50,000 for the physical equipment. With our VR solution, you can do a demo tomorrow.”
•The company is also mixing social media with virtual reality technologies to offer benefit. “A client participates in three trade shows per quarter to showcase their products,” said Mr. Kingsley. “The constraint is the client cannot ship every product to every show. With our VR solution, our client’s prospective customer at the trade show walks into a virtual demo centre, wears a headset, and based on his requirements, gets the right solution or product.” What if the company representative at the show does not know answers to specific queries? “The expert based at headquarters, using his laptop or smart phone with a camera, can virtually enter the chat room and answer queries. He is said to have been ‘teleported’ into the chat room.” Reminds you of Harry Potter?
•The third aspect of innovation for Hexaware is around voice. Its healthcare app on the Amazon Alexa appstore can help diagnose a user’s illness based on your answers to questions that it asks. Using artificial intelligence, it can change the structure of questions to help diagnosis. In addition, it uses natural language processing capability and voice recognition. “We leverage the technology that Amazon offers,” said Mr. Kingsley.
•Ten years ago, the most exciting projects were ERP implementation, or a five-year application outsourcing contract which consolidated groups of apps or a five-year infrastructure outsourcing contract, Mr.. Srikrishna said. “At the time, the ‘early’ projects were say, an e-commerce platform, which were typically lost in the client organisation, as they were too small and the people on it were not really on the radar of top management in client firms.”
•Today, the form and shape of each had changed, he said. “ERP implementation is a cloud or hybrid implementation. No one does big monolithic projects. These have got splintered.” Application outsourcing still happens, but the initial phase of consolidation is all done and now automation is the focus. “Infrastructure management has seen the maximum change among all, because of the underlying tech. There, the rate of change of moving to the cloud is the maximum.”
‘Consulting, not skills’
•“Earlier, engagement was limited to providing skills,” said Jagdish Mitra, chief strategy and marketing officer, Tech Mahindra. “Now, the client wants to know how the tech partner can help him decide, ‘what products and services I should launch’… If a client wants an SME vendor to use the client’s network better, he would seek a solution around IoT, data centre and cloud centre.”
•Decision support systems or resource planning systems earlier alerted users to status of materials available, he said. “Now, predictive analytics tells you when and where to sell which of your products, and accordingly what components to source at what time. You take action only when the system tells you to.”
Market research changes
•Data analytics is playing a major role in decision-making using data outside the enterprise, too. “Social listening has changed a lot,” said Pramad Jandhyala, co-founder of data analytics firm LatentView Analytics. “Ten years ago, it was about text mining and capturing sentiment.” Now, she said, the emphasis was more business-centric than on sentiment analysis.
•“We are working with a food company to identify new flavours to launch. We listened in on social media conversations around which restaurants people ate at, their recommendations etc. Now companies want to see what they can learn from what people are saying rather than merely understanding if they are saying good or bad things about a product.”
•This has changed the entire market research process, according to her. “Earlier, a food company would go to a panel of chefs and focus groups to see what product to launch. In that model, people didn't tell you anything unless you asked a question. Now, you don’t ask any questions, only study trends.” Her firm has helped a client decide in favour of flavours from Peru, Thailand, Korea and Nepal. “A decade ago, Latin American flavours were the rage.” Without data analysis, catching on quickly to changing tastes may not have been possible.
•“A decade ago, companies were only tracking the number of followers on social media, the channels through which they came…” Now, LatentView is working with a technology major to help understand what its competition is doing. “Some 100,000 live users have agreed to put some kind of software on their machines so that every click of theirs is recorded.
•“We help analyse this data to see how competing products are changing and how users deploy those products.” Computing speed, infrastructure needed to look through this data, the visualisation and the automation tools we have today were not available ten years ago.
•The good news for the industry is that newer technologies, which saw experimenting with at the edges of the industry, are now becoming mainstream. In a recent interview, the MD of India’s largest IT services firm TCS, Rajesh Gopinathan, said adoption of digital technology by enterprises was moving from the periphery to the core. “[This] is a big shift,” he said.
•Malcolm Frank, executive vice president, strategy and marketing, Cognizant, echoed the thought.
‘Intelligence, at scale’
•The IT services firm has traditionally referred to its digital solutions as the SMAC stack — spanning the Social, Mobile, Analytics and Cloud space. “SMAC is a given today. About 2-3 years ago, it might still have been a buzzword, but no more,” he said.
•“Client pilots using digital technologies have been happening at the department level, and especially for departments such as marketing, which are customer facing.”
•And success with such pilots is encouraging enterprises to take new technologies to their core. Asked how he would describe the change in the past decade, he said, “In 2007, we were building systems of record. Today, we are building systems of intelligence at a much bigger scale.”
•Along with scale, clients are using new technologies to make processes more efficient. “Changes have been happening at the process layer. How clients rethink their processes [is key],” said Mr. Frank.
•End customers of IT client organisations are demanding experience that is intuitive and simple. “Two key pillars to a client’s business model is customer experience and change the business [model]. If you have to go digital, you need those two.”
•“And, for IT services companies to help clients with the above two, you have to show up with industry expertise. Blockbuster was a great company but had no supporting business model in its fight against Netflix.” The ideal now is to have ‘Amazon’s price and Google’s speed’. “Your business model has to enable price and speed,” said Mr. Frank.
•The pace of change is also making clients look to vendors for suggestions. “A client recently told me that people don’t any more have the capability to define what they want,” said Mr. Srikrishna of Hexaware. “They can look at something and say ‘yes’ or ‘no’, but to define from scratch as to what they want is not possible any more.”
•These changes are also influencing skills that IT firms seek and the way services are delivered. “The biggest focus of the technology customer today is on being able to deliver [quickly] to their end customers,” said Bhanumurthy B. M., president and COO, Wipro. “Second, the problems our clients are trying to solve are multi-dimensional, especially with the focus around how well they can deliver a fantastic experience for their end consumers.”
•IT vendors are helping clients change both their methods of working, and the manner in which they get value from their data, he said.
•“So the ability to look at the customer holistically, rather than as functions or departments in the organisation, is key. You need to have people capable of delivering good domain consulting for our customers. We see this as the first entry point in a client organisation.”
•Delivery of services is also undergoing change, placing pressure on the nature of skills required. IT providers are now betting on agile methodologies. (Agile allows for continuous iteration of software development and testing throughout the lifecycle of the project. Both development and testing activities are concurrent unlike in the traditional, ‘waterfall’ model.) As a concept, agile was meant for small teams that are co-located in the same area. But now, firms such as Wipro and TCS have talked about adopting agile ‘at scale’, a significant change for the industry.
•“The Indian project manager (PM) is used to telling the customer, ‘Sir. tell me what you want’,” said Mr. Srikrishna. “He can’t lead the customer to help them figure out what they might want. It’s a structural issue – you have half a million people in your organisation. The mark of leadership has been people management. So you have structures over structures of people who are good at managing the HR aspects of [other] people.”
•Agile concepts do not require or recognise a project manager profile. “What is the PM’s role in an agile team? If at all there is an equivalent role, it is the Scrum Master (SM) who actually has to be a developer in the team. It is a self-governing team. Everyone knows what to do. He might have additional duties such as facilitation, but he is possibly the best coder. But, no PM knows to code, because they may consider it to be ‘beneath’ them.”
📰 Insolvency Code: what’s new
Homebuyers as financial creditors
•In a major change, homebuyers would now be treated as financial creditors or, in other words, on par with banks. The amendment enables homebuyers (either as an individual or group) to initiate insolvency proceedings against errant builders. Homebuyers shall have the right to be represented in the committee of creditors (CoC), which takes the key decision regarding revival of the company or its liquidation.
Definition of a related party in relation to an individual
•The amendment now defines related party in relation to an individual running the firm and they would be barred from bidding for the firm under the resolution process.
•Prior to the amendment, related party was defined only with reference to a company facing insolvency.
Changes in voting share of committee of CoC
•The amendment has changed the voting share required in CoC meetings. For extending the insolvency process beyond 180 days till 270 days and for appointment of the resolution professional (who oversees the process), now a voting share of 66% is sufficient, compared with earlier requirement of 75%. Unless a specific approval is required in the Code, all other decisions of the CoC can be taken with 51% voting share against the earlier norm of 75%.
•Withdrawal from the insolvency process is permitted with the approval of 90% of voting share of the CoC (the norms for which would be prescribed).
•If a financial creditor is a related party
•If a financial creditor (banks and other financial institution) or his authorised representative is a related party to the company facing insolvency, it shall not have any participation or voting during a meeting of the CoC.
•However, exemption is provided in case the financial creditor has become a related party on account of conversion or substitution of debt to equity shares or instruments convertible into equity shares prior to the date of commencement of insolvency proceedings.
•Moratorium not to be available to the guarantors of a company
•For a company under insolvency, a moratorium period is provided during which no parallel proceedings are allowed. Whether such moratorium is available to guarantors of the company was a subject of debate. Now the amendment has said that the moratorium is not available to persons who provided guarantee for the loans availed by the corporate debtor.
Filing of application by the company
•A company can file an insolvency application, provided it seeks shareholders’ approval and at least three-fourth of the stakeholders approve the proposal.
Operational creditor to confirm dues only if available
•Operational creditors (suppliers of the company) are required to furnish a certificate from the financial institution managing their accounts regarding pending dues from the company, only if it is available. Prior to the amendment, it was mandatory.
•Tenure of an insolvency resolution professional
•Under the insolvency process, an interim resolution professional (IRP) is appointed first and then, a resolution professional. As per the amendment, the tenure of the IRP would continue till the appointment of the resolution professional (RP), compared with the earlier 30-day fixed tenure. Also, for the appointment of the RP, a written consent from the professional is required in a specified format.
📰 Challenges may dampen glee over Deocha Pachami
‘New approach, tech tie-ups needed’
•Several challenges would need to be tackled by the West Bengal government, which is currently in a euphoric mood after getting sole rights to mine the Deocha Pachami block in Birbhum district. It holds immense potential but needs some new thinking.
•The State government had initially been nominated for this allocation along with six other States.
•However, that model did not work and there was little progress on the project. Persistent follow-up by the State paved the way for the West Bengal government to be declared the sole allottee.
•Chief Minister Mamata Banerjee has said the project would generate one lakh jobs and bring significant investments. But the project faces serious and unique challenges.
•Deocha Pachami, with an inferred or indicated reserve of more than 2 billion tonnes, is among the biggest coal mines in the world. But it may also turn out to be the toughest to mine, due to the depth at which the deposits are believed to be lying (200-300 metres) and beneath layers of basalt rocks.
•India does not have the technology to mine this deposit. “Huge exploration is needed as the reserves need to be proven,” said Rana Som, non-executive chairman, Bengal Birbhum Coal Company Ltd., the special purpose vehicle for this project, which has been allocated to the West Bengal Power Development Corporation Ltd. as its captive source. A sizeable quantum of land too may have to be acquired to develop this mine.
•Coal-sector insiders felt this project cannot be implemented in a conservative, piece-meal manner of setting up a small mine just to mark its commencement.
•The mine-capacity has to be large to ensure viability, since the initial investment including the cost of overburden removal till the coal seam is reached could be staggering. New mining methods and international expertise would be needed to develop the mine optimally.
•Former Coal India Chairman Partha Sarathi Bhattacharyya said that at a time when the utility of coal as a fossil fuel is under threat, against dipping prices of renewable energy, the chances of using the Deoacha Pachami coal to feed power plants was limited, as West Bengal is a power-surplus State and export options are limited, by grid availability as well as competitive tariff.
‘Alternative use’
•“One would need to think of alternative use for this coal,” he said, adding this may need either widening the scope of business of WBPDCL beyond power generation or creating a differ institutional mechanism to develop the block.
•An international mine development operator, in consortium with an exploration agency, may have to be selected to carry out mining. For conversion of coal-to-oil or chemicals, established large plants operating in Sasole in South Africa, or in China, could be partners in a technology tie up.
•Sasole mines 40-45 mtpa coal annually and converts it to produce a substantial amount of oil besides a large variety of chemicals. India depends on imports for such products.
