📰 What next after #MeToo?
It is important to use this moment to craft a new, more effective framework for due process
•Sometimes to upend entrenched power structures, a revolution is required. Naming and shaming powerful men in the #MeToo campaign is in many ways a revolutionary act. The truth about most was known, spoken in whispers, but not to their face. But now that omerta has been broken by some intrepid women, there’s a palpable sense of power and possibility.
Moment of change
•Revolutions are by definition anarchic, as they are aimed against those who make and enforce the rules. So it has been with #MeToo. Men are named, sometimes anonymously, and the naming itself requires punitive action to be taken against them. There isn’t really any room for discussion on context or degree of culpability. Some have raised questions about due process, and the response has been, somewhat reasonably, that due process has failed. And it is true, arguing for due process when due process has failed feels a bit like batting for status quo. So let it be said, #MeToo despite its limitations is unreservedly a good development.
•However, the question is, what next? The #MeToo movement is more than just outing powerful men, it is about shifting the balance of power between men and women, transferring the punitive aspects — shame, denial of work opportunities — from the victim to the perpetrator. It is about ending impunity embedded in our social construct by shaping new social mores. This is and has to be a collective effort, and it is important for the #MeToo movement to have these discussions. There are two broad questions which require discussion. First, what should constitute sexual harassment? Second, when and how should the state and other institutional mechanisms come into play?
•As personal accounts have tumbled out on social media, it has become obvious that the definition of “sexual harassment” is very fluid. In support, many have taken the line that sexual harassment is whatever makes the woman uncomfortable, and it’s for her to decide. This is a completely justifiable response when it comes to personal interactions, and when the response is personal by, say, ticking someone off. However, when we bring collective pressure to bear against anyone for punitive effect, we have a responsibility to collectively define behaviour which will invite punitive action. Moreover, while public opinion has reduced culpability to a binary concept, it is important to define graduated norms of unacceptable behaviour, including associated levels of criminalisation and punitive consequences. Along with the manner of establishing culpability, this is the sum and substance of due process.
•There is no ambiguity that any form of coercion is wrong and should engender exemplary punitive consequences. But what about social awkwardness? What about behavioural conflicts arising out of differential expectations in societies in transition? Staring, telling risqué jokes, crude propositioning can be as much about social awkwardness as abuse of power. It’s not that such behaviour is not inappropriate or wrong, but we should pause and think about the consequences of bringing in state or institutional power to penalise transitional behaviours in personal interactions.
•India as a society is transitioning rapidly, and people with widely different understandings of acceptable social mores coexist without having had time to acclimatise. In a study on sexual harassment by the National Students’ Union of India (NSUI) in Delhi University, we found that one in four girls reported sexual harassment. In this, by far most instances related to staring, crude comments, etc. One conversation with two very articulate and urbane female students went quickly from young men staring and making women uncomfortable to an anti-reservation tirade for allowing university spaces to be allegedly overtaken by crude lower-caste rural men. As a society we can frame this situation as gender/caste/class antagonism or of managing inevitable conflicts in transitional societies. The institutional response in the former conception will be regulatory and punitive, the latter will be more about defining mores of acceptable behaviour and education.
Concerns about state power
•There are legitimate concerns with bringing in state power to penalise transitional behaviours. First, the response is often too heavy-handed, and second, it makes social reform and gender relations too antagonistic. Section 354 of the Indian Penal Code defines sexual harassment as “physical contact, advances of unwelcome and explicit sexual overtures” but also “making sexually coloured remarks”. It is true that conviction rates under legal processes are extremely low but surely even conceptually, we don’t want to send people to jail for telling crude jokes.
•Institutionally too, it is important to expand the discourse to talk about the measures required to create more gender-neutral spaces while retaining room for graduated levels of punishment. Censure, delayed or reduced work opportunities, suspension and firing are all forms of regulating inappropriate behaviour and we should be wary of a reductive public discourse where the institutional response is a binary of firing/not firing, with the latter interpreted as sanction and/or encouragement.
•Impunity exists in a social construct. Till now, due process did not work because the social context was skewed in favour of marauding men. However, the long battle waged by generations of strong women before and the courage of many women today together is forcing the social context to change. It is important to use this moment to institutionalise and craft a new, more effective due process. That should be #MeToo’s lasting legacy.
📰 India to join Afghan peace talks today
•In a significant departure from India’s stand on engaging the Taliban, the government announced it would participate at a “non-official” level. Two former senior diplomats will attend talks on the Afghanistan peace process to be held in Russia on Friday.
•The talks, known as the “Moscow format”, will include a “high-level” delegation from the Taliban as well as a delegation of Afghanistan’s “High Peace Council”, along with representatives of 12 countries, and will mark the first time an Indian delegation has been present at the table with the Taliban representatives based in Doha.
📰 Airports privatisation grounded yet again
Questions over drafting of concession agreement hold up the process
•Uncertainty gripped privatisation of six major airports, including those of Chennai and Kolkata, as the bidding has been deferred again, till the middle of March.
•This is the third time the process has been postponed midway, putting a question mark over the exercise, which started in November last.
•Sources in the Civil Aviation Ministry said the process was hit by questions over the drafting of the concession agreement, which would have to be signed by the selected private company, the Airports Authority of India (AAI) and the Ministry.
•The due date for the Request for Qualification had earlier been pushed from January-end to February 17 for the Chennai, Kolkata, Lucknow and Guwahati airports, and to February 12 for Jaipur and Ahmedabad. These dates have been pushed further to March 17. Now, it seems the bids will be opened only after the general election as the model code of conduct is likely to come into force by early March.
•In a major policy shift in September last, the government invited applications from the private sector. But in November, the process was postponed by two months.
•Several foreign infrastructure companies such as IL&FS Transportation Networks, Essar Projects India, Cochin International Ltd., Essel Infraprojects Ltd., GVK, Fraport, Saudi Arabia, GMR Airports Ltd., Sahara Group and Turkish firm Celebi Habacilik Holding AS have evinced interest in the project.
•The modernisation of the Kolkata and Chennai airports had cost the AAI Rs. 2,325 crore and Rs. 2,015 crore. The move has come under severe criticism from several quarters, including AAI employees, trade unions, political parties, airlines and the International Air Transport Association.
📰 Independence and accountability: on RBI
As the RBI’s autonomy is debated, it needs to revisit its exclusive focus on inflation-targeting
•Far from achieving a desirable ‘monetary-fiscal coordination’ in India today, the Reserve Bank of India (RBI) and the government give the impression that they are not on the same page even as far as an understanding of their roles is concerned. This may be seen in statements by them on websites, Twitter and in the old-fashioned mode of the public lecture given by the Finance Minister and a Deputy Governor of the RBI, respectively. The RBI suggests that its independence is being violated while the government rationalises its intervention in terms of its concern for the economy. How do we make sense of these positions?
Defining autonomy
•Even at the time when the idea of central bank independence began to germinate some two decades ago, this was understood to mean a ‘functional’ independence. That is, the bank would be unconstrained by the government in its functioning, which includes both the instruments it uses and how it uses them. However, its autonomy was not to extend to ‘goal’ independence. What the goals of the central bank should be were to be chosen by the government without reference to the bank. The main issue here was whether the bank should focus on inflation alone or also on the level of employment. Within a decade of this debate, it had been conceded that the focus would be exclusively on the former, and monetary policy came to be identified with ‘inflation targeting’.
•Two points may be mentioned in this context. First, the discourse was solely among interlocutors from Western democracies, ensuring the issues were those related to their economies. Second, even as the major central banks of the world shifted to inflation targeting, in yet another example of American exceptionalism, the U.S. did not revise the goals of the Federal Reserve. It was to continue focus on maximising employment while keeping prices stable, a sensible recognition of a possible trade-off between these goals. In India where for close to a quarter century political parties of all hues appear to suggest ‘what is good for America is the best for India’, this has been missed. In 2015 the RBI was by law, in line with a “modern monetary policy”, expected to target inflation. It was to remain the banking regulator though.
•Once we are aware of how central bank independence was first sought to be understood and of the agreement between the RBI and the Government of India in 2015, it is not difficult to separate the grain from the husk in the public spat between the two playing out in the media. The issues of contention happen to be the corrective action to be taken for stressed banks, the prudential norms to be adopted by financial institutions, the easing of liquidity and the sharing of the surplus generated by the RBI. Here, barring the last, all others are in the RBI’s bailiwick so to speak. On the other hand, on the sharing of the surplus, it is understood that the Government of India legally is the owner of the surplus generated by the country’s public institutions. Even under this architecture, though, all care must be taken to ensure that the central bank’s reserves are of a level commensurate with the extent of the financial sector and the potential degree of systemic risk from its malfunctioning, which can vary. So, we can’t go just by formulae here.
•Apart from the issue of sharing the surplus, the RBI should be left alone by the government to decide on the right course of action. This derives not so much from a notion of central bank independence as it does from the point of view of a credible governance policy. The Government of India would have chosen the Governor, participated in the choice of his deputies and had a say in the appointment of even the independent members of the central board of the RBI. In addition, the board has representatives of the government on it. It should now be left to this body to decide on the precise corrective action for banks with high NPAs, the desirable state of liquidity and the prudential norms to be observed by banks. The RBI is the banking regulator after all, and for the government to attempt to direct it would constitute micro-management.
Stability of the economy
•Stepping away from legal niceties, there is reason to believe that some of the actions being sought to be imposed on the RBI today could jeopardise the stability of the economy. While acting as the lender of last resort can be stabilising, under no circumstances would it be advisable to lower prudential norms in the presence of stressed banks. The government’s concern for the health of the medium and small enterprises is well-founded. After all, they were among the most affected sections following the demonetisation of 2016. If, in the spirit of contriteness as it were, the government wants to reach out to them, the right course would be to provide interest rate subvention, rather than to force the RBI to tweak its lending norms. There is a severe lack of judgment in loan melas promising online sanction in less than an hour. There is the suggestion in this of the political business cycle, a government trying to nudge the economy prior to an election. The resistance of the RBI top brass to this desperate action is understandable.
•Whatever may be the misfeasance of the government in its recent dealings with the RBI, however, it would yet be acceptable to review its own performance in the sphere in which it has an untrammelled independence, namely monetary policy. Under this arrangement it has control over the interest rate. Over 2013-2018 there has been a 5 percentage point swing in the real interest rate in India, moving from a negative to a positive level, making it among the highest in the world, much higher than that of China. This is clearly the consequence of an exclusive policy focus on inflation from even before inflation targeting was formally adopted by Parliament in India. It may well have contributed to slow industrial and export growth, due to a real appreciation of the rupee, and a rise in NPAs even after their existence had been recognised. If this is the monetary policy that central bank independence brings with it, we might just be a little sceptical of the value of the independence itself.
Enabling job creation
•There is a certain populism inherent in privileging inflation control to justify extraordinarily high interest rates. While it would be bad economics to tolerate high inflation, the absence of inflation by itself only benefits those in employment, it does not assure jobs to the unemployed. Thus a monetary policy that ignores the impact of its actions on unemployment is not credible. Interestingly, the government and the RBI have always been on the same page as far as inflation targeting is concerned. The populist message that inflation erodes the income of the poor conceals the possibility that in the implementation such a policy could hold back job creation by restricting investment. The rising current account deficit, the slow growth of employment and the disappointing performance of manufacturing, the sector most closely affected by high interest rates, should prompt us to review how monetary policy is conducted in India. In the past, the RBI had a ‘multiple indicators approach’ which paid attention to inflation, growth and the current account. This may not have borne the precision conveyed by ‘inflation targeting’ but it did answer to Keynes’s dictum, “It is better to be vaguely right than to be precisely wrong.”
📰 Political economics: credit stimulus for MSMEs
The credit stimulus for MSMEs could have some unintended consequences
•In the run-up to the general election next year, the Centre has announced an important credit stimulus package for micro, small, and medium enterprises (MSMEs). Among the many sops doled out under the new scheme, Prime Minister Narendra Modi has promised the sanction of business loans of up to ₹1 crore within a time frame of 59 minutes, in order to encourage faster credit flow to MSMEs. These companies will also receive an interest subvention of 2% under the scheme and support from public sector units, which will now be mandated to make at least 25% of their overall purchases from MSMEs. It is worth noting that MSMEs, which account for 30% of India’s gross domestic product (GDP), were hit hard by the twin shocks of demonetisation and the implementation of the Goods and Services Tax over the last couple of years. Further, in the aftermath of the IL&FS crisis, which has affected the amount of lending done by non-banking financial companies to the MSME sector, the government would be looking at the scheme as a tool to improve credit flow and the pace of job creation in the economy. A study by officials of the Reserve Bank of India in August 2018, however, showed that growth in credit flow to MSMEs had recovered to pre-demonetisation levels by the April-June quarter, just before the liquidity crisis.
•The scheme has signs of state-led economic planning written all over it. The biggest risk of a credit stimulus is the misallocation of productive economic resources. Pumping extra credit into MSMEs now may well lead to a temporary boom and enable a feel-good atmosphere in the run-up to elections, but it can lead to a painful bust when the stimulus ends some day. Another unintended consequence is the likely deterioration in credit standards as financial institutions are pushed to lend aggressively to MSMEs. Efforts to expedite business loan approvals may be welcome from the point of view of growth and job creation, but they rarely end well when motivated by political reasons. Conceptually, the Prime Minister’s latest credit scheme is no different from the MUDRA loan scheme, which has been troubled by soaring bad loans. In September, former RBI Governor Raghuram Rajan had warned that loans extended under the MUDRA scheme could turn out to be the source of the next financial crisis. Care needs to be taken to see that the new MSME loan scheme does not pose a similar risk in the future. Also, the demand that PSUs must procure a quarter of their inputs from MSMEs could breed further inefficiency in the economy. In all, the MSME loan scheme is yet another example of how bad economics can make for good politics.
📰 Centre to sell its entire stake in Dredging Corporation
Cabinet approves proposal to sell stake to a consortium of four ports
•The Cabinet Committee on Economic Affairs on Thursday gave ‘in-principle’ approval for strategic disinvestment of the government’s entire stake in the Dredging Corporation of India Limited (DCIL) to a consortium of four ports viz. Vishakhapatnam Port Trust, Paradeep Port Trust, Jawahar Lal Nehru Port Trust and Kandla Port Trust.
•The government holds 73.44% shares in DCIL valued at a little over ₹700 crore as per current market prices of the share.
•“The approval will further facilitate the linkage of dredging activities with the ports, keeping in view the role of the DCIL in expansion of dredging activity in the country as well as potential scope for diversification of ports into third party dredging,” the government said in a statement.
•It added that the co-sharing of facilities between the company as well as ports will lead to savings for ports. “This would further provide opportunities for larger investment in DCIL as integration with ports shall help in effective vertical linkage in the value chain,” it said.
•The government had set a disinvestment target of ₹80,000 crore for the current financial year.
•The strategic disinvestment of DCIL shall be undertaken after conducting due diligence exercise by both the entities with the help of advisors appointed for the transaction.
Filling up Padur SPR
•The Union Cabinet also approved the filling of Padur Strategic Petroleum Reserves (SPR) at Padur, Karnataka, by foreign oil companies.
•“The SPR facility at Padur is an underground rock cavern with a total capacity of 2.5 million metric tonnes (MMT) having four compartments of 0.625 MMT each. The filling of the SPR under PPP model is being undertaken to reduce budgetary support of Government of India,” an official statement said. The government expects to save ₹10,000 crore by this move, Electronics and IT Minister Ravi Shankar Prasad said, adding that “energy security is important for every country… so we maintain strategic petroleum reserve.”
•India has constructed and commissioned underground rock caverns for storage of total 5.33 MMT of crude oil at three locations — Vishakhapatnam (1.33 MMT), Mangaluru (1.5 MMT) and Padur (2.5 MMT). The Cabinet also approved the continuation of 30% quota for State-owned ITI Ltd. in the procurement by three telecom companies — BSNL, MTNL and BBNL — for three years. “This will provide further boost to the order book of ITI and help in improving its financial health,” an official statement said.
•The procurement quota will also include 20% of the orders for the turnkey projects (like GSM network roll-out, Wi-Fi of BSNL and MTNL and BharatNet project network roll-out of BBNL), the statement said.
