📰 Modi’s two summits: UAE trumps G7
The UAE was a bigger investor in India in 2021 than Germany and France combined
•Prime Minister Narendra Modi is attending two summits this week – he is a ‘special invitee’ at the 48th G7 Summit at Schloss Elmou in Germany. After that, he has a bilateral summit in Abu Dhabi with the UAE President Sheikh Mohammed bin Zayed Al-Nahyan on June 28. Though the pundits may consider the second event as a sideshow, some statistics are enough to prove them wrong.
•If the U.S. is exempted, no G7 country comes close to the UAE as India’s trading partner, exports market, Indian diaspora base and their inward remittances. According to our official Foreign Direct Investment data, the UAE invested more in India in 2021 than Germany and France combined. Unlike the UAE, none of the G7 countries has yet signed a bilateral Comprehensive Economic Partnership Agreement (CEPA) with India.
•Both summits are important to India, but unlike the interlocutors in the Bavarian Alps, our Prime Minister is unlikely to be hectored in Abu Dhabi about where not to buy oil from or how much Indian wheat and sugar must be sold. The agenda is likely to be more constructive and benign.
India-UAE synergy
•The current India-UAE synergy and amity are largely due to Prime Minister Modi’s tending. This would be his fourth visit to Abu Dhabi and sixth summit with Sheikh Mohammed over the past seven years. These have re-energised this historic, but long-dormant, relationship. The visits have plenty to show — from Emirati investments in Jammu and Kashmir to a CEPA. After a COVID-19-induced three-year hiatus, a Modi-Sheikh Mohammed summit was desirable to infuse a fresh momentum.
•In protocol terms, Mr. Modi would commiserate the passing away of UAE President Sheikh Khalifa bin Zayed on May 13 and the appointment of Sheikh Mohammed, 61, as his successor. As Sheikh Mohammed has been the de facto President since Sheikh Khalifa suffered a stroke in 2014, the change at the helms means little in the practical term. However, this being the only second transition at the top since the formation of the UAE in 1971, it is significant. It symbolises political stability and continuity in a turbulence-prone region. Mr. Modi would probably be the first non-Arab leader to be received in Abu Dhabi after the 40-day State mourning ended on June 22. Thus, the Abu Dhabi summit would be a useful opportunity to recalibrate the bilateral ties and open new vistas following the operationalisation of the bilateral CEPA from May 1.
Changes since the pandemic
•Significant changes in the bilateral, regional and global context have taken place since the two leaders last met in August 2019. Both countries have successfully contained the COVID-19 pandemic and can pool their experiences. Their bilateral trade grew by 68% in 2021-22 to $72.9 billion, a new record. While both exports and imports grew, the trade deficit reached $16.8 billion, also a new record. Thanks to the CEPA, the robust economic revival, higher oil prices and larger Indian imports, trade is likely to grow even higher in 2022-23. The corrective mechanism built into CEPA would, hopefully, prevent the deficit from going out of hand. As the UAE collects petrodollars, India, the world’s fastest-growing major economy, could be a lucrative market for investments in areas such as petrochemicals, pharmaceuticals, renewables, infrastructure, manufacturing, logistics, start-ups, etc. A lot has already been done to streamline the manpower sector, including skilling the young Indian labour force to suit the Emirati requirements, but more can be done. The two sides can collaborate for the eventual reconstruction of the war-ravaged regional countries such as Yemen, Syria, Somalia, Iraq, Libya and Afghanistan. In the bilateral political domain, the two sides have cooperated efficiently on security and anti-terrorism, but they need to do more to fight money laundering and the flow of illicit narcotics.
A complex area
•The South West Asian region is a complex and evolving area. The UAE has disrupted the longstanding Arab Israeli stalemate by normalising relations with Israel in 2020. The two sides have recently signed a bilateral CEPA. After pursuing a muscular regional foreign policy against political Islam and in regional hotspots such as Syria, Yemen, Libya, Sudan, and Somalia, Abu Dhabi seems to have decided to stage a phased withdrawal and improve ties with Syria, Qatar and Turkey. The ties with Saudi Arabia remain somewhat edgy, due to policy divergences and economic competition. Similarly, Abu Dhabi has developed some ruction with the Biden presidency in the U.S. and is diversifying its strategic options with Russia and China. It has conspicuously ignored the plea by the U.S. and other Western countries to raise its oil production. India, the UAE’s second-largest trading partner, and largest source of tourists and manpower, can be a useful ally.
•Against this ongoing regional and global flux, the India-UAE summit is both topical and opportune and can have an impact beyond the bilateral context.
•The World Bank has approved a $250 million loan to support the Government of India’s road safety programme for seven States under which a single accident reporting number will be set up to better manage post-crash events.
•The India State Support Programme for Road Safety, financed by the World Bank, will be implemented in the States of Andhra Pradesh, Gujarat, Odisha, Tamil Nadu, Telangana, Uttar Pradesh, and West Bengal. The $250 million variable spread loan from the International Bank for Reconstruction and Development (IBRD) has a maturity of 18 years, with a grace period of 5.5 years.
•The project will also establish a national harmonised crash database system in order to analyse accidents and use that to construct better and safer roads. The project will also provide incentives to States to leverage private funding through public private partnership (PPP) concessions and pilot initiatives.
📰 India’s gig workforce will grow to 2.35 crore by 2029-30: Niti Aayog study
Social security, including paid leave, occupational disease and work accident insurance are among the recommendations
•The government’s policy think tank Niti Aayog has recommended that measures should be taken to provide for social security, including paid leave, occupational disease and work accident insurance, support during irregularity of work and pension plans, for the gig workforce in the country, which is expected to grow to 2.35 crore by 2029-30.
•According to the study released by Niti Aayog on Monday, the number of workers engaged in the gig economy is estimated to be 77 lakh in 2020-21.
•“India requires a framework that balances the flexibility offered by platforms while also ensuring social security of workers. The consequent platformization of work has given rise to a new classification of labour — platform labour — falling outside of the purview of the traditional dichotomy of formal and informal labour,” the study states.
•It added that platform workers are termed as “independent contractors” and as a result, they cannot access many aspects of workplace protection, and entitlements.
•The report broadly classifies gig workers — those engaged in livelihoods outside the traditional employer-employee arrangement — into platform and non-platform-based workers. While platform workers are those whose work is based on online software apps or digital platforms, non-platform gig workers are generally casual wage workers and own-account workers in the conventional sectors, working part-time or full time.
•The report notes that at present, about 47% of gig work is in medium skilled jobs, about 22% in high skilled, and about 31% in low skilled jobs, and the trend shows the concentration of workers in medium skills is gradually declining and that of the low skilled and high skilled is increasing. “It may be expected that while the domination of medium skills would continue till 2030, gig work with other skills will emerge,” it said.
•While in 2020-21, the gig workforce constituted 2.6% of the non-agricultural workforce or 1.5% of the total workforce in India, by 2029-30, gig workers are expected to form 6.7% of the non-agricultural workforce or 4.1% of the total livelihood workforce in India, the study added.
•The think tank has also recommended introducing a ‘Platform India initiative’, on the lines of the ‘Startup India initiative’, built on the pillars of accelerating platformisation by simplification and handholding, funding support and incentives, skill development, and social financial inclusion. It has suggested that self-employed individuals engaged in the business of selling regional and rural cuisine, street food, etc., may also be linked to platforms so that they can sell their produce to wider markets in towns and cities.
•“Access to institutional credit may be enhanced through financial products specifically designed for platform workers and those interested to set-up their own platforms. Venture capital funding, grants and loans from banks and other funding agencies should be provided to platform businesses of all sizes at the pre-revenue and early-revenue stages,” it has recommended.
•Other recommendations include gender sensitisation and accessibility awareness programmes for workers and their families, extending social security for gig and platform workers in India, and conducting a comprehensive study on key aspects of the platform economy.
📰 States, freebies and the costs of fiscal profligacy
The need for instituting more effective checks that can make wayward States fall in line is compelling
•During the planning last year and the campaign ahead of the Punjab Assembly election, the Aam Aadmi Party (AAP) promised a sum of ₹1,000 per month to every woman in the State. To drive home the generosity of the promise, the AAP leader and Delhi Chief Minister, Arvind Kejriwal, emphasised that under AAP’s ‘Mission Punjab’ for the Punjab polls 2022, if there were three adult women in a household (daughter-in-law, daughter, mother-in-law), each of them would get ₹1,000. When questioned how Punjab, already reeling under heavy debt, could afford this, Mr. Kejriwal said something to the effect that if there is good political management, money would not be a problem.
Growing freebie culture
•Electoral promises of this kind raise several questions. Is borrowing and spending on freebies sustainable? Is this the best possible use of public money? What is their opportunity cost — what is it that the public are collectively giving up so that the government can fund these payments? Should not there be some checks on how much can be spent on them?
•I am using Punjab to illustrate a point and by no means to suggest that it is unique. In fact, many States are pursuing the freebie culture, some even more aggressively than Punjab.
•Ideally, governments should use borrowed money to invest in physical and social infrastructure that will generate higher growth, and thereby higher revenues in the future so that the debt pays for itself. On the other hand, if governments spend the loan money on populist giveaways that generate no additional revenue, the growing debt burden will eventually implode and end in tears.
•Concerned by an increasing number of States that are embarking on this financially ruinous path, senior bureaucrats reportedly flagged the issue at a meeting with the Prime Minister, telling him that ‘some States might go down the Sri Lankan way’.
•There is an argument that this concern is being exaggerated. After all, if you look at any analysis of State Budgets by the Reserve Bank of India or any think tank, the inference you will draw is that State finances are in good, if indeed robust, health, and that all of them are scrupulously conforming to the Fiscal Responsibility and Budget Management (FRBM) targets.
•This is a misleading picture. Much of the borrowing that funds these freebies happens off budget, beyond the pale of FRBM tracking. The typical modus operandi for States has been to borrow on the books of their public enterprises, in some cases by pledging future revenues of the State as guarantee. Effectively, the burden of debt is on the State exchequer, albeit well concealed. The Comptroller and Auditor General of India (CAG) had in fact pointed out that in respect of some States ‘if extra-budgetary borrowings are taken into account, the liabilities of the government are way above what is acknowledged in the official books’.
•How big is the problem? There is no comprehensive information in the public domain to assess the size of this off-budget debt, but anecdotal evidence suggests that it is comparable in size to the debt admitted in the Budget books.
•The obvious motivation for States in expanding freebies is to use the exchequer to build vote banks. A certain amount of spending on transfer payments to provide safety nets to the most vulnerable segments of the population is not only desirable but even necessary. The problem arises when such transfer payments become the main plank of discretionary expenditure, the spending is financed by debt, and the debt is concealed to circumvent the FRBM targets.
•The more States spend on transfer payments, the less they have for spending on physical infrastructure such as, for example, power and roads, and on social infrastructure such as education and health, which can potentially improve growth and generate jobs. The truth of the Chinese saying, ‘give a man a fish and you feed him for a day; teach a man to fish and you feed him for a lifetime’ is self-evident to everyone, including politicians. But electoral calculations tempt them to place short-term gains ahead of long-term sustainability.
Institutional checks, balances
•What about the institutional checks and balances that should prevent this downward spiral? Unfortunately, all of them have become ineffective. In theory, the first line of defence has to be the legislature, in particular the Opposition, whose responsibility it is to keep the Government in line. But given the perils of our vigorous democracy, the Opposition does not dare speak up for fear of forfeiting vote banks that are at the end of these freebies.
•Another constitutional check is the CAG audit which should enforce transparency and accountability. In practice, it has lost its teeth since audit reports necessarily come with a lag, by when political interest has typically shifted to other hot button issues. Besides, our bureaucracy has mastered the fine art of turning audit paras into ‘files’ which run their course and die a quiet death.
•The market is another potential check. It can signal the health or otherwise of State finances by pricing the loans floated by different State governments differently, reflecting their debt sustainability. But in practice this too fails since the market perceives all State borrowing as implicitly guaranteed by the Centre, never mind that there is no such guarantee in reality.
The costs can be huge
•The costs of fiscal profligacy at the State level can be huge. The amount States borrow collectively every year is comparable in size to the Centre’s borrowing which implies that their fiscal stance has as much impact on our macroeconomic stability as does that of the Centre. The need, therefore, for instituting more effective checks that can make wayward States fall in line is compelling.
•Here are two suggestions towards that end.
•First, the FRBM Acts of the Centre as well as States need to be amended to enforce a more complete disclosure of the liabilities on their exchequers. Even under the current FRBM provisions, governments are mandated to disclose their contingent liabilities, but that disclosure is restricted to liabilities for which they have extended an explicit guarantee. The provision should be expanded to cover all liabilities whose servicing obligation falls on the Budget, or could potentially fall on the Budget, regardless of any guarantee.
•Second, under the Constitution, States are required to take the Centre’s permission when they borrow. The Centre should not hesitate to impose conditionalities on wayward States when it accords such a permission. States slapped with conditionalities will of course baulk and allege political motives. The challenge for the Centre will be to act transparently and in accordance with well-defined, objective and contestable criteria.
•Finally, there is the draconian provision in the Constitution of India which allows the President to declare financial emergency in any State if s/he is satisfied that financial stability is threatened. This Brahmastra has never been invoked so far for fear that this will turn into a political weapon of mass destruction. But the provision is there in the Constitution for a reason. After all, the root cause of fiscal irresponsibility is the lure of electoral nirvana. It will stop only if the political leadership fears punishment. It is therefore important to ensure that the prospect of a financial emergency in case of gross and continuing fiscal irresponsibility is not just an abstract threat but a realistic one.
•Disappointingly, the Centre itself has not been a beacon of virtue when it comes to fiscal responsibility and transparency. To its credit, it has embarked on course correction over the last few years. It should complete that task in order to command the moral authority to enforce good fiscal behaviour on the part of States.
📰 From higher to hire education
Higher education is increasingly getting delivered by for-profit entities
•Higher education policy planners and regulators are busy giving shape to the digital university, which was announced in the 2022-23 Union Budget. Though still on the drawing board, the digital university is expected to offer any number, kind, and type of course without limits on intake, in a hybrid or ‘physical plus digital’ mode. It proclaims to provide equitable access to quality higher education and employability-enhancing skill development programmes to all.
Recent developments
•In the interim, the University Grants Commission has relaxed the norms and standards for setting up open universities. In particular, land requirement has been reduced from 40 acres to just five acres. This is likely to open the floodgates for private open universities. Simultaneously, more universities are being enabled to offer courses in the distance, open and online mode, mostly in collaboration with EdTech startups and unicorns. Some have already outsourced the delivery of their courses to such agencies. Students are also made to complete a certain portion of their course requirements through Massive Open Online Courses. Additionally, they can accumulate credits at will and deposit them in their Academic Bank of Credit to be exchanged for a degree at a later stage. Higher education in India is getting metamorphosed into ‘hire education’. In the process, higher education is now getting delivered by for-profit entities, in contravention of the long-held belief that education at all levels must be provided on a not-for-profit basis.
•The idea of providing higher educational opportunities in a non-formal mode is not new. Most mainstream universities in India have been allowing students, particularly women and working people, to learn on their own and take university exams as private candidates. Many have performed quite well.
•The mode and medium of remote learning have, however, been changing to keep pace with technological advancement. Broadcasts and telecasts were once regarded as game changers to impart education remotely. They were espoused to be the cheapest way of enhancing access to quality education. The realities belied these expectations.
•Information Communication and Entertainment technologies, augmented and virtual realities, artificial intelligence and machine learning are being touted as technologies with immense possibilities for transforming the delivery of education. The higher education horizon appears densely dotted with EdTech startups and tech companies as higher education aggregators.
•Technology-enabled and mediated digital learning is projected as the future of higher education. Such learning is supposed to end face-to-face formal education — so much so that some have already started writing the obituary of the brick-and-mortar universities. Two years of COVID-19-compelled online education seems to have convinced them that in future, education, particularly higher education, will transform into a virtual space.
•Evidence of massive learning losses due to the digital divide, but primarily due to the inherent limitations of technology, are being regarded as mere teething troubles. Sold to the idea, policy planners and regulators are aggressively pushing the distance, open, virtual, and online modes of education.
•The EdTechs and technology companies are euphoric about these developments. The media is already abuzz with EdTechs raising resources and enhancing capacities to capitalise on the opportunities that these market-friendly reforms throw up. How successful and effective would such programmes be? No one knows. Going by the evidence, employers across the world are generally negatively disposed towards this. Most recruiters prefer to hire those who have graduated in face-to-face mode.
•No wonder even the strongest proponents of online and virtual education feel that such programmes be subjected to stricter oversight, tighter regulations, and rigorous processes to ensure high standards and robust quality control. Given the fact that the quality of higher education is inversely proportional to the intensity of regulation, designing and developing an efficient and effective regulatory mechanism often proves more challenging than imagined.
•The open and distance mode of learning, including the latest model based on digital and virtual delivery, often finds favour with the government due to cost considerations. It is, however, wrong to assume that these are economical and cost-effective. To be effective, they not only require massive capital investment in infrastructure, but also demand a significantly higher recurring expenses on content development and their continuous updating and upgradation.
No substitute for teachers
•Digital delivery and technology integration in education may undoubtedly serve a useful purpose. Higher education must indeed embrace and keep pace with the advancements in technology. Technology can be effectively leveraged as a quality-enhancement tool. It would, however, be a blunder to regard technology-mediated teaching-learning as an alternative to face-to-face education. Technology can supplement and not substitute teachers.
•No world-class universities, including those with a high degree of technology integration in their teaching and learning processes, are planning to cut down their faculty cost or their number any time soon. On the contrary, they envision hiring more of them to attain greater excellence. India cannot be an exception to this. Higher education is a lot more than borrowing content and delivering them online or outsourcing content. This would render India a consumer of knowledge. We must, instead, be focussed on exploiting our full potential to emerge as a producer of knowledge and providers of the global workforce.
