New Farm Bills are reminder of British Raj and Gandhi’s Champaran Satyagraha

India is a free country led by representatives elected by voters. In theory, this means that the last man is not only represented in the legislature, his interests are also taken care of. The new farm bills that have now become a binding law break this trust on many counts. And while the common man is only aware of the debate around ‘freedom to sell the produce anywhere in the country’, there is so much more that lies beneath.

The ruling party is busy convincing farmers that they are now ‘free’ to sell their produce anywhere and this would eventually mean getting better remuneration. Let’s consider this aspect later and first talk about what they are calling as contract farming – a way for farmers to enter into highly remunerative deals with corporates. Really? Will the farmer win? Go a little back in the past to see how OYO Rooms- an Indian hospitality chain- lured hoteliers, mostly with modest resources, into signing so-called ‘lucrative’ and ‘revenue multiplying’ deals.

Hoteliers were relatively better aware of commercial and contractual aspects as a major chunk came from cities. In the end, however, the hoteliers feel cheated. Many have alleged that OYO abused its dominant position and manipulated contractual obligations in their own interests, thereby leaving hotel owners with losses. Think of the farmer. Barring a select few, most of these do not have even basic understanding of contracts and laws governing them. Do you expect the corporate to enter into a morally and ethically equitable contract with the farmer? Indeed, this is nothing but wishful thinking.

Now also consider how the British forced Indian peasants into growing indigo. The Mahatma’s first major agitation in India had this issue at its core. The peasants of Champaran pleaded with Gandhi to become their voice against oppressive methods employed by British landlords. What do you expect the corporates will do? Will they even care about soil losing its nutrients due to unsustainable farming practices? Will they ask the farmer to grow crops that are best-suited to the region or those that can fetch lucrative returns? Will they adjust to uncertainties in farming including monsoon or will they abuse the contract to protect their own financial interest?

Anyone convincing the farmer that contract farming will open floodgates of innovation, better infrastructure and remuneration is doing the same thing as was done by the PM when he declared a so-called 21-day war against coronavirus. Did coronavirus go away? Did demonetization put an end to black money? Did GST prove a boon to small businesses? Forget promises and assurances and think rationally this time.

Lastly, any discussion on the so-called new freedom to farmers to sell produce outside of APMC premises is flawed. This was already happening and a few corporates were buying directly from farmers. Yes, there were charges imposed by state governments but that is the discretion of state governments in India. When a packet of Parle-G can have a portion of tax in its retail price, are APMC levies so unfair? The central government, by bringing the new law, has first, impinged on state list subjects; and then, has given a new glossy-looking sanction to trade outside of APMC only to make corporates appear more acceptable.

The farmer community is at loss, realise it before it is too late.

Ask for it- Price Freeze and Financial Emergency

Governments can help you feel good and reassured through rhetoric. The harsh fact, however, is that retail prices of many basic goods including food products, beverages and appliances are on a rise amid an unprecedented economic crisis. Consider this- big producers can pledge huge money to government relief funds, however, can they justify raising exorbitantly the MRPs of their goods?

Don’t forget India is still a developing country, no matter how greatly politicians project. A large section of population remains poor and the middle class is fragile. Pandemic and bad governance have dealt a severe blow to financial growth and majority of companies have resorted to pay cuts and layoffs. The only truth amid all the glorification and chest-beating by politicians is that incomes have come down and prices are rising. Stagflation is what this is termed in the financial world.

Price Freeze- a policy action by which the government prohibits and penalizes any increase in prices of goods during the period of disaster- is the only way out. Yes, prices that prevailed in the beginning of March 2020 have to be declared, by law, the upper limit for at least next few months. Any price increase for specified goods has to be declared illegal with immediate effect and all recent hikes must be recalled immediately. Products must include all foods and foodstuffs, all clothing, light bulbs, appliances used in preparation of food, basic electronic goods and basic tools.

Critics can argue that price freeze can have a detrimental impact on the economy in the long-run. Let’s not get into that argument since this price freeze has to be for a limited term. Moreover, most companies have yet to cut salaries of top executives and once done, it will bring down costs for them. Believe it or not, producers and traders are profiting at the expense of consumers and governments are mute spectators.

Second, ask for proclamation of financial emergency. Do you think it is justified to charge you the usual tariff for electricity when your income has dropped? Government companies, public sector units, public sector banks and other similar establishments haven’t cut down on their operational costs of which salaries and perks are a major chunk. Is it justified for the state power company to charge high tariff from consumers to fund salaries of their staffers when consumer community is experiencing financial crunch? No. Ask for proclamation of financial emergency that must compel governments to reduce their revenue expenses and transfer some relief to ordinary people.

Price freeze and financial emergency, however tough-to-implement they may sound, are policy actions that can help the common man find at least some relief amid a severely harsh time. A well-intentioned and well-managed scheme can make these two things work. Ask your government for these measures.

The Fall of Many, the Rise of Oligarchs

Two datasets are out in the open. One, the Indian economy in FY ending 2020 grew at slowest pace in a decade (coronavirus not to blame), and two, some richest men of India saw their wealth soaring in the same period. India suffered contraction in quarter ending June but billionaires, including chairmen of Reliance Industries and Adani Group, are getting richer. All this may seem normal on its face but we need to know what lies beneath this disparity where the country is becoming poorer but a few aren’t.

In virtually no time, Reliance’s Jio has become the undisputed jewel of India Inc. Foreign investors are rushing to buy stake in the enterprise and their analysts know that Jio will give great returns. What began with a disruption in the telecom industry by luring the mass with free voice calls and data has now spread in many sectors. Reliance can now be a common man’s grocery, clothing, internet, digital payment and toys (Hamleys) supplier, and much more, all at the same time. From ports to airports and green energy to edible oil, Adani is almost everywhere and is setting new records with deals like airport takeovers and world’s largest solar contract.

Why did we refer to the term ‘oligarch’ in the title? Oligarchs are typical to Russia and former USSR, and their rise was fueled by the nexus between politics and industry. Oligarchy means ‘the rule of the few’. These private players are dominant forces in the economy and no matter what happens to health of the nation’s economy, they manage to thrive, and thrive well.

The second part of the title says ‘the fall of many’ and these are the small and medium businesses in the Indian economy. Now that they are under intense pressure, the government has only one relief for them- borrow more. This vicious measure will result in small businesses shutting shops and banks reeling under their NPAs. Soon, and it’s already happening, small grocery stores in the neighbourhood will face death at the hands of ‘oligarchs’ who will have both- better bargaining power and economies of scale. Oligarchs will decide what the mass buys, where they buy it from and what price they pay for their purchases.

And this rise of oligarchs doesn’t come without clandestine sponsorship of the ruling government. Now if Facebook wants its WhatsApp payment business to get regulatory approvals, it must not only show bias towards the ruling party in its conduct of normal business operations, it should also invest in the business of the oligarch, the oligarch who in turn funds the ruling party. That’s nexus, easy.

But what about the popular support? India, indeed, is a democracy where elections must be won to hold on to power. And this popular support is derived by playing the nationalism card. It’s too simple. Shun all rationality and pragmatism, and issue a clarion call of nation-first. Urge people to reject imports and go for local alternatives backed by the argument that lesser the imports, greater will be the prosperity. But why not answer this- by keeping competition over price and quality out and giving local provider a free rein to pass off substandard and pricier goods in the market, who are you really allowing to prosper?

From rail projects to renewable energy to 5G infra, the oligarchs can now prevail without having to face competition over price and/ or quality. Who, however, is at loss when competition disappears and a select few control everything? It’s the common man. And in such a scenario, small and medium firms too have no option but to bow out. Just think why the farmer, who produces and sells for little to the middle-man, never thrives but the middleman does? Because the middleman has a better bargaining power and this is the same when small businesses compete with oligarchs.

The informal economy of India is collapsing but the wealthy few are becoming wealthier. We are already in the phase where we are facing the threat of oligarchy, the rule of the few.

Does ‘Vocal for Local’ resemble China’s ‘Giant Leap Forward’?

Detractors can say that while India’s Vocal for Local campaign has been started by a political party that vehemently rejects communism, the Giant Leap Forward (GLF) was started in late 1950s by a communist regime, and hence any comparison is innately flawed. Here, it is important to note that all definitions of capitalism, socialism and communism that have ruled textbooks and discussions for decades now seek alteration owing to some late developments. For example, the communist China became more liberal, less protectionist under Deng Xiaoping, while the capitalist US has become protectionist under Trump.

That said, let’s begin with why the much-hyped vocal for local campaign of PM Modi may leave India poorer. The GLF’s failure and resulting Great Chinese Famine hold the cue.

When Chairman Mao Zedong launched GLF, he foresaw China becoming self-sufficient in production of steel, back then a product seen as fundamental to economic growth. What Mao did was he moved labour from farms to ‘backyard furnaces’ to augment steel production in China. Barely equipped with proper infrastructure and technical expertise, this plan backfired and what heightened the pain was that public officials suppressed the failure of the plan for long in order to stay in the good books of Mao.

Compare this with what the Indian PM seeks from his vocal for local pitch. He wants Indians to produce goods that were hitherto imported from other countries, especially from enemy countries including China. In simple words, he wants Indian banks to cut their dependence on point-of-sale machines imported from China and rather use locally produced products. He also wants Indians to shun platforms like TikTok- we will not talk about national security concerns here- and move to locally made platform.

The debate here is local v foreign and the PM has projected India as capable of being a self-sufficient or self-reliant nation. But let’s be rational. Why did we need to import in the first place? It’s because we do not yet have the expertise to produce similar goods locally and match price and quality of imported goods. India is an IT behemoth and our techies grab the largest chunk of professional visas in the US and other developed countries. In simple terms, we are good in terms of techies but lack when it comes to producing some goods, and let’s accept this.

Mao miscalculated results of his GLF campaign and the same public that backed his efforts with an ultra-nationalistic fervor was the biggest loser in the end. Now consider another program that ran parallel with GLF- the ‘Hundred Flowers’. Here, Mao encouraged criticism of government policies for a short period, however, in the end identified criticizers and persecuted them. Can you find a resemblance? Intellectuals rarely get rewarded in the Modi-regime. From RBI heads to ECs- anyone who critiqued the government was shown the door. It means that while there was no one left in China to warn Mao of the inevitable failure of his short-sighted backyard furnace plan, in India, anyone who will advocate that India should not be ultra-protectionist, at least for the sake of the poor, will risk being seen as anti-national.

The losers, however, in the end will be the general public. Inflation has breached the acceptable threshold and contraction in GDP growth is inescapable. Add to this the impact of import-substitution. From toys to auto components, import duties have been hiked with a view to ‘promote’ the local industry. We all have read how imports remained stuck for weeks at ports owing to delayed custom clearances and unwarranted red tape. All this is doing nothing but making goods and services expensive in India.

There is another element to this. The government has also restricted FDI from countries bordering India citing national security concerns. Do we forget that many startups, from Swiggy to Paytm to OYO, are funded by investors from neighbouring country? These startups have been burning cash for years and have yet to turn profitable. They, however, employ a considerable chunk of labourforce. Does India have any farsighted plan to employ these workers should these startups choose to shut shop?

There is much to write. However, let’s conclude with some notable failures of GLF. Infrastructure was hastily developed without much technical expertise that resulted in the unfortunate dam collapse incident a few years later. Unsubstantiated farming techniques were employed to increase output, however, it resulted in drastic fall. All this calls for a well-planned policy for import-substitution instead of ceding to the popular call of ‘boycott’.

PS: National security is paramount. At the same time, policy stance of the government has to be rational, not populist.

For economic growth, inclusive development, we need ‘24×7 operations’

For this argument to make sense, we must focus on fundamentals alone- production and consumption. The world of today is far more educated than it was when abundance of agricultural produce led to industrial growth with more and more people taking up other, varied occupations. But the irony is that with a relatively more educated world, we have been unable to repeat the feats of previous revolutions in the present time where economies are either contracting or growing at a lesser-than-expected rate.

The problem is we are overlooking fundamentals of economy. A big, tangible change can be observed should we choose to consider just two things- production and consumption. Let’s understand this with the Indian economy in the backdrop. Which were the periods when the country grew rapidly? These periods are the ones where our economic activity increased, and to be precise, production and consumption saw rise.

The present working of the economic landscape is definitely an impediment to further growth. And there is an eye-opener in the form of COVID-19-induced lockdowns that lays bare the fact that any halt in economic activity leads to nothing but impoverishment. Until it struck, India was doing business as usual. Most enterprises operated from typical 9am to 5pm working hours and indeed, it did provide employment opportunities to some people. Yet, many remained unemployed or underemployed- thereby hitting both production and consumption.

India is a country with demographic dividend and abundant labour, but there is limited work. In the present scene, when enterprises operate for 9 hours, any government, any policy think tank, any activist or any economic adviser cannot succeed in any attempt targeted towards economic growth.

First, increase production by allowing and encouraging enterprises to run for more hours in a day. This will automatically trigger employment generation. More production of varied goods and services will lead to prices coming down. This in turn will boost consumption. One, more people employed means more money in the hands of people, and two, lower prices means more consumption of goods and services that aren’t mere basic necessities.

The simple logic here is that to have a positive GDP growth, we need to produce more, and this production is only possible when people consume more. Both can be achieved by letting the enterprises operate 24×7.

No other scheme, policy action, legislation can achieve the economic growth that we seek to pull out more and more citizens out of poverty and enable India’s shift from ‘developing’ to ‘developed’. The appetite has remained untapped for long. Appetite for motorized vehicles, for electronic goods and even luxury goods has to be tapped by first increasing production and letting the consumption side play its part.

Indian IT industry, BPO sector and other enterprises are examples of what happens when you operate 24×7. Indeed, we cannot start with manufacturing passenger vehicles 24×7, and this is why we need more research on how to implement this plan. The basic rationale is that increased production activity alone can assist economic growth of India. Imagine this- institutions of higher learning operating round the clock and producing more doctors and chartered accountants- of course we need them; banking services available 24×7 and enabling more and more money transactions.

proclamation of financial emergency – the only way out of this nationwide crisis

let’s talk real. majority of citizens are struggling with their finances. factories, offices, shops are shut. since there is no way for anybody, save those employed with various governments and government bodies, to make money, the onus lies on governments to provide relief. agreed, a few big corporates will pay salaries during the lockdown period from their reserves and some bosses driven by ethics and morality will also do so.

but india is a big, big country. nearly 90 percent of total workforce is employed in the informal sector and most of the employers will find it impossible to pay their workers due to nil cash flows and unavailability of reserves earmarked for such situations.

amid all this, the governments are charging for electricity and other supplies. they are doing so since the employees of the state and state-owned enterprises will be paid their salaries in full. but is this justified? at a time when companies are laying off workers and not paying salaries due to exigencies that are beyond the control of employers, how can the state pay its employees in full? how can state-owned enterprises, from public sector undertakings to public sector banks to institutes and bodies under various ministries pay their employees in full?

and if they are doing so, this is against the principles of equity. moreover, the state doesn’t earn from commercial activities. a bulk of its revenues comes from taxes and other levies. even the poorest of poor contributes to the exchequer by paying indirect taxes when a bucket or biscuit is bought. it is this money that is used to pay the state staff.

let’s talk about public sector banks. although they undertake commercial activity, we know they rarely do so in the best way. this is the reason they are supported regularly from budgetary resources to save them from sinking. institutes, bodies and associations under various governments and ministries too are funded from budgetary resources.

now when the very foundation of the budget, the taxpayer, is under severe stress, is the state justified in paying its employees in full? although a handful of state governments have declared some cuts in such expenditures, they aren’t enough to tackle the crisis. the only answer is the government proclaiming financial emergency by using powers under article 360 of the indian constitution. after all, the provision has been added to tackle emergencies and the current crisis is deserving of such action since what is happening is unprecedented.

article 360 gives power to the state to issue direction and “any such direction may include a provision requiring the reduction of salaries and allowances of all or any class of persons serving in connection with the affairs of a state.”

nation’s resources belong to every citizen, rich or poor. and hence, equity must be brought without any delay.

good governance in the times of covid-19

at the time of writing this, a few more than 27,000 samples have been tested in india, a country of more than 1.3 billion. of these, more than 800 have returned as positive for coronavirus. but this may not be the only concern. we are short on testing kits and test centres and the government’s and other authorities’ response to the crisis is worrisome.

let’s start with the announcement that the prime minister will address the nation at 8pm on 19 March, 2020. this announcement came in advance and gave enough fodder to rumour mills. the pm has a history of causing panic at 8, one can recall the demonetization episode. an advance announcement of pm address triggered panic buying and people stockpiled. in fact, the pm and his team of advisors failed to realise this would happen.

then came the declaration of a ‘janta curfew’ on sunday. will this be a curfew, a lockdown or something else, nobody knew. without planning anything, this went ahead. many people misunderstood the clapping thing and thought it would lead to an end to the coronavirus crisis. many states extended this janta curfew and made no provisions with respect to those not in their homes, especially migrant workers.

trains were halted and buses too, leaving migrant workers no way to return to their homes. this came in the wake of losing jobs since economic activity has literally stopped. a few days later, pm addressed the nation yet again at 8 pm and declared a poorly-planned lockdown till april 14. what was intended was preventing people from leaving homes and contracting the infectious disease. however, exactly the opposite of this happened. people gathered outside grocery stores, medical shops to buy essentials.

then came another announcement, this time from the reserve bank of india. that term loan emi will be deferred for 3 months was announced and every news house bought this on its face value without reading the fine print or without thinking that if all emis are suspended will indian banks be able to sustain?

moreover, prudence suggests that allowing moratorium to public sector, government and mnc employees who shall be paid in full even during lockdown is unjustifiable. will this not adversely impact banks’ balance sheets and shatter priority sector lending? but, at the time of writing this, there is still no clarity.

good governance in the times of crisis means planning and management, not mere presentation and oratory. tens of thousands or even more migrant labourers are out on the roads walking to their home states. are they not vulnerable? central, state and district authorities are not on the same page and nobody knows how to exactly implement lockdown. the police is seen beating up people who have stepped outside of their homes, even when they may have done so to buy essentials.

we, indeed, elected good marketers, orators, but not good planners, good managers.

why it is impossible to create new jobs in existing industries

one can take cue from the agriculture sector of india, where the demand for farm produce is not commensurate with supply, to understand the jobs generation issue. on the supply side, the number of growers is high and this has resulted in glut in the market for such crops as wheat and sugarcane. by contrast, farmers who have wisely shifted towards alternative options, for example floriculture, are prospering in an otherwise distressed sector.

this is enough to understand what needs to be done in manufacturing and services sectors to generate jobs for the large number of youths entering the labourforce.

be it the conventional textile industry or telecom, the demand for their products has hit the wall. thus, these industries cannot be expected to generate the jobs needed in the economy. the information technology sector is not in similar distress and new engineers (with updated skills) are being recruited. this is owing to demand for new tech, including cloud, artificial intelligence and robotics, for which the supply side needs to produce more and for which more and more workers are required.

the government’s skill india scheme failed to take note of the fact that by skilling young Indians in conventional industries where the supply is already more than demand, we are only creating unemployable skilled youths. another area of pain is that even the demand cannot be boosted since new buyers are either jobless or underpaid.

for india to create new jobs, we need to closely study the supply and demand sides of all sectors of the economy. this study would reveal that unless we create an altogether new supply side, the dream to create jobs will remain as such. the country needs to invest heavily in emerging industries, for example cannabis (coca-cola has recently announced its plans to infuse cannabis in its beverages) and lithium-ion battery powered electric vehicles.

the underlying problem is that we are wasting our time and money in skilling the workforce keeping in mind traditional jobs and industries. this is exactly the same as is with the farm sector- the supply side is already outperforming the demand side. the best way to create jobs is to identify promising new industries, encourage setting up of new enterprises in these and skill youths with respect to these findings.

why corporates need to rationalise costs

economies across the world have slowed down, those posting good numbers of gdp growth rate aren’t faring well on equitable distribution of national income. then is the issue of rising number of loan defaulters. so what happened suddenly in the economic landscape that well-established companies, barring a few, are increasingly falling in the trap of squeezed profits?

first globalisation (that in the indian scene resulted in public sector undertakings sharing their market base with more competitive enterprises, causing gradual decline in performances of psu firms) and now easy access to information (all thanks to the internet revolution) that is not allowing companies to reap unfair profits owing to new ventures in related business coming up rapidly through easily gained knowledge of a profitable market.

google is perhaps the best company to work with as per studies, the internet giant has great workplaces, jaw-dropping salary packages for staffers and the perfect work-life balance. but google can afford this, at least for the time being, for no other internet-based company can today challenge its might.

but for others, is replicating google’s workplace and work culture a sure-win position? infosys (an india-based outsourcing firm), for instance, started off with some eye-catching buildings and perks for its staffers; today the company is finding ways to cut costs. others like flipkart too are matching international standards on the back of foreign funds, but will they be able to sustain these costs is a question.

uber recently announced its departure from south-east asia and its only promising market outside us and Europe is india, where again it is struggling to convert revenue into profits.

the ground reality for today’s corporates is that the market is wide open for participants. you just cannot afford doling out great salaries and perks to your staffers that work from expensive and lavish offices. you may be able to sustain this for initial few years, but the rush of entrants in your sector will eat into your profits sooner than later and turn these so-called eye-catching assets into burdens.

same is the story with indian public sector undertakings and banks that have failed to grasp the fact that you cannot offer excessive pay packages to your employees when the private sector peers are working on comparatively lower packages.

the corporate sector on a whole is reeling under the pressures posed by hiring workers that are promised good pays and regular appraisals, margins are regularly thinning and entering negative territory. the hard reality of today is you just can’t afford these. should you not correct course, be ready to fall.

problem with government banks is that they are government banks

while everyone is counting the exact figure of non-performing assets, no one has taken time to see how messy, obsolete is the slip that is to be attached when depositing cash in a public sector bank. the modus operandi of government banks has led them to where they stand today; india’s so-called gem of banking sector, state bank of india, has posted a quarterly loss for the first time in 17 years.

cut to solution. divestment is the only option to revive indian public sector banks, and yes this can come with challenges hence the need is to think of an appropriate method of divestment.

when divestment is considered, we only think of making a public sector unit private by way of selling the stake of the government. this, however, can be a kneejerk decision. what is the alternative then? form a government trust and handover the stake currently held by government in public sector banks to this trust. yes, it sounds similar to how the tata group operates.

the government trust so created must have as its trustees experts from different spheres. what you call a ‘ppp’ mode of ownership in projects has to be replicated in this scenario. the majority of trustees must come from private sector and the trust in itself should not be considered as child or property of the government.

tasks given to the trust must include rationalization of salaries of personnel in public sector banks and a quick shift from the present modus operandi to functioning in a corporate, professional manner where customer is considered the king, profits are considered the prime target and the enterprise as a whole is run as a corporate venture, not a government enterprise.

the recent fraud unearthed in the pnb’s mumbai branch and central bank’s tough directives on recognizing and resolving bad assets are indicative of the severely bad health of government banks. and accept this, the sector is on the verge of falling into the category of ‘irreparable’.

the only problem is that the modus operandi of our public sector banks has worsened to the core and the banking staff, at every level, is motivated only by high salaries they draw, which in itself is a reason for failing banks.

form trusts and pass over the entire government stake in public sector banks to these trusts (individual trust for every psb) at the earliest to save the backbone of our economy.