~ By Shakti Sinha

To paraphrase, John Kennedy famously said that success has many fathers but failure was an orphan. The claim of the opposition Congress party is that it was due to their pressure that the Finance Minister Arun Jaitley made revival of agriculture and the rural economy. The focus of his budget is proof that this non-theatrical and practical approach is the way forward. At the same time, it would be incorrect to conclude that the need to encourage the manufacturing sector especially small and micro enterprises have not been recognised or acted upon. The fact that the rural and the urban areas exist in continuum has been recognised by this government which launched the Shyama Prasad Mukherjee Rurban Mission and which forms part of the budget. This comprehensive vision is what makes this budget eminently sensible and what makes more sense than making dramatic announcements that deliver little.

Before passing judgement on the budget, it would be useful to appreciate the contextual circumstances prevailing. India is firmly ensconced within the global economic system, and to pretend that it can be unhinged at will would be delusional. While the U.S. continues to grow, all other major economies barring India are stuttering. Europe and Japan are still to sort out the structural rigidities they find themselves trapped on. And no amount of statistical window-dressing and monetary stimulus can hide the fact that China’s growth rate has settled down to a much more sustainable 4.5%. While the collapse of international oil prices is seen as a bonanza, India as a major exporter of petroleum products has to live with much lower export price realisation. Second, the failure of two successive monsoons has led to distress in agriculture and the rural economy. Though agriculture contributes only 15% to India GDP, it employs just under half of the country’s labour force. Three, pervasive crony capitalism and its deep nexus with the banking sector has meant that with the change in government and RBI’s cracking the whip, the public sector banks are facing a deep chasm, since the days of ‘ever-greening’ loan default cases by converting overdue interest into principal. It is estimated that public sector banks would require rupees 1.8 lakh crores of capitalisation to meet Basel III requirements.

How has the finance minister met these challenges?

Despite the recommendations of many economists, he has stuck to the fiscal deficit targets; India is on target to eliminate the revenue deficit in two years time so that it need not borrow to meet current needs. Arguably, the advantage of pump-priming the economy by announcing large, public funded investments may well have been nullified by an increase in bond yields, which would have further strained the balance sheets of banks and pushed up inflation. This would have made it impossible for Raghuram Rajan to cut interest rates. Sticking to fiscal targets increases India’s credibility and encourages foreign investors to put their money into India. However, India needs much more investment in the infrastructure sector, specifically roads, railways, transmission lines, pipelines etc. However, in order not to increase public borrowings to fund these, it is better to market them on stand-alone basis so that private investment and borrowings could flow to financially viable sectors without breaching government’s fiscal targets.

This budget has rightly been called a budget for Bharat. The increased allocation for the Pradhan Mantri Gramin Sadak Yojana would have substantial multiplier effect on rural incomes in particular through better realisation of farm products, particularly in conjunction with the opening up of road passenger sector to the private sector. The latter would also create lakhs of jobs directly. Rural productivity and quality of life would improve with universal electrification of households and availability of LPG connections. Though successive governments have talked of drought-proofing India, irrigation suffers from last mile connectivity problems. By identifying these and putting the necessary investments, Jaitley aims to increase the area under irrigation by 28 lakh hectares. The adverse effects of monsoon can be partly mitigated through irrigation but to handle uncertain weather events that often have only local effects, crop insurance is the panacea. The imaginative efforts shown in the budget is probably the single-most initiative that would help the farmer from facing uncertain times due to crop failure. The commitment to provide states with rupees 38,500 crores for NREGA would help provide the rural landless with employment opportunities to help cope with loss of work in agriculture due to poor monsoon, and also help generate aggregate demand in the economy.

The comprehensive approach to reforms of the banking sector is an indication of ‘creative incrementalism’ at work. The pre-budget announcement of the establishment of a Bank Bureau Board headed by Vinod Rai is a clear indication of government’s determination to fix the problems of PSU banks. The government would provide rupees 25,000 crores to help meet the banks’s capital needs; allocating more could only be possible either by starving funds to other pressing needs like agriculture or by breaching fiscal deficit targets. It would also have sent a bad signal of public funds being used to bail out banks from the effects of their bad/questionable decisions, a clear case of moral hazard. Instead the government by sticking to its end of the fiscal pact has shifted the onus to the RBI, which can with confidence go about monetary easing without the fear of inflation rising. Further, the RBI by changing its rigid method of calculation banks’ capital, can help add rupees 35,000 crores to the latter capital base. The loud thinking on mergers of banks and the decision to allow government’s share in IDBI Bank to go below 50% is an indicator of the future trends in the banking industry.

The budget has many other initiatives that are imaginative and incremental realising that an economy of India’s size and complexity is best not subject to Jeffery Sachs’ shock therapy prescriptions. These cannot all be commented upon but one in particular needs highlighting. In standard literature, the phrase ‘private sector’ is equated with big industry and manufacturing. However in India, over 90% of all employment is in the informal sector, of whom substantial is self-employed – the marginal farmer, the vegetable vendor, the dhobi, the cycle repairer, the mason, the iron smith etc. The biggest hurdle they face in their efforts to survive and grow is the lack of access to credit. The disadvantage is all the more if the entrepreneur is a women, SC or ST. Allocations to MUDRA and Stand Up India is a bold move to bring more such persons within the formal cover. This way not only would the entrepreneur have a better chance to grow, but would also help create more jobs for those at the bottom of the pyramid.

There have been questions about the optimistic revenue assumptions particularly realisation from disinvestment and from auction of spectrum. Similarly, introduction of new cess means increased reliance on indirect taxes instead of direct taxes, seen as more progressive; also, that not enough was announced on reform of the direct tax regime, frequently accused of ‘tax terrorism’. These observations are valid; clearly the finance minister has relied on improved nominal GDP numbers to help him meet the targets. This means that the investment climate continues to improve, and at a faster rate. Disinvestments can yield more if strategic sales of profit making (or those with potential) PSUs are thought off. Reliance from new cesses should be balanced against abolition of many old cesses, and the need to help govern of India temporarily tide over the ‘shock’ of implementation of recommendations of fourteenth Finance Commission. In any case, as and when GST becomes a reality, all cesses would become history. The new cesses are also progressive in nature as they target high end purchases. On direct tax, the government would have to demonstrate greater will, or least remove the perception of trigger-happy taxmen chasing non-existent profits. A number of steps were announced on limits to appeal and high levels of discretionary amounts required to be deposited, pending appeals etc., but it must be understood that reforming tax regimes and systems are best done incrementally; and dislocation would land up hurting the economy and the tax payer disproportionately.

Lastly, the environment did not fall off the radar, with the increased taxation of luxury cars as well as the formalisation of a carbon/green tax indication seriousness of the issue. Sustainability and more efficient use of resources is a pre-requisite for increased incomes and a better quality of life.

Shorn of its glamour, the budget is a financial statement of the government with odd policy initiatives packaged with it. This government deserves congratulations for considerably demystifying the budget process and its content. It is best seen as a working plan, which needs implementation and constant monitoring to see that the country is on the right path. With its clarity, this budget is a task well begun; twelve months later it would be judged on how much it has delivered.

Shakti Sinha is Director, India Foundation. The views expressed are his own. 

~ By Sakshi Suri

The 2016-17 railway budget presented by Suresh Prabhu, Union Minister for Railways, pleases everyone from the common man to the business elites and environment activists. This ‘growth-oriented’ budget is a combination of popular schemes that prioritize customer experience and efficiency, along with new initiatives that align with PM Modi’s ‘Make in India’ aspirations to promote job creation and public-private sector collaboration.

Amongst other things, this no-tariff-hike budget has increased quotas for women and elderly travellers, promised Wifi connectivity at 400 stations by next year, initiated better catering services by expanding choice of cuisines offered on board, and implemented the ‘Swacch Bharat’ initiative by adding 17,000 bio-toilets and additional toilets in 475 stations before the close of this financial year. While there are several finer features of this budget that demand scrutiny, the key features of this year’s railway budget are highlighted below.

Railway Industry to act as India’s Growth Engine

Prabhu’s railway budget provides a huge boost to the ‘Make in India’ initiative by creating direct and indirect employment and business opportunities in the railway sector. The opening of two new locomotive factories with an order book of Rs. 40,000 crore will provide jobs for low-skilled workers, even as the ambitious plan to electrify 1,600 km of railway lines this year, and an additional 2,000 km next year will generate jobs for both, high-skilled engineers and low-skilled workers.

Additionally, the proposal to set up Wifi at 400 stations across India has paved the way for new partnerships between Indian and foreign companies: Google, a global tech giant and Railtel, an Indian PSU which owns pan-India fibre optic networks, have collaborated in order to provide wide coverage and high capacity internet services on several major stations, starting with the Mumbai Central station where testing has already concluded. Not only have such partnerships ushered in an era of unprecedented foreign investment, but the creation of jobs and exchange of ideas might also facilitate India’s transformation from a technological processing centre to a technological innovation hub.

In addition to luring foreign investors, Prabhu has favourably engaged domestic players to fund many of its commercially viable projects. The minister realistically understands that the Gross Budgetary Support (GBS) from the Finance Ministry is unlikely to meet all of Railway’s expectations, hence he has highlighted the need to depend on the External Budgetary Resources (EBR) for execution of capacity augmentation projects. LIC (Life Insurance Corporation of India) has agreed to invest Rs. 1.5 lakh crore over period of five years, and he is hopeful that other such projects can be executed through joint ventures with respective state governments. Co-operation between domestic players can be harder to achieve and manage, but it truly embodies the PM’s ‘Make In India’ vision by curtailing India’s dependence on international markets and circumstances.

Lastly, in addition to creating significant job opportunities through the implementation of the aforementioned projects, this year’s budget also supports ancillary business activity through the introduction of double-decker trains on business travel routes, and a special purpose vehicle built for the Ahmadabad-Mumbai high speed corridor. These initiatives buttress the government’s plan of furthering growth in the business sector, in addition to generating high revenues through increased fares of these special air-conditioned luxury trains.

Transparency and Regulations in Railways

Perhaps the most unique feature of this year’s budget is the government’s singular intention to introduce and enforce greater transparency within the railway sector. Prabhu’s pragmatic decision to create an independent railway regulator that decides tariffs and investment proposals is critical to winning the confidence of both domestic and international private investors who have previously been wary of corruption in government ranks. The Railway Minister is in the midst of finalizing the proposals for a proper overseeing mechanism and a draft bill can be expected after discussions with relevant stakeholders.

Accordingly, Prabhu has also encouraged the use of ‘social media’ to enhance transparency and access to citizens. This budget also aims to shift the entire recruitment process online to ensure greater visibility, transparency and fairness in the hiring process.

The minister has acknowledged the need to organize the Railways’ assets by en-cashing opportunities to monetize current assets. To this extent, the minister spoke about the creation of a holding company that will help to increase rail revenue by the right investments of its current assets, including the companies it owns. This clear, organized and transparent approach ensures that the Railways capitalize on all such opportunities that help to maximize revenue without burdening the end customer.

Safety, Security and the Environment

In his speech, Suresh Prabhu congratulated the Railways for a better safety record than last year (accidents are down 20% since last year), but added that more needs to be done. This year’s budget aims to eliminate all unmanned level crossings by the year 2020 and install CCTV cameras at all major stations through a phased approach.

The budget has also recognized the safety and security of women as one of its key goals: 33% reservation has been provided for women in the reserved categories in catering units, an All India 24/7 helpline number (182) has been launched for women to assault or harassment, and potential availability of baby food, hot milk and changing boards for young mothers has been announced in order to mitigate the difficulties faced by women travellers.

In the context of ensuring the safety of the planet, this budget has introduced several ground-breaking green initiatives including the installation of bio-toilets, LED lighting on stations, installation of solar micro-grids at remote railway stations, and timely energy audits that will help to check India’s carbon footprint.

Looking forward

This year’s pragmatic rail budget echoes the government’s intent to transform Railways as a crucial engine for economic growth that is capable of moving the nation towards a manufacturing economy. However, some questions about the feasibility and success of such cost-intensive projects loom large. Without a hike in fares, will the minister be able to justify the balance sheet of the railways, particularly in the face of a massive spending burden on account of 7th Pay Commission? The lower fuel cost and new sources of investments from private partners might help to alleviate some concerns, but would these adequately generate revenues of the order of Rs.1,84,820 crores, and increase the operating ratio to 92% as envisaged by the minister?

Overall, this year’s railway budget has plenty for everyone across all sections of society. The budget has potential to overhaul Indian railways through several small-stage and balanced reforms, rather than grandiose plans and enterprises. However, the fundamental challenge lies on the implementation-front, where the minister will have to walk a tight rope to balance finances with aspirations.

Sakshi Suri is a research intern at India Foundation. The views expressed are her own. 

~ By Kanchan Gupta

Hundred and twenty-seven people, innocent civilians, men and women, possibly children too, were massacred in cold blood in Paris on the night of Friday, 13th of November 2015 . Suicide bombers blew themselves up, terrorists with Kalashnikovs roamed the streets killing people at cafes, soccer fans at a packed stadium were targeted and the audience at a concert sprayed with bullets.

In separate messages, some of the grotesquely congratulatory, Daesh, or the Islamic State, has claimed responsibility for the multiple attacks in at least six different places in France’s capital city. Police have told media that eight terrorists died in the coordinated attacks: seven of them suicide bombers, the eighth a gunman with an assault rifle.

Many more are likely to have been involved. Some of the terrorists involved in the slaughter may have escaped, making use of the confusion and chaos. There would be others who provided logistical support. Hunting them down, smoking them out of the Muslim immigrant ghettoes that now dominate Paris’s suburbs would be like looking for a needle in a haystack.

Meanwhile, reports from Germany suggest Islamists in Ms Angela Merkel’s haven for Arab hoardes washing up on Europe’s shores could have been involved in Friday’s nightmare-turned-real. A 51-year-old immigrant was arrested by German police when they found his car packed with bombs and other weapons of death and destruction. Interrogation has revealed he was on his way to Paris.

If the German connection proves true, this won’t be the first time Germany is found to have nurtured, under its benign liberal gaze, Islamists on a terror mission. Many of the 9/11 mass killers came from Germany too. Clearly lessons that should have been learnt were ignored. Nobody tolerates Murderous Islamism like the liberal West, with Ms Merkel’s Germany showing the way.

Soon after he was evacuated from the stadium targeted by terrorists, where he was watching the disrupted soccer match, France’s President Francois Hollande was understandably enraged and horrified by the enormity of the crime and promised retribution. “We will lead the fight. We will be merciless,” he said, declaring a state of emergency.

On Saturday, addressing a shocked nation, he elaborated on that promise. Friday’s carnage was “an act of war.” The attacks on a stadium, concert hall and Paris cafe diners, he said, were “committed by a terrorist army, the Islamic State group, a jihadist army, against France, against the values that we defend everywhere in the world, against what we are: A free country that means something to the whole planet. France will be merciless toward the barbarians of Islamic State group. France will act by all means anywhere, inside or outside the country.”

Strong words.Very strong words, indeed. But it would be foolish to believe that the barbarians who plotted the massacre, the terrorist army, the Islamic State, are shivering in their baggy pants or looking for places to hide, cowering in fear. After being chased out of Sinjar by a determined Peshmerga force, they needed to demonstrate their might, and they have. First it was the twin suicide bombings in Beirut’s suburbs that killed 37 Lebanese, then the multiple attacks in Paris.

True, this is not the first time Europe is discovering the horrors of terrorism. In March 2004 Spain witnessed the Madrid train bombings that left 191 commuters dead. In July 2005 it was London’s turn when suicide bombers killed 52 commuters, targeting a bus and two Underground trains. In January this year Charlie Hebdo’s offices were attacked, killing 12 people.

In between we had the 9/11 attacks of 2001 that left 2,977 people dead as the Twin Towers were blown to smithereens. And there were the 2008 attacks on Mumbai, claiming 266 lives. There other attacks too. Killing a few here, another few there. In Pakistan, the incubator and cradle of jihadi terror, the safest of havens for terrorists wanted globally for crimes against humanity, 132 school children were shot dead in Peshawar, making not the least difference to its sponsorship of terror.

We can rail and rant. We can threaten to wage war. We can promise extermination. But all that adds up to a big, fat zero. The US-led War on Terror meandered into disastrous misadventurism to settle personal slight and scores. Washington’s hypocrisy did not end with unwarranted regime change in Iraq and unsettling Assad in Syria. It extended to mollycoddling Pakistan and gifting Rawalpindi’s military-ISI-jihad enterprise with arms and dollars.

Security experts (everybody is one) have been quick to point out that there are remarkable similarities between the bloodletting in Mumbai and Paris. If we look hard enough, there is remarkable similarity between all acts of terrorism: they are committed by terrorists.

The US and its European allies are welcome to believe otherwise, but there are no good terrorists and bad terrorists. Drawing such distinctions to further American and European interests cannot but rebound, and rebound with hideous consequences. There are no, you see, good kafirs and bad kafirs. Everybody, including believers who refuse to concede Islam faces a monstrous problem, is fair game for jihadis.

Mr Hollande would do well to pause and ponder as France and the civilised world grieve for those who died Friday evening. He must accept, as must Europe and America, that the West has utterly, totally, unquestionably failed to respond to the threat posed by Islamic radicalism, of which the Islamic State is a fearsome manifestation. The spurious air strikes at Islamic State targets by a bogus coalition are a telling example.

The world still awaits a Comprehensive Convention on International Terrorism. It cannot be decided upon because the Organisation of Islamic Countries won’t let terrorism be defined. Instead, they want the UN to mandate any criticism of Islam and Islamism as Islamophobia. Resolutions of the UN Security Council, especially Resolution 1373, are violated with impunity as the West twiddles it thumbs or, worse, turns an indulgent Nelson’s eye. Such is the determination to fight terror.

The world slept as Boko Haram let loose a reign of terror. The world slept as Israel was haunted by Palestinian terror. The world slept as the Islamic State went about recreating the Caliphate. The world slept as India was hit again and again, inflicted a thousand cuts by a terrorist state fattened on American dollars. The world slept as Islamism’s blood-stained crescent waxed and human values waned.

In recent times the world has woken up twice. First, when Russia’s President Vladimir Putin called America’s bluff and took the battle to the Islamic State’s doors. And now as France counts its dead. With such knowledge, what forgiveness?

Kanchan Gupta is a Senior Journalist. The views expressed are his own. 

(Disclaimer : This article first appeared in the Pioneer)

~ By Varsha Gupta

“The country’s first priority is generating employment for the youth of the country”, said Prime Minister Modi on 15 July 2015, at the launch of the “Skill India Mission”. The statement sums up the need of the hour, when almost 65 per cent of Indian population is below 35 years of age, which constitutes the potential workforce. The situation demands immediate action from the government to utilise this manpower to propel the economy to greater heights and not allow them to languish aimlessly, making them potential recruits for anti-national outfits. Skill India Mission, therefore, seeks to create “structures and mechanisms to nurture youngsters, enabling them to find employment” and to live a life of dignity.

The ambitious Skill Development Mission primarily aims to impart skills to more than 40 crore young people by the year 2022. It will not only make the youth capable of earning the bread and butter for their family but would also instil in them with a sense of self-confidence and respect, and would enthuse fresh energy into the country. The vision statement of the Mission quite aptly summarises its daunting aim which is “to create an ecosystem of empowerment by skilling on a large scale and speed with high standards so as to ensure sustainable livelihoods and to place India in the comity of front ranking entrepreneurial and innovative nations”.

Schemes under the mission

The Skill India Mission, launched under the leadership of Rajiv Pratap Rudy, Union minister of State (Independent Charge) for Skill Development & Entrepreneurship, introduces two major schemes.

The Pradhan Mantri Kaushal Vikas Yojana (PMKVY) is the flagship scheme that will be implemented through the National Skill Development Corporation (NSDC). It is the outcome-based skill training scheme which seeks to train around 24 lakh youths to enable them to earn their livelihood. Under this scheme, the trainees would be trained, assessed and duly certified as per international standards through various government approved industrial training centres, polytechnic institutes, schools and colleges. The successful implementation of this scheme would lead to the generation of new skilled workforce that would neutralise the excessive demand for manpower in the key sectors over the next five to seven years.

The second key scheme, the Skill Loan Scheme, will help the Indian youth to overcome financial hurdles in their training. The Government, under this scheme, would provide loan facilities ranging from Rs 5,000 to Rs 1.5 Lakh to the interested candidates who would express their interest to enrol themselves in the skill development programme. For the people who were not able to get the adequate training as per their interest due to financial burden, this initiative would act as a hopeful encouragement as they would now be able to overcome the burden with ease.

Other useful initiative launched by the government under the Skill India Mission includes “Udaan”. Udaan is a ‘Special Industry Initiative for Jammu & Kashmir ‘ that will focus on the enhancement of the employability of the unemployed youth of the region by providing them certified skill training from accredited training institutes. The implementation of this scheme would provide the much needed exposure to the unemployed youth of the State in leading companies, thus enabling rich talent of the State to compete in the corporate world.

Entrepreneurship

One of the most promising features of the Skill India Mission, the ambitious brainchild of the BJP-led NDA Government, is the provision of opportunities for entrepreneurship. The Modi Govt. has been successful in realising the fact that it is practically not possible to provide jobs for all. There is a dire need to turn some proportion of the skilled workforce into skilful entrepreneurs who would be then able to generate employment for others. The Prime Minister, in his speech at the launch of Skill India Mission, aptly said, “We want opportunities to increase. That is why we have not restricted ourselves to skills, we have focussed on entrepreneurship.” To do this, an entrepreneurship development scheme is presently being formulated by the Ministry of Skill Development and Entrepreneurship. This scheme will not only help in generation of new businesses but it will also smoothen up the process of starting new business ventures.

Make in India

The skill development schemes will compliment the other successfully launched programmes of Govt. of India like “Make in India”, “Digital India”, “Swachh Bharat Abhiyaan” and “100 Smart Cities”. These schemes, though would lead to a significant increment in the manpower requirement of the country, but these schemes would also lead to an increased demand of new skills. There will be a higher need of jobs like sweepers, welders, artisans, drivers, plumbers, security guards, cable operators, electricians, masons, mobile retailers, vendors, traders, etc. On the other hand, there will be the creation of new skilled jobs like social media planner, cyber-security officer, architects, transport planners, and many more.

Presently, only 4.69 percent of the total workforce of India is formally skilled which is considerably low in comparison with 80 per cent in Japan, 75 per cent in Germany, 68 per cent in the UK and 52 per cent in the USA. The implementation of Skill India Mission with its robust framework will bridge the gap between the workforce and the industrial employers. The mission will not only boost the employability and efficiency of the Indian youths but it would also enhance the economic growth in the companies. Moreover, the new highly skilled workforce would also encourage and invite international companies to set up their manufacturing units in India which would in turn generate new employment opportunities in the country.

Overview

In the coming years, India will face a huge demand for skilled manpower. Rudy pointed out that “The Infrastructure development industry alone would require more than 10 crore people over the next five years; clothing and textile industry would require 1.4 crore people; and building and construction industry, on the other hand would require around 3.5 crore skilled manpower.” This proves that India would soon be a dire need of skilled workforce and the government must fulfil it.

However, this would be a daunting task for the government as a number of challenges stand in the way of proper implementation of the Skill Development mission. Some of the major challenges in the current skill development framework include inadequacy of infrastructure, lack of certified trainers, lack of focus on the qualitative outcomes and lack of appropriate vocational opportunities in the present education system. All of these have to be countered keeping in mind the present situation of the nation and the future requirements with regard to skill development and entrepreneurship. The Skill Development Mission must stand to the test of implementation to make India “the largest provider of skilled workforce to the world”.

Varsha Gupta is a Research Associate at India Foundation. The views expressed are her own. 

~ By Bhushan Kumar

With a roaring lion in its backdrop, Make in India (MII) – one of PM Modi’s most ambitious program – was launched almost 10 months ago. Aimed at giving a thrust to 25 key manufacturing sectors (including automobiles and pharmaceuticals), MII has an underlying theme of promoting green and advanced manufacturing. Naturally, this entails a huge opportunity for job creation and skill development across these sectors and their allied industries. There has been a strong voice of support from various sections of the organized sector in this regard; however, things have moved at a snail’s pace and not much has been achieved on-the-ground in this direction over this period. Perhaps, looking at this program merely for improving India’s manufacturing methodologies could be myopic and limiting its true potential. Instead, MII’s true objectives have to juxtapose with India’s brand globally. MII has to be seen more as a ‘value chain management’ program than merely a mode for attracting further capital investment.

Manufacturing sector has always been an Achilles’ heel for the Indian lawmakers. From Nehru’s time of laying of industrial foundation to India’s decades of license-permit raj and Narasimha Rao’s era of liberalization, this sector has continued to be in a constant cycle of troughs and crests. Giving it a fresh lease of life after the demise of UPA-2 and with a view to make India the global manufacturing hub, PM Modi has tried to leverage on his experience of Vibrant Gujarat by unveiling the MII scheme. As mentioned elsewhere, this scheme is towards making the environment congenial for these sectors to flourish and take the next decisive step in improving their health. Strong and clear signals across the verticals of the Government and the bureaucracy have accompanied the implementation of the MII program. And the industry has responded equally encouragingly.

A series of organizations have publicly supported the cause and pledged their efforts to this goal. However, a past trend of such blink-a-miss show of hands provides fodder for the critics of MII. The Economic Freedom of the States of India 2013 report, put together by the Cato Institute and Indicus Analytic, estimated that the Indian average for what is basically a promise-to-projects metric comes out to about 6 percent: which means, that in the states evaluated in 2010-11, only 6 percent of all the amount promised actually turned into investment. Mere investment proposals or securing expressions of interest will continue to make hollow news headlines. What is it that can raise this realization rate to relatively acceptable levels, under the MII regime?

Perhaps the answer lies in the fair gap between the intention of the Government and the comprehension of the market players. The market players continue to believe that MII is limited to play of numbers on capital investment tables, and increasing the immediate job opportunities. This, in the author’s opinion is lack of foresight and discernment. What the Government intends through MII is not a mere increase in flow of capital investments into various greenfield and brownfield projects. Instead, the Government is concerned with creating a base, where the highest value addition happens within the geographical boundaries of this vast nation.

With a colonial hangover, India has over decades been a major exporter of resources. Having regard to the economics of value chain, it can be seen that India has always been at the losing end of this process. Taking a leaf out of China’s meteoric economic rise, Modi has clearly understood the dynamics in play on the global platform. With the MII programme in place, this Government intends to promote the adoption of various links of the value chain within India. Apart from enhancing the much needed foreign exchange reserves, it will contribute to the development of a very strong and dependable brand: India.

A question arises as to how a brand would be developed by mere vertical integration. Ask any of the India Brand Equity Foundation (IBEF) officials, and they will tell you that it is never about manufacturing alone. The answer can be sought by asking the markets for examples. Look at any of the large conglomerates in India (ITC, Mahindra) or across the world (ABB, Unilever), and one knows why India must replicate this across sectors to re-engineer its own brand. A Calvin Klein brand may get its products manufactured in the Asian countries, but it is the brand that enjoys the highest share of the value, in the entire process of manufacture.

It is exactly also the reason why a product ‘Made in USA’ or ‘Made in Taiwan’ catches more attention than ‘Made in India’, even two decades after economic liberalization. By creating a wide portfolio of value additions and ensuring highest standards in the manufacturing processes, a brand will have to be gradually woven in India’s economic fabric. In due course, there will be a noticeable upliftment of the entire industry, causing great benefits to its allied industries as well.

A growth in the vertical integrations will have far reaching consequences to allied industries, which play the role of the indispensable walking stick. Take for instance: an excellent initiative in this direction could perhaps be bringing the manufacturing of shipment containers to India (as was recently indicated by a senior government official). Currently, manufacturing contributes to 50% of India’s exports, and a smart investment in allied industries such as container manufacturing, will definitely help in retaining the value within the country leading to an overall economic boost.

Obviously, this solution is easier said than implemented. Sifting through the bureaucratic shackles and getting environment clearances are reasons for widespread angst.

To raise the turnaround ratio between promises and projects, and to cause a systemic change for achieving an economic freedom, an intense fervour is needed in this direction. If the Government intends to make even the actors at the bottom of pyramid active participants in this huge brand building exercise called MII, it must spread the intent of MII – and not merely limit itself to the operational implementation. India needs to build a brand that is not merely a product of a catchy design or logo, but a result of reliable and consistent value addition process.

Bhushan Kumar is a Young India Fellow (2014-2015) at the Ashoka University. The views expressed are his own. 

~ By Priyang Pandey

Black money is a term used for monetary transactions that evade taxation by avoiding the usual banking system; these transactions tend to create a parallel economy within the existing economic ecosystem. These transactions however do not contribute to the national income. As per reports, the size of India’s black money economy is estimated between 23 to 26 percent of the GDP. Black money being unaccounted becomes a major source of corruption and for many criminal and anti national activities including acts of terrorism, drug trafficking etc. Consequently, it poses a grave threat to national security. In view of this, large stockpiles of currency notes with private parties also enables anti-India powers to print fake currency notes and circulate them with impunity.

The NDA government before coming to power had come with a solemn commitment to fight the nefarious evil of black money. Consequently, in the very first cabinet meeting of the Government, an SIT (special investigation team) was constituted to look into the cases of black money stashed abroad in various tax havens. However, in addition to this, a significant step towards fighting black money was the introduction of ‘Prime Minister’s Jan Dhan Yojana’ (PMJDY), a financial inclusion scheme with a mission based approach for providing a bank account to every household in India. The scheme facilitated opening of bank accounts for marginalised sections of the society, who hitherto had no access to banking facilities.

As per the official data, the actual target achieved was much more than the set target of 15 crore accounts till 26^th January, 2015. PMJDY accounts   have been offered with the zero balance facility; but the excitement of new account holders turned this into a huge pool of Rs. 19,990.52 crore which by itself is a landmark achievement. PMJDY also offers a Ru-pay debit card to every account holder, this is to familiarise people with card transactions, so that more and more people use banking channels to make their routine transactions. Financial inclusion by all means is a significant step towards the full-fledged war against corruption and black money.

Curbing and eliminating black money needs strong political will power as well as a dedicated approach. There were many half baked steps taken by the previous Governments to contain corruption and act on the black money issue, but they all failed to attain their primary objective. There may have been many reasons for the failure, but there is a need to fight back with a target based approach. In the past many anti-corruption crusaders have talked about demonetising higher denomination currency notes, with the obvious intention of pushing people to use banking channels.  However, these steps were often opposed on the premise that the rural and marginalised sections of our society do not have access to banking channels. However, after the success of PMJDY, the government can intend to go ahead with the demonetisation of higher value currency notes, once people become more familiar with the modus operandi of their respective accounts. RBI has already taken the first step by demonetising currency notes printed before 2005. This will also prevent circulation of counterfeit currency, as most of the fake currency is printed in higher denominations, so as to make it economically beneficial. ISI has for long been printing fake Indian currency notes and this has been used to promote various anti-national activities within India.

PMJDY will also allow the government to pay money for various schemes run by the government, as well as for the subsidies, directly to the beneficiaries, thereby eliminating middlemen who by itself are a major source of corruption. Direct cash subsidy transfer has proved to be a major initiative to make the subsidy model leak proof, as well as to ensure that subsidies are not given to those who do not deserve.

Use of credit/Debit cards helps in making all cash transactions transparent. According to a survey, only 14 per cent Indians hold credit cards. Only 2 per cent spend more than Rs 18000 per month, this accounts for an average expenditure of around Rs. 350 per month per person. If these figures are correct, not more than 8 per cent of India’s income is spent through credit cards. That is too small a number to check black money. It is therefore necessary for the government to incentivise card and banking transactions, so that people are attracted to use banking transactions over cash. It is expected that with the help of the recently launched Digital India initiative, a majority of account holders will now have the facility of branch-free banking through smart phones.  With some added incentives, it should be feasible to raise the proportion of online transactions. Recently the government decided to waive off the taxes incurred on card payments at some merchant outlets as well as websites like IRCTC, this may well be considered as a small step towards incentivising card or cash-less payments. However, the government may need to reduce service tax from card transactions to make its usage more attractive.

Recently, the government also launched MUDRA Bank to facilitate the financing of micro units or small scale entrepreneurs. As per the NSSO survey, 90 per cent of the non agricultural jobs are created by these micro units and small scale entrepreneurs. By extending easy loans through last mile financers, which in most of the cases are commercial banks; unit holders can be motivated to use the banking route as the only mode for monetary transactions. This step will lessen cash transactions substantially and the activity of these unit holders will come into the account for GDP calculation through the banking system. According to various reports, the inclusion of these micro units and small entrepreneurs in the national income will result in an overall increase of at least seven to nine percent in GDP.

To sum up, Jan Dhan Yojana, which has been a successful tool of financial inclusion can be used to draw people away from cash transactions and towards usage of various banking channels. This in times to come can greatly reduce corruption. By demonetising higher value currency notes, the government can eliminate a huge proportion of Black Money stashed in various vaults, both in India and abroad. Government needs to utilise the ability of its newly constituted think-tank ‘NITI Aayog’ as well as other agencies to ideate and come up with more efficient utilisation of huge addition of new account holders to the banking channels and utilise this tool of financial inclusion to curb corruption and eliminate black money, which has a major evil for India.

Priyang Pandey is a Research Associate with India Foundation. The views expressed are his own. 

~ By Alok Bansal

Iran and six Western powers led by the United States reached a historic agreement on 14 July 2015. The agreement ends decades of Iran’s isolation, while significantly limiting Iran’s ability to produce a nuclear weapon. The deal clinched after 18 consecutive days of discussions, brought an end to the negotiations that were going on for last 20 months. The agreement has for the time being capped Iran’s capacity to acquire a nuclear weapon, without overtly denigrating Iran or hurting its national pride and dignity. It has been projected as the biggest diplomatic achievement of Obama Presidency and has enormous implications for the entire globe including India.

The agreement drastically reduces Iran’s stockpile of low enriched uranium for 15 years, by directing it to ship 98 per cent of its current holdings abroad, the most likely destination being Russia. In addition Iran has been asked to reduce its centrifuges by two third. These two actions will extend the time taken for Iran to make a nuclear bomb form two to three months at present to one year, should it decide to abandon the accord. The agreement based on verification, grants Iran sovereign rights to develop nuclear energy after satisfying the international community that it has no plans to build a nuclear bomb. Accordingly, there are no restrictions on Iran to produce nuclear fuel after 15 years and it can carry out research on advanced centrifuges after eight years. International Atomic Energy Agency (IAEA) safeguards will remain in perpetuity and so will be the verification process by IAEA inspectors on all the nuclear facilities of Iran. It has also agreed for the time being to a ban on designing warheads and carrying out tests with detonators and nuclear triggers that could lead to nuclear weapons in future.

The agreement will allow Iran to boost up its petroleum production and ameliorate the sufferings of its population. Consequently, there were jubilations on the streets of Tehran as soon as the news about the agreement was disseminated. Crippling sanctions had led to devaluation of Iranian Rial leading to massive inflation and shortages of essential goods including medicines. Ordinary citizens in Iran believe that the deal will create jobs and usher in better days. Iran has also been permitted to import and export conventional arms as well as pursue its guided missile programme, after five and eight years respectively. President Hassan Rouhani, who was elected in 2013 on an agenda of freeing Iran from sanctions, claimed that the agreement was the culmination of Iranian people’s prayers. There is no doubt that such an agreement was virtually impossible under the previous hawkish government in Tehran.

Iran was the second largest producer of crude before the sanctions set in and its return to the global petroleum market will result in lowering of crude prices. This will help to boost the global economy and be especially beneficial to the energy deficit developing countries like India. However, the biggest impact of this deal has been on the security environment and as expected there has been disquiet amongst the Arab regimes in the Persian Gulf as well as in Israel, whose Prime Minister has called it a ‘historic mistake’ that would create a terrorist superpower with nuclear weapons. An objective analysis indicates that this deal will enable the western world to collaborate with Iran and Iraq to take on the Islamic State (IS) as well as the Al Qaeda and its affiliates, which possibly pose the greatest long term danger to global peace an security. Thus the agreement has the potential to make the globe more secure and peaceful; in the process it could strengthen Bashar al Assad in Syria and Houthis in Yemen. However, it also gives an opportunity to bring in democratic reforms both in Syria and Yemen. This may upset some of the Arab states, who are known to propagate an extremist version of Islam and abhor secular and democratic regimes.

From India’s point of view, the agreement is extremely significant. India’s strained relations with Pakistan and China in the past, ensure that Iran provides the only access to Afghanistan and Central Asia. Geo-political imperatives of India mandate good relations with Iran if it wants to have any role in Afghanistan or Central Asia. In the past India and Iran have collaborated against Taliban in Afghanistan and may need to collaborate against the growing menace of IS and various affiliates of Al Qaeda. Iran also provides India the shortest access to the vast energy resources of the Caspian basin and the Caucasus region. The growing Indian economy not only requires the vast untapped markets of central Eurasian landmass, but also needs newer sources of energy supplies. In the past cooperation between India and Iran was severely hampered due to sanctions that were in force.

Iran possesses 10 per cent of world’s proven oil reserves and approximately 15 per cent of global gas reserves. Despite having the second largest reserves of natural gas in the world, Iran has not been able to exploit them optimally and thus its exports are fairly limited. There are therefore strong complementarities between India and Iran. Indian investment, technology and markets can enable Iran to develop its gas reserves, which could be used to quench the growing thirst for energy in India. Iran’s energy resources provide one of closest and cheapest energy resource available to fuel India’s growth and India has been considering North South Transport Corridor and Iran-Pakistan-India (IPI) gas pipeline to meet its energy requirements. After the agreement, India can look at this pipeline afresh to resolve its energy crisis. Iran also does not have adequate refining capacity and In spite of its enormous oil reserves, imports approximately one third of its consumption. On the other hand, India today has excess refining capacity and is a net exporter of petroleum products. Indian refineries in the private sector, which are unable to market their products locally, sustain themselves by exporting them to Iran. In the past, some of them had to curtail their exports due to sanctions; the agreement will provide a fillip to their exports to Iran.

As India has lot of stakes in the success of this agreement, it should actively work to ensure that the agreement succeeds. The agreement has a provision of re-imposing sanctions against Iran, if it violates the provisions. New Delhi must ensure that such a situation does not arise. Both Iran and the West trust it and it can therefore play the role of an honest broker. Similarly, the US congress dominated by the Republicans may vote against the deal, although President Obama has promised to veto any congressional opposition, it may be in New Delhi’s interest to use its newly acquired clout on the Capitol Hill to lobby for this significant agreement.

~ By Kanu Agrawal

‘Importance of Bilateral Investment Treaties’

In a fast paced, technologically driven globalized world, foreign investment plays a crucial role in the progress of most developing countries. The role of foreign investment becomes more complex, as it mostly takes place from ‘developed’ economies to the ‘developing’ economies. There are basic social, political and transactional differences between domestic investment and foreign investment, which provides the latter with increased scrutiny and attention. The basic jurisprudential point where the conflicts emerge are the methods through which foreign investment takes place and the control that the host-state wants to exert over the investors. The investors seek mechanisms to protect their investments and are reluctant to take the increased risks that come with bringing their resources in a legally and politically turbulent foreign country. To address such concerns, several mechanisms have been developed to reduce the uncertainties associated with investing in such countries by providing assurances and security to foreign investors. In fact the need to regulate trade and provide protection was what prompted the parties at first to enter into Bilateral Investment Treaties (BITs). These bilateral investment treaties are international contracts between two sovereign states where they guarantee each other protection of investments, fair treatment, mechanism to resolve disputes and the provision dealing with other technicalities like expropriation and repatriation.

When a dispute takes place between a developing nation and a foreign investor, the respective international investment tribunal, which derives its powers from the BITs, becomes the disputes resolvers. The International Centre for Settlement of Investment Disputes resolves disputes for most countries of Europe, South and North America and some countries of Asia; it was established through a special multilateral treaty between these nations. Although, India is not a party to the Convention establishing the Centre, its jurisprudence and membership is likely to become a bone of contention for India in the future.  Presently, the investor state tribunals concerning India gain legitimacy from the dispute settlement clauses in the BITs between the investor’s home state and India. These settlement clauses are inserted to provide protection to the investors in matters where the agreed economic standard in the BITs has been breached by the host country.

‘Model BIT and Negotiations’

In the modern era, the negotiations in entering new treaties happen on the basis of the Model BITs released by different countries. The Model BITs must be considered as the starting point for negotiations, based on which each country takes the deliberations further. The new Model BIT released by the Finance Ministry unsurprisingly makes significant departures from the principles enshrined in the earlier one, such as, to tilt the balance back in favor of securing India’s sovereign investment rights.

For the settlement of ‘investment disputes’ with a foreign investor, the new BIT provides for the establishment of an arbitral tribunal to be governed by the United Nations Commission on International Trade Law (UNCITRAL) model, but successfully protects the Indian judiciary’s turf by providing for the constitution of arbitral tribunal only after exhaustion of all domestic remedies, and with a prohibition that such a tribunal shall not review pre-decided judicial matters. The non-exhaustion of local remedies is one of the defining points, which protects the host nation’s sovereignty, with the basis argument being that a local legal system provides equality of treatment within the market and basically represents the risk a foreign investor shall take for seeking the enhanced profits as compared to its investment in its own state.

The new BIT makes a tectonic shift to an enterprise-based definition of investment by requiring a foreign enterprise to be constituted in India and to carry out ‘real and substantial operations’ along with employing ‘substantial number’ of employees in India with a long-term commitment of capital.

The Most Favoured Nation (MFN) clause, a creation of the developed countries which provides equal treatment to investors of a particular country in future in light of further treaties entered by the host country with other countries. On the face of it, the MFN clause seems be a novel and reasonable invention, but in practice it summarizes the biased regime and its one-sided direction. MFN clause proved a nemesis for the government in the case involving the White Industries o and Coal India.  An arbitral tribunal found the Republic of India guilty of violating the India-Australia bilateral investment treaty (BIT) and excluded tax dispute matters from its coverage.

 ‘Development’

There is one thing common in the Modi Government’s agenda and the debate surrounding the International Investment law experts, i.e., Development. Mr. Modi personally deserves a lot of credit to make the term an election agenda, which was a very welcome departure from the borderline communist and fundamentally populist election discourse in the country. While the term may understandably have varying political connotations depending upon on a party’s ideological affiliations and priorities, surprisingly, the term is quite an enigma even for legal experts.

Development as an international right has been frequently recognized in international human rights instruments, particularly the 1986 United Nations General Assembly Declaration on the Right to Development. While the justifiability of the right to development remains contested by governments and scholars, the binding quality of the right does not depend on its justifiability. There must be a necessitated push for the right to development, which would be similar to other international norms and must operate within the parameters of State sovereignty and investor protection.

The present regime of solving disputes between host nation and foreign investor represents an inherent disadvantage to the host nation and thus restraining these tribunals to take jurisdiction over the matter becomes imperative. ‘Development’ then becomes one of the most debated and contested criterion. The inclusion of development, even if not directly but through the inclusion of ‘real and substantial’ in the definition as a necessary criterion for any protection under the BIT is a much neglected but welcome move. The developing countries faction in the international investment dispute settlement regime have been fighting for this very provision for years and it represents the ideological central point of view around which debates take place around the world.

In conclusion, the new Model BIT is a welcome move and it would be interesting to see in which direction the Indo-US BIT moves, considering the renewed relationship and the diabolically opposite nature of the countries’ respective BITs.

Kanu Agrawal is a graduate of the National Law Institute University, Bhopal and is currently practicing law in Delhi. Views expressed are his own.

~ By Sanjay Paswan

The misplaced narrative being articulated by a section of the media and the intelligentsia on the effectiveness of the BJP led NDA Government in the Centre on the social sector front is indeed worrisome. By all means, the Government of India (GoI) is effectively exploring multiple facets of empowerment for the socially, politically and economically deprived sections of the society. This article makes certain observations about the steps taken by the present regime to achieve the pristine objective of social justice and holistic development of the last man in the village, which is reflective of the eternal commitment to the principles of Antyodaya.

Social Justice is a vital cornerstone of our constitution. Within the dichotomy of development and justice, one should not ignore the core responsibilities of the state. As far as development is solely concerned, non-state actors are sufficiently equipped with the resources and wherewithal to carry out developmental activities. Holistic inclusion can only be realized with the intervention of the state. It is here that there is an imperative need to revisit and rethink the role of the state. It is therefore opined that the State’s role is critical and should not be minimized. Disinvestment and abrupt privatization should be transparently debated and discussed as profit making and revenue generation leads to immense competition and ‘survival of the fittest’ syndrome. Socially, politically and economically deprived sections of the society may not be able to compete in the extremely demanding circumstances of the corporate world. Hence one of the paramount challenges is to create an amicable atmosphere to enable ease of doing business for these sections of the society.

The idea behind ‘Subaltern Entrepreneurship’ is to equip the subaltern skill base with the requisite support system comprising of financial and regulatory facilities. Through this article, the author recommends some ideas and suggestions to explore various avenues of empowerment beyond the conventional contours of the Constitution. One is aware of the fact that, government jobs are fast evaporating hence too much reliance on the government machinery might be a dangerous proposition. India has been traditional preservers of various skills such as shoe making, polishing etc. It is in the area of Skill development that one must evolve ways to match the existing skills sets amongst citizens with the ever increasing needs of the globalized world. It is also an appropriate time to think beyond redundant institutions such as National Scheduled Caste Finance Corporations etc. Policies facilitated by actions must ensure adequate representation of the weaker sections in co-operatives, corporates and civil societies through well-organized interfaces as well as through engagements at both institutional as well as at individual levels.

Financial inclusion or inclusive financing is the delivery of financial services at affordable costs to the economically weaker and the lower-income segments of society. True to this, GoI has taken several initiatives on the social sector front, all of which are potentially game-changers in the realm of social sector policy canvas. Right-based legislations initiated by the erstwhile regime have proved to be a nightmare both in vision and implementation. Hence, instead of lofty ideals, an actionable policy armed with inclusive growth is the need of the hour.

The key initiatives undertaken by the Union Government for social and economic security have been enumerated below:-

• Prime Minister Jan Dhan Yojana. This is a very significant scheme that strives to end Financial Untouchability by ensuring that the economically weaker sections have access to bank accounts.

• Expansion of Social Security Net. This has been achieved through Pradhan Mantri Suraksha Bima Yojana (Accident Insurance), Atal Pension Yojana (Unorganized Sector) and Pradhan Mantri Jeevan Jyoti Yojana (Life Insurance), which provide social and economic security to the marginalised sections of the society.

• Institutional Support for Subaltern Entrepreneurship. This has been achieved through MUDRA Bank, to provide microfinance to entrepreneurs in rural hinterland of India.

• ‘Venture Capital Fund for Scheduled Caste Entrepreneurs’. The objective of this Scheme is to promote entrepreneurship among the Scheduled Castes and to provide concessional finance to them. The scheme would be implemented by the Industrial Finance Corporation of India (IFCI) Limited for which Rs. 200 crores has been allotted.

• Credit Enhancement Guarantee Scheme for the Scheduled Castes: The objective of the Scheme is to promote entrepreneurship amongst the scheduled castes and to facilitate concessional finances to them. A budget of Rs. 200 crores has been allocated to IFCI Limited to facilitate the scheme.

• Swachhta Udyami Yojana: As an integral part of ‘Swachh Bharat Abhiyan’ launched by the Prime Minister on 2nd October, 2014, the National Safai Karamcharis Finance & Development Corporation(NSFDC) has launched a new Scheme ‘Swachhta Udyami Yojana’ on 2nd October, 2014 for financing viable community toilet projects and sanitation related vehicles to collect garbage.

• Green Business Scheme: The scheme has been Started by NSFDC, with the aim of promoting green businesses to support sustainable livelihoods of Scheduled Castes and Safai Karamcharis. Financial assistance would be provided for those economic activities that could address the challenges of climate change, e.g., E-rickshaw, solar pumps and other instruments working on solar energy etc.

• Sanitary Mart Scheme. Launched in 2014-15, under the scheme, loans are provided to up to Rs. 15 Lakhs to Safai Karamcharis for construction of toilets/bio-degradable toilets.

These schemes clearly highlight that the present government is committed to the cause of upliftment of Dalits and other disadvantaged sections of the population. As outlined, various landmark initiatives have been initiated under the present regime to eliminate poverty and empower the weaker sections of the society. In addition to this, there are several specific pointers which the GoI could keep in mind while formulating policies towards achieving holistic empowerment of the socially, politically and economically weaker sections of the society in the days to come. Some of them are:

• Democratizing Skill Development. Opening of Industrial Training Institutions (ITI) at block level. Presently, every district in the nation is mandated to have one ITI each for rudimentary skill development like plumbing, electricity, hardware etc.

• Credit Accessibility for ITI trained workforce for encouraging start-ups.

• Market Accessibility for the first generation of ITI trained entrepreneurs by ensuring backward and forward linkages.

• Bharatiya Dalit Bank on the lines of Bharatiya Mahila Bank can be created to ensure hassle-free access to financial services. Funds from Scheduled Caste Sub-Plan can be annually earmarked for the functioning of BDB.

• National University for Dalit Studies (N.U.D.S) – Centre of Excellence can be established for undertaking studies on different dimensions of empowerment.

• National Legislation to prevent the illegal diversion of funds from the Scheduled Caste Sub-Plan like the one in Andhra Pradesh.

Dr. Sanjay Paswan is a former Union Minister and member of BJP National Executive Council. The views expressed are his own