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The Economic Survey and a prelude to Budget 2021

Sanju Verma

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budget 2021
Budget 2021

Ahead of the Union Budget for 2021-22, the Economic Survey has batted for a continued expansionary fiscal stance by the Modi government to ensure that growth returns to pre-Covid levels. Further growth is likely as economic activities are looking to normalise sooner due to the mega vaccine rollout. The survey argues that rising public debt is not a cause of concern, as a higher GDP growth will lead to a fall in the debt-to-GDP ratio.

The need for a fresh asset quality review of Indian banks and greater focus on core inflation to drive policymaking instead of a sole focus on CPI inflation is warranted. The Economic Survey says that the new farm laws, which are being widely opposed by a few vested groups, will be beneficial for small and marginal farmers and herald a new free market era for Indian agriculture. The need to curb over-regulation, setting up a healthcare regulator, focusing on real and not “jugaad” innovation and emphasising exports in areas where we have a competitive advantage are the other key issues that the Survey highlights.

The Economic Survey also unleashes a scathing no-holds-barred attack on former RBI Governor Raghuram Rajan, who generously indulged in the infamous practice of “accounting sleight of hand” and evergreening of loans. The evergreening of loans, which was rampant during the inefficient Congress-led UPA-2 regime, happens when banks lend a new loan to a borrower on the verge of default near the repayment date of an existing/old loan to facilitate repayment of the old loan. Such transactions go undetected as banks are not required to disclose them, unlike restructurings that warrant disclosures. The decision on regulatory forbearance or allowing temporary suspension on loan repayments resulted in an increase in lending to unproductive firms, popularly referred to as “zombies”. The Survey said that the share of new loans to such “zombies” increased from 5 percent in FY08 to 27 percent in FY15, thanks to rampant transgressions by bankers under corrupt Congress dispensations. However, the Modi government decided to bite the bullet, reclassifying restructured standard advances as non-performing due to asset quality review (AQR).

In 2019-20 (FY20), the revenue deficit was 3.27 percent and fiscal deficit widened to 4.6 percent of the GDP. Fiscal deficit, which signifies the gap between government revenue and expenditure, was higher than the revised estimate of 3.8 percent for FY20. In absolute terms, total receipts of the government were Rs 17.5 lakh crore, against the estimate of Rs 19.31 lakh crore. The government’s total expenditure was Rs 26.86 lakh crore, lower than Rs 26.98 lakh crore projected earlier. This fiscal deficit is funded through government borrowing by issuing bonds. As of January 8, 2021, the Union Government has borrowed a total of Rs 10.72 lakh crore, which is 65 percent more than what it had borrowed in the corresponding period in FY20. The state governments have borrowed a total of Rs 5.71 lakh crore between April 2020 and January 2021, which is 41 percent more than the number from the previous financial year. The gross tax revenue earned by the government during the period between April 2020 and November 2020 fell by 12.6 percent, to Rs 10.26 lakh crore. This tells us that the fiscal deficit of the Union government for 2020-21 will be much more than the projected 3.5 percent of GDP and also higher than last year’s number of 4.6 percent. It should be closer to the 6-7 percent range. Is a higher fiscal deficit bad? No, certainly not under the current circumstances! In order to overcome economic challenges arising from the worst global pandemic seen in 102 years, and in the face of revenue shortfalls, most major economies and central banks have infused money by way of a fiscal stimulus, so a higher deficit is only natural. Clearly, it was a Hobson’s choice for the Modi government between growth and fiscal prudence. And it has chosen growth, and rightfully so, because a rising tide can lift all boats. A higher GDP can take care of a higher deficit eventually. Also, between FY15 and FY19, the Modi government did a stellar job in reining in fiscal deficit at sub 4 percent, with primary deficit (fiscal deficit minus interest payments) falling to as low as 0.3 percent in FY18!

One of the key economic achievements of the Modi government has been the victory over inflation, barring in 2020, when supply chain disruptions due to Covid-induced bottlenecks pushed inflation to over 6 percent for months together. However, retail inflation, measured by consumer price index (CPI) fell from 6.93 percent in November 2020 to 4.59 percent in December 2020, with food inflation also registering a sharp decline from 9.5 percent in November to 3.41 percent in December. Core inflation also eased to 5.34 percent in December 2020, as compared to 5.56 percent in November. In 2014-15, retail inflation was 5.9 percent; in 2015-16, it was 4.9 percent; in 2016-17, it was 4.5 percent; in 2017-18, 3.6 percent; and in 2018-19, 3.4 per cent. Under an inept Congress-led UPA-2, retail inflation in 2013 touched a back-breaking high of 12.17 percent, and food inflation a nasty 14.72 percent. The Economic Survey expects the Indian economy to grow by 11 percent in real terms (adjusted for inflation) during 2021-22 (FY22). This is great news as it implies that, in nominal terms, the economy is expected to grow by 15.4 percent during 2021-22, assuming underlying inflation at 4.4 percent.

The most important point in the Economic Survey is that the government has come in as the “spender of the last resort”, with government consumption in the second half of FY22 expected to grow by 17 percent, after contracting by 3.9 percent during the first half. On the other hand, private consumption, which forms more than half of the Indian economy, is expected to contract by 0.6 percent in the second half, after contracting by 18.9 percent during the first half. The big silver lining is that the pace of contraction in private consumption has slowed down significantly. For instance, the index of industrial production (IIP) number for October 2020 was revised upwards from a growth of 3.6 percent to a growth of 4.9 percent. The fact that the corporate capex cycle is turning around is evident from the excellent results shown by corporate India in the December 2020 quarter. For instance, public sector giant SAIL reported a profit of Rs 1,468 crore in the December quarter, versus a loss of Rs 344 crore in the same quarter last year. Infosys saw constant currency dollar revenue growth of 5.3 percent, sequentially, the best in eight years. GST collections rose to 1.15 lakh crore in December 2020, a jump of 12 percent over December 2019. Bank credit, as on January 1, 2021, is up 6.7 percent YoY, much better than the 5 percent odd number a few months back. The bounce back in credit growth is also evident from the excellent earnings reported by India’s largest private sector bank, HDFC Bank Ltd, which saw an 18 percent jump in profit and a 16 percent YoY rise in its loan book, to Rs 10.82 lakh crore. Deposits of the bank also grew by 19 percent YoY, to Rs 12.71 lakh crore, for the December 2020 quarter.

Of the major sectors, agriculture is expected to grow by a solid 3.4 percent in FY21. The interesting thing is that the share of agriculture as a part of the total gross value added, from 14.7 percent in 2019-20 (FY20), is expected to grow to 16.3 percent in FY21. Under the Modi government, India’s foodgrain production has been hitting new highs every single year in the last few years. From just 255 million tonnes in 2012-13, under an inept Congress regime, to 285 million tonnes in 2018-19 and 296 million tonnes in 2019-20, it is a vindication of how India’s self-sufficiency, with exportable surplus in the foodgrain space, has added to India’s economic heft.

Besides agriculture, a bright spot has been the foreign portfolio investments (FPI) amidst the pandemic, with December 2020 recording the highest-ever monthly inflow from FPIs at Rs 62,016 crore, surpassing the previous high of Rs 60,358 crore recorded in November 2020. The year 2020 also recorded the highest-ever yearly net inflow of FPIs into equities, at over Rs 1.70 lakh crore. Do note that the huge surge of FPI money into India in the last nine months is a vote of confidence from international investors for the Modi government’s structural reforms. As recently as March 2020, there had been a net outflow pegged at Rs 61,973 crore. Hence, the sharp rebound with which foreign investors have turned from being net sellers to becoming net buyers of Indian equities is another big positive. Not only FPI inflows but also foreign direct investment (FDI) into India has grown by 15 percent to $30 billion during the first half of the current fiscal, that is FY21, showcasing the attractiveness of India as an investment destination for long term sticky capital. Also, for the first time in 18 years, in FY21, the Modi government is slated to showcase a current account surplus (CAS) of 2 percent of the GDP, which is highly commendable. Don’t forget that, thanks to the gross mismanagement of our external finances in the December quarter of 2013, India’s CAD, under a lethargic and corrupt Congress-led dispensation, had risen to a precarious 6.7 percent of the GDP. For the fiscal year 2019-20, the current account deficit narrowed to 0.9 percent of the GDP, compared to 2.1 percent in FY2018-19, reflecting how the external management of India’s trade economy has always been exemplary under PM Narendra Modi’s government. In December 2020, while exports dipped by 0.8 percent YoY, imports rose by 7.6 per cent. Within imports, while oil imports fell by 10.37 percent, non-oil imports rose by a healthy 14.27 percent. Non-oil, non-gold imports surged by 8.42 percent, endorsing the fact that India’s current account surplus under the Modi government is due to better terms of trade and not merely due to declining imports, as alleged by naysayers.

Amidst the ongoing slew of positive data flows, one should not forget the stimulus of Rs 2.65 lakh crore under Aatmanirbhar Bharat 3.0, taking the total stimulus by the Modi government since the onset of Covid to Rs 29.88 lakh crore, which is akin to almost 15 percent of the GDP. The government’s contribution to the stimulus is 9 percent, with the remaining 6 percent coming from the RBI. It is true that the Rs 1.46 lakh crore expenditure in the form of production-linked incentives (PLIs) to ten new sectors will happen over five years. That said, there is no denying the fact that Aatmanirbhar Bharat 3.0 has, had, and will continue to have a multiplier impact on consumption, especially across stressed sectors, accelerate economic recovery and incentivise job creation through a virtuous cycle. The Modi government has already approved PLI schemes for three sectors at a cost of Rs 51,355 crore, debunking claims by the leftist cabal which falsely alleged that the government has been stingy in spending.

Earlier, the Rs 1.93 lakh crore allocated to the Pradhan Mantri Garib Kalyan Package (PMGKP), Rs 11.03 lakh crore allocated towards the Aatmanirbhar Bharat Abhiyaan 1.0, Rs 82,911 crore for the PMGKP Anna Yojana (which was extended till November 2020) and Rs 12.71 lakh crore infused via RBI measures, announced till 31 October 2020, did not only inject liquidity into money markets, but also increased purchasing power via direct benefit transfer (DBT), improved cash flows by recalibrating EMIs and provided access to cheap credit for MSMEs, migrants and farmers. Launched on June 1, 2020, applications received as of January 28, 2020, stood at over 33.22 lakh, out of which more than 18.21 lakh applications, involving Rs 1,817 crore, were sanctioned. Out of the sanctioned applications, nearly 13.63 lakh applications, involving close to Rs 1,344 crore, have been disbursed.

Since jobs have been at the forefront of every recent debate, the Modi government will provide subsidy for two years in view of the newly eligible employees engaged on or after 1 October, 2020 under the Aatmanirbhar Bharat Rozgar scheme, at an additional cost of Rs 6,000 crore. The overall allocation under this scheme is Rs 36,000 crore. Employee contributions (12 percent of wages) and employer contributions (12 percent of wages), totalling 24 percent of wages, will be given to Employees Provident Fund Organisation (EPFO) registered establishments employing up to 1,000 people. The 24 percent subsidy covers 95 percent of EPFO establishments. Those employing more than 1,000 employees would get only 12 percent employees’ subsidy. The addition of new employees would have to be above the base of September 2020 employee count. Also, if a company has up to 50 workers by the end of September, then it needs to create at least two jobs to become eligible for the EPFO subsidy and it will be an addition of “five new employees if the reference base is more than 50 employees”. New employees have been classified as those with a monthly wage of less than Rs 15,000, who have never been registered with EPFO earlier. But companies which hire workers who lost their jobs between 1 March 2020 and 30 September 2020, with a salary cap of Rs 15,000 per month, shall also be eligible for getting this subsidy. The Aatmanirbhar Bharat Rozgar Yojana will be operational until 30 June.

Moreover, Rs 73,504 crore have already been released by the Modi government for rural jobs under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS), leading to the creation of 251 crore man-days of employment. Rs 65,000 crore support for agriculture, in the form of fertiliser subsidy, Rs 18,000 under PM Awaas Yojana-Urban (PMAY-U), that will help 12 lakh houses to be grounded and 18 lakh houses to be completed, besides generating 78 lakh jobs, are all indicative of the Modi government’s commitment to empower weaker sections. An estimated increase in fertilizer usage of 17.8 percent, over the actual usage of 571 lakh metric tonnes in 2019-20, has also been noted. In 2016-17, the fertilizer consumption was 499 lakh metric tonnes, which is slated to rise to 673 lakh metric tonnes in 2020-21, showcasing how the rural growth story has had a big head start.

Again, Rs 10,200 crore for industrial infrastructure and domestic defence equipment, Rs 10,000 crore towards rural employment and Rs 6,000 crore for equity infusion in national infrastructure investment fund (NIIF)’s debt platform have been significant steps. NIIF’s debt platform has a loan book of Rs 8,000 crore and a deal pipeline of Rs 10,000 crore. NIIF and its investors/affiliates will raise a debt of Rs 95,000 crore from the market and will provide infra project financing of over Rs 1.10 lakh crore by 2025. NIIF funds have already invested in downstream funds and companies to the tune of Rs 19,676 crore, showcasing how infrastructure development is a continued focus area for the Modi government. Additionally, replacing earnest money deposit (EMD) with bid security declaration (BSR) and relaxing performance security fees on contracts, to 3 percent from 5-10 percent, should hasten project completion.

MSMEs have always been a focus area for the Modi government and the Emergency Credit Line Guarantee Scheme (ECLGS) proves this. ECLGS, for supporting stressed sectors, by giving collateral-free loans with a tenor of five years, including a one-year moratorium on principal repayment, is a clear example of how a targeted and calibrated approach is paying rich dividends. The eligible entities under this scheme are MSMEs, business enterprises, individual loans for business purposes and MUDRA borrowers. The Modi government has enabled the sanctioning of 71.3 percent of its ambitious Rs 3 lakh crore ECLGS for Covid-hit MSMEs and other businesses as of January 8, 2021. Under ECLGS 1.0, around 12 public sector banks, 23 private sector banks, and 31 non-banking financial companies (NBFCs) sanctioned a loan amount of Rs 2.14 lakh crore for 90.57 lakh borrowers, out of which Rs 1.66 lakh crore were disbursed to 42.47 lakh borrowers.

To fuel demand in the residential housing sector, the government has raised the differential between circle rate and agreement value, from 10 percent to 20 percent (under section 43-CA of Income Tax Act) for the period from the date of the announcement to 30 June, 2021, in the case of primary sale of residential units of value up to Rs 2 crore. A consequential relief up to 20 percent shall also be allowed to buyers of these units under Section 56(2)(x) of IT Act for the said period. Focus on the real estate sector is also evident from the SWAMIH scheme, where 135 projects with an outlay of Rs 13,200 crore have already been approved. This will result in the completion of 87,000 stuck houses.

Goldman Sachs recently revised India’s real GDP growth forecast to 13 percent in FY22 from the earlier 10 percent, while IMF revised its estimates from 8.8 percent to a solid 11.5 percent, for 2021-22. “When the world is in crisis, we must pledge—a pledge which is bigger than the crisis itself. We must strive to make the 21st century India’s century. And the path to do that is self-reliance”—this powerful quote by PM Modi sums up the ethos of Modinomics in more ways than one. The Union Budget is expected to carry forward this ethos of self-reliance and inclusivity, amidst a fluid global scenario that continues to battle deflation, a liquidity glut and negative interest rates.

The writer is an economist, national spokesperson for the BJP and the bestselling author of ‘Truth & Dare: The Modi Dynamic’. The views expressed are personal.

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Opinion

Direct Selling Rules: The return of the inspector raj?

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The one in a century catastrophe, the Covid-19 pandemic, has been a disruptor of businesses and a fuel to social imbalances. The Covid crisis has put a dent on the growth delta and has caused a tectonic shift in the fundamental functioning of the economic ecosystem. Priority consumer spending during the pandemic was a boon for the IT and pharma sector, however, it devastated the most labour intensive and consumer discretionary product industries, which together make up 30% of the total population and majority of the lower middle class. Worsening the fact is that 81% of the workforce in these industries are in the informal structure, often on daily wage with no job security. In the past few months, as the local brick and mortar businesses struggled to stay afloat, global e-commerce giants spread their reach across the urban & rural areas. As a result, over 7.4 million livelihoods are on a brink of a fallout.

The Direct Selling industry (where products reach consumers from their friends, neighbours of family-members who are direct sellers) offers livelihoods to millions, with no investment but time and effort, this is an industry that is now part of the socio-economic landscape of the country. According to the annual survey of IDSA, this industry is part of the global $180 billion industry, that has heavyweights like Amway, Herbalife and Oriflame from overseas, as well as Indian companies like Medicare etc. Pegged at a Rs 16,772 crore annual turnover in 2019-20, this industry has been struggling to find its place in the sun, due to the baggage of perception, when they are unfairly mistaken with Ponzi schemes. To be sure, it is a disruptive form of selling daily-use products, that has come under flak in many countries for the aggressive recruitment and sales pitch.

The industry which has been seeking regulatory clarity for over a decade, may finally see light at the end of the tunnel, as and when the Department of Consumer Affairs (DoCA) notifies Direct Selling Rules under the Consumer Protection Act 2019. 

In end-2016, the DoCA notified Guidelines for the Direct Selling industry, which were the result of an Inter-Ministerial Committee comprising Consumer Affairs, Finance, Commerce, Law, IT as well as Chief Secretaries of three States. Sixteen States notified these guidelines and Direct Selling found mention in the Consumer Protection Act 2019, along with e-commerce. These Rules are expected to strengthen consumers› interest, as well as to bring about regulatory clarity for the Direct Selling business in the country. On 30 June this year, DoCA put up the Draft Rules for Direct Selling on their website, giving until 21 July for stakeholders to send in their comments.

What’s interesting is that precise a decade since the first regulatory action threatened the very existence of this industry. In July 2011, the Oomen Chandy-led government in Kerala, was on the verge of shutting this industry down, as a few Ponzi scheme operators vanished overnight. In a classic case of let’s-throw-the-baby-out-with-the-bathwater, there was a move to shut down this industry, till intense industry interactions spread over three months, saw the State issue guidelines in September 2011. 

A perusal of the recently proposed Rules indicates that the industry will finally get what it has sought—total and complete legitimacy, but may push the industry toward a licence raj. If the Rules come out the way they are, each and every of the 7.4 million Indians will have to register themselves with the Department for the Promotion of Industry and Internal Trade. Industry associations representing this industry are of the view that this goes against the fundamentals of Ease of doing business, as this unprecedented step, will take this fledgling industry, back into the licence raj days.

In 2020, India jumped 14 ranks to 68th position in the World Bank›s annual report on the Ease of Doing Business (EODB). This was owed to an increased penetration of digitalisation, simplified IBC norms and narrowing of the registration windows. However, in reality, these advances are limited to medium and large enterprises and often does not touch the small business who are majorly unorganised but employees the maximum unskilled workers. India can achieve true ease of doing business only when a person, even with no formal education, can ideate and execute a business within a viable period of time. However, the recently passed Direct Selling Rules can act as a major deterrent in achieving this goal.

Even though the Indian government was finally able to recognise the industry, but the strict norms of registration may demolish the flexibility of the system, which gives the industry a major leverage. Our neighbouring countries, although were before the time in their regulations, however, they maintained the sanctity of the industry functioning. The Direct Sales and Direct Marketing Act 2002 of Thailand, the Multi-Level-Marketing Supervision Act 2014 of Taiwan, the Door-to-Door Sales Act of South Korea not only recognised the industry but also allowed generous slack in the system.

The implementation of the Direct Selling Rules will act as an inflection point in the growth trend of the industry. However, If the government wants to promote entrepreneurship at the grassroots level, the current norms of direct selling need to be amended and the direct selling business should be made reachable to the lowest income strata and women, which currently constitutes 74% of the total people involved in the industry. We hope with dialogue and actions we can resolve the only point in this revolutionising regulation.

Rajesh Mehta is a leading consultant & columnist working on Market Entry, Innovation & Public Policy. Uddeshya Goel is a financial researcher with specific interests in international business and capital markets. The views expressed are personal.

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Opinion

SECRETARY BLINKEN HAS A GOOD VISIT TO INDIA

Joyeeta Basu

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US Secretary of State Antony Blinken would have won many admirers for himself and his administration in India for the sincerity and seriousness with which he handled the question on the state of India’s democracy during the press conference he addressed in New Delhi on Wednesday, along with External Affairs Minister S. Jaishankar. In a ringing endorsement of Indian democracy, he described it as “a force for good”, while pointing out “that every democracy, starting with our own (the United States), is a work in progress”. He said when he discusses these issues, he does it with “humility” and added that “as friends (India and the US), we talk about these issues, we talk about challenges we face in renewing and strengthening our democracies. Humbly we can learn from each other. No democracy regardless of how old or large has it all figured out.” This is exactly what India has been saying—that no democracy is perfect, that they are a work in progress, but it’s ultimately the people of a democracy who make it great and there is no dearth of that “quality” in this country. Or as Secretary Blinken put it, “Like our own, India’s democracy is powered by its free thinking citizens.” That there was not even a whiff of “lecture” in his statements would have reassured many observers of India-US relations, who were worried that Blinken would give legitimacy to the spurious narrative of “backsliding of India’s democracy” being peddled by the mainstream western media, and a section of activists and analysts. During the press meet, Dr S. Jaishankar made it clear that India’s policies of the past few years came in the category of righting historical wrongs and that freedoms did not mean non governance and lack of governance. It appeared from Secretary Blinken’s statements that there was a realization of India’s position. Hence, his statements will go a long way in building trust between the two countries. It is also hoped that this will force the woke-Wahhabi public pushing the concocted narrative, to fall silent and concentrate on a matter that is of actual concern—how to prevent the takeover of the civilized world by a malign power.

As EAM Jaishankar pointed out, India-US relations have undergone major transformation—for the better—in recent years and have advanced to a level that enables them “to deal collaboratively with the larger issues” of Indo-Pacific, the Quad, climate change, tackling Covid-19, as well as regional problems such as the Af-Pak. The centrality of China in all these spheres cannot be ignored, not even in climate change—it emits nearly 28% of the world’s greenhouses—and now increasingly in Afghanistan. The day Blinken was in India, the Chinese were hosting the radical extremists of Taliban in Beijing. China hopes to extend its sphere of influence in Afghanistan by facilitating an armed takeover of Kabul by the Taliban. In such an eventuality, Afghanistan will descend into chaos and slide back into the medieval ages, with all gains made in the last 20 years lost. The human cost will be too high, apart from the strategic and economic costs for both US and India. Afghanistan does not have any option but to continue with a democratically elected government in Kabul. As EAM Jaishankar pointed out, peace was a priority in Afghanistan and there was more convergence than divergence between India and US on this issue. But peace is one commodity that the Taliban cannot guarantee and in this context Secretary Blinken’s clear condemnation of the Taliban was important, especially when Washington has allowed itself to believe that the Taliban will keep its end of the peace-bargain and not aim for a hostile takeover of Afghanistan. Blinken was categorical that taking Afghanistan by force was not the path that the Taliban should pursue and that the peace process must be Afghan-led and Afghan-owned. However, this is easier said than done, and now that China is joining hands with these dangerous extremists and terrorists, it will have to be seen whether US action will go beyond lip service and what role India can play to bring peace in Afghanistan.

On the Quad, Blinken pointed out that it was not a “military alliance” but was meant to work on regional challenges, including vaccine production. It seems that both India and US are wary of antagonizing China, knowing its sensitivities about the Quad, which is perceived to be an anti China grouping. But if it is not a military alliance, in which category do the military exercises of the Quad countries come? Given China’s aggressive nature and its dream of world domination as an imperialist power, sooner or later the Quad will have to develop into a security alliance. And in this, US and India will have to work hand in hand. After all, one of the defining partnerships of the 21st century—India-US—also has a well-defined enemy

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Opinion

Hardball diplomacy needs hard power

To defend the Indian Ocean and the Himalayas, and to play a prominent role in the Indo-Pacific and have a seat on the global table, India has no alternative but to achieve sophisticated high-level economic growth through its manufacturing and technological muscle.

Narain Batra

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In spite of the fact that service and consumer economy has been a major contributor to India’s GDP, it’s not good enough to meet the rising aspirations of the high-tech digital generation; nor does the service economy enable India to face the complex challenges of national defence, diplomacy, and international trade. Service economy does not create muscle power.

Tourism, call centres, delivery services, public education, and healthcare, etc, are very important, in fact indispensable, for the general welfare and prosperity of the people; but the Aatmanirbhar Bharat needs a strong and diverse technology and manufacturing base that can raise companies like Huawei, Samsung, and Taiwan Semiconductors Manufacturing Company (TSMC), for example.

Japan, South Korea, Taiwan, and later China grew their economic strength out of manufacturing, and the push to meet global standards made them exporting juggernauts. China’s share of global manufacturing is 28.7% compared to India’s 3.1%, according to Statista (2019). By and large, it’s manufacturing that enabled China to lift 850 million people out of extreme poverty since Deng Xiaoping opened up the country to the outside world. The Belt and Road Initiative rose out of its “Made in China” manufacturing might.

Without a vast, diversified and sophisticated manufacturing & industrial base, India would be always looking for the next generation of French Rafale jets or Russian S-400 missile system. And keep enviously looking at China’s Mars rover Zhurong and fearing its next move in the Himalayas.

India’s has the potential to, and must, become a globally competitive manufacturing and exporting colossal; and in the process, apart from absorbing surplus farm labour due to increasing agricultural mechanisation, it would create high paying jobs by utilising the brainpower of 1.5 million engineering graduates it turns out annually from its more than six thousand engineering and technology institutions. Hardly 20 percent get jobs for which they have been trained.

Manufacturing challenges scientists, engineers, and technocrats to keep developing new technologies and products through R&D for which there’s no end state. There’s always a new product to be developed to meet the competition. A culture of innovation and zero-defect perfection begins to develop in society. 

Last year, a McKinsey Global Institute report, India’s Turning Point, posited that by 2030 India would need to generate at least 90 million new nonfarm jobs. Therefore, in order to “capture frontier opportunities, India needs to triple its number of large firms,” which numbering about 600 “account for almost 40 percent of total exports, and employ 20 percent of the direct formal workforce.”

Large companies (over $500 million revenue) are more innovative and productive than small or midsize firms. India needs to shed its socialistic-era fear of private sector big corporations, which must be allowed to become the engines of growth and high-paying employment. That said, in comparison with their corporate peers in major Asian economies, “India’s large firms have also not achieved their productivity or profitability potential,” according to the report.

India’s private sector needs more global exposure. Excessive protectionism diminishes competitive spirit and the need for innovation. Creative destruction is sine qua non for a free marketplace economy.

An atmosphere of intense marketplace competition, challenge and response, and struggle to scale up or perish must be created so that only the most efficient and best performing firms survive. The government’s recent decision to privatise more than 300 Public Sector Undertakings is a step in the right direction because it would open up huge spaces for the private sector to expand, compete, and innovate as well as create tremendous investment opportunities for Indian and global players.

To accomplish these goals India needs a new political-economic paradigm under which the Central government, the states, and the business sector need to be partners for economic growth. In the wake of the Covid-19 pandemic, the public-private sector cooperation has become absolutely essential as it is happening in the United States where the Biden government has stepped up to support critical industries from vaccines to advance manufacturing, space, and semiconductor chips. China, of course, has always supported its strategic companies, financially and diplomatically, to help them expand globally of which Huawei is a supreme example.

Being a democratic country, India cannot cherry-pick any particular company for the fear of crony capitalism; but it must select critical export-oriented manufacturing sectors for its “Make in India” programme and support them financially and diplomatically. Today exports need diplomatic support.

It is important to keep in mind that an exporting nation is diplomatically a stronger nation. International trade and commerce create diplomatic leverages, apart from spreading the nation’s culture. To have a global market share, a company has to be constantly innovative and price competitive, which in turn also helps the consumer at home. The United States, the European Union, and now China use their trading powers to advance their diplomatic goals.

Not least, to defend the Indian Ocean and the Himalayas, and to play a prominent role in the Indo-Pacific and have a seat on the global table, India has no alternative but to achieve sophisticated high-level economic growth through its manufacturing and technological muscle. Hardball diplomacy needs hard power.

Narain Batra, the author of ‘The First Freedoms and America’s Culture of Innovation’, and the forthcoming ‘India In A New Key: Jawaharlal Nehru to Narendra Modi’, is a professor of communications and diplomacy, Norwich University, Vermont. The views expressed are personal.

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Opinion

RADIA, PEGASUS AND BEYOND

Priya Sahgal

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Why has the Pegasus snooping scandal not created the same amount of buzz as the Radia tapes? Well, the obvious reason is that the Radia tapes actually had transcripts of alleged conversations (later, some were found to have been manipulated by FBI forensic experts). The Pegasus list so far is just that, a list of names alleged to have been snooped upon but no transcripts of conversations that took place. The second reason of course is that unlike the BJP which played up the Radia tapes to the hilt alleging that UPA was one big nexus of corrupt Luytens’ Delhi “privilegentia” that fixed ministerial appointments, the Congress has not been able to get the same kind of mileage out of the Pegasus list. Even though the firm that owns Pegasus NSO has confirmed that it sells its snoopware to only governments or vetted government agencies. That does give rise to a concern that if the snoopware was misused against Indians and it wasn’t by our own people then surely the Government of India should be worried as to which enemy state was spying on us? The fact that the only denial so far has been that there was no ‘unauthorised’ use of the snoopware has not reassured those whose names are on the list.

But already the government has moved on to other business. And so has the rest of Parliament, including the Congress. Rahul Gandhi, for one, does feel that the issue needs to be played up; he is leading from the front on this one, holding an impromptu press meet outside Parliament to highlight his concerns. But others in his party feel that the issue is not emotive enough to reverberate outside the capital. There is a feeling that everyone does it so what is so new about the Modi government doing the same, if indeed it did deploy the snoopware as is being claimed. Even if this was the case that “every government” has done this in the past, it has had a catastrophic impact on some of the governments accused. From R.K. Hegde to Chandrasekhar, several leaders lost their governments on such allegations. Even the UPA was affected by Radia tapes. But from the Opposition’s point of view, the Pegasus allegations have failed to make a dent on the Modi government. This has led a rethink within the Congress on whether to stay on the issue or raise something more emotive such as the economy, rising fuel prices and the contentious farm bills. This had Rahul Gandhi driving a tractor to Parliament to protest against the farm bills as well.

The issues raised by the Pegasus revelations are grave enough to have the French and Israeli governments institute an inquiry. What if they turn up something awkward for the current government? Will the government be under global pressure to react, for unlike the Radia tapes this is not confined within India›s borders? While the Pegasus scandal may not have the impact the Opposition would have been hoping for, the last word on this is not out yet.

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Opinion

Iron birds in grey skies: Age of drones

A forward-looking, harmonised and appropriate legal framework must be put in place to harness the benefits of drone technology, while protecting the common citizen from its illegal and criminal use.

Brijesh Singh and Khushbu Jain

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As fireworks lit the sky for the opening of the Tokyo Olympics, something magical happened: A fleet of 1,824 drones in the air formed the official symbol of the Tokyo Games; the display then transformed into the Earth with coloured maps of continents. This heavenly performance was orchestra to the score of Imagine by John Lennon (reworked).

The drones utilised Intel’s “Shooting Stars” platform, and displayed the unprecedented power of the advanced technology with a breath-taking spectacle like none before.

The global commercial drone market size has been valued at $13.44 billion in 2020. Expected to be galloping at a compound annual growth rate (CAGR) of 57.5% from 2021 to 2028, the Covid-19 pandemic has accelerated this growth rate with a considerable increase in the utilisation of drone technology across various scenarios. UNICEF has said that more than eighteen countries have deployed drones for delivery and transportation purposes during the pandemic.

The terrorist organisation ISIS has been using drones for warfare and has posted videos from its successful hits online. The US government has been successfully using Predator drones to take out high value terrorist targets in Pakistan and Afghanistan. Recently the terrorists in Jammu and Kashmir upped their game by attacking an Indian Air Force technical airport with drones on 27 June, increasing instances of use of drones by anti-national elements and terrorists are being noticed causing widespread concerns.

UTILITY

The Drones have umpteen applications, some of which we have not yet envisioned.

Replacing hazardous works such as climbing tall structures, inspecting confined areas and traversing dangerous terrains. They are helping save lives during search and rescue efforts and are optimising energy production and delivery.

1.     Enforcement: The drones are an important enforcement tool been used by the police in search and rescue, identification of victims, monitoring, analysis, and management of road traffic, or for monitoring pedestrian behaviour and accident prevention, to deal with illegal immigration, for border surveillance. In some US states, the police use drones for crowd control, in accidents, crime tracing, for the monitoring of crime suspects, and in search and rescue operations.

2.Commercial: As compared to on-ground vehicle deliveries, drone deliveries are more environmentally friendly and companies are drawn towards preparing themselves to offer drone delivery services. Some examples among others are Amazon and Google. 

3.Environmental Protection: Another crucial and effective role of Drones are in protection of the environment, enforcement of environmental law and environmental crime prevention. In Africa drones have been used to deal with illegal poaching, which threatens the extinction of mammalian species, while in Italy, the police launched the “DroMEP” project, which involves the use of drones in environmental monitoring. Apart from Forest Monitoring, illegal logging, deforestation, and smoke detection to prevent forest fires, small drones can be used for low-cost data collection for biodiversity, natural disasters, and wildlife monitoring and assessment.

4.Agriculture: Agriculture has been most benefited from the usage of drones for different applications such as: mid-season crop health monitoring, irrigation equipment monitoring, and midfield identification. Data acquisition and analysis and for continuously monitoring fields for learning and developing modern farm management skills by the farmers.

5.Health and public: Low-cost drones with a camera on board have been used for public health purposes by detecting water spots to reveal mosquito breeding areas responsible for malaria. 

6.Healthcare Logistics: Drones are facilitating the much needed requirement of modernising the last mile in medical deliveries and bridging gaps in access by providing regardless of location—just in time resupplies of key medical items.

In recent times, drones for healthcare have witnessed a range of landmark moments.

A.    In India, Medicine from the Sky, a World Economic Forum initiative in partnership with the Telangana government and Apollo Hospitals, has also helped enable and scale drone-based medical deliveries in the region.

B.     University of Maryland drone delivered a kidney that was successfully transplanted into a patient suffering from a serious neurological condition, the first ever drone delivery of a human organ.

C. In Rwanda more than 13,000 deliveries have been done by Zipline drones demonstrating their humanitarian potential.

D. Outside of Kigali, drones now carry 35% of blood supplied for transfusion.

E. In Ghana delivery of Covid-19 testing materials.

Globally, every state is acknowledging the use of drone technology as the need of the hour. India with vast and equally difficult geography and wide-raging healthcare disparities need to incorporate drone delivery solutions on a much larger scale.

TECHNOLOGY

Ranging from Boeing’s Phantom Eye with a 150-ft wingspan that cruises at 20,000m for days together to small hummingbirds, drones come in all shapes and sizes. Airplane-like with fixed wings, Helicopter-like with rotary blades, or balloon-like and insect or bird-mimicking devices.

There are different categories of drones, drones with different weights, control systems and else. They can be remotely piloted via a communication link from a ground station, with a smartphone, or utilise satellite communication; they can even be autonomous. Their speeds may vary from static hovering to more than 1,000 km/h. Drones can have varying flight ranges and endurance, from a few minutes to even months. They have evolved to use different power sources, including solar energy. Furthermore, they utilise different lift technologies from fixed wing drones which can take off in the same way as aeroplanes, to other types that can be launched through a rocket or catapult or even by hand; there are some which take off vertically using multi-rotor and helicopter type blades, the variety is immense and mind-boggling.

REGULATION

When an emerging technology does not fit neatly within a pre-existing regulatory scheme, regulators have the difficult task of creating new rules that do not conflict with existing ones. In the absence of an established record of risk assessment data, regulations of new and emerging technologies are largely based on ethical considerations, perceptions of risk, or their potential impacts. This is the case with regard to unmanned aerial vehicles, more commonly referred to as drones, and the potential threat they pose to manned aircraft and persons on ground. The Ministry of Civil Aviation recently released a draft policy for drones titled Drone Rules 2021 which will replace the Unmanned Aircraft System (UAS) Rules 2021, which came into force in March this year. The said policy focuses on more safety features and aims at addressing the concerns of India’s nascent unmanned aerial vehicle (UAV) such as self-certification, and non-intrusive monitoring, reducing the number of approvals required by applicants. From 25 the number of forms required are reduced to 6 with reduced fees for certain approvals. The draft policy also makes a push for ‘Made in India’ technologies, includes exemptions for research and development (R&D) activities, and envisions a drone trade body. On the aspect of safety—the policy proposes mandatory safety features like ‘No permission—no take-off’. It also mandates for drones to be equipped with a real-time tracking beacon and geo-fencing. This technology ensures safety as it will help in triggering real time alerts if and when the vehicles cross a certain boundary which are prohibited or under exempted list. The existing drone owners who don’t have these installed, will have to incorporate them within six months of the rules coming into effect. Interesting aspect introduced in the draft rules are provision for promotion of adoption and use of drones by creating a Drone Promotion Council which will facilitate:

(a)  development of a business-friendly regulatory regime, including automated permissions;

(b) establishment of incubators and other facilities for the development of drone technologies;

(c)  involvement of industry experts and academic institutions in policy advice; and

(d) organising competitive events involving drones and counter-drone technologies.

 The new rules also provide for classification of drones based upon the maximum all-up weight including payload which remains unchanged and are as under:

(a)  Nano drone: Less than or equal to 250 gm;

(b)  Micro drone: Greater than 250 gm and less than or equal to 2 kg;

(c)  Small drone: Greater than 2 kg and less than or equal to 25 kg;

(d)  Medium drone: Greater than 25 kilogram and less than or equal to 150 kilogram;

(e)  Large drone: Greater than 150 kg.

The draft rules are open for public suggestions until 5 August, 2021.

DRONE FORENSICS

The INTERPOL has recently issued a detailed ‘Framework for Responding to a Drone Incident’ which provides guidelines for First Responders and Digital Forensics Practitioners on how to respond to a drone incident.

Once a drone is captured there is an opportunity to collect a wide range of forensic evidence. This may include the serial number of the frame of proprietary drones, which can lead to the person who purchased the machine, to physical cues like fingerprints of the pilot or other ground crew who put it in the air or handled its operations. It may also have connected devices that store data in an SD card and can be used as forensic evidence.

A camera onboard can be a source of rich information for investigation; other than the stored data, the recorded footage might contain not only visual information but metadata in the form of EXIF data. Exchangeable Image File Format (EXIF) is a standard that defines specific information related to an image or other media captured by a digital camera. It is capable of storing such important data as camera exposure, date/time the image was captured, and even GPS location.

 Analysis of electronic evidence for forensic purposes consists of discrete stages such as acquisition, examination, analysis, and presentation. Throughout the process, the chain of custody of the evidence must always be updated whenever it changes hands and its integrity must be secured at all times. 

There are two primary sources of evidence in a drone related incident viz. The Drone, and Drone Remote Controllers (RC.)

Data on drones can include the one stored on different data storage mediums, including the drone itself, removable storage mediums, mobiles devices, the cloud, and so on. In addition, there is important residual data held on the drone RC which includes: (a) Telemetry data related to the drone’s flights such as GPS, (b) Velocity, (c) direction, (d) altitude, (e) motor speeds, (f) Time and Date (from GPS signal), and (g) user inputs.

Then maybe Associated Devices that have been paired or connected to the controller such as a mobile handset or tablet. Which can provide IMEI of the handset or unique hardware ID of the device.

Additionally, it may hold important information about Registered User Accounts containing email address or registered account name that has been created with the drone manufacturer.

Communication logs would contain signalling data which logs the signal strength between the drone and the RC. These and other related artefacts can be of immense importance interesting the origin, motive targeting and tradecraft of the adversary.

CONCLUSION

Law has a tightrope to walk, on one hand it has the task of adapting and rising up to ever-changing technologies, on the other, not to be a hindrance to innovation and growth.

The future is a grey sky filled with iron birds, which will be doing almost everything, from surveillance to saving lives and assisting with pest control to cleaning oceans.

Criminals, terrorists and disruptive elements will not be behind too; from contraband transport to targeted assassinations, attacks on critical infrastructure to dissident protests in the sky, and violation of individual privacy to advanced cybercrime, drones will be used by adversaries to the fullest.

It is, therefore, imperative that a forward-looking, harmonised and appropriate legal framework is put in place to harness the benefits of this wonderful emerging technology, while protecting the common citizen from its illegal and criminal use.

Brijesh Singh, IPS, is an author and IG Maharashtra. Khushbu Jain is an advocate practising before the Supreme Court and a founding partner of law firm Ark Legal. The views expressed are personal.

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CONCOCTED NOISE ON HUMAN RIGHTS CANNOT STALL INDIA-US PARTNERSHIP

Joyeeta Basu

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US Secretary of State Antony Blinken is all set to visit India this week, during which he is expected to discuss the Quad—specifically how to counter the threat posed to the world by China—the situation in Afghanistan and the terrorism emanating from Pakistan. However, a State Department spokesperson’s statement that Blinken will also raise human rights issues with New Delhi, has got people of the woke variety excited, without realizing that at best any such talk will be a sideshow, a token mention under pressure from lobbies, some of which are even backed by Pakistan and China. The focus will be primarily on countering China, and India’s role in this scheme of things. Amid the cacophony over human rights, it must be pointed out that India has never claimed to be a perfect democracy. India is as flawed or as “perfect” as any other major democracy. Nothing has happened in the last seven years of the Narendra Modi government for India to be losing its democratic values. The whole issue is political, where a narrative of intolerance and authoritarianism has been spun for the last seven years by the “entitled”—and their ecosystem—who have been tossed out of the power structure and have become increasingly irrelevant. In fact, the power structure itself is more democratic now because of the wider representation on top from those outside of the “entitled” zone. The citizens of this democracy are as powerful as ever in exercising their will, and know how to keep their rulers under check. Institutions too are resilient enough to correct the excesses. The flaws are, of course, innumerable, but then which democracy is perfect? The American version, with its difficult race relations, its BLM riots, its mess of an election process which leaves millions feeling disenfranchised, its President’s refusal to hand over power even after losing an election? Hence, the picture being painted globally by mainstream foreign media—severely burdened by its left-liberal baggage—and some foreign policy analysts, with active help from some of those from inside this country itself, is a caricature of the ground reality. Add to this the fact of the rabid Left joining hands with the Wahhabis in the US, a manifestation of which are the so-called Progressives in American politics, and we have the concoction of a narrative whose ultimate goal seems to be ensuring a regime change, disregarding the verdict of the people in the world’s largest democracy.

The consensus in India is that Blinken will make a huge mistake if he barks up the “human rights” tree. Lecturing will not be tolerated. The backlash will be severe to the unfair criticism, jeopardising India-US strategic partnership. This is exactly what the Chinese want, to drive a wedge between the two nations. However, there is no reason to believe that he doesn’t understand that, whatever be the Democratic Party’s domestic compulsions, where the radical Left-Wahhabi fringe is threatening to become mainstream. The US recognises the threat that China is to the civilized world and the need to contain it. In fact, to come across as tough on China is excellent domestic politics for Joe Biden, given the negative sentiments in his country about India’s neighbour.

Considering Xi Jinping’s dangerously aggressive overreach, where he wants to be the emperor of all that he sees, military means may be the only way of containing him. So a conflict is likely, sooner or later—a conflict where the Quad will have to play a central role. Hence, much to their disappointment, the woke public is likely to discover that the “human rights” talk is at best a sideshow, confined to token statements from both nations. No amount of spurious noise can stall a partnership whose time has come, and Blinken’s India visit is testimony to that.

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