On the eve of the 2019 elections, Ruchir Sharma, the chief global strategist at Morgan Stanley, expressed his disappointment for Prime Minister Narendra Modi in a New York Times column. According to Sharma, beneath the Modi rhetoric of “minimum government, maximum governance” lay a Bernie Sanders-like socialism including a welfare splurge, which disappointed a free-marketeer like him who expected a Reagansque redux of reform and small state. In a subsequent book, he ascribes Modi’s socialism to electoral exigencies instead of philosophical moorings.
Sharma’s analysis is partly true. In a country where three-fourths of the population is either facing acute poverty or dependent on agriculture that is contingent upon the grace of rain gods, welfare spending becomes imperative rather than a choice. Hence, when American political scientist James Manor asked P.V. Narsimha Rao who his role model was, he intuitively named social democrat Willy Brandt, the German Chancellor whose economics was animated by expanding both private capitalism and welfare spending. Astute politicians like Rao and Modi, both boasting a humble background, understand social welfare as a fait accompli in India. While Modi never publicly espoused the likes of Brandt as his hero, his former chief troubleshooter and strategist, the late Arun Jaitley, alluded to this balance: “Being pro-poor and pro-business are not mutually exclusive.”
But what makes a government pro-business? The Ruchir Sharmas sitting in global capitals are much more ambitious in their ask from what is termed as a right-wing government in India. They can grudgingly countenance an increasing welfare spending so far as reforms remain on track. Lesser taxes, divestment, and minimum state interference start their wish list followed by a range of expectations. Reagan and Thatcher personify their ideas of economic governance, and hence, they sum up their pro-business laundry list by citing these conservative British and American giants.
The lack of an Indian Reagan is partly due to electoral reasons but also partly due to the lack of an intellectual ecosystem that produces Reaganomics. President Reagan enacted policies that incubated in the American conservative movement for decades. The likes of the American Enterprise Institute and Heritage Foundation prepared the fine print that was impregnated with political will before those policies were finally conceived. Reagan was a heavy consumer of Friedmanite worldview even before he considered running for the presidency. However, it was The Heritage Foundation, headed by Edwin Feulner, that injected conservative principles and policies through a 1000-odd pages prescription-laden manual, which encompassed a potential policy outlook for all major US cabinet departments and federal agencies. To see these policies through, the Foundation manned key political appointments with suitable conservatives.
Thatcher’s story is no different. Her two steady sources of prescriptions were the Institute of Economic Affairs and then-inchoate Center for Policy Studies. Sir Keith Joseph, another Friedmanite and founder of CPS, is considered the most significant influence on Thatcher while she was in office. He chose to be the Secretary of State for Industry in the Thatcher administration and kicked off the divestment program in Britain on an unprecedented scale.
Coming back home, where are Modi’s Edwin Feulner and Keith Joseph? Where are BJP’s Heritage Foundation and Center for Policy Studies? Surely, Sangh has affiliate organisations working on economic policies—Swadeshi Jagran Manch (focuses on indigenous economic development), Bharatiya Vitta Salhakar Samiti (for finance and taxation professional), Laghu Udyog Bharati (for small and medium enterprises), and Sahkar Bharati (for cooperatives). These organizations, more than producing an economic canon that defines the Indian right, have mostly served as a feedback loop for RSS and BJP. Something that comes closest to a CPS is Vivekanda International Foundation in terms of personnel, but its impact on policy is not that evident.
Economics, it seems, is barely on the mind of even modern Hindutva ideologues. For example, BJP MP Swapan Dasgupta in his book Awakening Bharat Mata curated two dozen essays by the pantheon Indian right would like to venerate. From historian R.C. Majumdar to former Prime Minister Atal Bihari Vajpayee and current Sangh ideologue S. Gurumurthy, it features the writings of who’s who. The anthology attempts to collate and create a philosophical canon sans a single essay on economic thought.
Another BJP MP, Subramanian Swamy, now a little sidelined politically, produced his version of ‘constitutional Hindutva’ in his book The Ideology of India’s Modern Right outlining five dimensions that suggest how Hindutva can exist within a constitutional framework. To his credit, Swamy, an old free-market warhorse and professional economist, sporadically mentions minimalist state as a governance desideratum. His subsequent work Reset makes a modest attempt to add to his earlier work using the framework of Integral Humanism of Pandit Dindayal Upadhyaya but falls short of adumbrating a complete economic program.
The illustrations of two oft-visible ideologues broach the lack of clarity and focus on economic thought in the broader Hindutva intellectual imagination. Their relevance to and influence on policy, if at all, remain questionable. Somehow, the Indian right, too preoccupied to parry itself from secular salvos, have failed to produce an ecosystem that can moor itself in a coherent economic philosophy. Such an ecosystem has to function outside of the party in the quiet, away from the rough and tumble of incessant elections.
Finally, such an intellectual ecosystem not only incubates policies but reconciles economics with other priorities of the movement. When Tory Brexiteers faced the challenge of squaring business interests with their Euroscepticism, the policy ecosystem outside the party salvaged them. Through its extensive outreach, it also brought on board scores of businesses who otherwise saw Brexit as detrimental to their trade.
Ruchir Sharma is correct to predict that India would never have its Reagan or Thatcher. In toto import of Western economic conservatism would be both unsuitable and undesirable. Given electoral exigencies, an occupant of 7 Lok Kalyan Marg would never be able to sign-up for it either. India would need a cocktail of Sanders and Reagan is a given. The Reagan part of it still remains undefined, and to an extent, unimagined. It is high time for this intellectual vacuum to be filled by the Indian right drawing from two ancient ideals: Sarve sukhinah santuh (prosperity for all) and making India vishwaguru (a leading major economy).
Chirayu Thakkar is a Visiting Fellow at the Stimson Center, Washington DC. The views expressed are personal.
Ruchir Sharma is correct to predict that India would never have its Ronald Reagan or Margaret Thatcher. In toto import of Western economic conservatism would be both unsuitable and undesirable. Given electoral exigencies, an occupant of 7 Lok Kalyan Marg would never be able to sign-up for it either. India would need a cocktail of Sanders and Reagan is a given.
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GOVERNMENT MUST ENSURE THAT PARLIAMENT FUNCTIONS
It is an accepted fact that it is the responsibility of the government and the treasury benches to ensure that Parliament functions smoothly. For this to happen, the ruling dispensation has to take into account the concerns of the Opposition and accommodate their views as far as possible. It has been the practice that before the commencement of any session, the government in consultation with the opposition lists out an agenda so that important matters are sorted out and the necessary Bills are passed. In the latest instance, a confrontation has built up from day one after 12 Rajya Sabha MPs were suspended for their alleged unruly conduct on the last day of the previous session. The 2 members have claimed that they were not provided any opportunity to defend themselves and explain their position and the suo-moto action against them was against all principles of natural justice. There is no doubt that the House in Parliament is supreme and can take any decision. Similarly, the presiding officers also have immense power to implement rules in the event of disruptions and unbecoming behaviour.
But equally important is that to have smooth functioning, excessive punishment is not the only answer. The charge against the government is that it was the one which was causing disruptions so that there can be no meaningful discussions on vital issues and this was a step aimed at diverting the country’s attention from burning matters like price rise, unemployment, and poor state of the economy. The Opposition has been complaining constantly that there have been procedural lapses while enacting legislative business. For instance, when the Farm Laws were passed in Rajya Sabha by voice vote, the objective was to deny the Opposition a division which was demanded to ascertain who all were for the motion and who all were against it. This right cannot be taken away under any Parliamentary procedure, especially when such an important matter is being sought to be passed. The Farm laws, therefore, lacked the legitimacy which would have been there if there had been threadbare discussion on this matter. Similarly, when the Farm Laws were annulled, again the decision was taken by a voice vote in the upper House without any discussion taking place.
The central point was that the enactment of the laws had resulted in country-wide protests and over 700 farmers lost their lives during this long agitation. Somebody had to be held accountable for the loss of these valuable lives. The official stand has been that when the Cabinet had given its concurrence to repeal the earlier legislation, where was the need for any discussion. It has also been stated that no compensation is to be given to the families of those who died and there was no record of these deaths. The issue has resulted in a deadlock and both inside Parliament and outside, many do not subscribe to the government’s stand.
The entire subject has been clumsily handled and therefore it is contributing to continuous social unrest in some states. The presiding officer of the Rajya Sabha has maintained that the suspension of 12 MPs would be revoked if they express regret which they are unwilling to. Questions are also being raised why no action was taken against Congress member Pratap Singh Bajwa, who was also seen in video clips standing on the table and hurling papers at the Chair. Was Bajwa ignored because there are elections in Punjab? There is also a technical aspect of the suspensions which were recommended by a committee set up by the House. Therefore, the action can only be rescinded by the House and not the presiding officer. There have been instances in the past when suspension or expulsion has taken place even though, Parliament is not normally the place where punishment can be handed out and it is done only in exceptional cases. During Atal Behari Vajpayee’s tenure, Sonia Gandhi was suspended following a Privilege issue and her suspension was revoked with retrospective effect when the UPA came to power. In the Janata Party era in the late 1970s, Indira Gandhi was expelled from the Lok Sabha soon after getting elected from Chickmaglur in a by-election defeating Veerendra Patil. She was charged with having scant regard for the constitution and suppressing democracy during the emergency. The latest matter needs to be resolved as early as possible since there is very little time left in this session, and if things continue the way they are, it is democracy that would bear the brunt.
GDP growth: Making of a V-shaped recovery
Recent economic indicators show that India has recovered completely from the Covid induced jolt, and this speaks volumes about Prime Minister Narendra Modi’s Atmanirbhar Bharat initiative, that has withstood the ravages of the pandemic, without buckling in.
India’s economy continued to expand in the July-September 2021 quarter, marking the fourth consecutive quarter of growth. India’s GDP grew 8.4%, year on year (YoY) in September quarter, against a contraction of 7.4% during the same period last year. Effectively speaking, GDP at Constant (2011-12) Prices in Q2 of 2021-22 (2QFY22) is estimated at Rs 35.73 lakh crore, as against Rs 32.97 lakh crore in Q2 of 2020-21 (2QFY21) and Rs 32.38 lakh crore in the previous quarter (1QFY22). 2QFY22 real GDP growth at 8.4% was in fact, slightly ahead of consensus expectations. The higher growth among other things can be attributed to nine consecutive quarters of over 3% agriculture growth, which has had a multiplier effect on consumer spending.
A large part of the growth upside was also driven by spending on public administration, education, health, etc. Overall, the sharp turnaround from the COVID second wave was visible across all segments, making the growth broad based in the September quarter. Investment growth remained strong even when compared to 2QFY20 (pre-Covid) levels. Growth will be well supported in 3QFY22 too, on account of festive season and better performance from the Services’ sector. Momentum remains well on track for a full year GDP growth of 9.5% in 2021-22 (FY22), which is what RBI and global rating giant, S&P are projecting too.
With a new COVID variant (Omicron),starting to spread globally, uncertainty on its impact on the global economic scenario may weigh upon things a tad bit, but on the flip side this would essentially imply that rate increases globally, and will be more calibrated and not happen any time soon, assuming they happen at all to start with. No Central Bank would want to nip the greenshoots that have taken root,by raising interest rates wantonly at this stage, despite the temptations, given that headline inflation and bond yields globally have been on the rise of late. India, in fact, has done far better than global peers on the inflation front. Annualised inflation in the UK is 5 6% and 6.2% in the U.S.A— with inflation in USA the highest ever since 1990. In India, retail inflation in October 2021 was 4.48% and food inflation 0.85%,after a reading of 4.35% and 0.68% respectively, in September 2021. While the RBI would continue with an accomodative stance, it will possibly wait for some more clarity before moving decisively on rates, though a reverse repo rate hike in February 2022 cannot be completely ruled out. RBI’s excellent job in reining in bond yields at around the 6.35% levels and thereby keeping a lid on government’s borrowing costs needs a special mention. In USA, yields have gyrated wildly from a low of less than 0.5% in 2020,to a high of over 1.74% in 2021.
The Q2 GDP growth data at a healthy 8.4% apart, the nominal GDP in September quarter stood at 17.5%. While worldwide, the US is possibly into the 6th Covid wave as per experts, and Europe in last few weeks has also seen a big surge in COVID numbers. India, on the other hand, has done a commendable job on this front, with over 125 crore vaccines administered. Both daily and weekly positivity rates are less than 1% and over 64 crore COVID tests have been conducted already. Multiple levers in the economy like Infra spend, low-interest rates, rising demand in the real estate sector and growing consumer demand are going to aid the GDP growth in the coming quarters. From the GVA perspective, farm, construction and public administration & defense services (PADS) grew faster than expected. The sharp increase of 17.4% in PADS was a big surprise in the 2QFY22 numbers. Farm economy continues to display remarkable consistency, with agri growth of 4.5% in September 2021 quarter, after an equally strong 4.5% growth in the June 2021 quarter too. Importantly, the broad story remains intact. While capacity utilization levels have improved, private investment is also on the mend, as corporates and banks are gradually shedding risk aversion, despite some nagging headwinds. High commodity prices and global supply bottlenecks posed a challenge for the Manufacturing sector worldwide. Tax collections aid government finances and it is here that the Modi government has seen big support from buoyant tax realisations. Fiscal deficit was contained at 36.3% of budget estimate (BE) in first half of this financial year, even while expenditure picked up. The multi-year low, fiscal deficit ratio can be attributed to robust revenue growth, outpacing expenditure rise, during first half of the fiscal. Capital expenditure at 45.7% of the target,also showed encouraging trend in line with the government’s focus on asset creation.
The economic activity in Q2 FY22 received favorable support from recovery in Manufacturing and Construction. The gradual removal of lockdown, good monsoon year and the rapid pace of vaccinations helped boost consumer confidence. The risk arising due to the Omicron variant are unlikely to be an obstacle to growth, going forward. Continued low interest and easy liquidity policy will help sustain the tempo.
Mining, Construction and Real Estate showed considerable growth in 2QFY22,at 15.4%, 7.5% and 7.8% respectively. A good monsoon year reflected well with high agricultural output. Private consumption is likely to pick up traction, as we complete normalization. The private capex will likely catch up with government spending and aid growth even further. Gross fixed capital formation (GFCF) grew by a solid 11% in 2QFY22, after a massive 55.3% growth in 1QFY22. The data will have a positive bearing on the RBI’s MPC meeting next week. The low interest, excess liquidity policy has been paying good dividends, across most major economies. Going forward, the way countries across the globe handle rising inflation and movement of crude oil prices, will have an impact on the growth rate across the globe. India— with a bumper crop, with food production in excess of 303 million tonnes in FY2021, the highest food output ever in the last seven decades— enjoys some inherent natural advantages which most large economies don’t.
During the July-September 2021 quarter, Trade, Hotels, Transport, Communication & Services related to Broadcasting sector,grew at 8.2%.Public Administration, Defence & Other Services grew at 17.4% during the July-September quarter, against 5.8% during the previous quarter. Government Final Consumption Expenditure (GFCE) came in at Rs 3.61 lakh crore in the second quarter of the fiscal year (2QFY22), against Rs 4.21 lakh crore in the previous quarter. GDP at current prices grew 17.5%.GDP at Current Prices in Q2 2021-22 is estimated at Rs 55.54 lakh crore, as against Rs 47.26 lakh crore in Q2 2020-21, showing a growth of 17.5%, as compared to 4.4% contraction in Q2 2020-21 (2QFY21). Private final consumption expenditure grew to Rs 19.48 lakh crore in the July-September 2021 quarter, up from Rs 17.83 lakh crore in the previous quarter. Manufacturing sector grew by 5.5% in the September quarter while the Construction sector grew by 7.5%. Both the sectors posted a healthy growth, which bodes well for the economic trajectory going forward.
India’s GDP at Constant (2011-12) Prices in Q2 2021-22 (2QFY22) is estimated at Rs 35.73 lakh crore, which is higher than the Rs 35.66 lakh crore seen in the first quarter of 2019-20 (1QFY20), signalling that India has recovered completely from the COVID induced jolt, which speaks volumes about Prime Minister Narendra Modi’s Atmanirbhar Bharat initiative,that has withstood the ravages of the pandemic,without buckling in.
A robust Construction sector, recovery in Contact-intensive services and pickup in government spending are supporting the Services’ sector, adding to the overall momentum. India’s Eight Core Sector data recorded 7.5% growth during the month of October 2021. Eight Core Sector data came in at 15.1% during the April-October period, which is again a good news.
After lagging the recovery during the initial phases, Q2 of this fiscal year, saw Services’ activity playing catch up. Relative control over new infections and a phenomenal increase in vaccination drive, helped improve Services’ activity. Indeed, while few supply shortages weighed on Manufacturing, the Services’ recovery scaled greater heights. Consumer and business optimism are improving sharply, leading to an uptick in job creation across sectors. Revenue Receipts up to October 2021 stand at 12.59 lakh crore against the budget estimate (BE) of Rs 17.88 lakh crore,which is 70.5% of BE. The fiscal Deficit for the April-October period stands at 36.3% of the budget estimate of Rs 15.07 lakh crore. Fiscal deficit during the same period last year stood at 119% of the budget estimates.
The gross value added (GVA) in Q2FY22 has grown by 8.5%, as compared to a decline of 7.3% in the same quarter last year. In Q1 of FY22, the GVA had sharply surged by 18.8%.
Private Final Consumption Expenditure (PFCE) in the July-September 2021 quarter rose by 8.61%,year on year,after a solid rise of 19.35% Q1FY22. The gap between GDP and GVA was driven by higher tax revenue collection and lower subsidy pay-outs.
The sharp 10.1% growth in Services, in 2QFY22, the biggest sector in India’s economy, is reflective of overall momentum.
In fact, Services’ PMI accelerated to a 10.5 year high in October 2021. This came about even as local companies increased prices of their final products due to costly raw materials, driven by rising input and commodity prices globally. Interestingly, unlike their Manufacturing counterparts, Services’ companies hired more hands, resulting in job generation reaching the highest level after the pre-Covid period of February 2020.
Services’ PMI index rose to 58.4 in October 2021,from 55.2 in September 2021, which clearly signals that the third quarter of the current fiscal year of 2021-22,may witness even higher GDP growth. PMI numbers, both for Manufacturing and Services, for October 2021,endorse the fast-paced,V shaped economic recovery that is underway.
GST collections of over Rs 1.3 lakh crore each, in October and November,bode well. In fact,the GST revenue in November 2021 is the 2nd highest monthly collection,ever since GST came into effect in July 2017.
According to respondents of the PMI Services’ survey, ongoing improvements in demand boosted growth in sales and subsequently in output. New work intakes increased at an accelerated rate, the strongest since July 2011.Companies linked sales growth to better underlying demand and successful marketing. Firms were able to secure a healthy intake of new work, despite charging more for their services. Output prices rose at a solid rate, again, the strongest since July 2017. Anecdotal evidence suggests that additional cost burdens were passed on to clients, reflecting the fact that purchasing power is back. Composite PMI reading in October 2021 came in at 58.7, the highest since January 2012, compared to 55.3 in September 2021.
Data by the Controller General of Accounts showed that the Central government spent 52.4% of its total expenditure target by October 2021, against 54.6% during the same period a year ago. However, the government exhausted only 36.3% of the year’s fiscal deficit target due to robust growth in revenue receipts. In effect, the Modi government has managed the growth versus inflation conundrum very effectively, without indulging in unwanted fiscal profligacy. The Dun & Bradstreet, Composite, Business Optimism Index (BOI) for ongoing quarter, stands at 94.6, up 27.4% compared to the September quarter. Data shows five out of six Optimism indices have registered an increase in ongoing quarter, as compared to September quarter. Arun Singh, Global Chief Economist at Dun & Bradstreet says, the GDP growth during the October-December quarter of 2021 (3QFY22) is likely to be much stronger, as the BOI has surged to an almost eight-year high.
The survey shows that around 79% of the respondents expect the volume of sales to increase in the December 2021 quarter, compared to 67%,in the quarter before. 62% of the respondents expect an increase in net profits in December 2021 quarter, compared to 48% in the September 2021 quarter. In fact, the business optimism levels in the ongoing quarter are at their highest ever levels since second quarter of 2014, as per Dun & Bradstreet, based on vital parameters like rate of hiring of new employees, output prices, and inventory levels. Clearly, if the 20.1% GDP growth in the June 2021 quarter was the harbinger of renewed economic momentum, the continued traction across all sectors and user segments in the September quarter cements the belief that the making of a V-shaped recovery in India, is now a full-blown one, for more reasons than one. The mega vaccination drive under the astute leadership of Prime Minister Modi, has been one of the key drivers of this “feel good” factor, that is now translating into hard numbers.
The writer is an Economist, National Spokesperson of the BJP and the Bestselling Author of ‘Truth & Dare-The Modi Dynamic’. Views expressed are the writer’s personal.
ANDHRA’S FINANCIAL STATUS QUO IS RINGING DANGER BELLS
Nowadays, the State of Andhra Pradesh has become a peculiar State, performing outside the purview of the accounting practices and even it adheres the Constitutional violations by diverting VAT on Liquor to Government incorporated Corporation instead of transfer to the Consolidated Fund by a special GO for raising additional Loans outside the FRBM limits— it is nothing but a mere window dressing of accounting practices and systems as a bad precedent for future of the country and most particularly the state itself. After careful examination of Financial Statements for the second quarter of the current financial year 2021-22, several key indicators of Andhra Pradesh financial adversity have been exposed with danger bells.
Estimated revenue collections and revenue expenditure in the budget and actuals thereof is very much vital in any Government since revenue surplus or deficit plays the crucial role for serving the capital expenditure for the future revenue-generating assets for the country or state; then it serves the interest on debts which impacts primary deficit and thereafter very much important component Fiscal Deficit arrives out of the impact of the all together above. Hence, Revenue Deficit is the root cause of all the other liking heads in the FINANCIAL Statements. Generally, revenue surplus for any State indicates a positive performance, and at least those states, which minimize the gap between revenue collections and revenue expenditure to register the shorter revenue deficit are also reasonably good.
As far as Andhra Pradesh is concerned, first indicator, Total Revenue Collections, estimated in the Budget for the Financial Year 2021-22 was Rs. 1,77,196.48 Crores and Estimated Total Revenue Expenditure was 1,82,196.54 Crores, Hence Estimated Revenue Deficit for the whole year was Rs. 5000.06 Crores. Total Revenues had registered for Rs. 64,871.99 Crores by September where the whole year estimated revenue was, it means, only 36.61% of the current financial year total revenue achieved after the lapse of 50% period in the year. But, the actual revenue deficit for the first two quarters of the current financial year has registered as Rs. 39,933.22 Crores, which means nearly 800% of the actual revenue deficit has emerged in the first six months itself when compared with the whole financial year’s revenue deficit. In these circumstances, we can predict that how worse the situation of Andhra Pradesh in the next 6 months.
Second indicator i.e the Capital Expenditure Targets are concerned, Andhra Pradesh had not achieved the target of 45% of the total Capital Expenditure estimated in the Budget for the financial year 2021-22 of Rs. 31,119.38 Crores in the second quarter of the current financial year to avail the additional loan as an incentive allowed by the Union Government based on the performance of creating future revenue-generating assets by incurring the targeted Capital Expenditure. Although, first-quarter target to incurring 15% of the Capital expenditure was achieved, it had not attained in the second quarter due to the lenient approach of the State Government in the exercise of Financial factors.
Apart from this, the State government had utilized the insurance premium, which was paid by the Women in the Self Help Groups for Rs. 2,100 Crores and LIC had openly declared in the newspaper advertisement that they were withdrawing the Agreement with Andhra Pradesh Government to pay future obligations to the beneficiaries since the State Government of Andhra Pradesh violated the terms and conditions and declared that the future obligations will be cleared by the nodal agency of the State Government Department SERP. Further, Recently the State government of Andhra Pradesh had incorporated Andhra Pradesh State Financial Services Corporation as an NBFC. Unfortunately, the State government had issued a direction to divert their bank deposits from every State Government Corporations, Departments, Boards etc., which are maintained in the Scheduled Banks to AP Financial Services Corporation forcibly— it causes the damage of independence of the respective Corporations, Departments, Boards as those funds have been diverting for unproductive expenditure which may hurt the actual system of the activity. And many experts have been questioned that Whether AP Financial Services Corporation is the reserve bank of Andhra Pradesh. There is an agitation of NTR Health University employees is going on against to transfer of Rs. 400 Crores of University-Corpus fund to the AP Financial Services Corporation from the Scheduled Bank. Ironically, State Government is expressing that Deposits in the Scheduled Banks are unsafe, whereas the people of Andhra Pradesh are in a feeling that the present approach of the State Government is not safe.
The financial destructive methods implemented by the State under the leadership of YS Jagan Mohan Reddy had cautioned by the CAG in their Report. The series of illegitimate and unconstitutional practices since the inception of YSRCP led State Government leads to Economic Nuclear explosion now. The State needs to repay 1.10 lack crores in the next seven years but the condition of the State is: it requires to raise debts even to repay the interest. As per the past expectation, the Revenue Deficit of the State should have reached zero by 2021, but the actual Revenue Deficit was registered for Rs. 36,000 Crores due to huge unproductive expenditure had been incurred. Further, the State Government was eligible to provide a guarantee on loans for Rs. 5,600 Crores only, But the same has crossed for Rs. 1.00 lack crores and the Government is trying to give guarantee for additional 1.00 lack crores where the gap in State Government Guarantees is eligible up to 90% as per norms, but State government has amended it up to 180%.
At present financial precarious condition has been emerged as Total Revenues and Debts are not serving the Budgetary Allocations other than the unproductive and illegitimate expenditure with corrupt practices. On the one hand, Total Debts had been registered for Rs. 39,914 18 by September where the whole year estimated debt was 37,029.79 Crores, it means more than 100% estimated debts for the financial year 2021-22 had crossed in the first two quarters itself without future revenue-generating productive assets through Capital expenditure and on the other hand, We can notice the Unconstitutional methods in the financial practices harm the state Brand Image, such as recent Order by the State Government to transfer the VAT on Liquor revenue to Beverage Corporation to raise debts. After analyzing the facts in the September month CAG report, danger bells of the AP State Financial Health have been ringing in all parameters and it needs remedial measures with immediate effect to put the things in order, otherwise, future financial damage to the state is unimaginable.
Controlling, addictive AI needs immediate attention
At the core of the concerns are the nature and design of algorithms that influence our choices. Online consumption, for instance, is not a free choice. Algorithms prod, poke and drive the consumer into a narrow set of choices which they may not have selected otherwise.
Can we govern the ungovernable? Should we even try to contain the advance of algorithms? These difficult questions don’t have a simple answer. However, what is clear is that the world needs a strong governance structure to shape the impact of algorithms and AI on our lives.
At the core of the concerns are the nature and design of algorithms that influence our choices. Online consumptions for instance is not a free choice. Algorithms prod, poke and drive the consumer into a narrow set of choices which they may not have selected otherwise.
“It is important to have ways to oversee the operations of these systems to ensure they are helping, not harming, humanity. The flurry of governance frameworks over the past two years has been crucial in helping leaders to better understand the issues surrounding AI, including potential for fairness and discrimination, disparate impact, and the associated issues of transparency and accountability,” says a recent report by World Economic Forum (WEF). “But much more innovation in the realm of AI governance is needed if we are to keep pace with both the advancement and application of AI-based systems,” says the report titled The AI Governance Journey published in November.
Until recently unfair market practice in the retail sector largely revolved around predatory pricing. In some cases, it involved using market muscle to prevent rivals from expanding their consumer base.
Today, unfair market practices are often baked into the business model using tech-based platforms of e-commerce companies. Anti-trust authorities in most free-market economies including India are trying to peek under the hood of the engines that run e-commerce sales.
Parts of the unfair play in digital markets are easier to see. Some e-commerce companies own a big chunk of a seller and therefore find it in their interest to promote that particular seller.
Other parts of unfair trade practice involve using algorithms that allow collusion between seemingly independent companies or manage reactive pricing which can hurt smaller sellers. The e-commerce may say that algorithms don’t choose for the consumer; consumers choose for themselves. However, the facts say otherwise.
The question now is not whether consumers choose or not. The question is what is their choice? Are the options available to the consumers open and fair? More importantly, do the sellers have equal access to the consumers in the market. Today this paradigm is often decided by the software robots who run the digital markets.
“It will be important to monitor developments in the application of machine learning and Artificial Intelligence to ensure they do not lead to anti-competitive behavior or consumer detriment, particularly in relation to vulnerable consumers,” says the Competition and Markets Authority (CMA) of the UK. There are examples where an e-commerce site has shown different prices to different customers depending on their location. A CMA paper notes, “It has been alleged that Staples’ website displayed different prices to people, depending on how close they were to a rival brick-and-mortar store belonging to OfficeMax or Office Depot.” Similar investigations are required in India and other emerging economies to ensure that algorithm-triggered personalized pricing does not become harmful.
Another type of antitrust activity takes place when online rivals decide to use the same pricing algorithm to align the prices of different products. When questioned by regulators or anti-trust authorities, e-commerce companies like to say that the decision taken by an algorithm is not their responsibility. However, authorities including the Competition Commission of India are challenging this.
At their root, anti-trust or anti-monopoly laws aim to ensure that consumers and sellers have the freedom to choose and compete on fair terms. A few sellers should not be allowed to dominate any market to the extent that other sellers are destroyed and therefore consumer choice is undermined.
Most regulators struggle to find proof of such activity as the level of sophistication is increasing constantly. Some are already unleashing their own algorithms to track and understand the pricing software of e-commerce companies. While companies collude on pricing, governments are collaborating on curbing online malpractices. The legal liability of an algorithmic decision will be interpreted as the legal liability of an entity of an individual. Anti-trust activities of algorithms should not go unchallenged in any economy.
Similar governance rules are needed for the algorithms used by social media giants. Privacy and data protection are often the key issues when debating the regulation around social media giants. However, an important dimension that needs more attention is the algorithms that decide, define, and drive online user behavior.
Even as various countries across the world battle social media giants for lack of transparency and accountability, some governments have begun to question the algorithms too.
The US Senate Judiciary Committee recently held hearings on “Algorithms and Amplification: How Social Media Platforms’ Design Choices Shape our Discourse and Our Minds.”
Like many countries, the US is concerned about the algorithms which are designed to addict. “… This advanced technology is harnessed into algorithms designed to attract our time and attention on social media, and the results can be harmful to our kids’ attention spans, to the quality of our public discourse, to our public health, and even to our democracy itself,” said Sen. Chris Coons (D-DE), chair of the Senate Judiciary’s subcommittee on privacy and tech
In the same way that India has the social media intermediary rules and laws, US has the Section 230 of the Communications Decency Act which offers some immunity for website platforms from third-party content.
The Senate hearings could lead to amendments in Section 230. Another Senator at the hearing said that the business model of “these companies is addiction.”
A legislation called ‘Don’t Push My Buttons Act’ has been introduced in the Senate with Tulsi Gabbard as the bill’s lead co-sponsor. The law would require that platforms with more than 10 million users should get user permissions before offering them content based on past behavior.
Basically, this means that companies can’t access our behavior and drive us further into similar content. This behavior is believed to be particularly harmful during Brexit conversations. Rather than allowing people to explore and stumble upon new content and alternate views on a subject, the algorithms drove users into more of the same. Effectively, it created online echo chambers and prevented people from absorbing other ideas.
The same principle can apply to consumer products or services. Algorithms can drive consumers to certain brands, categories while reducing choice and therefore hurting competition.
The laws will seek changes in Section 230 and remove the protection offered to the giants if they persist with addictive algorithms. Companies including Facebook, Google, and Twitter have testified at the Senate hearings on addictive algorithms.
While the hearings are focused on US citizens, governments in other countries should also be alert about the consequence of addictive algorithms. As the government of India is establishing the rules of play for social media giants, it will be important to scrutinize and question addictive algorithms. With an addressable market of over a billion users, the tech giants will invest a lot of resources to increase their users. The variety of languages and users in the country lend themselves to using algorithms that use personal data for greater effect.
India has to put in place legislation and rules which seek more clarity and transparency from technology companies. Domestic and global companies that use consumer behavior data to enhance addictive behavior must be scrutinized and controlled.
Currently, the intermediary guidelines focus mostly on content management and grievance redressal. However, the underlying software engines that influence online consumer behavior need oversight too.
The WEF report has made some suggestions for the future. The world needs, “Standards providing a framework for responsible AI. Standards for measuring bias, fairness and related technical details – Processes and tools for assessing AI systems.” The regulation of algorithms that define AI and thus our choices will have to be made at several levels. From Multilateral to national to local, depending on the sector, geography, and usage.
The writer is the author of ‘India Automated: How the Fourth Industrial Revolution is Transforming India’. Views expressed are the writer’s personal.
Democratic deficits and disaster management
Disaster management may turn into a bigger disaster if complaint handling
mechanisms fail to resonate in the Parliament. In our emerging concern for
Parliament’s democratic deficits, one need not be complacent to phenomenal challenges
that besiege disaster management in the country’s larger governance.
Substantive democracy led by ethics and the spirit of the Constitution is a flywheel of governance. After the suspension of 12 Rajya Sabha Members on the first day of Parliament’s winter session for the rest of its session, it is more than obvious that institutions of governance suffer from a culture of democratic deficits. That, Parliament is becoming a platform for reprimanding opposition, bowdlerising debates, pecking into question hour and using available disciplinary authority in a repressive manner hounds the Constitutional spirit. In sharp contrast to Subramaniam Swamy’s expulsion on the basis of a detailed report on his alleged anti-national activities produced before the House in 1976, the current expulsion with short liner allegations and that too from a previous session appears monkey business. A right to speak, be heard and debate within Parliament represents the strength of this apex national institution as a repository of freedom and aspirations of people. Anything other than this can prove to be suicidal to policy formulation especially in the management of disasters which is currently the highest priority besides being indispensable to achieve Sustainable Development Goals by the year 2030. Crisis incidentally, overlooks procedures for the demand of speed and efficiency but this cannot escape the hawkish eyes of a belligerent or cantankerous opposition in the Parliament. Any disproportionate use of disciplinary authority will provide a cover to all illegalities, diversion of funds, human insecurity and rise of surreptitious developmental mafias in disaster-affected zones where it would not be easy for the country to escape its catastrophic impact for a long time to come.
Democracy and disaster management are Siamese twins and this relationship rests on five pillars of disaster management, that is, (i) participatory decision making; (ii) transparency of aid flows; (iii) financial safeguards; (vi) transparent procurement and contracting; (v) Project monitoring, evaluation and feedback. Disaster management may turn into a bigger disaster if complaint handling mechanisms fail to resonate in the Parliament. In our emerging concern for Parliament’s democratic deficits, one need not be complacent to phenomenal challenges that besiege disaster management in the country’s larger governance. In a 2015 report of the European Bank for Reconstruction and Development, it was found that a 10% increase in the per capita amount of disbursed funds leads to a 12.2 % increase in corruption. However, the disaster led fund transfers are much larger and therefore, offer a wider scope for corruption. This aspect is of particular interest in the kind of governance that weaker democracies suffer in non-tax transfers such as relief from national and international organisations.
The real source of democracy comes from community-based organisations such as the Panchayats in rural areas or Municipal Corporation in urban areas. At this level, tolerance to undemocratic measures is the least, reactions are mostly direct and confrontation more united and lasting against the government. From the tribal protest against three controversial bills in Manipur that lasted 600 days from 2015 to 2017 with eight bodies of their young boys kept in the morgue to the farmers’ protest against three contentious land laws lasting 466 days, one can see that these results of a united agitation are impossible from those areas distanced from communities. There was intensive research that went behind a transformative governance framework suggested by the post-Tsunami Hyogo Declaration of 2005 for a community-based action in disaster management. Hyogo Framework for Action, as it is referred to, directed governments to focus on community resilience-building as a priority. It stated, ‘communities and local authorities should be empowered to manage and reduce disaster risk by having access to the necessary information, resources and authority to implement actions for disaster risk reduction.’ It is sad that grassroots slippages of disaster management policies have weakened action against disasters. During the 2018 Kerala floods most of the Panchayat members from Kottayam to Idukki and Munnar shared that even though some alerts in the form of red, yellow and green were being sent to them, they were unable to make any sense of it as no one had ever spoken to them or trained them to understand it. This deficit of mutuality and participation runs through the system up to the Parliament yet no government ever pays any heed to priority action needed at the ground.
How democracy replenishes community resilience building is to be understood by our various research visits to regions marooned in hopeless islands of corrupt governance. Around 2009, tea plantation workers of 14 tea gardens of Dooars in West Bengal lost their livelihood and were pushed into starvation and death. The estate owners had fled bag and baggage without anyone’s knowledge to escape huge payments to workers under the Tea Board Act 1949, Plantation Labour Act 1951 and Industrial Disputes Act 1947 leaving behind ageing and unproductive tea gardens. Since these workers had known no other skill but plucking tea leaves they did not know how to cope up with the sudden closure and absentee government. Our visit to their broken homes raised hopes that someone is reaching out to them, they started coming out in numbers during our evening discussion groups arranged in their villages. These meetings also brought out a subtle presence of mafias which helped garden owners to flee without notice after which they illegitimately started collecting relief funds, indulging in trafficking across borders and also becoming their despotic masters. Our meetings which had nothing to give them except sharing information, inadvertently enlightened them on the Constitutional framework and the laws to strengthen their conviction during depressive times. Their awakening helped to revive the inactive Tea Board, receive a more meaningful restoration plan within the Panchayat Act and receive livelihood guarantee under MNREGA.
During 2015-17 our team visited Sundarbans in West Bengal and some districts of Manipur. Despite much segregation and high vulnerability due to its geographical location, Sundarbans could display a vibrant community action. We could talk to people waiting in queue for seeking the benefits of the public distribution system and also those who were repairing their homes to prevent snakes and tigers from entering. The place was vulnerable to many forms of disasters but people despite poverty were prepared with their indigenous techniques and plans using the most basic equipment for early warning, human and cattle rescue besides grain storage for emergency use. On the other hand in Manipur, as we travelled through Churchanpur, Thoubal, Senapati and Tamenglong people flocked around us as they felt that the government officials were finally visiting them for a change. Even their Ward Councilors had no knowledge of their responsibilities and availability of developmental funds for their Ward. The communities over there had not seen any government official visiting them. There was a big dent between the Meitei led government and Kuki, Paite and Nagas outside Imphal. No one had ever spoken to them and they felt that probably a change of government at the Centre has sent this JNU fact-finding team to their villages. It was a coincidence but in the election that followed this silent suffering tribal abode kicked out a non-participatory government in their silent revenge. If some of these examples could be a lighthouse on the power of democracy, Hyogo Declaration would become a serious enterprise.
A participatory framework provides a unique opportunity to promote a strategic and systematic approach to reducing vulnerabilities and risks to hazards besides identifying ways of building the resilience of nations and communities to disasters. Now that the community of world nations has been taking Hyogo spirit through Sendai Framework (2015-30) on the adoption of measures which address the three dimensions of disaster risk (exposure to hazards, vulnerability and capacity) a need for an increased resilience-building rests on nation’s ability to protect democracy at every Constitutional layer of governance. No technology, internet-based information or e-governance can replace physical meetings and face to face discussions and learning. Yet, how could this be possible if representatives of these people are not able to air concerns in the State Assembly of the Parliament? There are Rules as strict as Rule 256 and Rule 259 of the General Rules of Procedure and Conduct of Business in the Rajya Sabha, but the Constitutional spirit behind the rules combined with the ethics of enforcement defines the manner in which these Rules are to be used against representatives of people.
Parliament is not a confidential Committee Room of the Intelligence Bureau or the Pentagon Boardroom but a microcosm of society where the government’s democratic personality and tolerance to Constitutional norms are most needed. If this tolerance is lost, there would be no time for multihazard disasters to inflict our country stretching beyond the government’s capacity to prevent or manage them. It is hoped that the government in its true wisdom realises that the genie may not be released from the corked bottle.
The writer is president of Network Asia-Pacific Disaster Research Group, Senior Fellow at the Institute of Social Sciences, and former Professor of Administrative Reforms and Emergency Governance at JNU. The views expressed are personal.
PARLIAMENT MUST BE ALLOWED TO FUNCTION
Vice President Venkaiah Naidu should be commended for refusing to back down on his decision to suspend 12 MPs from the Rajya Sabha for the whole of the winter session for unruly conduct during the monsoon session. Public memory may be short, but it’s not that short that the bedlam Parliament witnessed in the monsoon session would be forgotten by now. In that session, MPs jumped up on tables, tore up documents, threw paper, misbehaved with the security staff, while at the same time playing victim and claiming that outsiders were brought in to manhandle them. Unprecedented scenes were witnessed in Parliament and the MPs who indulged in such mayhem deserved to be suspended. The parties that alleged that outsiders were brought in should have provided the evidence to back up such a charge, barring which the nation will be forced to consider only the video evidence that is available in the public domain and those clips show the most appalling behaviour by certain MPs.
That the Vice President, as Chairman of the Rajya Sabha, feels strongly about the disruption of Parliament has been clear for some time. In September, while delivering a lecture on the topic of “if disrupting Parliament was an MP’s privilege or could be regarded as a facet of Parliamentary democracy”, he had said that disruption was “a certain negation of the spirit and the intention behind the rules of the House, the code of conduct and the parliamentary etiquette and the scheme of parliamentary privileges, all aimed at enabling effective performance of individual members and the House collectively. Given the consequences, disruption of proceedings clearly amounts to contempt of the House…” Even otherwise he has been unhappy that disruptions were leading to the loss of productivity of both Houses. The monsoon session this year was among the least productive in the Narendra Modi government’s second tenure. According to available statistics, out of 96 hours, the Lok Sabha functioned for just 21 hours and 14 minutes, which is 22% productivity, and Rajya Sabha for only 28 of the total 97.5 hours, with 28% productivity. Important bills were passed without any debate and the government too adjourned Parliament early. All this signify a complete breakdown of Parliamentary proceedings.
Unless due process is followed and every bill debated and amendments suggested and incorporated, the sanctity of a Parliamentary democracy cannot be upheld. Parliament is a place for debates, discussions and repartees, with the jousting limited to verbal rapier thrusts. Indian Parliament has a long tradition of that. A good Parliamentary debate can be fascinating and intellectually stimulating, especially when both the treasury and the opposition benches are peopled with great orators. It is a shame when their voices get lost in the din and the nation is deprived of their views. For that matter, even a limited amount of din is acceptable, but not physical aggression. And as VP Naidu correctly pointed out on Wednesday, “the members who have committed this sacrilege…have not expressed any remorse”. Forget about remorse, some of them think that it’s a matter of pride that they have been suspended for “raising their voices on behalf of the farmers”. It is not known how rushing to the well of the House, throwing paper planes, tearing up files, jostling and pushing are part of the exercise of raising one’s voice on any issue. Street politics should be left outside when entering Parliament. In this context, mention must be made of the unparliamentary language being used by certain Parliamentarians, outside Parliament. One of these worthies implicitly compared the president of a rival political party with a barking dog. It is incumbent on every party leadership to rein in these foul-mouthed entities, instead of trying to portray them as fire-brand people’s politicians.
As for the disruptions that have started once again, it is hoped that saner heads among the Opposition will prevail and the two Houses will be allowed to function. Every government needs to be held accountable for its actions and inactions on the floor of the House, every bill needs to be debated and discussed before they are made into law. Not allowing that to happen amounts to “sacrilege”.
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