Best of BS Opinion: FTA with UK a clear shift in India's stance on trade

Our daily wrap of today's Opinion page traverses the India-UK FTA, what the RBI needs to do to make the financial inclusion index more transparent, US tariffs, and the Jane Street affair

India and the UK last week signed on to free trade agreement that promises to be the most expansive the former has had in a few years. But more importantly, says our first editorial, it marks a shift in India's thinking on trade. How far that will carry remains to be seen, especially in the ongoing talks with the European Union, where India might have to concede some more ground in return for the outsize opportunities it can get from the European bloc. India hasn't raised any hackles domestically with the UK FTA, but the real challenge will come when it's time to finalise a similar deal with the US, with which it runs a significant surplus, where both sides are seemingly locked in a staring contest. 

Our second editorial welcomes the Reserve Bank of India's financial inclusion index, which shows the country is doing better in providing access to financial services. However, more needs to be done in terms of transparency of the diverse data points, which would help make better policy easier. Since the central bank hasn't released a sub-indice-wise score, it is hard to tell where it is lagging, making it harder to target specific areas of concern. It also does not offer much by way of regional disparity, masking continuing financial exclusion of those in underserved regions. More granular data, our editorial says, would go a long way in formulating meaningful policy interventions. 

It is clear that US President Donald Trump truly believes that high tariffs are a must if America is to succeed, whatever that might mean. Meanwhile, the Yale Budget Lab estimates that US buyers will have to pay at least 20 per cent more at the till - the highest tariff rate in more than a hundred years. While developing nations are likely to face the brunt of these trade deals (Exhibit A: Philippines @ 19% export tariffs, zero on US imports), they are hedging that they will be better off than their peers, notes Mihir S Sharma. But does the US really want to bring some of these low-end manufacturing jobs back home again? Sharma points out that young Americans likely do not want the same jobs that the Greatest Generation or even the Boomers did; it certainly would not bode well either for their weekly cheques or for the US' productivity. 

L'affaire Jane Street lays bare structural flaws in India’s derivatives market, writes Debashis Basu, as he identifies two key issues. The first, he argues, is that the indices used for the futures and options (F&O) markets themselves are flawed. The second is that the claim that derivatives markets enable efficient price discovery and helps investors manage risk is incorrect because the large volumes are limited to just two indices - the Nifty50 and the Bank Nifty (and a bit to FinNifty). To elaborate on his proposition, he considers index construction and the efficiency of the F&O market. The former, Basu writes, is lopsided because of skewed weightages, while the latter has nothing to do with the cash market, making price discovery illusory, liquidity superficial, and hedging merely theoretical, all because the F&O market is limited to two indices, despite the NSE having launched over a dozen other indices. 

In her review of Sugata Srinivasaraju's The Conscience Network: A Chronicle of Resistance to a Dictatorship, Aditi Phadnis is struck by the author's meticulous research, nuance, and restrained elegance. The book, as she notes, approaches one of the most seminal moments of Indian democracy - the imposition of Emergency - from an angle not many are aware of: the resistance provided by Indians/Indian-Americans living in the United States. These men and women fought against the curtailment of democratic norms and civil rights, inspired by both American values as well as by Mahatma Gandhi and Jayaprakash Narayan, better known as 'JP'. Coincidentally, American democracy had just gone through its own wrenching democratic upheavals - the Vietnam War and Watergate - which helped Indians there find space to voice their protests.