September 27th came and went and yet much was not made of this year&rsquo;s &lsquo;Earth Overshoot Day&rsquo; in India. It was the day the Earth&rsquo;s inhabitants exhausted their current year&rsquo;s entitlement of natural resources based on the planet&rsquo;s capacity to regenerate them during a full year. For the rest of the year the planet lives on borrowed resources &mdash; borrowed from future generations.

Ninety five days in debt

Business Standard

Planning Commission Deputy Chairman Montek Singh Ahluwalia is an easy, and favourite, target for the Left and an assortment of populists. So it was not surprising that an innocuous affidavit, filed by his office in the Supreme Court, explaining the basis for India&rsquo;s official poverty-line estimate became the subject of ill-informed controversy. Part of the problem lies in the very subject under discussion. The idea of a &ldquo;poverty line&rdquo; is easily and widely understood, but the manner in which the official estimate is arrived at can confuse even trained economists. This paradox of simplicity and complexity can result in obfuscation in any political debate. That is what happened over the past week when the submissions made in the affidavit became the centre of controversy.

Poverty of debate

The Indian Railways has indicated that it is unlikely to reach the operating ratio (operating expenses to revenue) of 91.1 per cent projected in the Budget for the current year (2011-12). This is unfortunate, not unexpected. When the Budget was presented, it was anticipated that the improvement in the operating ratio would be &ldquo;hollow&rdquo;. The ratio (the lower the better), which deteriorated sharply in 2009-10, made some improvement last year. But a lower (arithmetically higher) target was set for the current year and now even this seems beyond reach. The scepticism, displayed long before the financial year-end is in sight, is intriguing since revenue performance in the first five months of the current financial year is along projected lines. Revenue has gone up 10 per cent in what is really the lean season.

Railways going downhill

The Union Cabinet&rsquo;s clearance of the proposal to repeal the existing Mines and Minerals (Development and Regulation) Act and replace it with a new legislation may help dispel the notion of continued stasis in government policy making. However, this gain in perception would be more than neutralised by the adverse effects the provisions of the new Bill would have on the mining industry. The government has been concerned about growing popular resistance to mining projects, on the grounds of corruption in the leasing of mines as well as unhappiness with the rehabilitation and compensation packages for displaced land owners and other locals. However, the solution the new Bill has proposed is unlikely to achieve many of the stated objectives for which the legislation has been conceived. On the contrary, several provisions of the proposed Bill will give rise to a host of more complex problems and, worse, may well sound the death knell for India&rsquo;s mining industry.

Mining undermined

It is not often that farmers go on strike. Forty thousand paddy growers have done so in the East Godavari district and adjoining areas in Andhra Pradesh. Their demand: make rice cultivation profitable. The striking farmers complain that the minimum support price (MSP) fixed by the government does not cover the cost of cultivation, let alone enabling a profit margin. Realising the gravity of the situation, the Andhra Pradesh government appointed the Mohan Kanda committee to ascertain circumstances that led to the crop holiday. However, the Centre has chosen to overlook this extraordinary event. With indications that many farmers in the key paddy-growing southern states like Tamil Nadu, Karnataka and Maharashtra may join their Andhra counterparts in the next cropping season, the danger now is that this localised protest can blow up into a large-scale farmers&rsquo; stir across the country.

Holiday as protest

State Bank of India should have seen it coming. The Reserve Bank of India had forced it to tighten provisioning because of teaser housing loans and other factors, and SBI&rsquo;s capital adequacy ratio had therefore fallen to 12 per cent in March, from 14.3 per cent two years earlier. To make matters worse, profits have been falling.

A predictable downgrade

The contrast could not be more dramatic. Indigo, the low-cost airline, posts a profit for the third straight year. Kingfisher, the full-service carrier which acquired a low-cost one, is approaching the end of its tether with rising accumulated losses, and decides to end its low-cost service. So what works in civil aviation &mdash; low cost or full service? There is no one answer. As a rule, low-cost airlines like Southwest in the US and Ryanair in Europe have done better financially than the full-service carriers; Ryanair, for instance, enjoys a handsome 20 per cent profit margin. Logically, in a middle-income market like India, low-cost flying should be the more attractive end of the market. However, many full-service carriers are profitable too, like Singapore Airlines, but usually with much leaner margins and often with the help of regulated markets characterised by restricted bilateral rights.

More rough weather

It&rsquo;s not just India that is seeing &ldquo;popular&rdquo; challengers to the existing scheme of things acquire new heft: civil society activists and quasi-Gandhian icons leading street protests have put governments on the defensive with an ease not seen till now. One is a movement against corruption, another against the arrest of a police officer, and a third against an official definition of what constitutes poverty. This so-to-speak democratisation of a political system that is already a democracy, but perceived as being run by a power elite, has acquired a global flavour &mdash; not just because of Arab Spring but also because a small &ldquo;Occupy Wall Street&rdquo; protest has mushroomed into a multi-city phenomenon termed &ldquo;American Fall&rdquo;. That, in turn, has come in the wake of the surprising success of the Tea Party movement in the US, as a challenge to the mainstream political parties.

Democratising a democracy

A year or so after he learnt about the pancreatic cancer, Steve Jobs bared his soul (Stanford University Commencement Address 2005): &ldquo;Remembering that I&rsquo;ll be dead soon is the most important tool &mdash; to help me make the big choices in life. Remembering that you are going to die is the best way I know to avoid the trap of thinking you have something to lose.&rdquo; In the six years left to him, he turned communication, mobile computing and digital entertainment upside down, by living that philosophy to the hilt. Apple built new domains around his insight that consumers would love touch-screens and ditch the mouse, which Apple itself had turned into standard equipment. Several years after Apple launched the iPhones and iPads, those devices remain the benchmarks in consumer gadgetry.

Technology with soul

A sub-committee of the Planning Commission has suggested merging the three centrally-sponsored schemes relating to wildlife &ndash; Project Tiger, Project Elephant and the Integrated Development under Wildlife Habitat &ndash; into a single wildlife protection programme. This will be in line with the Planning Commission&rsquo;s policy of reducing the number of centrally-sponsored schemes, to avoid duplication of effort and to capitalise on synergies. Earlier, the Commission gave similar advice to the agriculture ministry, which operates more than a score of centrally-sponsored schemes. On wildlife, the Plan panel has argued that the amalgamation of the different schemes is advisable in view of the pressing need to save other endangered species specific to states, such as lions and rhinos.

Saving the tiger, lion, rhino?

All global rankings are fraught. Much depends on the methodology used and assumptions made. Several world rankings put out by western outfits are based on western concepts that privilege them. Thus, it is not surprising that so many western institutions dominate the global top 200 universities worldwide. To take an example, the assessment of &lsquo;quality of research,&rsquo; the citations index used and the definition of &lsquo;international outlook&rsquo; of staff, students and research has a pro-western bias. It is not surprising that an analysis undertaken by UK&rsquo;s Times Higher Education would list 75 universities from the US and 32 from Britain in the top 200! The question could be raised why these countries are not doing as well as they used to despite having so many good institutions and how come China, Brazil and India are doing so much better with so few &lsquo;world class&rsquo; educational institutions at the top.

Not so higher

The US has done well to pause and reflect on the consequences of a proposed legislation that would penalise China for keeping its currency artificially low. The &lsquo;Currency Bill&rsquo;, if passed, would allow the US to impose tariffs on Chinese goods, by way of retaliation for China keeping its currency artificially undervalued. The Chinese riposte would surely be in the form of counter-sanctions on US imports into China. A trade war between the world&rsquo;s two pre-eminent economies is the last thing the tottering global economy needs at this time! The move to impose sanctions comes against the backdrop of a faltering US economy characterised by anaemic growth (the Federal Reserve&rsquo;s forecasts for 2011 and 2012 are 1.7 per cent and 1.2 per cent, respectively), stubbornly high unemployment (officially estimated at 9.1 per cent), staggering public debt and a high trade deficit ($500 billion in 2010).

Avoiding bravado

Mahatma Gandhi was a committed constitutionalist. He, like the entire pantheon of India&rsquo;s freedom fighters including B R Ambedkar, believed in the rule of law, negotiated settlement and the integrity of democratic institutions. Mr Gandhi never went on a fast to make a demand; he fasted as an act of penance. Thus, neither the threat to fast in pursuit of a demand nor the assertion that citizens are above Parliament is Gandhian. It can certainly not be accepted as a legitimate assertion of a free people&rsquo;s democratic rights. Arvind Kejriwal of the India Against Corruption movement is, therefore, wrong to assert that his leader Baburao Hazare stands above Parliament. Parliament is answerable to people through constitutionally mandated means, and not in the populist sense that Mr Hazare assumed when he fasted at New Delhi&rsquo;s Ramlila Grounds seeking to shape Parliament&rsquo;s business on an hourly basis in the name of the people.

Institutional integrity

The worm may be turning. The microfinance industry, after a disastrous second half last financial year and more pain likely in the first half of the current year, is being told by some of its investors to refocus on its primary objective: uplifting the poor. The crisis happened because some aggressive microfinance institutions (MFIs) tried to deliver on the commitments they had made to their global investors. Hence, this refocusing may be the beginning of a return to stability as well as slow and steady growth. The overall lesson is that only variations of social entrepreneurship can sustain lending to the poor. If that means slow growth and not accessing a lot of quick return-seeking global capital, then so be it.&nbsp;By losing sight of the cardinal objective of improving the lives of the poor and chasing numbers, the sector will open itself to the allegation that it is nothing but a moneylender dressed in modern corporate garb, as was levelled by the Andhra Pradesh government.

Sense on microfinance

Early reactions from mobile service operators and investors in telecom stocks suggest that there is much to welcome in the focus of the draft telecom policy that Union Telecom Minister Kapil Sibal announced this week. Certainly the policy was long overdue. In a country that now has 900 million subscribers, it is absurd that the industry should operate on a policy that was framed 12 years ago when there were less than 100 million subscribers. The dynamics of the industry have changed drastically since then and the declining relevance of the 1999 policy is probably well illustrated by the current controversies over the last round of 2G licensing. Overall, the pro-consumer and largely pro-industry intentions augur well for the final policy that is due out in December. But, as always, the proof of the policy&rsquo;s efficacy lies in its implementation and the nitty-gritty of the guidelines that sector regulator issues.

Pressing the right keys

Thomas Sargent of New York University and Christopher Sims of Princeton University are the proud recipients of the Nobel Prize in the Economic Sciences for 2011. Their work in structural macroeconomics seeks to explain the impact of policy decisions, such as a tax cut or a hike in interest rate, on economic growth and inflation. While Professor Sargent&rsquo;s work focuses on the long-term impacts of such policy decisions, Professor Sims&rsquo; work deals with understanding the nature of &ldquo;shocks&rdquo;, which by their very nature are sudden. By orientation, Professor Sargent is a pure theorist, while Professor Sims&rsquo; work is more applied, which makes their respective work complementary. There is no denying their seminal contribution to economics.

Rational choice

The media is like the weather; everyone has an opinion on it, but no one really knows how it could be changed. As a result, all too often bad ideas get an airing and government action does more harm than good. Take the central government&rsquo;s reported decision to withdraw its advertising from five &ldquo;anti-national&rdquo; newspapers in Kashmir (some with a large readership) that are said to be &ldquo;fostering separatism and leading to disharmony&rdquo;. In another instance, the Press Council of India&rsquo;s new chairman reportedly commented on using &ldquo;harsh&rdquo; measures as an admittedly non-preferred way to deal with the media, such as imposing heavy fines, withdrawing government advertising and suspending their licence. Or take the government&rsquo;s proposal to establish new norms for granting TV licences.

Rewarding good behaviour?

Even as the nation&rsquo;s capital is once again gripped by dengue and the usual post-monsoon viral fevers, the Indian government has finally acknowledged the presence of the dreaded drug-resistant bacteria, or superbug NDM-1, in the country. The situation may not be alarming yet, claims the government of Delhi, where studies have detected bacteria carrying antibiotic-immune protein (gene) called New Delhi metallo-beta-lactamase-1, or NDM-1, in the intensive care units (ICUs) of some leading hospitals. However, the potential danger to human health is truly enormous. Though unfairly named after New Delhi, since it was traced simultaneously at several places in Britain, India and Pakistan, its discovery had caused global scare, and for good reasons. If allowed to multiply and spread, the superbug can render most of the infection-fighting drugs &ndash; including the most powerful class called carbapenems &ndash; ineffective.

Bugged by the superbug

In an ideal situation, the government&rsquo;s policy on foreign direct investment (FDI) should seek to achieve at least two clear objectives. One, the policy should be able to channel more investment flows into the country in greenfield or existing projects. Two, the rules under the policy should be transparent and non-discretionary. It is, therefore, surprising and disturbing that a key change introduced in the government&rsquo;s FDI policy early this month is unlikely to achieve either objective. Shorn of its legalese, what the changed policy has done is to deny FDI status to all investments in convertible debentures or mandatorily convertible preference shares if they have in-built options of any type. And if these instruments with such options are issued or transferred to non-residents, they would have to comply with the existing guidelines on external commercial borrowing.

Tinkering with FDI

Recent national income data confirm the suspected slowdown in services sector growth. While agricultural sector growth is holding up overall growth numbers, weak industrial sector performance is now being followed by weak services sector performance. This trend could continue if government spending is curbed to control the fiscal deficit. The seasonally adjusted services sector business activity index (SSBAI) fell to 49.8 in September 2011 from 53.8 a month ago. An SSBAI score of 50 or above suggests the economy is growing, while a score below 50 indicates that the economy is contracting. More to the point, this is the first time since April 2009 that a contraction in service sector growth has been witnessed.

Slowdown in services

New Delhi&rsquo;s expanding Metro system is changing lifestyles and living patterns in the nation&rsquo;s capital in a variety of ways, some perhaps not even anticipated. It is not clear if the Metro&rsquo;s planners anticipated the fact that spending an evening on New Delhi&rsquo;s Boat Club lawns, the green expanse stretching from the Parliament House and the Central Secretariat at one end of Rajpath to India Gate at the other end, would become attractive and affordable to lakhs of Dilliwallahs holed up in little boxes in Delhi&rsquo;s far-flung colonies. The ease with which people can commute has not only made the Boat Club lawns an attractive venue for family outings but also an easy place to mobilise crowds for whatever cause, as all the candle light gatherings testify to.

Life after the Metro

Incisive columns and editorial comment by top opinion leaders

Page 531 - Editorial Comment