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FINANCIAL EXPRESS, NOV 6, 2017
How India can tap agriculture to boost tradesurplusThe new minister for commerce and industry, Suresh Prabhu, expressed his resolve to expand exports at the occasion of his anointment as the minister.
The new minister for commerce and industry, Suresh Prabhu, expressed his resolve to expand exports at the occasion of his anointment as the minister. He highlighted agri-exports potential for not only for promoting overall exports, but also in augmenting farmers incomes and ameliorating farm distress. His objective is laudable and achievable, provided there is a paradigm shift in policymakingfrom being obsessively consumer-oriented to according farmer interests a higher priority. But before elaborating on this, let us take a look at the trends in agri-trade, both exports and imports, during the Manmohan Singh (MMS) period (2004-05 to 2013-14) and theNarendra Modi(NaMo) period (2013-14 to 2016-17). A close look at these trends and their drivers can help Suresh Prabhu and his team identify agri-commodities that can help boost agri-trade surplus. In general, both agri-exports and imports have increased substantially since 2004-05. Agri-trade increased from $14 billion to $59.2 billion between 2004-05 and 2016-17. As a share of agri-GDP, it increased from 11.1% in 2004-05 to 16.7% in 2016-17, after peaking at 19.6% in 2012-13, reflecting the increasing integration of Indian agriculture with global markets. It is interesting to observe that the MMS period saw agri-trade surplus surging seven -folds, from $3.6 billion in 2004-05 to $25.4 billion in 2013-14, but then fell dramatically by two-thirds during the NaMo period, touching $8.2 billion by 2016-17. The tumbling agri-trade surplus was the result of falling exports and rising imports. Agri-exports, after peaking at $42.9 billion in 2013-14 fell to $33.7 billion in 2016-17, while imports kept rising from $17.5 billion in 2013-14 to $25.5 billion by 2016-17. Agri-exports suffered primarily from significant fall in exports of cereals (especially wheat and maize), cotton, oilseeds complex and, to some extent, bovine meat. This, in turn, was largely due to a steep fall in global prices on one hand and restrictive export policies on the other. The global prices of wheat, maize, soybean, and cotton, e.g., fell by 47%, 39%, 25% and 18%, respectively, during 2013-16. The FAO food price index fell from 209.8 in 2013 to 161.5 in 2016. Export policies for pulses, oilseeds/edible oils, several vegetables, etc, was restrictive. Nevertheless, exports of fish-seafood, and fruits-nuts-vegetables (mainly guavas/mangoes, grapes, cashew nuts, onions) have been growing steadily touching $5.8 billion and $3 billion, respectively, in 2016-17.
Agricultural imports have been rising continuously since 2004-05. Edible oils ($11.3 billion), pulses ($4.3 billion), and fruits, nuts, vegetables ($3.1 billion) together touched $18.7 billion out of a total agri-imports of $25.4 billion in 2016-17.
Where do these trends lead us to in terms of policy?
First, if we have to promote our agri-exports, we must build global value-chains for some important agri-commodities where we have a comparative advantage. Estimates of revealed comparative advantage show that India is export competitive in almost 70% of agricultural commodities, non-tradablei.e., our prices are between import parity (cif) and export parity (fob) pricesin about 10-15%, and import competitive in the remaining 15-20% commodities. On the exports front, India is relatively competitive in cerealsespecially rice and, occasionally, in wheat and maizeoilseeds, especially groundnuts, and oil meals, provided we have an open and stable export policy. We have also been the worlds second-largest exporter of cotton. But it is fish and sea-food, bovine meat, and fruits, nuts and vegetables, where we have great potential to grow. And these are the commodities to focus on for stimulating agri-exports. This would require infrastructure and institutional supportconnecting export houses directly to farmer producer organisations (FPOs), sidestepping the APMC-regulated mandis, removing stocking limits, trading restrictions, etc. These are elements of structural reforms in agriculture. It is when global prices dip suddenly by 25-30%, as was the case between 2013-16, that problems arise for domestic exporters and export-oriented value-chains may need some support to push back. A special package to support value-chains at such times through infrastructural investments (in, say, assaying, grading, packaging and storing facilities), which will also create jobs in rural areas, or assistance in adhering to sanitary and phytosanitary standards (SPS), etc, would make them more resilient to future price-shocks.
Second, India needs to adopt an open, stable and reliable export policy sans flip-flops. Abrupt export bans, high minimum export prices to restrict exports, or other quantitative restrictions such as on pulses, edible oils, and, at times, even on vegetables and cereals, etc, must give way to open and free exports.
Third, on the imports front, it is the edible-oils sector, especially palm and soybean oil, where India loses the most. Palm oil is used to adulterate several other oils for the domestic market. Similarly, among pulses, primarily yellow pea is used as an adulterant in besan (chickpea flour). The import policy must, therefore, be designed such that the landed price of palm oil and yellow pea never goes much below the domestic prices of their nearest rivals, say, soybean oil and chickpea, respectively.
Lastly, liberalisation of factor markets, especially land-lease markets would also help in building more efficient and reliable export value-chains. Over-regulated land-lease markets have kept landholdings small and forced informal tenancies to flourish, rendering them incapable of mobilising large-scale capital. Long land-lease arrangements can facilitate private investments in building export-oriented global value-chains, generating rural non-farm employment and enhancing farmers incomes.
Now is the time for Prabhu to actand steer a farm-to-foreign strategy, improve agri-trade surpluses by promoting agri-exports, and most importantly, bring more jobs and prosperity to rural areaswithout losing time.
Co-authored by- Smriti Verma
Gulati is Infosys Chair professor for agriculture, and Verma is consultant, ICRIER
TELEGRAPH, NOV 5, 2017
Promotion limbo in govt
Basant Kumar Mohanty
New Delhi:The department of personnel and training has been sitting on promotions for the past year, leaving thousands of mid-level officers in different central government ministries stagnating in their posts since late 2016.
Sources said over 2,000 employees at different levels - like section officers, undersecretaries, deputy secretaries and directors - have not got promotion because of ongoing legal cases related to reservation in promotions.
"Lack of promotion is very discouraging," said an undersecretary in the human resource development ministry. "There is no restriction on the DoPT to promote general category staff against vacancies in the unreserved category and Scheduled Caste and Scheduled Tribe employees against vacant posts in their respective categories."
The DoPT promotes a few employees every month at all levels against available vacancies. But not a single employee has been promoted since October 2016.
As a result, 250 of the 600 deputy secretary- and director-level posts are vacant. At the undersecretary level, 337 of the 1,462 posts are vacant, while 1,574 out of 3,018 sanctioned posts are vacant at the level of section officers.
Article 16 (4) of the Constitution provides for reservation in jobs for socially and educationally backward classes.The 77th constitutional amendment, passed in 1997, introduced a provision - 16 (4) (a) - that provided for reservation in promotion for SC/ST candidates on the ground they were not adequately represented in the public services.
The DoPT accordingly issued an order in 1997 and SC/ST employees started getting reservation in promotions.
In a 2006 judgment, however, the Supreme Court ruled that under-representation of the backward classes needed to be established with empirical data while giving reservation-based promotions.
In a recent judgment, Delhi High Court held that the DoPT should have modified its order keeping in view the top court's 2006 ruling.
Some central government staffers have approached the Central Administrative Tribunal, saying some employees had got reservation-based promotions in violation of the 2006 judgment.
In another case, the Supreme Court has ruled that no SC/ST employee can be given reservation-based promotion against vacant unreserved posts.
DoPT information officer K.S. Dhattwalia has not yet responded to an email sent on Monday.
Some employees say the DoPT should give promotions subject to the final outcome in the pending legal cases. A DoPT official, however, said the department was not willing to promote any employee till the reservation dispute is settled.
HINDU, NOV 7, 2017
Teaching ethics to aspiring civil servants
We need to debate the future of the IPS
The arrest in Chennai of an Indian Police Service (IPS) officer on probation,for cheating during the civil services examination, raises questions on future recruitments to the All India Services and the training of officers. It is tellingly ironic that the incident occurred around the same time when the nation wascommemorating the birth anniversary of Sardar Vallabhbhai Patel, who stood for integrity in government and was considered the chief architect of post-Independence civil services. The incident also took place some months after thegovernment approved all the recommendations of the Seventh Pay Commission, which was done in the hope that more pay would mean greater levels of honesty and dedication on the part of public servants.
Unlike in normal criminal justice matters, the burden here of proving innocence rests with the offender, as long as the decision is to proceed against him in an internal inquiry and terminate his services thereafter. However, going by the severity of the offence, it is doubtful whether the ends of justice will be met by resorting only to departmental action. There is always a public perception that double standards are applied when punishing criminality in high places. This is why there is no option but to prosecute the officer in a court of law. Of course, he should be given every opportunity to defend himself, but the dice seems heavily loaded against him. The punishment aside, what needs to be revisited in this context is the provision in civil service rules that permits a serving officer to constantly look for opportunities outside the service to which he or she had been allotted in the first instance.
A wider malaise?
The question is, is this instance of misconduct by a public official, chosen on merit and pampered later with enviable perquisites, a mere aberration or is it symptomatic of a wider malaise? What is worrying is that there are growing accounts of dishonesty among public officials, especially in the State governments.
This is not to say that amid widespread corruption, senior civil servants cannot but yield to a dishonest political executive. Ultimately it is the moral fibre of an individual officer that counts. A substantial percentage of senior officials still stick to the path of virtue and act according to the codes of good conduct. It is this phenomenon that gives us hope that all is not lost.
The pride of the Indian Police is the National Police Academy in Hyderabad that trains IPS recruits. It offers comprehensive training to shape the profile of police officers. In recent years, some measures have been initiated to impart instructions in ethics. The Chennai incident throws serious doubts over the quality of such inputs aimed at character-building. It is not my case that a greater emphasis on ethics will measurably improve civil service conduct. However, we also cannot say nothing can be done in the matter; that would be disastrous.
The NPA faculty, including its director, must enhance the quality of instruction in ethics. The institution will receive ample support from the Home Ministry, which has been most generous in granting the finances needed to sharpen police training in the country. In sum, there must be indoctrination of trainees in ethical behaviour. Other training inputs take a back seat.
Further, supervisors in the State Police do not play the role required of them to train IPS probationers once they are assigned for field training after finishing the course at the NPA. Only a few senior officers take interest in instilling the right values in IPS trainees. This is not only because of sheer indolence and the low priority accorded to responsibility of monitoring training, it is also because of the declining moral standards of senior police officers themselves.
If the IPS stands somewhat discredited in the present time despite its glorious record in maintaining order in the most difficult of terrains, including in Jammu and Kashmir and Naxalism-affected areas, it is because a large number of senior officers concentrate on their own careers at the cost of guiding trainees. A vibrant and well meaning national debate on the future of the IPS therefore seems appropriate.
R.K. Raghavan is a former CBI Director. Views expressed here are personal.
BUSINESS LINE, NOV 3, 2017
Pharma price controls hurt consumers
Public procurement at a negotiated price is a better option. Price curbs deter producers and dont check pharmacy margins
The Governments attempt to keep the prices of essential medicines affordable and curb the extraordinary returns earned by private healthcare providers through price controls has started an inexorable process whose end does not seem in sight. Will these moves eventually be counter-productive?
First came the move to extend the scope of what are considered essential medicines so as to bring a larger number of them under price control. Then came the move to impose a cap on the prices of medical implants first coronary stents and then knee implants. This led to some foreign manufacturers of implants seeking to withdraw some products from the Indian market. The Government refused such permission for six months and over time the original applicants submitted fresh applications to withdraw their products after six months.
Now the question is, how long can you prevent manufacturers from withdrawing their products? Are they likely to introduce their newest products in India in future when they are globally released?
Taking a hit
US pharma manufacturer Johnson & Johnson has taken a $10 million hit in the September quarter on sales of knee implants as a result of price control in India, which it described as an extreme example of such action occurring periodically around the world. Also, AdvaMed, a lobby of US medical device manufacturers, has asked the US trade representative to cut duty concessions to Indian imports into the US under the generalised system of preferences (GSP) in response to India capping cardiac stents and knee implant prices. Two Indian associations of medical device manufacturers have protested, adding that GSP is a multi-country arrangement and there is a downside to tinkering with it unilaterally.
Meanwhile, the private players are not sitting still. After the initial price controls on implants, the Maharashtra FDA sent a report to the National Pharmaceutical Pricing Authority on overpricing in, not stents, but balloons and guiding catheters, also used for angioplasty. Patients were paying up to five times the imported cost of these devices.
On the drugs front, the Government made it mandatory for doctors to prescribe medicines using generic names. Now the Government is considering limiting the number of brands of a drug a company can manufacture and also ending contract or loan licensing.
What all this does not address is the chemist-manufacturer nexus. Since the whole exercise is to help those who cant read the doctors prescription, the chemist will pass across the counter the product of a company which offers high margins.
Tackling the problem
Technology at one stage offered a way of getting around the often untrained but always street smart Indian chemist online pharmacies. But in India, where substandard and spurious drugs abound, the best way to ensure you are served only the genuine stuff is to rely on the chemist you have known for long and trust. Plus, online pharmacies need to be regulated and watched over. The best way to do so, the Government feels, is to get them to upload all their trade transactions onto a central portal. That will make transparent what is being sold at what price and who has manufactured it.
Now, the issue of a level playing field has come up. Online pharmacies are saying we will agree to upload all our trades if the offline pharmacies do the same. Right now, that is where things stand. The lesson is there is no end to the controls a government can impose and business ingenuity in getting around them. In the process, the price fixing bureaucracy will become both gargantuan and slow, and inevitably court cases will follow.
There is no single solution but if price controls and extensive regulatory supervision will not, then the following can be a solution. It acknowledges that there is no getting around the need to have a multilayered and extensive public health service in order to contain private hospitals, clinics and diagnostic centres. But that is not enough. How can the health service access affordable quality medicines and devices? This is where public procurement comes in. A public agency can procure in bulk at a negotiated price and do the job of price control at a fraction of the cost and paperwork of direct price control.
According to an OECD study, operational and governance-related waste can be reduced by transparent and efficient public procurement of pharmaceuticals. The scope for corruption in public procurement can be reduced by seeking out more transparent pricing of medicines and consolidating requirements at the central level through joint initiatives.
TELEGRAPH, NOV 4, 2017
Research to face pay hike blows
Basant Kumar Mohanty
New Delhi:Two clauses in the Centre's order announcing the 7th Pay Commission hikes in teacher salaries have opened it to charges of discouraging research and deterring teacher recruitment at state universities.
One, Thursday's order has scrapped an incentive under which PhDs and MPhils taking up teaching jobs received higher joining salaries than non-doctorates.
Two, the Centre has clarified that in the case of state universities, its already reduced share in the additional cost of teacher pay hikes will apply only to posts already filled by January 1, 2016. For the rest, it would not bear any part of the burden.
Currently, the entry-level salary for PhDs recruited as teachers outstrips that of non-doctorate recruits by an amount equivalent to five annual increments. For MPhil recruits, the difference is equivalent to three increments.
The incentive was available also to other teachers if they earned a doctorate during their period of service. But Thursday's order says this incentive is being withdrawn because the doctorate teachers are anyway likely to be promoted faster.
"The incentive structure is built-in in the pay structure itself wherein those having MPhil or PhD degrees will progress faster under the career advancement scheme. Therefore, there shall be no incentives in form of advance increments for obtaining the degrees of MPhil or PhD," the order says.
Rajesh Jha from Academics for Action and Development, a teachers' organisation, and a member of Delhi University's executive council said the move would "dampen teachers' enthusiasm for research".
"Faster promotions for PhD holders are nothing new: the extra incentive was meant to encourage research," Jha said.
"This reflects the central government's extreme insensitivity towards the hard work and challenges faced by researchers," said Arun Kumar, general secretary of the All India Federation of University and College Teachers' Organisations, which represents nearly six lakh state government teachers.
A human resource development ministry official said the pay review committee had not recommended the continuation of the incentives.
Currently, nearly 50 per cent posts are vacant in the state universities. Teachers said these vacancies might not be filled because of the Centre's refusal to bear any part of the additional cost of the revised salaries for teachers recruited after January 1, 2016.
As for posts filled before that date at state universities, the Centre has lowered its share in the additional cost from 80 per cent to 50 per cent, which it will bear for only 39 months against the earlier practice of 51 months.
STATESMAN, NOV 2, 2017
The recent findings of a survey commissioned by the Union HRD ministry indicates that a large number of under-qualified teachers are teaching in schools throughout the country. This is incredible and appalling. It reaffirms the malaise in education.
It is astonishing too that nearly four lakh teachers in Bihar and Madhya Pradesh have failed to secure the 50 per cent benchmark in the Class 12 exam and almost 45,000 teachers have not studied beyond the Higher Secondary level. The state of primary education in West Bengal is no less distressing due to the recruitment of a large number of untrained teachers on the basis of the Teachers Eligibility Test.
Despite the Calcutta High Court order to abide by the RTE Act, the situation has been aggravated by the state governments indifference. Qualified teachers are absolutely necessary for quality education, most particularly at the elementary level. Recruitment of primary teachers with suitable qualifications and training is the fundamental imperative, one that has consciously been violated by the administration.
If teachers are not qualified enough, how they will teach? What impression are they going to convey to young minds? How will the concept of a digital and skilled India materialise without adequate literacy? The ratio of student and teacher is also a major problem which needs to be addressed immediately. The one-teacher school is a mockery of the education system. Some time ago, Parliament amended the Right to Education (RTE) bill.
It gave 8.5 lakh untrained teachers a time-frame till 2019 to get themselves qualified and to secure a professional degree from a recognised academic body. When the Right to Education Act was introduced in 2010, many new schools were set up, but untrained teachers were recruited. They were given five years to get themselves qualified.
The striking feature of the Bill is its emphasis on quality education. It envisaged that the evaluation of teachers would be conducted periodically. Teachers without the required qualifications would be given five years time to qualify. However, an evaluation of the RTE Act, after seven years, has exposed its shortcomings. The recent CAG report substantiates this appalling state of affairs. The problems are non-utilisation of funds by several states, decrepit infrastructure, midday meal scam, dearth of qualified teachers, one-teacher dominated schools and little or no supervision. The Right to Education Act was promulgated after six decades of independence.
During this period, many experiments on childrens education were made both by the Centre and the states. The collaboration with Britains Department for International Development (DFID), Unicef, and Unesco for the improvement of elementary education has yielded nothing tangible. The recent Unicef report mentions about 450 million illiterates in our country. The RTE Act envisages the relaxation of bureaucratic control and a conducive environment for peoples participation in the overall development of primary education.
At present 4.6 per cent of 22 crore children in the 6-14 age-group are out of school, i.e. about one crore. The figure is extremely dismal, to say the least. Basic education or Buniadi Siksha, as formulated by Mahatma Gandhi, was both remarkable and challenging.
Cooperation, harmony rather than competition was given due importance in this scheme for overall development of the child. Community programmes, play, dignity of labour, work education, creativity and imagination enhanced the childs psychological attitude and personality. The effectiveness of the Right to Education Act will depend mainly on the quality of teachers. It is necessary to create an All India Teachers Service and to recruit meritorious candidates through a central selection board.
Qualified teachers should be paid suitably in the interest of good education. There is no substitute for good teachers. Technology can act as a catalyst in the mind of the child. We have enough young minds in our country with the propensity to learn, but few qualified teachers to teach them with care and affection.
If we recognise education in the 21st century as a valuable commodity that is monopolized and marketed ruthlessly by the school, it will be more expensive in the days to come. Throughout the country, the cost of educating a child is increasing enormously, and the time has come to ackowledge the role of teachers in society, their background, outlook, and professional ability. The news that a teacher can beat up a student to death simply because of his failure to complete homework is horrifying. This suggests that some teachers do not even possess the basic human qualities of tolerance and affection.
School education, particularly at the elementary level, is in a sordid state. Despite recommendations by several commissions before and after independence (like Sadlers, JP Naik, Mudaliar, Radhakrishnan, Kothari etc), there has been little or no improvement. Governments both at the Centre and in the states are incurring a huge expenditure to bring about qualitative improvement and expansion of elementary education, but with little success. Elementary education has virtually collapsed. There was a time when schools were regarded as temples of learning. The teachers, if poorly paid, were regarded as the backbone of society, and respected and honoured. Good teachers were well-organised, firm and fair with a sense of humour.
The environment of schools with its strict discipline, rules and regulations, was congenial. Barring few exceptions, most of the schools today are a prison-house with a heavily-loaded curriculum, which is evident in the size and weight of the school bags. The childs daily routine is marked by joyless learning which affords no time for play. The education system has two facets ~ its administrative component and the academic.
Training of teachers is the responsibility of the school management. NCERT has been doing commendable work for half a century in the development of pedagogy, educational technology, preparation, publication of text books and teacher manuals. The National University of Educational Planning and Administration (NUEPA) must monitor the quality of education through continuous evaluation and research. The NUEPA must also assess whether the child has acquired the cognitive skills of knowledge economy.
The education system showcases organized anarchy and corruption. It was dismal during the 34 years of Left rule in West Bengal. In the Education Development Index (EDI), West Bengals rank was at 33, only ahead of Jharkhand and Bihar. A radical change and reform in elementary education is absolutely necessary. The formal education system should be given due importance and funds ought to be provided to this segment only rather than non-formal education.
The school examination system should not be done away with. Examination and evaluation can help children to know their strength and weakness in a particular subject. Happily, the HRD ministry has very recently scrapped the no-detention proposal.
Mahatma Gandhis buniadi education, Swami Vivekanandas overall development of humanity and educational epistemology as perceived by Rabindranath Tagore should be blended. Above all, we require qualified and devoted teachers with a sense of morality, values and ethics.
(The writer, a former Reader in Chemistry at Presidency College, Kolkata, was associated with UGC and UNICEF)
FEDERAL STATE RELATIONS
FINANCIAL EXPRESS, NOV 2, 2017
Inter-State Council reconstituted with PM Narendra Modi aschairman
The Inter-State Council, which is mandated to investigate and advise on disputes between states, has been reconstituted with Prime Minister Narendra Modi as its chairman and six Union ministers and all chief ministers as members.
The Inter-State Council, which is mandated to investigate and advise on disputes between states, has been reconstituted with Prime MinisterNarendra Modias its chairman and six Union ministers and all chief ministers as members. According to a gazette notification, the Union ministers who will be members of the reconstituted council areRajnath Singh(Home), Sushma Swaraj (External Affairs),Arun Jaitley(Finance), Nitin Gadkari (Road Transport), Thaawar Chand Gehlot (Social Justice and Empowerment) and Nirmala Sitharaman (Defence). Chief ministers of all states and Union territories having legislative assemblies will also be members of the council.
Eight other Union ministers have been made permanent invitees to the council. They are Suresh Prabhu (Commerce), Ramvilas Paswan (Food), Harsimrat Kaur Badal (Food Processing Industries), Jual Oram (Tribal Affairs), Prakash Javadekar (HRD), Dharmendra Pradhan (Petroleum) and Piyush Goyal (Railway). The Article 263 of the Constitution provides for the establishment of an Inter-State Council which is mandated to inquire into and advise upon disputes which may arise between states, investigate and discuss subjects in which some or all of the states, or the Union and one or more of the states, have a common interest. It is also tasked with giving recommendations on any such disputes and recommendations for the better coordination of policy and action.
In another notification, the government reconstituted the standing committee of the Inter-State Council with the chairmanship of Home Minister Rajnath Singh Four Union ministers and seven chief ministers are members of the new standing committee of the council. The Union ministers are Swaraj, Jaitley, Gadkari and Gehlot. The chief ministers are N Chandrababu Naidu (Andhra Pradesh), Amarinder Singh (Punjab), Raman Singh (Chhattisgarh),Manik Sarkar (Tripura), Naveen Patnaik (Odisha), Vasundhara Raje (Rajasthan) and Yogi Adityanath (Uttar Pradesh). The standing committee will have consultation and recommend matters for consideration of the council, process all matters pertaining to Centre-state relations before they are taken up for consideration in the council. It will also monitor the implementation of decisions taken on the recommendations of the council and consider any other matter referred to it by the council. The standing committee may, if necessary, invite experts and persons eminent in specific fields to have the benefit of their views while deliberating upon the related subjects.
STATESMAN, NOV 1, 2017
UNs reform logjam
At a recent event organised in Washington by the US-India Friendship Council, the US Ambassador to the UN, Nikki Haley, said that the key to India becoming a permanent member of the Security Council is not to touch the veto. She could not have been more spot-on in terms of reality. Her statement that the permanent five (P-5) members of the Security Council ~ Russia, China, UK, the US and France ~ are reluctant to forego their right to veto might be a bitter pill for India to swallow.
The fact of the matter is that reform of the Security Council would mean amendments to the Charter, and this is liable to be opposed by the US and Britain. Both countries are against radical reform and particularly against any loss of veto power.
The United States has for long been a supporter of Indias claim to a permanent seat in the Security Council. India has practically been catapulted to the enviable position of a sixth nuclear weapons state, if not eventually within the NPT system. Indias refusal to sign the NPT because it included specific prohibitions on developing countries and vague disarmament and technology transfergoals. Without the US backing, matters could have been more difficult than they actually turned out to be. However, Indias membership of NSG was blocked by China and we were livid that it was grounded on a premise of exception.
The position of privilege accorded to the veto-wielding P-5 nations made both India and Pakistan cite the discriminatory nature of global non-proliferation rules as part of the context for their decision to manufacture nuclear weapons, besides other regional imperatives. Neither was willing to accept that the veto powers would relate only to nuclear weapons, particularly when the nuclear powers were not committed to the NPT in order to move towards nuclear disarmament.
On the flip side, the power of veto is to forestall collective action against Sudan or North Korea by China; against Iran by Russia; against Israel or Pakistan by the US, thereby preempting consensus on when terrorism, weapons proliferation, and human rights violations warrant the Councils action. There is also an anomaly. While the US claims the right to use preventive force against what it considers to be credible threats, it argues that others engaged in similar actions ~ India invading Pakistan, China invading Taiwan, or Russia invading Georgia ~ would endanger international security.
The historical precedent, specifically on the need for strong institutions after World War II led to the Covenant of the League of Nations. Certain privileges were acorded to the Great Powers even at the expense of sovereign equality. This influenced the negotiations that led to the UN Charter. This was exploited by the Great Powers in their favour.
At the Dumberton Oaks conference, the US, the UK, the Soviet Union, and China reached an agreement on the general shape of the Security Council, but negotiations over voting arrangements, especially over the extent of the veto, were prolonged and difficult. None of the Great Powers was willing to accept, and they signalled their position at the San Francisco conference. Tentative proposals by many smaller states to limit the veto, the role of the permanent members of the Council, or its powers as such were vehemently resisted.
Australias proposal to exclude the veto from all arrangements relating to a peaceful settlement of disputes was put to vote, but it failed to garner enough support. In fact, more far-reaching attacks on the veto came to naught time and again because of the privileged position of the Great Powers. It was presented as a sine qua non by the sponsoring powers. The smaller countries soon realised that it was a choice between an organisation with Great Power privilege or, none at all. The reform of the Council in 1965 only resulted in an increase in nonpermanent members, and in the 1990s, attempts to abolish the veto soon gave way to greater realism. Even if numerical expansion of the institution complicated the exercise of Great Power dominance, in formal terms they hardly compromised on the voting power of the permanent members.
No new veto rights have been put in place. Nikki Haleys comment, therefore, dwells on a certain structural immobility that is inherent in the United Nations, most particularly the Security Council. Neither reform of the Charter nor any change in the Councils composition can materialise without the consent of every member of P5.
However, much of the blame for the failure of reform proposals over the decades can be attributed to P5 and its recalcitrance to shed or share power, differences among regional groups of states over whether the new members actually represent their regions (and if so, through what mechanism), or would they simply be from those regions.
These factors have contributed to what has been called a reform logjam, exemplified by Pakistans opposition to Indias candidature and Chinas against Japans. The existence and scope of the veto power, alongside the appropriate number of permanent and non-permanent members and the number of votes required to pass resolutions have been central to the idea of reforming the composition and procedures of the Security Council durings 1963-65. This led to changes in the number of nonpermanent members during 1993-97.
In 2005 two options relating to reform were proposed. Both envisaged the expansion of the Security Council from 15 to 24 members. In one model, six new permanent members were proposed ~ two from Asia (with India and Japan being leading contenders); two from Africa (where the main contending states were Nigeria, South Africa, and Egypt); one from Europe (Germany); and one from the Americas (a slot Brazil was primed for). Besides, there would be three new non-permanent members on a non-renewable two-year term.
The other model envisaged no new permanent members, but instead a new category of eight semi-permanent members elected on a regional basis for a renewable four-year term; and one new non-permanent member on a non-renewable two-year term. The negotiations over both models fizzled out. Neither option involved any change in the number of vetowielding powers. In a multilateral entity like the UN, India should persuade the US to sacrifice the veto power, and then convince the other four to do the same.
The extent to which great power privilege is institutionalised in the UN Charter is exceptional in the comity of nations and anathema to the democratic spirit. The basic point is exceptionalism which is actually a culture of privilege. The veto power remains the prerogative of the five permanent members. This no longer has as much relevance to the balance of superpower interests as it did in the context of the Cold War.
In the 21st century, it is an anachronistic privilege, used too often to undercut one another or for narrow national interests. The veto has reached its sell-by date.
(The writer is a Kolkata based commentator on politics, development and cultural issues)
STATESMAN, NOV 7, 2017
A talk with Pakistan
In December 2016, Dr Ashley J Tellis, a renowned South Asia scholar, made a presentation with a stark title ~ Are India-Pakistan Peace Talks Worth a Damn? ~ to a very discerning audience at an event organised by Carnegie India. As always, Tellis marshalled his facts well and was brutally frank and deeply incisive in his analysis.
Though he was in a way preaching to the committed, his presentation was extremely thought-provoking and insightful and was very well received. Those who missed the talk can now read his brilliant monograph: Are India-Pakistan Peace Talks Worth a Damn? (Carnegie Endowment for International Peace, Washington, D.C., 20 September 2017). That the unlikely but realistic title has been retained comes as a pleasant surprise.
The authors major conclusions reflect a deep understanding of the state of play in South Asia and are unexceptionable: The international communitys routine call for continuous India-Pakistan dialogue is not only misguided but also counterproductive.
This entreaty fails to recognize that the security competition between the two nations is not actually driven by discrete, negotiable differences Pakistans revisionist behaviour is intensified by its armys ambition to preserve its dominance in domestic politics Possession of nuclear weapons has permitted its military and intelligence services to underwrite a campaign of jihadi terrorism intended to coerce India This manifestation of hostility toward India makes any kind of diplomatic solution satisfactory to both Islamabad and New Delhi highly elusive.
The glaring asymmetries between the strategies of India and Pakistan have been highlighted by the author. India is a status quo power that perceives China to be its foremost strategic challenge, while Pakistan is a revisionist state that seeks to make territorial gains through the use of military force. Tellis writes, the path to peace depends largely on Pakistans willingness to accept its current strategic circumstances. Since the full subordination of the Pakistani military to its civilian leadership is unlikely for the foreseeable future, a shift in Pakistans orientation and behaviour will depend fundamentally on the military itself. The implication is clear: the army calls the shots and is not inclined to change course.
According to the author, mediation by the international community will not help to usher in peace, Since the United States lacks the means to alter Pakistans strategic calculus and China lacks the desire China would likely utilise Pakistan to slow down the rise of its emerging Asian competitor, India. India is firm in its conviction that all disputes between the two countries should be resolved through bilateral negotiations in terms of the Shimla Agreement of 1972 and the Lahore Declaration of 1999. Hence, India is unlikely to accept international mediation.
Tellis recommends that the US and the international community should prevail on the Pakistan army to stop sponsoring jihadi terrorism in India and persuade it to, acquiesce to the current territorial and strategic realities involving India and, as a consequence, end its relentless revisionism, which threatens to destabilise the Indian subcontinent and the security of Pakistan itself. Such a change in orientation may be difficult to bring about, but the international community, should certainly avoid reinforcing troublesome Pakistani behaviour through a premature and futile call for dialogue.
The author recounts the history of the security competition between India and Pakistan since the independence of both in 1947 after a partition that was violent and cataclysmic and bred intense emotional hostility between the two states. He states that, p ermanent hostility to India, nurtured through the continuous promotion of a parochial Islam, animates what is widely referred to as the ideology of Pakistan. He describes Pakistans inability to acquire the state of Jammu and Kashmir, even though it was both contiguous to Pakistan and a Muslimmajority state, as the root cause of Pakistani resentment.
The use of military power by India to force other Muslim-majority principalities like Hyderabad and Junagadh to join India added to the bitterness. Tellis dwells at length on Pakistans nuclear coercion that serves to shackle India and prevent it from fully focussing on consolidating its economic achievements and enlarging its geopolitical reach beyond South Asia He aptly deduces, nuclear weapons in Pakistani hands, far from being just deterrents against Indian adventurism, in fact, provided Rawalpindi with a licence to support insurgencies within, or terrorism against, India Pakistans ever-expanding nuclear arsenal serves to prevent any significant Indian retaliation against Pakistans persistent low-intensity war for fear of sparking a nuclear holocaust.
Tellis analyses the prospects of transition to genuine civilian rule in Pakistan in detail and concludes that there is a greater probability of Pakistan remaining a Praetorian Democracy as long as the army continues its policy of persistent revisionism and finds it difficult to change its stripes. He points out the enormous damage sustained by Pakistan for nurturing, sponsoring and supporting various terrorist organisations and the armys commitment to jihad as a grand strategy.
He writes, The more precarious Pakistans security situation has become as a result of the armys successive strategic failures, the tighter the militarys lock on political power, financial resources, and policy direction.
The author examines the usefulness of compellence as a strategy to coerce the Pakistan army to stop its sponsorship of cross-border terrorism. He is of the view that the international community lacks the leverages necessary to do so.
He feels that between the US and China, the latter is better placed to prevail on the Pakistan army to stop using jihad as a strategy because of their much closer relationship, but China is unlikely to do so. He discounts the possibility of a maverick General coming to power in Pakistan, who has the gumption to undertake a transformative reorientation of the countrys policies.
Finally, Tellis recommends that the US should stop calling for a sustained India-Pakistan dialogue on the full range of economic and political issues; it should, instead, make a determined effort to compel the deep state in Rawalpindi to sunder its links with jihadi terrorism; and, should not become an accessory to Rawalpindis strategy of extortionary engagement with India. He suggests that the US should stay out of the India-Pakistan contention altogether, leaving it up to both states to reach any agreements that can based on their relative power.
It emerges clearly from the authors analysis that peace between India and Pakistan is unlikely until Pakistans deep state ~ the army and the ISI ~ gives up what it perceives to be a low-cost, high payoff quest to continue to bleed India through a thousand cuts.
Till the Pakistan army realises the colossal amount of harm that it has caused to its own country and changes course, ugly stability will continue to prevail in South Asia. This excellent monograph is a profoundly analytical account of the history, the present state and the future prospects of the complex India-Pakistan relationship, especially the role played by Pakistans deep state in perpetuating conflict.
It must be read by policymakers, armed forces leaders and the members of the strategic community in both India and Pakistan. In fact, it should be prescribed reading in the training establishments of the armed forces and foreign service training institutions.
(The writer is Distinguished Fellow, Institute for Defence Studies and Analyses (IDSA), New Delhi)
HINDU, NOV 1, 2017
Collegium and transparency
The initiative adds a veneer of respectability to a mechanism that has little constitutional basis
On October 3, the Supreme Courts collegium published a resolution promising to hereafter make public, on the courts website, its various decisions, including its verdicts on persons nominated for elevation as judges to the high courts, its choices of candidates for elevation to theSupreme Court,and its decisions on transfer of judges between different high courts. These results, the resolution added, will be accompanied by the reasons underpinning the collegiums choices.
At first blush, the move strikes us as both necessary and important, as bringing transparency into a system that has been notorious for its opacity. But when probed deeper, on even a bare reading of the first set of publications released by the collegium, it becomes clear that the initiative adds, at best, a veneer of respectability to a mechanism that lacks any constitutional basis.
Consider some of the reasons professed thus far. In the cases of A. Zakir Hussain and Dr. K. Arul, candidates nominated for elevation to the Madras High Court, the collegium hasverbatimpublished the following statement of rejection: keeping in view the material on record, including the report of Intelligence Bureau [IB] he is not found suitable for elevation to the High Court Bench. The details of what the IBs reports might contain and the apparent materials on record remain concealed. Yet, threadbare as these reasons might sound, those offered for rebuffing the nomination of Vasudevan V.N., a judicial member of the Income Tax Appellate Tribunal, are particularly perplexing.
While one of the two consultee-colleagues has offered no views about his suitability, the other colleague has not found him suitable for elevation, the report reads. As per record, his name was also recommended by the Collegium of the Calcutta High Court on 28.11.2016 and the Government of West Bengal has expressed its disagreement. Record placed before us also shows that the proposal for his elevation initiated on a previous occasion by the Collegium of the Bombay High Court was rejected by the Supreme Court Collegium on 1st August 2013. A complaint pointing out this fact has also been received in the office of the Chief Justice of India. Keeping in view the views of the consultee judges and the material on record the Collegium is of the considered opinion that Shri Vasudevan V. Nadathur is not suitable for elevation to the High Court Bench.
The collegium, ever since its inception, following the Supreme Courts judgment in what is known as theSecond Judges Case(1993) has been enveloped by a sense of the hugger-mugger. The present revelations, much opposed to their perceived objective, scarcely make the system more transparent. In Mr. Vasudevans case, for example, we dont know which of the consultee-judges (presumably one of the two senior-most Supreme Court judges, in this case, who have previously served at the Madras High Court) objected to his elevation, and why the judge interviewed found him unsuitable. Also peculiar is the collegiums express noting that Mr. Vasudevan had previously been recommended by two different high court collegia, which would mean that, in all, the chief justices of three high courts, at different points of time, found him worthy of selection. But, were now left wondering how the view of one consultee judge whose reasons arent provided to us can override the opinion of three chief justices of three different high courts.
These issues concerning the system employed to appoint judges to the Supreme Court and the high courts even if they often involve matters of inscrutable procedure are of particular salience. The judiciary, after all, was regarded by the Constitutions framers as central to the social revolution that the document was meant to herald. Indeed, as the historian Granville Austin recounted in his book,The Indian Constitution: Cornerstone of a Nation, the Constituent Assembly brought to the framing of the Judicial provisions of the Constitution an idealism equalled only by that shown towards Fundamental Rights. It saw the judiciary as critical to upholding the equality that Indians had longed for during colonial days, but had not gained.
To this end, to ensure that judges would be insulated from political influence, the assembly agreed on a consultative process of appointing judges, a middle course, as B.R. Ambedkar described it. The Constitution avoided the cumbersome process of legislative interference and the undemocratic provision of a veto to the Chief Justice, and vested in the President the power to both make appointments and transfer judges between high courts. The President, who would act on the advice of the council of ministers, was, however, required to compulsorily consult certain authorities, including the Chief Justice of India (CJI), and, when making appointments to a high court, the chief justice of that court.
Originally, in 1977, inSankalchandSheths case, when interpreting the word consultation, the Supreme Court ruled that the term can never mean concurrence. Hence, the CJIs opinion, the court ruled, was not binding on the executive. But nonetheless the executive could depart from his opinion only in exceptional circumstances, and, in such cases, its decision could well be subject to the rigours of judicial review. This seemed like a perfectly sound balance.
And indeed, in 1981, in theFirst Judges Case, the court once again endorsed this interpretation, albeit partly. But twelve years later, in theSecond Judges Case, the court overruled its earlier decisions. It now held that consultation really meant concurrence, and that the CJIs view enjoys primacy, since he is best equipped to know and assess the worth of candidates. But, the CJI, in turn, was to formulate his opinion through a body of senior judges that the court described as the collegium.
In 1998, in theThird Judges Case, the court clarified its position further. The collegium, it said, will comprise, in the case of appointments to the Supreme Court, the CJI and his four senior-most colleagues and, in the case of appointments to the high courts, the CJI and his two senior-most colleagues. Additionally, for appointments to the high courts, the collegium must consult such other senior judges serving in the Supreme Court who had previously served as judges of the high court concerned. (On whether these views of the consultee-judges are binding on the collegium or not, the judgments are silent.)
Whats clear, though, is that these dizzying requirements maintain no fidelity whatsoever to the Constitutions text. Yet the court has been keen to hold on to this power. Indeed, when the Constitution was altered, through the 99th constitutional amendment, and when the collegium was sought to be replaced by the National Judicial Appointments Commission a body comprising members of the judiciary, the executive and the general public the court swiftly struck it down. It ruled, in what we might now call theFourth JudgesCase (2015), that the primacy of the collegium was a part of the Constitutions basic structure, and this power could not, therefore, be removed even through a constitutional amendment.
But perhaps mindful of some of the hostility that the system was facing, the judgment also promised to consider introduction of appropriate measures, to improve the collegium system. The new resolution, it might well seem, is an effort towards this end. Unfortunately, though, the publications only serve to further underscore the deficiencies in the appointment process, which remains, as Justice P.N. Bhagwati once described it, a sacred ritual whose mystery is confined only to a handful of high priests.
Suhrith Parthasarthy is an advocate practising in the Madras High Court
HINDU, NOV 5, 2017
Shelves of our lives
Bookshops are a reminder of the importance of discarding and forgetting
With word out that the brick-and-mortar bookshop is a retail model continuing on borrowed time, great claims have been made for its centrality to the examined life. In fact, a curious, and extremely encouraging, trend seems to be gathering strength the subgenre of books on bookshops is growing, with some bookshops in Delhi, for instance, giving more space to such volumes. The latest one to arrive isBookshopsby Jorge Carrin, who teaches literature at the University of Pompeu Fabra in Barcelona (its translated from the Spanish by Peter Bush). And like the best of such meditations on bookshops, in the end it is as much about the specifics of particular shops as it is an invitation to the reader to reorganise her reading in her mind, to periodically appraise her reading self. A bookshop does so in a way that a library, that even more vital institution, cannot.
Points out Carrin: Cultures cannot exist without memory, but need forgetfulness too. While the Library insists on remembering everything, the Bookshop selects, discards, adapts to the present thanks to a necessary forgetfulness. Limited real estate would be the obvious reason. And as he indicates elsewhere in the book, we as readers fail ourselves by not studying them closely enough: The history of bookshops is completely unlike the history of libraries. The former lack continuity and institutional support. As private entrepreneurial responses to a public need they enjoy a degree of freedom, but by the same token they are not studied, rarely appear in tourist guides and are never the subject of doctoral theses until time deals them a final blow and they enter the realm of myths.
Around the world
ReadingBookshopsat one stretch can leave you feeling giddy, as Carrin races through time and history talking of important bookshops. From Altair in Barcelona, to Chatwins in Berlin, from Pariss Shakespeare and Company in its two avatars to Ram Advani Booksellers in Lucknow, from Foyles of London to Pandora in Istanbul and Gandhi of Mexico City (theres a lovely story there that a little Googling yields), its a tour that screams for a map. And given the fragile existence of most bookshops, its also a call to list-making to check which bookshop is still around.
The search for lost, or even fictional, bookshops is part of this belief that there is something to be learnt from how they organised themselves, and from the echoes of that organisation all these years on. As he points out, literary pilgrims still go to Londons Charing Cross Road, looking for number 84, to try to steal a glimpse of something in the street view to connect to Helene Hanff book84, Charing Cross Roadabout her transatlantic relationship with the books and staff of the now long gone Marks & Co.
Carrin sees the absence in time and space forming in front of his eyes while writing this book, when Llibreria Catalonia, est. 1923, shuts to make way for a fast food outlet. A notice says in a heart-tugging apology, Now and in the future, in all the forms that the dissemination of culture will take, there are and will be individuals, associations, collectives and enterprises ensuring the survival of literature and written culture in general. Unfortunately, the Llibreria Catalonia will not be part of that future.
But Carrions essay is not simply a tribute to the shops that are gone, it is also a hopeful introduction to the ideas and endeavours behind new or resuscitated bookshops. He is particularly won over by Londons Daunt Books. The first outlet, which opened in the early 1990s, in Marylebone High Street has its books displayed to a geographical classification. Display, in fact, may be crucial to beating the they are all doomed in the Age of Amazon chorus, his interview with James Daunt, owner of the Daunt bookshops but whos also managed Britains vast Waterstones chain, suggests. Daunt tells him that key to the revival of the chain was to put trust wholeheartedly in our booksellers and give them the independence to decide which books they wanted to sell and which they didnt. Integral to this was junking the sale of display space to publishers, and therefore also the revenue that came from this model. The challenge, says Daunt, is satisfying the most intellectual customer without frightening off the least intellectual.
Importance of listing
Bookshopsis also a reminder that the manner in which books are made available to us changes with our sense of distance, time, mobility and leisure. Train travel enabled the success of chains such as WHSmith, Hachette and Indias A.H. Wheeler. Travel time has often determined the texture of reading. So has the spread of American-style consumerism, with bookshops in the second half of the twentieth century [possessing] the agglutinating character of shopping malls, where the display of books, kindergarten, childrens playground, entertainment palaces, restaurants and, gradually, videos, CDs, DVDs, video games and souvenirs cohabit or are neighbours.
When the merchandise is books, no bookshop can be bad, but as Carrin says, One must distinguish between the worlds great bookshops and emergency bookshops. This book is perhaps the most engaging explanation about why listing the great bookshops is so vital.
BUSINESS LINE, NOV 4, 2017
Mukul Roy joins BJP
Former Railway Minister Mukul Roy, who recently quit the Trinamool Congress, today joined the BJP.
Roy, a founder member of the TMC, was was inducted into the party at BJP headquarters.
Roy had resigned from the Rajya Sabha and quit the TMC earlier this month. He was suspended from the party for six years for indulging in anti-party activities after he had announced that he would quit the party last month.
The former TMC leader, known for his organisational skills, joined the BJP in the presence of Union minister Ravi Shankar Prasad and party general secretary Kailash Vijayvargiya.
(This article was published on November 3, 2017)
FINANCIAL EXPRESS, NOV 13, 2017
India Posts Payments Bank to have nationwide operations by April
India Posts Payments Bank will be opened across 650 districts by around April, according to communications minister Manoj Sinha
IPPB, operational in Raipur and Ranchi now, will use post offices for its operations. Photo: Bloomberg
New Delhi:India Posts Payments Bank (IPPB) services are expected to be available across the country by April, communications minister Manoj Sinha said Friday.
(India Posts) Payments Bank branches will be opened across 650 districts by around April. All these branches will be linked to rural post offices. This will be largest banking network in the country, Sinha said on the sidelines of the launch ofDeen Dayal SPARSH scholarship scheme.
The IPPB branches are operational in Raipur and Ranchi. It will use post offices for its operations. There are 1.55 lakh post offices in the country. In the private space, Airtel Payments Bank, launched in January this year, started operations with a network of 2.5 lakh merchants. Chinese internet firm Alibaba controlled Paytm also started payments bank operations this year.
Payments banks can accept deposits of up to Rs1 lakh per account from individuals and small businesses. The new model of banking allows mobile firms, supermarket chains and others to cater to banking requirements of individuals and small businesses.
Payments banks are set up as differentiated banks and will confine to accepting demand deposits, remittance services, internet banking and other specified services. IPPB offers an interest rate of 4.5% on deposits up to Rs25,000; 5% on Rs25,000-50,000 and 5.5% on Rs50,000-1,00,000.
BUSINESS STANDARD, NOV 4, 2017
Foundation for poverty-free India to be laid by 2022: Niti
Govt nominates Rajiv Kumar to RBI boardRajiv Kumar new DFS Secy; Gujarat's Anita Karwal CBSE chiefGDP growth to hit 7-7.5 per cent in July-Sept: Rajiv Kumar (Eds: with more info)GDP growth to hit 7-7.5 per cent in July-Sept: Rajiv Kumar (Eds: Adding details after para 13)Economist Rajiv Kumar is new Vice Chairman of NITI Aayog
Niti Aayog in a presentation today said the foundation for freedom from six problems -- poverty, dirt, corruption, terrorism, casteism and communalism -- will be laid by 2022 whenIndiacelebrates 75 years of Independence.
The presentation published on its website "made a detailed case for making development a mass movement and thereby, laying firm foundation by 2022 for achieving a NewIndiaand securing the six freedoms (poverty, dirt, corruption, terrorism, casteism and communalism)," Niti Aayog Vice-ChairmanRajiv Kumarsaid.
The presentation, which was made by Kumar at Conference of Governors last month, talked about a NewIndiaby 2022 which would be free from poverty, dirt, corruption, terrorism, casteism and communalism.
It did not clearly state that Niti Aayog was talking of laying foundation for freedom from these six problems by 2022.
However, the vice-chairman later in the evening clarified that he implied laying of foundation for freedom from the six problems by 2022.
The document talks about connecting all villages with habitations over 500 (250 in special areas) with all-weather roads by 2019 under Pradhan Mantri Gram Sadak Yojana (PMGSY).
Referring to education and skill development, it saysIndiashould have 20 world class higher education institutions by 2022.
It also visualises that all villages selected under Pradhan Mantri Adarsh Gram Yojana (PMAGY) should attain model village status by 2022.
FINANCIAL EXPRESS, NOV 13, 2017
How succession planning can create wealth: Interest of individual must give way to largergroupSuccession planning has been a matter of intense debate and discussion over many years amongst Indian business families. While the concept has many facets, at the root of the idea is the fact that the family gold does not lose its sheen as it changes hands over generations.
By:Vaibhav GuptaandSamudra Acharyya
History has seen many families struggle through succession issues, while at the same time a structured approach has helped an amicable succession plan to be formulated by many others. (Thinkstock)
Succession planning has been a matter of intense debate and discussion over many years amongst Indian business families. While the concept has many facets, at the root of the idea is the fact that the family gold does not lose its sheen as it changes hands over generations. History has seen many families struggle through succession issues, while at the same time a structured approach has helped an amicable succession plan to be formulated by many others. The recent spat at Raymond, the management versus ownership debates atTataand Infosys, are all cases of succession issues and their complexities.
The matter of succession is a function of an entire host of family priorities, vision for the business, balancing of disparities in personalities, interspersed with emotions and sensitive relationships. Regardless of the different mindsets of different families, certain common threads need to be sewn together for an efficient and strong plan to emerge. The elements of succession planning include seamless change in ownership of assets, transition of control and management, and germination of fresh ideas in a manner such that the wealth is not only preserved but also enhanced at all times.
One of the foremost considerations behind this is the entire Indian tax and regulatory framework, which has a bearing on how ownership transfers can be effected. There are talks around reintroduction of an estate duty or inheritance tax regime in India, which used to exist until 1985. Simply put, the concept of inheritance tax is to levy a tax on the estate of a deceased person. Many countries across the globe, such as the US, the UK and Germany, have inheritance tax as part of their tax structures, with rates as high as 30-40%.
The current Indian tax laws have beneficial provisions for transmission of assets, through a will or inheritance. However, as we have seen in the past, wills are subject to disputes, with warring families in courts making newspaper headlines and eroding family wealth in the process. History has witnessed businesses closing down due to such family disputes. Clearly, there is a need to look at succession planning as a more meaningful and value accretive exercise.
In recent times, private family trusts have emerged as vehicles for a perpetual succession of family wealth. If planned appropriately, trusts offer significant flexibility, while retaining the key characteristics of a will. While ownership of assets moves into a trust today, the patriarch can still retain protection over the assets and flexibility over creation of beneficial interests, through provisions built into the trust. Legally speaking, a trust is not a separate entity, but an obligation assumed by the trustee for someones benefit. The trustee owns the assets in a fiduciary capacity and is obliged to discharge his duties accordingly. Protection against unauthorised actions by the trustee is available to the beneficiaries under law. In addition, the creator of the trust who transfers assets into the trust has options to retain protection rights to ensure that the objects of the trust are not compromised at any stage.
From a tax perspective, transfer of assets by an individual into a trust created solely for the benefit of relatives is fully exempt. For non-relatives, the tax matters get complex and need to be more carefully planned, ranging from issues such as what constitutes property, valuation rules for transfer of shares in multi-layered structures, discretionary versus specific trusts, etc. From a regulatory perspective, inter alia, one needs to take into account impact of Sebis takeover regulations for transfer of shares or control in a listed company into a trust, impact under the exchange control regulations for foreign assets or non-resident family members, partnership laws for limited liability partnership structures and stamp duty costs for immovable properties.
With more and more Indian families having cross-border business interests, a key element of succession revolves around transfer of wealth to non-resident successors. Family trusts may be structured as effective means to bring in non-resident successors in light of issues such as limited capital account convertibility and restrictions on transfer of assets to non-residents under the current Indian exchange control norms.
The other complexity that one needs to grapple with in the wake of offshore assets or offshore family residents is the exposure to inheritance taxes in countries of situs or residence. Consider, for example, the US, which has much advanced laws governing estate duties, gifts, etc, and US green card holders and US citizens are subject to more stringent provisions under the estate law. Provisions around throwback tax rules, passive foreign investment company/controlled foreign corporation classification have a significant bearing and call for careful consideration of relevant issues to mitigate tax exposures. Again, the UK has recently introduced certain changes in its inheritance tax law on residential properties located in the UK held through offshore structures, including foreign trusts.
In addition to the legal structure, another important element of succession is the evolution of a sound governance framework that serves as a guidance for the family across a whole host of issues impacting business, assets, spending, etc. Such family constitution may take the form of a governance council or a family board, which is responsible to devise rules around interests, rights and obligations of family members inter se, decision-making powers in relation to businesses, returns framework to incentivise performance, and to preserve interests of future generations. The idea is to ensure that family disputes should not impact business, wealth and interests of successive generations, while at the same time retain flexibility to resolve disputes, provide exits wherever necessary, avoid creation of conflicting/competing interests in businesses and encourage generation of fresh ideas in the family.
Clearly, succession planning is not an end, but just a means to an end, which requires a committed effort, an anchor to ensure the process doesnt slip between the cracks and, most importantly, a family where the larger group interests find priority over individual needs. Either way, its an opportunity to write a legacy for our generations in the annals of history.
TELEGRAPH, NOV 7, 2017
Deeper causes- The decline of Calcutta
WRITING ON THE WALL- ASHOK V. DESAI
Defeated by ideology
One should be careful about what one writes; it can come to haunt one decades later. I had quite forgotten about an article I wrote on foreign investment inSocial Scientistin 1984; I found it cited by Tirthankar Roy in an article on Calcutta's decline he recently wrote in Business History Review. His explanation is so complex and nuanced that it is difficult to let it pass.
Calcutta was a premier industrial centre before Independence. Bombay had probably surpassed it in terms of industrial production by World War I. But the prominence of Calcutta was not just due to the industry it housed; it was partly due to the managing agencies located there that controlled tea gardens and jute mills spread over Assam and Bengal. Calcutta declined precipitately in the 1950s and 1960s. Its downfall was tragic; but neither the Central nor the state government did anything to prevent it. More noisy events, such as wars with Pakistan, famine, Emergency and the oil crisis intervened, and the fate of Calcutta was forgotten.
Roy calls the explanations given for the decline conjectures; he thinks 'hypotheses' is too respectable a word for them. First, the British managing agencies that dominated the pre-Independence Calcutta scene were too conservative and inflexible; in particular, after Independence they were not prepared to take in Indians into top management. A second explanation contradicts the first: the British businesses ran short of money during the Depression of the 1930s and took it from Marwaris, who eventually manoeuvred to take over their companies. The third is that British managing agencies were dependent on the British government, and could not survive its exit. The fourth is that the British could not adapt themselves to the licence-permitrajthat followed Independence. The fifth is that the Marwaris, who took over the companies from the British, were speculators and traders and had no skills in industrial management. The sixth is a potpourri of explanations: freight equalization, replacement of jute by plastic, the silting of Calcutta port, the hostility of the Central government and so on. While he acknowledges what befell them, Roy thinks that it cannot explain the decline of the firms: why did the firms not adapt and recover? So he looks at micro evidence. More precisely, he concentrates on a number of Marwari families.
He is not the first to do so; Calcutta Marwaris have received a good deal of academic attention. But their watchers have shown no knowledge of or curiosity about the origins of Marwaris; they assume that Marwaris in Degana, Didwana or wherever in Rajasthan just packed their bags one day and made their way to Calcutta. The reorganization of India into linguistic states has made Indians parochial. British India was better integrated than it is today, and it was easy for people to move hundreds and thousands of miles. Thus, Gujarati businessmen spread out to Bombay, Karachi, Nairobi and Johannesburg; Bihari workers were indentured to work in Fiji and British Guiana; Marwaris moved all over the Hindiphonic world east of Rajasthan. Many of them, for instance, set up sugar mills in Uttar Pradesh and Bihar. After making money, they wanted to settle down in a city where they found people who could speak theirpatoisand could give a good dowry to their daughters. That is how many of them ended up in Calcutta. The academic preconception that Calcutta Marwaris got rich from trade and speculation is just speculation; there is no solid empirical research to back it. A large proportion of the rich Calcutta Marwaris had a background in industry, often industry elsewhere than in Bengal.
Once they were settled in Calcutta and had money and time to spare, many played the stock market as portfolio investors, and speculated in shares, for which the Calcutta stock exchange was a perfect arena. Much of that speculation was bound to be in shares of tea and jute companies, which dominated the stock exchange. These companies were peculiar animals. They had been started by British businessmen in the 19th century, and had acquired their capital by selling shares to British army officers and civil servants in India, who got generous salaries and had savings to invest. The companies were run by British - generally Scottish - managers and engineers, and employed cheap Indian labour. They sold their shares both in Calcutta and London. The first shareholders often retained the shares when they returned to Britain; but sooner or later they died or needed money and sold the shares on Calcutta stock exchange where they had greater liquidity. Rich Marwaris bought them; that is how they got their initial foothold in the companies. After Independence, the new Indian government wanted to get rid of British investors and industrialists. It used exchange control to make it difficult for Calcutta companies to remit dividends to their British shareholders. So they sold out in a rush. That is when Marwaris became the dominant shareholders, and often, managing agents. In the 1940s and 1950s, they took over much of the jute industry and some of the tea gardens. As these industries went into the crisis of the 1960s and 1970s, the Marwaris lost most of their industrial assets. But that had nothing to do with their being Marwaris or Calcuttans. That was the time of nave socialism - of industrial and import licensing, of capital issue controls - and all private industry did badly. The Bombay textile industry under Gujarati and Parsi ownership went under as badly as the Marwari-owned Calcutta industry.
But we should not assume that just because the industries of Calcutta went down, their owners went down too. I looked at some of the prominent Marwari tycoons of that time. One invested in the press, and continues to own its assets. Another's grandsons control enterprises in cigarettes, medicines, chemicals, cement, information technology and so on. The heirs of a third one make cement; his name survives in the locality named after him in north Calcutta. The grandson of a fourth one is in jute, tea, floriculture, timber, finance and real estate. Thus, the heirs of the Marwaris I have looked at are very much in business, and are enormously diversified; they own and manage a balanced chunk of Indian industry. Some of them still live in Calcutta, but their business has expanded far beyond eastern India.
And the decline of Calcutta? Industrial decline is nothing special; it applies equally to Mumbai or Ahmedabad. What is remarkable about Calcutta is that it did not attract anything else. New activities call for redevelopment - putting land to new uses. That is extremely difficult in Indian cities because of the inefficient property laws. The Mahalaxmi area in Mumbai is the only one which has been redeveloped; the factory buildings have been dismantled, and the area now has posh residences and hotels. In other cities, activity has moved out: from Delhi to Gurgaon and Noida, from Mumbai to New Mumbai, from Ahmedabad to Baroda - and from Calcutta to all over India. It went so far out of Calcutta because the state government did not create new development areas; the leftists were ideologically hostile to private industry. Calcutta's decline has more to do with ideologues than with Marwaris.
FINANCIAL EXPRESS, NOV 1, 2017
Open letter to CEA Arvind Subramanian: How urban isIndia?
When low level of urbanisation, declining rates of urban population growth, limited role of rural-urban migration, and out-migration of manufacturing from cities are all added up, the stress on urban India is evident.
By:Om Prakash Mathur
Dear Dr. Subramanian,
Allow me, at the outset, to compliment you for widening the scope of the 2016-17 Economic Survey to include inter alia a discussion on such themes as how urban is India (pp 221-224, volume II), (ii) the size-distribution of urban settlements in relation to the Zipf law (pp 301-2, vol I), and (iii) decentralization and municipal finance (pp 302-314, volume I). Inclusion of these themes signals an important departure from the Economic Surveys of the earlier years which would consist of a routine and often lackadaisical description of the central government urban programmes and initiatives. In line with the trends you have now set, we expect that the 2017-18 Economic Survey which you will have the honour to present in January 2018, will have a more comprehensive account of the state of the Indias urban economy. Urbanisation is important to the Indian economy and deserves better treatment and coverage. I am writing this open letter with regard to the theme How urban is India, where the key point that you make is that the Census of India does not fairly capture the countrys level of urbanisation, attributing it to the demanding criteria it uses for classifying a settlement as urban, and suggest that criteria such as the population size, density, and occupational character of settlements, are inadequate to capture the complex phenomenon, especially when we study this at the state or local levels. In support of this statement the Economic Survey shows Indias urbanisation level to be significantly higherin the range of 47% to 78%if population thresholds of 2,500 or 5,000 or density thresholds of 400 or 800 persons per sq/km were used to measure it, as indeed countries such as Ghana, Qatar, Mexico and Venezuela do. The Economic Survey also presents figures from Uchidas agglomeration index and the GHSL satellite imagery datasets to reinforce the point that India is more urban than what the Census of India shows.
You would recall that, until 1951, the Census of India used a population threshold of 5,000 as the sole criterion for classifying a settlement as urban. The change to a three-fold criteria was introduced in 1961 on the grounds that population size as the sole criterion was an inadequate measureurbanisation was not just a spatial unit with X number of people, it represented concentration of population and of non-primary sector activities, and these needed to be brought in to distinguish an urban settlement from a rural one. I do not know if Ashok Mitra, the then Census Commissioner, was in any way influenced by the 1938 seminal paper of Louis Wirth who had argued that the characterisation of a community as urban on the basis of population size alone was obviously arbitrary and had further asserted that the shortcomings attached to the number of inhabitants as a criterion applied, for the most part, to the density of population as well. More recently, the United Nations has taken the same position (2011: pp 32).
I fully understand that the position taken by Mitra, Wirth or the United Nations does not in any way weaken or diminish the relevance of the suggestions made in the Economic Survey, and, in fact, it is quite simple to rework the level of urbanisation by changing over to any of the suggested criterion. But you will agree, Dr. Subramanian, that a question as important as How urban is India is much broader in scope and needs to be addressed by looking at not just the share of urban population in the total, but also firstly, the rate at which India is urbanising, whether the rate is commensurate with the countrys growth parameters and whether the rate has the potential of producing a level of urbanisation that is comparable with that of the other large, emerging economies, and secondly, the composition of urban population growth, whether it is led by the run-of-the-mill natural increase or driven by rural-urban migration which, as the text books suggest, is central to the process of urbanisation. These three attributes, viz., the level, rate, and composition, taken together, should give a better grip on the question, How urban is India.
Let me provide some facts on these two aspects. That India is urbanising rapidly (Economic Survey, pp 221 vol II) has been a common refrain in the media coverage of the past 2-3 years. Facts here are somewhat complex. Indias annual growth of urban population (AEGR) registered a high of 3.83% in the 1971-81 decade and 3.09% in 1981-91, but dipped in the 1991-2001 decade to 2.74%, recovering marginally to 2.76% in the most recent decade of 2001-2011. While a rise and fall in such rates are commonplace, and this fall too would have gone unnoticed but for the fact that the fall took place during the decades of high rates of economic growth when most observers had expected it to accelerate. What caused the rate to decline, indeed, plummet to its lowest level since 1961? Has Indias economic growth become independent of urbanization and the economies it is associated with? A fall in the urban population growth rate at this stage of Indias urbanisation and per capita income cannot be dismissed as just an ordinary number or a blip; it has important implications.
That Indias urbanisation is propelled by droves of people migrating into cities and towns is another narrative that has found space in the print media of the post 2015 period. Is this portrayal justified? The Census figures on migration suggest that the share of net rural-urban migration in urban population growth has been around 20-22% for the past 3 decades and shown little uptick or buoyancy. The economy-wide changes of the recent years, it would seem, have found little use of rural-urban migration in the development process. The question is how was the urban demand for labour met during this period? Did technology come in to substitute for the labour? Or do the explanations lie elsewhere? Irrespective of the reasons, the low level of rural-urban migration differs markedly from the trends observed in China and several South-east Asian economies where rural-urban migration has played an important disruptive and transformative role in the process of urbanisation and economic growth.
The all-too-familiar China story is almost entirely founded on a low wage, rural-urban migration, making China among the most competitive economies for a large number of goods and services. The question is: Has India lost out on this opportunity? There are a few economic facts that also allude to the slowing down of the pace of urbanisation in the country. The first is the urban share of the Net Domestic Product (NDP). According to the Central Statistical Organization (CSO), the urban share of the NDP was estimated at 52.6% in 2011-12, where the key point to note is that between 2004-05 and 2011-12, the urban share of the NDP increased by just 0.6% point, hardly an increase considering that the overall NDP rose substantially during the period! The CSO data further show that the urban share of NDP accruing from manufacturing took a beating during this period when its share shrunk to 48%, less than the rural share of manufacturing NDP ! Puzzling as it may seem, rural areas now produce more domestic product from manufacturing than the urban areas! The Annual Survey of Industries data reaffirm these trends, showing a decline in manufacturing employment from its urban share of 67.2% in 2001-02 to 59.2% in 2014-15.
What has led the manufacturing activities to migrate from the urban to the rural areas? Has India become geographically flat, using Thomas Friedmans description of the globalised world, where the rural areas in terms of their potential are now no different compared to their urban counterparts? Are cities proving to be difficult places for business and manufacturing to operate efficiently? When all of this is added uplow level of urbanisation, declining rates of urban population growth, limited role of rural-urban migration, and out-migration of manufacturing from citiesthe stress on urban India is evident. At the same time, there is no clarity if these trends are transitionary, whether the urban sector is a victim of the structural weaknesses such as the problem with the urban land market referred to in the Economic Survey, or do these happen to be the unintended consequences of public policies. Urbanisation in India is central to growth and development. The Economic Survey rightly puts it as integral to Indias development trajectory. I assume that the discourse on urban issues tha