Ask for it- Price Freeze and Financial Emergency

Governments can help you feel good and reassured through rhetoric. The harsh fact, however, is that retail prices of many basic goods including food products, beverages and appliances are on a rise amid an unprecedented economic crisis. Consider this- big producers can pledge huge money to government relief funds, however, can they justify raising exorbitantly the MRPs of their goods?

Don’t forget India is still a developing country, no matter how greatly politicians project. A large section of population remains poor and the middle class is fragile. Pandemic and bad governance have dealt a severe blow to financial growth and majority of companies have resorted to pay cuts and layoffs. The only truth amid all the glorification and chest-beating by politicians is that incomes have come down and prices are rising. Stagflation is what this is termed in the financial world.

Price Freeze- a policy action by which the government prohibits and penalizes any increase in prices of goods during the period of disaster- is the only way out. Yes, prices that prevailed in the beginning of March 2020 have to be declared, by law, the upper limit for at least next few months. Any price increase for specified goods has to be declared illegal with immediate effect and all recent hikes must be recalled immediately. Products must include all foods and foodstuffs, all clothing, light bulbs, appliances used in preparation of food, basic electronic goods and basic tools.

Critics can argue that price freeze can have a detrimental impact on the economy in the long-run. Let’s not get into that argument since this price freeze has to be for a limited term. Moreover, most companies have yet to cut salaries of top executives and once done, it will bring down costs for them. Believe it or not, producers and traders are profiting at the expense of consumers and governments are mute spectators.

Second, ask for proclamation of financial emergency. Do you think it is justified to charge you the usual tariff for electricity when your income has dropped? Government companies, public sector units, public sector banks and other similar establishments haven’t cut down on their operational costs of which salaries and perks are a major chunk. Is it justified for the state power company to charge high tariff from consumers to fund salaries of their staffers when consumer community is experiencing financial crunch? No. Ask for proclamation of financial emergency that must compel governments to reduce their revenue expenses and transfer some relief to ordinary people.

Price freeze and financial emergency, however tough-to-implement they may sound, are policy actions that can help the common man find at least some relief amid a severely harsh time. A well-intentioned and well-managed scheme can make these two things work. Ask your government for these measures.

The Fall of Many, the Rise of Oligarchs

Two datasets are out in the open. One, the Indian economy in FY ending 2020 grew at slowest pace in a decade (coronavirus not to blame), and two, some richest men of India saw their wealth soaring in the same period. India suffered contraction in quarter ending June but billionaires, including chairmen of Reliance Industries and Adani Group, are getting richer. All this may seem normal on its face but we need to know what lies beneath this disparity where the country is becoming poorer but a few aren’t.

In virtually no time, Reliance’s Jio has become the undisputed jewel of India Inc. Foreign investors are rushing to buy stake in the enterprise and their analysts know that Jio will give great returns. What began with a disruption in the telecom industry by luring the mass with free voice calls and data has now spread in many sectors. Reliance can now be a common man’s grocery, clothing, internet, digital payment and toys (Hamleys) supplier, and much more, all at the same time. From ports to airports and green energy to edible oil, Adani is almost everywhere and is setting new records with deals like airport takeovers and world’s largest solar contract.

Why did we refer to the term ‘oligarch’ in the title? Oligarchs are typical to Russia and former USSR, and their rise was fueled by the nexus between politics and industry. Oligarchy means ‘the rule of the few’. These private players are dominant forces in the economy and no matter what happens to health of the nation’s economy, they manage to thrive, and thrive well.

The second part of the title says ‘the fall of many’ and these are the small and medium businesses in the Indian economy. Now that they are under intense pressure, the government has only one relief for them- borrow more. This vicious measure will result in small businesses shutting shops and banks reeling under their NPAs. Soon, and it’s already happening, small grocery stores in the neighbourhood will face death at the hands of ‘oligarchs’ who will have both- better bargaining power and economies of scale. Oligarchs will decide what the mass buys, where they buy it from and what price they pay for their purchases.

And this rise of oligarchs doesn’t come without clandestine sponsorship of the ruling government. Now if Facebook wants its WhatsApp payment business to get regulatory approvals, it must not only show bias towards the ruling party in its conduct of normal business operations, it should also invest in the business of the oligarch, the oligarch who in turn funds the ruling party. That’s nexus, easy.

But what about the popular support? India, indeed, is a democracy where elections must be won to hold on to power. And this popular support is derived by playing the nationalism card. It’s too simple. Shun all rationality and pragmatism, and issue a clarion call of nation-first. Urge people to reject imports and go for local alternatives backed by the argument that lesser the imports, greater will be the prosperity. But why not answer this- by keeping competition over price and quality out and giving local provider a free rein to pass off substandard and pricier goods in the market, who are you really allowing to prosper?

From rail projects to renewable energy to 5G infra, the oligarchs can now prevail without having to face competition over price and/ or quality. Who, however, is at loss when competition disappears and a select few control everything? It’s the common man. And in such a scenario, small and medium firms too have no option but to bow out. Just think why the farmer, who produces and sells for little to the middle-man, never thrives but the middleman does? Because the middleman has a better bargaining power and this is the same when small businesses compete with oligarchs.

The informal economy of India is collapsing but the wealthy few are becoming wealthier. We are already in the phase where we are facing the threat of oligarchy, the rule of the few.

Does ‘Vocal for Local’ resemble China’s ‘Giant Leap Forward’?

Detractors can say that while India’s Vocal for Local campaign has been started by a political party that vehemently rejects communism, the Giant Leap Forward (GLF) was started in late 1950s by a communist regime, and hence any comparison is innately flawed. Here, it is important to note that all definitions of capitalism, socialism and communism that have ruled textbooks and discussions for decades now seek alteration owing to some late developments. For example, the communist China became more liberal, less protectionist under Deng Xiaoping, while the capitalist US has become protectionist under Trump.

That said, let’s begin with why the much-hyped vocal for local campaign of PM Modi may leave India poorer. The GLF’s failure and resulting Great Chinese Famine hold the cue.

When Chairman Mao Zedong launched GLF, he foresaw China becoming self-sufficient in production of steel, back then a product seen as fundamental to economic growth. What Mao did was he moved labour from farms to ‘backyard furnaces’ to augment steel production in China. Barely equipped with proper infrastructure and technical expertise, this plan backfired and what heightened the pain was that public officials suppressed the failure of the plan for long in order to stay in the good books of Mao.

Compare this with what the Indian PM seeks from his vocal for local pitch. He wants Indians to produce goods that were hitherto imported from other countries, especially from enemy countries including China. In simple words, he wants Indian banks to cut their dependence on point-of-sale machines imported from China and rather use locally produced products. He also wants Indians to shun platforms like TikTok- we will not talk about national security concerns here- and move to locally made platform.

The debate here is local v foreign and the PM has projected India as capable of being a self-sufficient or self-reliant nation. But let’s be rational. Why did we need to import in the first place? It’s because we do not yet have the expertise to produce similar goods locally and match price and quality of imported goods. India is an IT behemoth and our techies grab the largest chunk of professional visas in the US and other developed countries. In simple terms, we are good in terms of techies but lack when it comes to producing some goods, and let’s accept this.

Mao miscalculated results of his GLF campaign and the same public that backed his efforts with an ultra-nationalistic fervor was the biggest loser in the end. Now consider another program that ran parallel with GLF- the ‘Hundred Flowers’. Here, Mao encouraged criticism of government policies for a short period, however, in the end identified criticizers and persecuted them. Can you find a resemblance? Intellectuals rarely get rewarded in the Modi-regime. From RBI heads to ECs- anyone who critiqued the government was shown the door. It means that while there was no one left in China to warn Mao of the inevitable failure of his short-sighted backyard furnace plan, in India, anyone who will advocate that India should not be ultra-protectionist, at least for the sake of the poor, will risk being seen as anti-national.

The losers, however, in the end will be the general public. Inflation has breached the acceptable threshold and contraction in GDP growth is inescapable. Add to this the impact of import-substitution. From toys to auto components, import duties have been hiked with a view to ‘promote’ the local industry. We all have read how imports remained stuck for weeks at ports owing to delayed custom clearances and unwarranted red tape. All this is doing nothing but making goods and services expensive in India.

There is another element to this. The government has also restricted FDI from countries bordering India citing national security concerns. Do we forget that many startups, from Swiggy to Paytm to OYO, are funded by investors from neighbouring country? These startups have been burning cash for years and have yet to turn profitable. They, however, employ a considerable chunk of labourforce. Does India have any farsighted plan to employ these workers should these startups choose to shut shop?

There is much to write. However, let’s conclude with some notable failures of GLF. Infrastructure was hastily developed without much technical expertise that resulted in the unfortunate dam collapse incident a few years later. Unsubstantiated farming techniques were employed to increase output, however, it resulted in drastic fall. All this calls for a well-planned policy for import-substitution instead of ceding to the popular call of ‘boycott’.

PS: National security is paramount. At the same time, policy stance of the government has to be rational, not populist.

Hating Liberals

Answer this- why would any individual choose to defy popular sentiments and instead suggest something unpopular? Answer this as well- why would any leader appease the religious, caste, race or sect minority when s/he knows the numbers are stacked in the favour of majority?

Liberals, indeed, risk a lot. When they call for equal rights for all humans, they risk earning the wrath of the elite class. When they call for laws and policy actions that can protect the environment and wildlife from insatiable greed for resources, they risk antagonizing capitalists and other stakeholders. When they call for prioritizing socio-economic wellbeing of individuals over beliefs and customs, they risk upsetting the clergy and the conservative.

But liberals love taking risks. And it is for this love of theirs that they are usually hated. But consider the above statements and notice whether the liberal seeks mere personal gain or inclusive development? By rallying for equal rights to all women, liberals brought universal franchise to most parts of the world. By stressing on the most fundamental principle of justice – ‘rule of law’ – liberals gave the world first-generation politicians, activists and leaders. By seeking equal opportunities of growth for all individuals, liberals fueled the rise of first-generation corporate leaders and capitalists. By placing peace and equity over bullying, liberals gave the hitherto underdeveloped countries after WW2 a chance to thrive.

Hating liberals is, at the same time, an easy thing. This hatred stems from the conservative roots of human life where faith, caste, race and colour hold precedence over relatively more meaningful things. But it is this misplaced priority that can ultimately lead to troubles that adversely impact everything- economy, social harmony, innovation, justice.

We tend to forget, deliberately or accidentally, that all progresses of today, from tech revolution to a competitive market that has globalization at its core, have roots in liberalism.

Sadly however, from times infinite, it has always been easy to hate and propagate hatred against liberals. Conservatives, who tend to be more popular than liberals, have a history of inciting the public sentiment against the latter. But the same public needs to recall that had it not been the Renaissance period of the 15th and 16th centuries or the Reformation movement in the 16th century Europe, the West as we know it today- more socio-economically developed than the rest- would have been something else. And liberals, not conservatives or orthodox, were the primary driving force behind all these defining movements.

Hating liberals can be a convenient option but not the most constructive. Think, read past developments, think again, juxtapose them with the present settings and then arrive at a more rational conclusion. Falling for the popular narrative may be detrimental, re-consider your stance.

For economic growth, inclusive development, we need ‘24×7 operations’

For this argument to make sense, we must focus on fundamentals alone- production and consumption. The world of today is far more educated than it was when abundance of agricultural produce led to industrial growth with more and more people taking up other, varied occupations. But the irony is that with a relatively more educated world, we have been unable to repeat the feats of previous revolutions in the present time where economies are either contracting or growing at a lesser-than-expected rate.

The problem is we are overlooking fundamentals of economy. A big, tangible change can be observed should we choose to consider just two things- production and consumption. Let’s understand this with the Indian economy in the backdrop. Which were the periods when the country grew rapidly? These periods are the ones where our economic activity increased, and to be precise, production and consumption saw rise.

The present working of the economic landscape is definitely an impediment to further growth. And there is an eye-opener in the form of COVID-19-induced lockdowns that lays bare the fact that any halt in economic activity leads to nothing but impoverishment. Until it struck, India was doing business as usual. Most enterprises operated from typical 9am to 5pm working hours and indeed, it did provide employment opportunities to some people. Yet, many remained unemployed or underemployed- thereby hitting both production and consumption.

India is a country with demographic dividend and abundant labour, but there is limited work. In the present scene, when enterprises operate for 9 hours, any government, any policy think tank, any activist or any economic adviser cannot succeed in any attempt targeted towards economic growth.

First, increase production by allowing and encouraging enterprises to run for more hours in a day. This will automatically trigger employment generation. More production of varied goods and services will lead to prices coming down. This in turn will boost consumption. One, more people employed means more money in the hands of people, and two, lower prices means more consumption of goods and services that aren’t mere basic necessities.

The simple logic here is that to have a positive GDP growth, we need to produce more, and this production is only possible when people consume more. Both can be achieved by letting the enterprises operate 24×7.

No other scheme, policy action, legislation can achieve the economic growth that we seek to pull out more and more citizens out of poverty and enable India’s shift from ‘developing’ to ‘developed’. The appetite has remained untapped for long. Appetite for motorized vehicles, for electronic goods and even luxury goods has to be tapped by first increasing production and letting the consumption side play its part.

Indian IT industry, BPO sector and other enterprises are examples of what happens when you operate 24×7. Indeed, we cannot start with manufacturing passenger vehicles 24×7, and this is why we need more research on how to implement this plan. The basic rationale is that increased production activity alone can assist economic growth of India. Imagine this- institutions of higher learning operating round the clock and producing more doctors and chartered accountants- of course we need them; banking services available 24×7 and enabling more and more money transactions.

proclamation of financial emergency – the only way out of this nationwide crisis

let’s talk real. majority of citizens are struggling with their finances. factories, offices, shops are shut. since there is no way for anybody, save those employed with various governments and government bodies, to make money, the onus lies on governments to provide relief. agreed, a few big corporates will pay salaries during the lockdown period from their reserves and some bosses driven by ethics and morality will also do so.

but india is a big, big country. nearly 90 percent of total workforce is employed in the informal sector and most of the employers will find it impossible to pay their workers due to nil cash flows and unavailability of reserves earmarked for such situations.

amid all this, the governments are charging for electricity and other supplies. they are doing so since the employees of the state and state-owned enterprises will be paid their salaries in full. but is this justified? at a time when companies are laying off workers and not paying salaries due to exigencies that are beyond the control of employers, how can the state pay its employees in full? how can state-owned enterprises, from public sector undertakings to public sector banks to institutes and bodies under various ministries pay their employees in full?

and if they are doing so, this is against the principles of equity. moreover, the state doesn’t earn from commercial activities. a bulk of its revenues comes from taxes and other levies. even the poorest of poor contributes to the exchequer by paying indirect taxes when a bucket or biscuit is bought. it is this money that is used to pay the state staff.

let’s talk about public sector banks. although they undertake commercial activity, we know they rarely do so in the best way. this is the reason they are supported regularly from budgetary resources to save them from sinking. institutes, bodies and associations under various governments and ministries too are funded from budgetary resources.

now when the very foundation of the budget, the taxpayer, is under severe stress, is the state justified in paying its employees in full? although a handful of state governments have declared some cuts in such expenditures, they aren’t enough to tackle the crisis. the only answer is the government proclaiming financial emergency by using powers under article 360 of the indian constitution. after all, the provision has been added to tackle emergencies and the current crisis is deserving of such action since what is happening is unprecedented.

article 360 gives power to the state to issue direction and “any such direction may include a provision requiring the reduction of salaries and allowances of all or any class of persons serving in connection with the affairs of a state.”

nation’s resources belong to every citizen, rich or poor. and hence, equity must be brought without any delay.

good governance in the times of covid-19

at the time of writing this, a few more than 27,000 samples have been tested in india, a country of more than 1.3 billion. of these, more than 800 have returned as positive for coronavirus. but this may not be the only concern. we are short on testing kits and test centres and the government’s and other authorities’ response to the crisis is worrisome.

let’s start with the announcement that the prime minister will address the nation at 8pm on 19 March, 2020. this announcement came in advance and gave enough fodder to rumour mills. the pm has a history of causing panic at 8, one can recall the demonetization episode. an advance announcement of pm address triggered panic buying and people stockpiled. in fact, the pm and his team of advisors failed to realise this would happen.

then came the declaration of a ‘janta curfew’ on sunday. will this be a curfew, a lockdown or something else, nobody knew. without planning anything, this went ahead. many people misunderstood the clapping thing and thought it would lead to an end to the coronavirus crisis. many states extended this janta curfew and made no provisions with respect to those not in their homes, especially migrant workers.

trains were halted and buses too, leaving migrant workers no way to return to their homes. this came in the wake of losing jobs since economic activity has literally stopped. a few days later, pm addressed the nation yet again at 8 pm and declared a poorly-planned lockdown till april 14. what was intended was preventing people from leaving homes and contracting the infectious disease. however, exactly the opposite of this happened. people gathered outside grocery stores, medical shops to buy essentials.

then came another announcement, this time from the reserve bank of india. that term loan emi will be deferred for 3 months was announced and every news house bought this on its face value without reading the fine print or without thinking that if all emis are suspended will indian banks be able to sustain?

moreover, prudence suggests that allowing moratorium to public sector, government and mnc employees who shall be paid in full even during lockdown is unjustifiable. will this not adversely impact banks’ balance sheets and shatter priority sector lending? but, at the time of writing this, there is still no clarity.

good governance in the times of crisis means planning and management, not mere presentation and oratory. tens of thousands or even more migrant labourers are out on the roads walking to their home states. are they not vulnerable? central, state and district authorities are not on the same page and nobody knows how to exactly implement lockdown. the police is seen beating up people who have stepped outside of their homes, even when they may have done so to buy essentials.

we, indeed, elected good marketers, orators, but not good planners, good managers.

how to read 2019 lok sabha poll results

there are three major players in 2019 lok sabha elections- the ruling bjp, main opposition party congress and a vague third front, which can comprise of various regional parties led by leaders including Mamata Banerjee, Mayawati, Naveen Patnaik and others. There can be a number of outcomes. One can be either the bjp or congress attaining absolute majority in the house and forming the new government with ease. however, chances of this are extremely slim.

In the second scenario, a pre-poll alliance, nda or upa, may attain majority. However, if any of the factions, nda or upa, falls short of majority, it will be comparatively easier for upa to muster support from those who may play the kingmaker. Last scenario is of the undeclared third front hitting the majority mark with combined seats from all parties in this faction. This can lead to a probable fight over the office of prime minister and key ministerial berths.

having noticed what may happen in the impending elections, let us also look at how 2019 lok sabha polls will serve as a reminder to all political parties in future parliamentary polls.

bjp’s campaign is focused primarily on nationalism and majoritarianism. even the party understands that they haven’t fared well on economic count and hence, the campaign has been diverted towards patriotism and a threat to india from evil foreign forces that the bjp says can only be averted by it. although the recently released manifesto of the party talks of better days for farmers and poor, this has been relegated to the backseat with main emphasis on ram mandir, influx of refugees and j&k focused article 35a.

congress’s campaign is populist and relies on connecting with those who are still marginalized after end of 60-months rule of bjp. the party manifesto isn’t tilted towards majoritarianism and focusses largely on the poor living conditions of  many indian households. the manifesto, however, appears inclusive on its face and this can appeal to minority religions, primarily islam.

now if the bjp emerges after the election as the party with highest number of seats and does form government, one can note that today’s india has moved beyond basic political themes and internal security and nationalism have captured the imagination of voters. this will serve as a testimony to indian voters tilt towards a centralized government with a strong figurehead.

in the second scenario, if the congress emerges as the largest party and does form government by seeking or without seeking support from other winners, this should serve as a reminder to political analysts and other stakeholders that poverty alleviation is still the single most important theme in indian polity. this shall also serve as a reminder that indians place trust in underdogs (first the teaseller,and now someone who has been made a subject of mockery by the bjp) and doesn’t like leaders presented as kings.

this is the only learning that one can and must take from 2019 lok sabha polls outcomes. rest will only be trp-generating content.

here’s what and why it will happen in 2019 lok sabha elections

poll analysts, immediately after the declaration of results of 2019 lok sabha polls, will come out with their versions of why the winner won and why the loser lost. it’s easy. the tricky part is to analyse the situation beforehand and wisely and assertively predict the outcome. we are doing this part here with what will happen and why will that happen.

let’s start with why. it’s 2019 and after 60 months in office, the modi-led bjp has only limited success to showcase. this limited success is nothing but the work-as-usual of the government and bureaucracy machinery, for example, increased accessibility to lpg, road construction and government-sponsored loans. in 2014, the bjp won the mandate on the promise of radically transforming the socio-economic landscape of india. 5 years on, virtually nothing has changed.

bjp’s claim of multiple schemes for unprivileged and vulnerable groups also falls flat. take a case of mudra loan. although the government claims lakhs of crores of money has been disbursed, the situation at ground level is pitiful. the real problem is that the government departments, whether of centre or states or autonomous such as banks, are still functioning in the same old fashion- no sense of responsibility and zero accountability.

another major factor that will shape the 2019 lok sabha outcome is the flawed bjp campaign of 2019. it relies on narcissism, machismo and chauvinism. yes, narcissism. the call ‘ab namunkin bhi munkin hai’ will only serve as a deterrent to bjp’s prospects. what is happening is bjp projecting modi as a raja and asserting that much success has already been achieved in past 5 years. yes, chauvinism will win the bjp votes in metro and tier-1 cities, the party, however, is set to score badly elsewhere.

now the opposition. almost every major regional party will perform better than how they fared in 2014. but that will not make them the kingmaker. the surprise will be congress’s unexpected comeback with at least 160-180 seats. this way, congress will easily gather support from other parties and yes, rahul gandhi shall be the new prime minister.

lastly, two most important factors. One, bjp’s poll campaign has reduced rahul gandhi to an underdog and democracies love underdogs, especially india where rural inhabitants, dalit and poor will empathize with rahul. And two, yogi adityanath. this one man is the bjp’s biggest mistake in 5 years. his ascendance to the top sends a message that bjp gives faith and caste politics precedence over inclusive development.

the verdict will be clear- bjp will win less than 180 seats. congress will win 160-180 seats and with the support of allies will form the new UPA government. it will then be best for bjp to introspect and understand that more than chauvinism or other jingoistic calls, development is the most critical poll issue in india, at least for next 20 years.

indo-pak hysteria will cost bjp 2019 polls

almost every political analyst and even those common men discussing politics at tea stalls and their office spaces in indian cities are arguing that the recent india-pakistan standoff will indeed up bjp’s and modi’s chances in 2019 polls. this seems true when one switches on the television set that is filled with patriotism and praise for the ruling dispensation. this also appears true when we turn to tier-1 and tier-2 cities of india where more or less every whatsapp and facebook user has some work that keeps their household afloat.

but the truth is that these aforementioned facts do not decide electoral outcomes in a country where almost half the population still works in farm sector and the formidable dalit constituency is still aspiring for socio-economic equality, which has been long-promised, however, remains a distant dream to day.

india’s politics does not run on how well we are faring in the global scene or on the strides we make in geopolitics. indians have a range of local issues that they expect the government to resolve and this is what made narendra modi the most favoured man in 2014 lok sabha elections.

today, he is more a cult with modism as the talk of the town. his party members are rallying behind him and are still riding the modi-wave. 5 years gone and the party can only claim limited success. in fact, the ground situation remains more or less the same. a young dalit entrepreneur is still facing hurdles in securing loan for her small-scale venture even as the government is claiming lakhs of crores of rupees lent through the mudra yojana. public offices are still unconcerned with people’s pain and the business in bureaucracy has remained as usual.

in 2014, when people voted decisively in favour of modi, they expected a new india in next 5 years. only a tiny fraction of population, which is earning a regular monthly income, thanks to their domicile in urban parts, expected india to rule the world and have a world leader as its prime minister. for most, expectations were simple- equal opportunity, improvement in standard of living and respect. sadly, the modi-mongers deprived the people of these by intimidating all who criticized modi.

today, modism is a cult. one is either a member or against it, and if the latter holds true for you, you are likely to be silenced by the cult members with impunity.

for modi, however, this is no feat. his poll analysts have forgotten that indians, especially those who have the command to swing the elections, hate strongmen and like underdogs. for them, modi’s preference of a geopolitically stronger india over local expectations is a strong reason to vote the bjp out of power in 2019. the recent quarterly gdp growth rate of 6.6 percent must worry the modi regime since it establishes distress in agriculture and manufacturing sectors.

in fact, the rallying of bjp behind the india-pakistan standoff will only cost bjp since the wider electorate is viewing it as sidelining of and compromising with other promises of development, opportunity, equality and better standard of living.