Your Move RBI

The upcoming RBI policy meet will be an interesting one to watch out for. The monetary policy has been quite hawkish on interest rates and inflation targeting of late. Based on their statements after the policy meets, one can understand that the majority of the committee is led by a very conservative mindset that is more concerned about avoiding inflation rather than stimulating growth. With signs of an economic slowdown hitting home, the policy meet may just have come at the right time.

If the government had its way, it would prefer a significant rate cut which would enable higher private investment. Yet, we have seen time and again that the economy does not function that way. It usually takes months before RBI rate cuts are actually transferred to the borrowers and that too in a Rajiv Gandhi style, only 15 paise reach the public for every rupee spent by the government. Banks have had surplus liquidity since demonetization which can be evidenced by low interest rates on deposits. However, banks have burnt their hands and the NPA problem refuses to die down making ambitious lending even more dangerous.

A narrative is being created today that Indian economy is in the doldrums like narratives created before, that of India being intolerant or cow vigilantes and lynching mobs having a free hand. The fact is that when structural reforms like GST and demonetization are undertaken, you cannot expect the economy to absorb it without shocks. The same way that when you are driving a car on the highway and your engine overheats, you can’t expect it to correct itself while you go on driving at 100kmph. The economy needs a start-stop button to reset itself.

Yet, what is important to note is that a stimulus is not the answer to a restart. The government is obviously aware that breaching the fiscal deficit is not the answer to its media-hyped woes. It must therefore hope and rely on a tight-lipped monetary policy committee to provide some easy credit into the market. The MPC on its part must again focus on how its inflation reading has been faulty in the past. Former Finance Minister and full-time critic of the current finance minister, P. Chidambaram has also advocated a cut in rates. Chidambaram actually advocated a 100 basis points rate cut but was quick to realize that the MPC cannot stomach a rate cut so big, lest it be seen as being in bed with the government.

The MPC must not worry about media opinions about its independence or competency. A bunch of arm-chair economists and prejudiced media personnel cannot decide monetary policy at the highest echelons of Indian economics. That a rate cut is required seems to be obvious to the government, but one believes that the MPC would be unwilling to cut rates at two back-to-back meetings even though it may be of the lowest possible number i.e. 25 basis points. 


Farmers = Money-Guzzling Demigods

India’s agriculture industry has been broken for decades without any sustained reforms being undertaken to improve lives of farmers and consumers. It was expected from the government of the day to undertake structural reforms, seeing as how Narendra Modi has been targeting doubling of farm incomes. However, like past governments, Modi’s men have also sought to target the symptoms rather than the root cause of the disease. The key to the destruction of the farm sector in India has been the loan waivers. Seen as a farmer-pleasing populist measure, loan waivers make little economic sense, if any. The agro industry is broken because of low productivity and disguised unemployment. Farming still employs about 50% of India’s workforce while contributes roughly 13.7% to the GDP as per 2013 estimates. Clearly India needs to transfer this idle labor elsewhere. Farming in India is still largely dependent on rains and other modes of irrigation are vastly underdeveloped. 

Productivity of Indian agriculture is pathetic owing to smaller land holdings of farmers and lack of irrigation facilities. Indian farmers have not been adept at adopting technology which has led to their own downfall. The opposition to Genetically Modified (GM) crops by groups with vested interest and lack of scientific knowledge has vastly complicated the scenario. Changes are required not only at the source but also in the distribution channels which are thronged by middlemen who work neither in interest of farmers nor in interest of consumers. They serve the sole purpose of inflating prices by hoarding and depriving farmers of their rightful share. 

Right from the times of “Jai Javan, Jai Kisan”, India has cultivated an unblemished and untainted image of farmers which is misplaced. Farmers must occupy the same position in the Indian economy as any other worker, professional or businessman. By granting them a noble status and not permitting market forces to have a free hand in agriculture, the governments have effectively destroyed the agriculture industry and doomed lives of farmers to the extent that farmers do not wish their wards to enter the farming industry. Farmers themselves are not beyond reproach. They have done their fair share in tarnishing their own image by destroying crops when a surplus is produced and vehemently seeking bail outs. By persisting with exempting agriculture income of farmers from income tax, they have been granted a superior status and this emotional attachment to farming must end. Are poor people in other sectors less vulnerable and important than farmers? 

The reality is that farmers, constituting more than half the working age population, are far too important a vote bank. This has given them a disproportionate bargaining power. Yet, history has shown that whenever a group of people has been used as a vote bank, they are the ones to have suffered at the hands of the ruling dispensation. By empowering their vote bank, the political party allows them to think for themselves whereas by ensuring the continuation of their poor and downtrodden status, the politicians can champion themselves as their knights in shining armor and peddle votes. Take for example the Muslims, the Dalits and now the Farmers.

The vilest economic decision ever taken has been farm loan waivers. It is the worst form of dole out of taxpayers’ hard earned money. Farmers have learned how to hold the government hostage and seek waivers from them. Not only does this lead to poor credit discipline, it makes banks wary of advancing credit to farmers and thereby makes farmers easy prey for moneylenders. This is why most private sector and foreign banks shy away from lending to farmers but state run banks with their priority sector commitments must undertake this charade. If home owners with their burden of EMI on home loans start committing suicide, will the government start waiving home loans too? Governments have aggravated the issue by not pulling out workers from the agro industry and now these farmers, dependent on rain fed irrigation have no way out when the rain gods fail them. The BJP has not learnt from the mistakes of past and in order to please this massive electoral vote bank has decided to grant such temporary lotteries to farmers. If waiving loans of farmers is acceptable, why not waive other forms of loans like student loans, home loans, personal loans etc. making the list endless.

The sole savior of the farming sector would be a robust manufacturing industry wherein surplus labor from farming and allied industries can be transitioned to a manufacturing industry allowing farmers as well as farm labors a better standard of living. This, coupled with better productivity, can allow a sustained reform of the sector. It can be achieved by instituting better research institutes for this sector, promoting GM crops and building a culture of technologically advanced farms. Also required, is the image revamp of the farming sector and not projecting them as demigods but as a small part of the larger economy. The sector has long escaped free market forces because of the superior status granted to it. Reforms must be made to distribution channels by allowing farmers to sell their output directly instead of through the Agriculture Produce Market Committees, known for their corrupt and inefficient working.

An idea that has not been explored well is corporatization of farms. Allowing corporates to buy huge tracts of land and conducting agricultural activities is a sure-shot way of revamping the sector as it will ensure better productivity, formalizing farm labor and better servicing of consumers. It will expand revenue streams for the government, solve the problem of distribution of the produce, lead to employment of better and superior technology and transfer risk from individual farmers to corporations which have a greater capacity to absorb it. This will however require grand structural reforms to irrigation facilities and allowing corporates to map out their own distribution channels. It will upset several vote banks but in the long run will lead to gainful employment of labor and better productivity thereby forcing the agriculture sector to pull its own weight in the economy. 

Farm loan waivers do nothing but give temporary relief to farmers until he takes a loan again from a government bank that is obliged to grant him a loan; poor rains lead to a crop failure; he defaults on his instalments; farmers join hands and demand loan waivers; governments buckle under pressure because well, farmers are superior to the rest of the populace and our money must always bail them out.

Why Universal Basic Income

The idea of a Universal Basic Income has been mooted for quite some time across the globe in various forums. So much so that such an idea has entered the public discourse frequently and even the average Joe has an opinion about whether it must be implemented or not. Universal Basic Income or UBI is a form of social security in which all citizens of a country are assured a fixed basic income regardless of their economic or social status.

The recently concluded Economic Survey by the Indian Finance Ministry dedicated a chapter to UBI in which Chief Economic Adviser Arvind Subramaniam talks about deliberating on UBI in India. The fact is that UBI is not new for India. A trial has been successfully conducted in rural Madhya Pradesh. The results so far have been encouraging. Yet, to implement the scheme on a nationwide basis remains a humongous challenge.

For starters, India already has more than 1000 public welfare schemes run under the aegis of both the central and state governments. Although several of these schemes are running inefficiently, abolishing them will be political suicide, even for a politician as popular as Narendra Modi. UBI can only work if these other welfare schemes and subsidies are abolished in favor of the universal income. In the Economic Survey, Arvind Subramaniam suggests a level of $9 per month for every adult Indian as the ideal level for a universal income which amounts to roughly Rs. 600 per month per individual. Subramaniam suggests that this amount, equivalent to roughly 5% of the GDP can be recouped by re-routing money from the numerous welfare schemes.

This brings us to the next problem i.e. should the income really be universal? What sense does it make to pay a destitute homeless man the same amount as is paid to Mukesh Ambani. In fact why even include the numerous people like Mukesh Ambani in the scheme at all? Don’t worry, Subramaniam has you covered. As per his calculations, only about 75% of the populace will be covered under ‘Universal’ Basic Income. However, the Indian state has been historically poor in identifying and separating the poor and needy from the well-off. This has been the chief reason for the failure of the numerous welfare schemes, apart from rampant corruption and red-tape of course.

Yet another argument against UBI is that it promotes laziness or disincentivises hard work. However, one can safely assume that a basic income of Rs. 600 per month is not enough for sustenance but still may be enough to abolish all subsidies and yet ensure that the poor can afford the basic necessities. Several arguments were put forth that such an income might be wasted away on alcohol and gambling. On the contrary, in the trial held in Madhya Pradesh, it was observed that such an income actually empowered women instead of it being a source of misuse in the hands of the menfolk.

The chief benefit of UBI though will be that it would enable the nation to pull a majority of its poor above the poverty line. This achievement is superior to what the governments in the past 70 years since independence have been able to do. On top of that, it ensures that the government’s welfare spending suffers no leakages, thanks to an almost universal Aadhar coverage. The only logistical upgrade required would be an easy access to banking services or greater penetration of digital payments.

By putting money directly into the hands of the needy, the government is eliminating scope for leakage and corruption. It also eliminates the paternalistic role of the government in which it assumed that people were incapable of making decision as to what should they do with their money. The government effectively hands over this responsibility to each and every individual thereby promoting greater freedom and less interference.

UBI promises to be a revolutionary idea, yet it is the immaturity of Indian politics that prevents us from implementing this idea. Such a revolutionary step is bound to ruffle the opposition’s feathers. There are several interest groups who will be negatively affected and who may make it their life’s mission to see that such a step is never implemented. All that matters is the will of the ruling party to implement such a step and for the people to give the government some time before they can reap the benefits of such a bold policy decision.

Demonetization – The Rights and the Wrongs

As the nation comes to grip with the fact that their money has overnight become virtually worthless, one can’t help but wonder about the origins and consequences of such a move. By effectively wiping out 86% of the cash in circulation, the Narendra Modi government has created a cash crunch so terrible that it may take months for growth to bounce back. This is where the media opinion has acted as the executioner by looking at the problem from a short term and naïve perspective, not realizing the wide ranging ramifications it can have.

First of all let’s understand the basic reason for this move. As touted by the Modi government, this move is a fight against black money and fake currency induced terrorism. Note how the Kashmir unrest that was at its peak died down instantly with no purported truce between parties concerned. This is the greatest achievement of this move and some might feel everything after this will go downhill. Now the fight against black money is a lot more complex than any of us can imagine.

It’s been said that the money is not a stock but a flow and this is not an effective way to target black money. However, one must realize the amount of political capital that Narendra Modi has at stake due to this move. This move hits hard at the middleclass traders whose businesses are essentially undergoing a recession as people begin to postpone conspicuous consumption. This is the principal vote bank of Narendra Modi and this move has the ramifications to upset this class and turn them against this government.

If Narendra Modi has effectively gambled on his chances of getting elected again, one must realize the amount of planning and thought that could have gone into the action. The government is not stupid. It has the vast experience and knowledge of the tax authorities and the Reserve Bank at its disposal. It would be childish to assume that the government has no idea about the loopholes in this action. As I hear from the community around me, people with reach have effectively managed to convert this money into gold, real estate etc. Others have found ways through commission agents to convert their old notes into new notes by paying the same amount as they would have if they had honestly paid their taxes before. Therefore, even though they get to keep their money, it is still unaccounted and they have ended up losing as much as they would have if they had been honest about it. Also it can come back to nip them in the bud.

Chances are we shall soon see action against other means of stashing this illicit wealth. If that does not happen, this move could be considered a mediocre success as far as curbing black money is concerned. Then again, politics is a game of optics and illusion whereby Modi is showing that he has the balls to take action against black money whether that happens or not is a completely different issue. This sole display of a 56 inch chest can garner him several followers.

Let us now move ahead to the way this move has been received by the country at large. Several media reports talk of the situation as an economic emergency. Almost all sources of media have decided that this move is anti-people and anti-poor. What they fail to grasp is that while they try to win this battle, the government has already run away with the war. No matter how many interviews, testimonials and alleged deaths are shown, the fact remains that the populace has at large taken this as a sacrifice for the greater good and a large majority has supported this move wholeheartedly in spite of the hardships faced. A major reason for the poor people supporting this move is the feeling of schadenfreude that they get as they for the first time see the rich industrialists running around to save their money.

This brings us to another problem in the Indian economy. The fact that a poor person can experience joy due to the suffering of the rich in spite of the fact that he himself must bear the pain for no fault of his speaks volume about the hatred and dislike of money. If India wants to project itself as a vibrant and open place of business, it must take note of the socialist behaviors of its masses. If the rural poor abhor their richer counterparts so much, one wonders whether we can really industrialize ourselves. What this schadenfreude shows us is that the rural and poor India despises the ugliness of a richer lifestyle and this has proven to be the primary impediment to our growth in recent times. We must shed this leftist idealism and root out populism if we are to realize the dreams of the aspirational India.

Several people have blamed the government for ineffective planning and faulty execution. For this move to have any significant impact, the element of surprise was of foremost importance. If anyone got wind of such a move, it would crash before taking off. Not to mention the government would be unable to postpone it as the common man would have already got an advance warning. By recalibrating ATMs in advance or by bringing about a sudden spurt in printing of new notes, the government would have risked rumors breaking out.

Another criticism is that by bringing in the Rs. 2000 note before the Rs. 500 note, the government made a massive error since no change could be found for the higher denomination note. Yet if you think about it, by printing in advance a radically different 500 rupee note when another note of the same denomination was in circulation, the government would risk rumor mongering. The same cannot happen with a brand new 2000 rupee note. Also, it takes the same time and effort to print a single note, whatever denomination it may be. By introducing a note of higher denomination first, the government can bring liquidity in the market faster as it can print 4 times the value in the same amount of time by printing a 2000 rupee note. So instead of having no money due to ATMs running dry people face only a little hardship because they cannot find change. At least they have valid and legal tender money. As far as the move to introduce a new 2000 rupee note is concerned, even I have my reservations. Although economically it makes sense as the cost of the note will be several times lower than its face value.

Finally to round it out with the medium and long term benefits. Real estate prices are sure to see a drop due to reduced liquidity leading to preference for banking transactions. The economy will definitely see a drop in inflation as people run out of hard cash to make purchases. It promotes and inculcates a habit of engaging in digital transactions for as many people as possible. It also ends up as a valid successor to the Jan Dhan Yojana so if you did not open a bank account voluntarily, the government is forcing you to open one now. Also the money that doesn’t come back to the banking channel effectively reduces the liability of RBI, although I shall not go into the technicalities of it as it is still vague as to whether this can be transferred as dividend to the government or not. Terror funding has definitely taken a hit and the menace of fake currency has been halted.

In hindsight, one must say that this move must have been planned long back. The government started with promoting bank accounts for all, Aadhar cards for all and mobile transactions. The JAM trinity was a precursor to this move and one cannot ignore, that if you had been a part of this, you would not have suffered right now.

Where India Shamefully lags behind Pakistan

Of course we know that India and Pakistan cannot be compared, India being this great country viewed as a future superpower while Pakistan being described as a radicalized failed state. However, there is one area where Pakistanis have put us Indians to shame. It is with a heavy heart and genuine shame that as an Indian I have to accept this. Pakistan is better at incubating startups than India is.


Surprised? Well we have all these great IITs, so many engineering colleges, students etc. We have such a vibrant startup economy with success stories like Flipkart, Olacabs, Zomato, Inmobi and whatnot. Unfortunately, our government is not as supportive of these startups as Pakistan is despite the Startup India program.

You might now start to doubt me and ask “Well where are the statistics?” Unfortunately, no one has yet effectively compared our start-up economies due to their diversity. So here I present to you a comparison of Indian and Pakistani startups for your enlightenment.

Sr. No. Incentives India Pakistan
1 Free Unlimited Finance No Yes
2 Travel Facility Abroad for Business Purposes No Yes
3 Purchase of Devices and Machinery No Yes
4 Tax Free No Yes
5 Active State Support No Yes
6 Training and Development at No Cost No Yes
7 Conferences with Successful Foreign and Domestic Startup Founders at no Cost No Yes
8 Retirement and Family Pension No Yes


The above chart clearly represents why Pakistani startup economy is clearly in a much better shape than the Indian startup economy. The blame lies entirely on the Modi government as well as the previous governments for ignoring entrepreneurship and employment generation opportunities for the youth of this country.

India has failed to provide a robust infrastructure mechanism that allows founders to employ their full potential towards successfully converting a startup into a full-fledged business. Moreover the Indian mentality is such that parents would prefer their child to have a stable job with a stable salary rather than to venture out on their own. Since Pakistan’s overall economy is a bust, the youth do not find well-paying jobs and are forced to engage in self-employment which is creating an increasingly wonderful trend in this country of suicide bombers.

Moreover, unlike successful Indian startups, most of the Pakistani startups are involved in exporting their services which as everyone would agree is a lot better than capturing just the domestic market. While this does not mean that the domestic Pakistanis have not been influenced by these startups. A lesson lies here for the Indian bureaucracy and the government to allow a free hand to our startups and take a page out of their books.

Here’s a list of some of the most successful Pakistani startups:

  1. Lashkar-e-Toiba (huge exporter in the Indian market)
  2. Jaish-e-Mohammed (having vast business interests in India)
  3. Jamaat-ud-Dawa (JuD)
  4. Haqqani Network
  5. Al-Qaeda
  6. Taliban
  7. Indian Mujahedeen

While some of them may not have initially started out in Pakistan, they definitively would have failed but for Pakistan’s aid. Shame on India, for discriminating against foreigners; while Pakistan treats them all fairly. Even Indian startups are given adequate funding and machinery by Pakistan.

Raghuram Rajan: The latest casualty of Indian Politics?

As the Indian economy decides to take a leap of faith from the throes of sub-par growth to an era marked by stupendous growth, it is the rock and roll central banker that stands in the way. Or does he?


Raghuram Rajan, the awe-inspiring central banker is staring at the end of his term in September of this year with no evidence of an extension in sight. He took over the reins at the Reserve Bank of India in August of 2013 when inflation was sky high, growth prospects were well-nigh dead, the Rupee was in a tailspin and our hopes in a revival were as slim as the chances of a Donald Trump presidency. Since then, the wholesale price index has touched historic lows, the nation’s foreign exchange reserves have scaled historic highs and we have seen approval for eleven payment banks. The banking sector is churning for the better and hopes in a revival now look well founded.

It would be stupid to give credit for all this to Mr. Rajan. A lot of the credit goes to the Congress Party and Rahul Gandhi for being stupid enough to not get re-elected and for Modi to just show up on the scene.

Lately though, the Raghuram Rajan fanclub seems to be diminishing with the finance ministry being conspicuous by its absence. The BJP has unleashed its favorite bloodhound on Rajan, Mr. Subramaniam Swamy and I’m pretty sure Rajan’s not one to bite back. If all goes as per plan, Rajan might return back to the University of Chicago as a professor and Modi will get to put in another of his yes-men at the helm of the banking sector.

Mr. Rajan is not your everyday nationalist who is willing to put everything at line for the Indian economy. Yet, who is Subramaniam Swamy to put a question mark on Mr. Rajan’s nationalist credentials. One has no idea how the wheels of governance churn. It is not Mr. Rajan’s prerogative to stay here and fight the current regime tooth and nail. He should and will return to his cushy post abroad once the dust settles over his re-election. The question is, whether Modi and Jaitley want him to stay?

The stock market will show the nation that Raghuram Rajan is good news for the economy once it falls on the day a new central banker takes over. The autonomous Rajan is set to lose his job over his own opinions and refusal to fall in line with the government’s reading of what the economy needs. While disagreements are a good sign and no one wants conformity for the sake of it, but unleashing a hound like Swamy was a low blow from the government. While I derive utmost pleasure from the antics of Mr. Swamy in dealing with the Congress party, employing such tactics against a non-political technocrat who the government badly needs depict a lack of sensibility on the part of the government. It is unreasonable to think that Swamy is acting on his own motion. What has happened here is a tacit signaling from the BJP central command that Rajan is persona non grata and his handling of the economy is not in line with the government’s. To be honest, Rajan has had his job longer than Jaitley and Modi have and it was Rajan’s actions that have brought about a principal change in the banking sector and the economy at large before the Modi-Jaitley duo got a look in.

If Rajan decides to stay after the Swamy-show, it will be out of his big-heartedness. All that is possible if only the government realizes that Rajan is an integral part of India’s rise to being the next economic superpower and it is the combined efforts of a Modi-Rajan duopoly that will be required and not to forget an absolute absence of our left of centre friends, i.e. Congress, Kejriwal, Nitish, Mamata and whosoever harbors Prime Ministerial ambitions in the current political scenario.

Will India Miss The Bus To Success?

miss the bus

Let’s not kid ourselves. India has squandered away its time like a carefree youngster in his 20s. While other Asian nations like China, Japan and South Korea were busy ramping up its manufacturing sector, we were too busy in wars, emergencies and communalism. Our policies were ad hoc in nature. Governments came and went, merrily mismanaging the public funds and trying hard to stay in power while fulfilling coalition pressures. As India was on the threshold of bankruptcy, Narsimha Rao and Manmohan Singh appeared like the knights in shining armor to rescue the nation. More than twenty years later, the Modi government is realizing that what was done in the Rao-Singh era was too little, too late. Manufacturing never really took off as the other Asian giants had already capitalized on that front. Finally some sense prevailed as Vajpayee-era reforms ushered in the growth of the service sector.

BPOs sprang up in Indian metros and suddenly India became the world’s call center. Today, the service sector is the largest contributor to India’s GDP despite employing only a quarter of our workforce. Agriculture on the other hand employs more than half of India’s work-age population, all the while contributing a meagre 14-15% to the GDP. This gloomy statistic shows us that India’s agricultural workforce is highly inefficient and our demographic dividend has indeed become a liability. All this while, the manufacturing sector has languished due to India’s stubborn bureaucracy. It is this red-tapism that Modi wishes to target as he promotes his Make in India campaign to give a much needed boost to India’s manufacturing sector. However, as manufacturing becomes much more capital-intensive, tough questions arise regarding employment opportunities in this sector.

The focus is now on India’s agriculture sector. The insufferable correlation between the employment generation in the primary sector and its contribution to GDP clearly suggests that India has many more farmers than it needs. This here is a clear case of disguised unemployment wherein additional labour joins the primary sector due to its inability to find suitable employment in the other two sectors. As many studies cite, several of India’s farmers don’t own the land they till. They work as labourers on farms and would gladly take up employment elsewhere if given the opportunity to do so. A major portion of land owners have such small land holdings that they can barely make a living out of what they produce. These farmers usually take huge loans via the unorganized banking sector at preposterous interest rates. Add to this the uncertain weather phenomena leading to crop destruction and you get suicidal farmers. The primary sector now faces a demand and supply problem. There are too many farmers and they fail to get a remunerative price for their produce.

So the government is forced to raise minimum support prices (MSPs) every time there’s a crop surplus. When there’s a crop failure, the government must compensate these farmers by introducing various subsidies to prevent farmer suicides. As weather isn’t something we have been able to control, such situations occur every other year. Basically, India’s government has been throwing money at the farm sector since time immemorial and nothing positive has come out of it ever since the green revolution. Like Albert Einstein said,

“The definition of insanity is doing the same thing over and over again, but expecting different results”

Maybe, the time has come to try a different approach. This is why the Land Acquisition Bill holds the key to India’s success or failure (assuming India hasn’t already missed the bus). With the majority that Modi has received, if he isn’t able to pass this bill, democracy in India has failed. Now the land bill is significant for two reasons. Firstly, it gives much needed impetus to industry and will certainly be the first step in transferring the excess workforce in agriculture to industries. Therefore, while being pro-industry, this bill is NOT anti-farmer. The reason the government is being pressurized to withdraw this bill is that India has too many stakeholders who rarely know the salient points of any step the government takes. Profits have dried up in the farming sector and the Indian farmer cannot sustain a family based on subsidies and MSPs during crop failures and bumper crops, respectively. Therefore, resources must be transferred ASAP from the primary to the secondary sector of the economy. Also to emphasize, the current wave of farmer suicides has nothing to do with the land acquisition bill but has everything to do with crop failure. The Land Acquisition Bill will allow surplus workforce to exit the industry and also get remunerative price for their land like farmers in Gujarat (areas near Sanand) got under Modi. The opposition must, for once think about the nation’s welfare rather than play petty politics by scoring brownie points with Indian farmers. (However, the situation Congress finds itself in is pitiable and of course projecting Rahul Gandhi as the savior of Indian farmers is more important than actually saving the Indian farmer).

The second reason why the passage of the land bill is necessary is much more symbolic in nature in the greater scheme of things. As the government reaches its one year anniversary, it has precious little to show in its report card. While I personally believe that the government needs greater time to make a significant impact, India is not in any position to wait. Industry leaders are already shifting nervously in their seats as much needed policy improvements are stalled. The populace is growing impatient each day, largely due to the tall and exaggerated claims by Modi himself. Now in this scenario, if the government has to withdraw the land bill it will cause widespread disillusionment among industry leaders. The development agenda and Make in India will take a major hit, probably never to recover. After a long time, the people of India were given a glimmer of hope and they delivered by giving Modi the majority he deserved but if Modi can’t find something useful to do with his majority thanks to the Sangh’s minority bashing and an unpatriotic opposition, democracy will have failed India. Which is why, the land bill is the key not only to India’s economy but also the idea of the nation.

The Drive to Privatize

There has always been a large hue and cry about how India has always failed to meet its fiscal deficit targets and has failed to keep it in control. This is also attributed to the government invariable failing to meet its divestment targets which are either too ambitious or lack adequate government will. The point is that quite a few government companies and PSUs have become a yawning abyss of money. We go on investing the tax payers’ hard earned money into businesses which have a history of wasting it away without raising any considerable benefit for the general public. Companies like Air India have received government funding for far too long without giving back any considerable benefit.

The governments of recent times have been far too lackadaisical to work on the privatization of Air India. Rarely a day goes by, when we do not here about the troubles of Air India flyers. Pilots on strike, delayed flights, corruption scandals and whatnot, all these have become synonymous with Air India. Its privatization could work wonders for it. One must look at the Singapore Airlines to see how it is owned by the government yet not run as per its whims and fancies. In fact, the government is quite outspoken about how it is not involved in the management of the airlines. This seems to be a viable model for India’s cash-strapped national carrier. While the government may own a majority stake in the airlines, it must disinvest in it to ensure adequate cash flow so that it need not give regular grants to the airlines. Management of the airlines cannot lie with the government as it has been reckless thus far. Appointing professionals at highest levels to promote ethical and operational efficiency is the need of the hour.

While Air India is just one example of how government can benefit from privatization and divestment, the next area is the banking sector. The banking sector has been in need of a fresh flow of funds for far too long. So while its non-performing assets (NPAs) rise, it has been deprived of an opportunity to grow due to the severe fund crunch. The government was never in a position to fund Air India, let alone the numerous state-controlled banks. What it must do is that while it retains majority control, it must give up most of its shareholding to raise greater funds.

drive to privatize

The same goes for other government institutions like Coal India. The government may face a lot of opposition in this endeavor but this government has the political majority to do so. So far it has also shown the will. The real trouble would be to thwart attempts from the trade unions which will surely be up in arms. This requires stringent labor reforms which have been long due. To facilitate privatization, the government must craftily deal with these unions who wish to remain in their comfort zone. For far too long these employees have enjoyed the perks of a government job without exercising even a modicum of responsibility that must come with it. Privatization is the need of the hour. The government has no business in doing business. While it may retain majority shareholding in these companies, it must give up day-to-day management and interference. The organizations must be run like any other company with professionalism that the government has not been able to display.

Where are the “Acche Din” you ask?

Acche din


The media has been abuzz about the completion of 100 days of the Modi government. Why this topic has been trending and raising a few eyebrows is beyond me. The work of no government can be effectively judged in a span so short. For 100 days is barely enough time for the ministers to get in their groove and absorb their responsibilities. However, that said, this phase does give us a slight peek into what the next years of this government are like. One must understand that the burden of responsibilities on this government as huge, given the massive mandate it received and its accession based on its much-touted development agenda. The reversal of a dismal economy and a pessimistic populace requires much effort, dedication and most importantly time. As it has been generating a lot of buzz, I thought I’d throw in my 2 cents.



As the Modi Sarkaar settles in, it has been credited with raising hopes of a cynical market and urban middle-class. It is credited with reviving the slumping Sensex. Indians believe more in “Sensex ooncha rahe hamara” rather than “Jhanda ooncha rahe hamara”.

The Foreign Policy

By inviting the SAARC heads for his swearing-in, Modi created history and set the ball rolling on India’s engagement with its immediate neighbors. The crucial part was the attendance of the Pakistani PM, Nawaz Sharif. His engagement with Modi was seen by many as a new chapter in Indo-Pak ties. However, this was short-lived as months later; the government cancelled the foreign secretary talks due to be held in Islamabad amid meetings of the Pakistani ambassador with Kashmiri separatists. India took a bold step, the consequences of which may or may not be dire. It showed the government as one that was strong on Pakistan, a much-lacking quality of the previous regime. How would Pakistan have responded if India would have held meeting with Baloch separatists? Just because something had not been reprimanded for more than two decades doesn’t mean it’s justifiable.

Modi then proceeded to visit Nepal, the first Prime Minister in 17 years to do so, signifying the importance he attaches to the mountain nation. The visit was successful too, with the government extending a greater credit line than before. This was followed by a visit to Bhutan, an all-weather ally of India. Both these nations are strategically located and their importance to India cannot be emphasized against a looming Chinese threat. India must show that it is no longer the Big Brother. Lastly, Modi topped off his foreign policy successes with a visit to Japan, meeting Abe, who broke protocol to meet Modi in Kyoto. Modi and Abe share a significant personal relationship, the result of which was the $35 billion that Japan will invest in India over the next 5 years. The external affair minister, Sushma Swaraj has been keeping busy too, visiting the strategically important Vietnam in the South China Sea.


Economic Impact

The markets have been shedding their slump ever since January, when Modi featured as the favorite in the opinion polls. Without a doubt, one can say that business confidence is returning and the government has begun working proactively towards promoting and sustaining a 6-7% GDP growth in the coming years. While luck has been on Modi’s side, evident in the declining crude oil prices(which will help in keeping the fiscal deficit down) and a laudable GDP growth (solely due to the re-infused business confidence), the government must realize that it doesn’t take time for luck to run out as Chidambaram learned the hard way. The GDP growth can also be contributed by the rapid rate of clearances of the stalled investments projects by the government. The RBI governor Rajan himself suggested that one must not expect big-bang reforms from the government. Even the budget, termed as boring, was the first budget of the government and we must cut them some slack.

However, the budget was commendable for the FDI in defense and insurance, pegged at 49%. The government has also shown its willingness to curtail the fiscal deficit by promoting austerity and scrapping ministries and the Group of Ministers (GoM) and the Empowered Group of Ministers (EGoM). It has begun digitizing the application procedures for environmental clearances and has suggested a complete digitization to cut corruption, promote transparency and speed up clearances. Modi has outlined his dream of making India a manufacturing hub by hammering home the message of “Make in India” during his Independence Day speech. The outdated Planning Commission has been scrapped and shall be replaced by a think-tank. This shows that the government is heading towards decentralization, an important aspect of growth for this large country. This decision also promotes competition among states to attain a greater share in Central Funds.

Petrol prices have fallen thrice since the government took over and diesel is heading towards deregulation and scrapping of subsidy, another factor which shall help contain the fiscal deficit. The SIT set up for recovery of black money has been making consistent progress, unlike what happened during the previous government. The Supreme Court has praised the work of this SIT, which suggests complete backing of the government for the SIT. Despite what anyone says, the government’s decision to block a WTO trade deal in favor of its farmers must be hailed as it is important for the government to remember that it is first and foremost a welfare state and in its hurry to appear business-friendly must not compromise on the subsidies which are essential for the farm sector. The Modi government is seen largely as an anti-populist government however one must not forget that India is still home to a large number or poor who require nurture and help from the government.


MODIfied Plans

Congress leaders were quick to criticize the government for the Pradhan Mantri Jan Dhan Yojana (PMJDY), the government’s financial inclusion scheme. Congress suggested that opening bank accounts for the poor was its idea and the BJP has no ideas of its own. The financial inclusion scheme wherein, 75 million unbanked families will be provided with 2 bank accounts each, comprising of overdraft facility (on a conditional basis), debit card facility and free accidental insurance is a highly innovative and beneficial idea, the credit for which must go to the Congress. But Modi has shown in his first 100 days what the Congress government couldn’t in 10 years, intent. In India, everyone has ideas but implementation is the key. Under Modi, the bureaucracy has already left its lackadaisical attitude. Work begins at time in cleaner offices. This shows intent to implement such schemes and work for the development of the poor which the Congress has failed to do ever since Indira Gandhi’s “Garibi Hatao” campaign. However, the Modi government’s successes must be analyzed over time and we must wait to see the impact this has on the ones who actually need it.

Other big-bang schemes include the announcement of a bullet train between Ahmedabad and Mumbai, for which the government shall approach Japan or China. Such vision was lacking under the previous UPA government. Modi also unveiled his Model Village idea during the Independence Day Speech, wherein all parliamentarians will be asked to pick a village and equip it with the most sophisticated infrastructure to set an example for other villages in the vicinity. This is similar to an idea he implemented in Gujarat during his early days as the Chief Minister, wherein he promoted intense competition among villages for greater grants. The governments idea of 100 smart cities is taking shape, as can be seen in my own city with posters highlighting the scheme’s benefits. The government’s pilot project to secure a tie-up between Flipkart and weavers in UP shows its far-sightedness and emphasizes its intent for public welfare. Under this project, weavers will bypass the middlemen and directly sell to Flipkart which shall sell this output throughout the country. His “Swach Bharat Yojana” talks about building toilets for girls in schools throughout the country. Such a sensitive issue was raked up by Modi during his Independence Day Speech. He also reprimanded the parents of males who commit serious rape crimes unlike other politicians who blame the victims. Favoritism in government decisions is down as shown in a recent survey, India improving its position from 94 to 49. The government has planned to repeal archaic laws in the country and a committee has already been set up for this purpose.

Modi plans to create a digital highway, thereby promoting internet connectivity even in the remotest villages. This is one of his pet projects, inspired by Vajpayee’s pet project, National Highways.

At the end of the day, the government must be praised for pushing through these reforms, not to forget its amendment of the Juvenile Justice Act to deter crimes among teenagers in the 16-18 year age bracket. The government has gone ahead with a controversial albeit important measure of overhauling the appointment of Judges, a much needed reform as suggested by numerous legal experts. The government has gone ahead with it though serious doubts were raised by certain individuals regarding the process undermining the independence of the Judiciary.



While the government has achieved remarkable progress in multiple fields, it still lags behind on key issues. The most formidable attack of the Narendra Modi government stems from its proximity to the Sangh Parivaar and RSS, its ideological mentors and far-right organizations. Sangh Parivaar and RSS chief Mohan Bhagwat alongwith BJP MP Yogi Adityanath have been spewing venom against minorities while subsequently promoting the ideas of a Hindu nation amid no attempt by Modi to counter them. Such incidents confirm the fear of the minorities, secularists and the pseudo-secularists that Moditva runs parallel to Hindutva. While it is praiseworthy that Modi called for a moratorium on riots during his Independence Day Speech, his actions have not suggested this. The government must be more proactive and sensitive towards such issues so as to deter the alienation of a largely moderate Muslim population. Aggravation of Muslims is one mistake India cannot afford at this after calls by Al-Qaeda to open a branch which shall concentrate on the Indian subcontinent. Efforts must be targeted towards inclusive development rather than issues like Love Jihad.

Another urgent issue which must be targeted by this government is that of women safety. A lot of hue and cry followed the 16th December gangrape after which the government woke up from its slumber. This government must make ample efforts as soon as possible to deter crimes against women. The government would have set a right example by not giving Mr. Nihalchand a post in the government as long as a pending case of rape against him is disposed of. Though he is innocent until proven guilty, the government can do without unnecessary controversies.

The pomp with which the government announced the Ganga clean-up project was followed by sharp criticism from the Supreme Court. The government appeared quite weak as it conceded against the demands of UPSC aspirants and scrapped the mandatory English section from the CSAT exams. It has still to reduce the bottlenecks in transport of coal across the country so as to tide over a serious power crisis. It must also avoid any further controversy by stirring up the issue of Article 370 for the time being as the valley is already a sensitive region without such controversies.

On the economic front, though the government has appeared hands-on, there are some areas wherein there is scope for improvement. The decision on implementing Goods and Services Tax (GST) a nationwide tax is languishing. The government also appears to be losing the fight on inflation, mainly due to a haphazard monsoon. It must not forget that onion prices can make or break a government, which the Gandhi parivaar learned the hard way.



One must always remember that only 100 days have passed since the government took over. Retrospectively speaking, it has performed much better in these 100 days than what the UPA could have done. The aim must be to keep the momentum, announce big-bang reforms, reduce red-tape, ease environmental norms for businesses while not compromising on a healthy environment, increase indigenous defense production, restart infrastructure projects, reduce poverty, reduce imports of essential commodities, subjugate corruption, promote secularism and so on and so forth.

While the 100 days provide a good outward showing, implementation will be the key. The government must not lose steam midway and aim for higher growth over the next five years, a pragmatic expectation considering its mandate. It must not be disconcerted by the by-polls results in various states as most of these were for the legislative assembly and Indians have been known to vote differently in state and central elections. It takes away many positives from its time while some lessons have yet to be learned. Let’s hope Modi lives up to his expectations and the ‘Acche Din’ will finally fall upon us!

Inflation vs. Growth


As a new government promises to bring the economy out of doldrums and revert back a slump, the RBI governor, Raghuram Rajan has become the new hard-task master on inflation. Modi has promised to bring about a phoenix-like rise of the economy from the ashes leftover by the previous government. Rising on the back of an anti-inflationary mood in the country and the lowest growth in two decades, the nation voted for a pro-business government which has promised to bring back the “Acche Din” (good days).

As the government settles in with its new PM, all eyes are on the Finance Minister Arun Jaitley, Modi’s trusted aide. The priority would be to bring out a pro-business budget with emphasis on easing land acquisition and availability of capital. The Modi government is concerned solely about bringing back the growth rates that prevailed in the past decade, fuelling India’s mind-boggling growth story. On the other hand, India is lucky to have a stern RBI governor whose priority since taking office has been to tackle the crippling inflation. One cannot ignore the conflicts that this may give rise to among India’s top financial honchos.

The fact is that the Congress government presided upon the India’s highest financial growth in decades. However, that doesn’t mean that they are to be credited for the overwhelming growth figures. The infrastructure development started by the Vajpayee government indeed left India shining. Only to be tarnished by the populist policies of the following government. During Vajpayee’s era, inflation rates were modest enough and one should be hopeful that after inducing high growth, the following government must be capable enough to not only sustain it but also build on it. No doubt, they had funds to splurge on their MGNREGA and Pay Commissions and Farm Loan Waivers but the question was how much? It was too late before it realized that the deficits were rising and subsequent development and productive expenditure was nowhere to be seen. Instead, it fuelled this expenditure drive, which was largely non-developmental (the productive expenditure was aptly consumed by its minsters) which powered inflationary pressures without a rise in supply and growth of essential commodities.

The result, a new government inherits an ailing economy downgraded by multiple credit-rating agencies. With inflation northwards of 8 % and growth southwards of 5 %, the government will find it tough to check one while raise another. One can only hope it won’t happen the other way round. In the recently concluded policy meet of the RBI, it kept all rates unchanged except a minor change in the SLR. This move must have been prompted by a pro-growth finance minister and would have been accepted by the subdued governor whose efforts to tackle inflation so far have been successful. What needs to be seen now is whether the government will want to increase rates thus stagnating growth or to let the rates fall and risk double-digit inflation? The only solution would be to increase the supply by ensuring expenditure is planned and leakages, in the form of corruption are minimal. India desperately needs to tide over a power crisis which has threatened the existence of several small and medium enterprises in northern and eastern parts of the country. Boosting of agricultural supply would likewise be tough with clouds of weak monsoon about. Even though one might argue that the Sensex is breaking all-time records, it is purely speculative and may collapse if growth forecasts don’t project a rosy picture in the weeks after the budget.

The silver lining here, one may find it only if one looks quite carefully, is the presence of opposite mindsets among the government and the RBI. It shall lead to healthy arguments and ensure that the country’s economy doesn’t produce a lopsided figure.