Game changers – for the better and worse

When the budget came out, I had felt disappointed particularly with respect to the inadequate provision on bank recapitalisation and for not extending the reduction in corporate tax rates to all companies. The other disappointments were with respect to the low salary limit in the mandatory labour deduction and in the incentive for employment generation.

On higher education, while the government announced the creation of ten centres of excellence in education and research each in the public and private sectors, the disappointment was that it could have been more radical.

However, the government appears to be working overtime to overcome the disappointments. On the banking sector, the budget was immediately followed up with RBI announcing that 45% of the revaluation of real estate holdings by banks would count towards Tier 1 capital.

SEBI has moved to ban wilful defaulters from capital markets and corporate boards. Clearly, the government and the regulators are acting in concert and that is good. But, more resolute action on wilful defaulters is needed to signal a change in India’s cronyism. 

Watch Brazil. A big industrialist has been put behind bars for nineteen years. A former President is being accused of money-laundering – all for a beach-front apartment, for now! This needs a separate post.

The government has announced a New Exploration and Production policy which R. Jagannathan has called a game-changer. Sunil Jain of Financial Express (FE), however, suggests that the government’s final pricing is no different from the one that the Rangarajan Committee delivered when UPA was in office. Hence, nearly two years have been lost. I am sure that the truth would lie somewhere in between. MINT has mostly a positive report on the policy changes announced.

Ordinary people under-appreciate the Cabotage rule change that India had announced earlier. We had covered it here.

Now, the Inland Waterways Bill has been passed and this article claims that it holds enormous potential. Particularly, diversion of traffic from Indian ports to Colombo and Dubai can be arrested. But, a lot would depend on Indian labour productivity and attitudes on the part of port managers and workers. See this brief ET news-story too.

The Real Estate Bill has been passed. That is good news for it brings quite a good measure of accountability and transparency to the largely buyer-unfriendly sector. Some reliefs are missing for the builders too but they are in the realm of the States. This article in ‘Forbes’ calls it a thorny rose but the thorns are with the States. They have to remove them.

 Even though this is from July 2015, the editorial from a government-hostile ‘Indian Express’ newspaper notes that the national e-market initiative for agriculture could be a game changer. The scheme is to be launched in April.

Giving legal standing to Aadhaar could be a very big moment in the annals of Indian federal legislation, according to this edit in FE.

 The first paragraph from this MINT story is self-explanatory:

The Union government’s decision to cut the prices of genetically modified (GM) cottonseeds, popularly known as Bt cotton, and slash royalty fees, will have a positive impact on cotton farming in Maharashtra, India’s top state in terms of area under cotton cultivation. [Link]

Sunil Jain of FE suggests that the government has needlessly interjected itself into the dispute and has antagonised Monsanto along with Vodafone, Cairns, and Reliance Industries.

Of course, one can argue that Sunil Jain bats instinctively for a business-friendly approach because the situation discussed in this simple Twitter ‘exchange’ is indeed ac complex one. The Government of India appears to have submitted to US pharma pressure not to issue ‘compulsory’ licenses to India’s generic drug manufacturers to make cheap copies of drugs made by US pharma producers. Here is my blog post on the matter.

On Monday morning, the ‘Business Standard’ reported that spectrum auction could be delayed by 3 to 6 months. Sunil Jain of FE has been arguing that one of the biggest revenue assumptions in the budget was about the receipt from the auction of spectrum. He has calculated that the auction would have to fetch Rupees 240,000 crores with the bidders paying 25% in cash (60,000 crores of Rupees) in the current financial year. In comparison, the auction last year was only for a little over Rupees 100,000 crores. The simple math is in these two tweets by Sunil Jain.

Lots and lots more to do in the country. But, the government’s sense of purpose, post-budget and concrete legislative achievements coupled with coordinated action with regulators deserve generous praise. At the same time, big unanswered questions are there. Post-budget record of the government is a mixed bag with a positive tilt.

Letter grade for post-budget action on the policy front: B.

Is the society a bigger concern than the government?

Long-term issues persist, however. The ‘escape‘ of Vijay Mallya to the United Kingdom even as banks were urging the Indian courts to stop him from leaving, is clearly an embarrassment to the government and to the society too. He had tweeted on the favours bestowed on the Indian media and asked them not to get highly moralistic. A fair point, that is.

Even in this abridged extract of Ms. Arundati Bhattacharya’s interview with Shekhar Gupta, it is clear how dysfunctional Indian processes are, how deep cronyism is, and how pervasive its reach is.

As Hindustan Times reports the busting of a Rupee 15,000 crores (nearly USD2.5bn) tax evasion racket, the question arises as to how much more remains undetected.

IDBI Bank employees are protesting against privatisation. It is quite hard to understand the rationale. There are more opportunities for institutional growth, for personal growth, for personal material rewards and the world of banking too could open up, once in the private sector. Yet, employees fear privatisation. Indian banking sector is still too small for country’s needs and hence it can only grow. Therefore, fear of job security is neither reasonable nor legitimate. There can be only two reasons: fear of accountability and reluctance to become more productive.


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