Wanted – Reforms on “Kaizen” Mode!

In the last few days, newspapers and online portals have been filled with nostalgic Op-Ed pieces on how the 1991 reforms happened as we celebrate 30 years of the reforms. These pieces by some of them who were part of “reforms team” then and other commentators often talk about the circumstances in which the reforms were unleashed, how the then Prime Minister Narasimha Rao weathered the political storm in taking some bold steps and how the then Finance minister Manmohan Singh and his team went about implementing them finally.

Yes, the “1991 reforms” was a significant event in our post Independent political history and in terms of impact on the ground, probably the most significant. Though it was not realised then, the reforms package helped to change gears of the country which was stuttering at a modest pace of growth all along, while the rest of the world was galloping.  It also helped lift millions of Indians out of poverty in the next 20 years.  So, it is apt that we give due recognition to the process and the people behind it and celebrate with much enthusiasm.

As a country, we are in a phase where we need the next reforms momentum. One that will define our growth trajectory for the next 30 years. In that sense, we need to now move on from living in past glory of what the 1991 reforms delivered and initiate the next cycle of reforms. So, what could they be? A reform is defined as a change brought in an existing system to make it better. Therefore there are reforms that result in incremental changes, thereby incremental benefits and there are reforms that are big which result in monumental changes and thereby impact. 1991 reforms can be grouped in the latter category.

 In the last 20 years, since the Vajpayee regime till now, it’s not that there have not been reforms of the big impact category in our country. But they have been few and far between. In the issue of reforms, I would like to see the glass as half empty. What we need is the next bust of reforms one shot that will change the course of our country forever and for the better. And if at all there is an opportune ‘muhurat’ for the same, it is this. Because when we come out of Covid hopefully very soon, we need to not just recoup the lost two years but get back to an irreversible high growth trajectory.  And for that, we need a whole set of big bang reforms that need to be unleashed ASAP. And I will group them in the following critical areas:

  1. Ease Of Doing Business: While we continue to say that we have improved our ranking on the Ease Of Doing Business front from before, those of us on the ground very well know that India continues to be a complex country to do business in and with. And the issue of “Central” subjects and “State” subjects adds complexity to the whole thing.  To put this in perspective, we have 1536 Acts, 69233 Compliances and 6618 filings to comply with for our businesses in our present regulatory environment.  There have been bits and pieces effort in states to remove/amend rules and regulations in the last few years. But these are just incremental changes and do not move the dial. What we need is a complete review of the existing rules and regulations across all states that include Central laws and state laws and a wholesale repeal of all the frivolous ones.
  1. Labour: This is connected to the “Ease Of Doing Business” but has scope beyond that as well in terms of ensuring competitiveness and achieving productivity as well. A paper I read on Labour Reforms mentioned that labour laws in India constitute 30% in terms of acts and 47% in terms of compliances in our regulatory framework! In terms of numbers, it is 463 labour Acts, 32542 labour Compliances and 3048 labour filings! Not that the existing regulatory environment has benefited the labour so far. The current labour laws cover only 9% of India’s employee base! So, there is an express need for simplified labour laws that will help the industry to grow while remaining competitive, will be fair to the employees while empowering them while bringing a majority of the labour force in its ambit.
  1. Infrastructure: It is undisputable that the general infrastructure in India has grown leaps and bounds in the last 20 years. There are two ways of looking at this. If we compare with where we were in the past, then of course, things are certainly better. If we look outwards and compare with our peers, then we will realise that we have still a long way to go in basic infrastructure. It is also a fact that with respect to infrastructure we are always in a perennial “catch up” and “Work in Progress” mode. And I will explain this with an example. In 2005, in the Nagoya city of Japan, a new airport was thrown open just to coincide with the World Expo that happened in that city. When I visited Nagoya in that year, I was appalled to find the new airport almost empty though, it was witnessing almost 4-5 times the normal traffic on account of the Expo. Compared to the old airport, the new one was huge and I was told then that this airport was now built forecasting for next 30 years of traffic growth so that they don’t have to meddle with this for a long time. Now, this is the approach required for infrastructure projects. However in India, we build projects based on today’s situation and by the time the project is completed, it is already bursting at its seams. The new Bengaluru Airport is an example of this. Inaugurated in 2008, it had to launch its expansion by 2011 within just three years! Most of our highway projects are planned like this. That’s why I say that the grudge towards the bullet train project in India based on today’s situation is ill informed. By now, we should have kicked off at least eight bullet train projects, not one.  Unlike in the past, financing for infrastructure projects is no longer a concern. There are global multi-lateral agencies backed by developed countries willing and waiting to fund viable infrastructure projects in a country like in India which offers potential and returns.  In the area of Infrastructure, we need drastic reforms in our planning method and execution. And that brings me to the next critical area.
  1. Land: Most of our infrastructure projects get stuck or go through inordinate delays due to the issue of land availability aka land acquisition. This is an indeed complex issue but we need to study best practices in other developing nations and come up with a new method that is fair to all and makes the process easy and less time consuming. The present Land Acquisition bill in its form needs urgent reform.

There are other areas too where reforms are the need of the hour and I will continue with those in Part – 2 of my blog next week.  But my focus remain on areas related to economic growth. To part conclude this piece, I would like to say that “Reforms” are a continuous process. And so continuous improvement of what we do is required. Going back to the Japanese way, they call it the “Kaizen” approach in management.  In India, we need Reforms on “Kaizen mode”!

To be continued.

 

30 Years of “1991”!

As I was wondering what to write on this week, I realised that in a few days, half of this year 2021 will be over.  Back in January, everyone thought or rather hoped that we were all done with the “New normal” and soon one will get back to the “Old Normal” in more ways than one. Till March, we were coasting on towards that. Then came the dreaded 2nd wave leaving us literally gasping for breath. And in no time we are back to hoping to see the end of this year.  Just the feeling we had the same time, last year.

And probably 30 years ago in the year 1991.  If 2021 has been a tough year for those who are running the country, I reckon 1991 would also have been so and for a variety of reasons.  When the history of post independent India is written, the year 1991 would feature prominently. Today, the year is associated with the unleashing of economic reforms and liberalisation in India and being crowned as the ‘Year that changed India”. But it has got so many other associations to it, which is what I thought I will write about, when we are in the midst of “30 Years of 1991”!

As 1991 dawned, I was in my 2nd year of MBA course in Bombay. Just as the year commenced, we were witness to the 1st televised war in the Gulf when US attacked Iraq to liberate Kuwait in “Operation Desert Storm”. In India, cable TV was still in its infancy. But we could watch some visuals of the war in “The World This Week” programme which made New Delhi Television (NDTV now) and Dr. Prannoy Roy household names in English speaking households in India.  I must add here that those days as young students we had tremendous appetite for news and current affairs which is seemingly missing in the current generation. Oh yes, that law of diminishing marginal utility! When News is a plenty all around, it finds lesser and lesser interest.

And it was during this war in 1991, that India probably removed its veil of Non Alignment, when the then government under Prime Minister Chandra Shekhar allowed re-fuelling of US Aircrafts in India. The decision had to be soon reversed under immense political pressure eventually in particular from the Rajiv Gandhi led Congress which was supporting the Chandra Shekhar government from outside. Though the war happened in the Gulf, it had its own implications for India as a country. Oil prices sky rocketed pushing the imports bill to hit the roof and plunging the economy into a deeper crisis. And we had a humanitarian crisis to deal with as the Gulf was home to millions of Indians.

In May, I was back in Madras after completion of the course and preparing to return to Bombay after a short break. On the 21st May, 1991, Rajiv Gandhi was assassinated in Sriperumpudur near Madras by a suicide bomber at an election rally. The death of Rajiv Gandhi that too in that most tragic manner shook the nation. Rajiv Gandhi was all set to return as the Prime Minister with the Congress getting a comfortable lead. But his untimely death put the country again in chaos and when the results came, Congress became the single largest party but short of majority on its own.

It is difficult to speculate as to what would have happened to our country had Rajiv not been killed and had he returned as the Prime Minister. It was widely believed that having learnt his lessons from his first stint, Rajiv was a wiser man and with his youth, energy and impatience would have changed the course of the country for the better.

With the loss of Rajiv, P.V.Narasimha Rao became the Prime Minister heading a Congress led coalition government. He made Dr. Manmohan Singh his finance minister and between them unleashed a slew of economic reforms that liberalised India. Those were eventful days and day after day, headline grabbing announcements followed.  Dramatic devaluation of the rupee, pledging of the country’s Gold reserves, announcement of the New Trade policy, announcement of the New Industrial policy that would end the licence-permit Raj,  the historic Budget presentation and so on. When all these were happening, one didn’t realise that these will forever change the destiny of India.

Unlike now, when economists and policy experts are in unison singing the praise of the 1991 reforms, back then the reforms were always projected as “Acts in Duress”.  Even among the ruling Congress, there was no consensus on the reforms forcing Dr. Singh to make that famous quote that he walked around with his resignation letter in his pocket.

Elsewhere in the same year, the dissolution of the Great Soviet Union was in rapid progress and by December the entire Soviet Union was formally dissolved that eventually ended the Cold War.  Google also tells me that the World Wide Web was launched to the public in 1991 and Microsoft.com went online, though I have no recollection of these!

Coming back to India, not to be limited to financial problems, in the same year 1991, on June 28th, Kashmiri militants kidnapped the then Executive Director of IOC, Mr. Doraiswamy. He was finally released after a couple of months in exchange of a few militants. I remember this vividly as day after day front page in the newspapers were occupied with this news.

For India, not just 1991 but the next two years were indeed full of challenges that wrecked the country pushing it from one crisis to another.  So, looking back, as a country we came out of all that relatively unscathed as we kept growing to what we are today, though the pace and extent of growth may not be our liking.

30 years hence, in 2021, as a country we have been inflicted hard by a global pandemic that has been hogging everyone’s attention. Our economy has been bruised badly. Lives have been lost and still counting.  Clearly not just India, but globally we have been set back by couple of years if not more.

As we come out of the 2nd wave, a recovery is imminent but not without the potential danger of further waves. We can only hope that this time also we will follow the 1991 cycle.  If you remember, the economy fared poorly in the 1st year of the reform (1991-92) but from 1993-94 after two years, the economy was on a roll.

Going back to 1991, personally for me that was the year when I started my professional career and so along with the country, the year has a personal significance and it will be always etched in my memory.  Where were you in 1991 and what are your memories of that year? Do share in the comments section.

India’s Vaccination Conundrum!

Delhi, India’s capital reported around 1600 new cases yesterday with the test positivity rate dropping to 2.5% from a high of 35% in April. Mumbai, the commercial capital reported around 1300 new cases yesterday. In the 1st half of April, the daily cases were averaging 10000 plus.  Both these cities are under near complete lockdowns and the reduction of activities has helped to bring the case load down. Elsewhere in India, many cities and towns are still showing a worrying trend and the respective authorities have imposed circuit breakers and I am certain the numbers there will also show a decreasing trend in the coming weeks.

Now with the decrease in the case load in Mumbai, already there is a clamour to “Unlock” so that business activities can resume. In Delhi, the Chief Minister has said that if the cases continue to drop for another week, his government will start the process of unlocking. As we saw in the past, when the lockdowns are eased, there is a chance that the case load goes up. It is a vicious cycle of numbers going up and down with locking and unlocking. Hence, at this point of time, the only option we have, to break this cycle is to rapidly vaccinate majority of the population.

India’s vaccination program thus far has only flattered to deceive. The programme kicked off on the 16th Jan, 2021. It is now over 5 months and yes, we have administered over 18 crore doses but, the coverage has only been 3% of the population. If we continue at the same pace, we will take years to cover the total population by which time, wreckage on all fronts due to Covid will be humongous. It is clear as daylight that we have to up our ante on the vaccination front as of yesterday.

This is where the government’s overall planning on the vaccination program begs all kinds of questions.   During the initial phases of the program that was meant to cover health workers and later senior citizens, one thought that the program was proceeding smoothly. However, it was during the 2nd phase – that of citizens over the age of 45 commenced, the whole program started falling apart. From a phase of vaccine hesitancy we quickly moved to vaccine shortages. And this was happening exactly at the time when the second wave Covid numbers were hitting the roof on a daily basis.

A panic struck government facing fire from all directions on a single day opened up the vaccination program whereby it allowed vaccine makers to sell 50% of their stock to states and private sector. And in another bizarre move, it opened up the vaccination to 18+ age group with a caveat that this will not be sponsored by the Central government.  Bizarre, because the opening up happened when there were no sufficient stocks to cover the 45+ age groups adequately.

Today as far as vaccination is concerned, there is a strange situation. As I mentioned earlier, there is less vaccine hesitancy among people. There is a good awareness and urge amongst many to get the vaccination done. However, due to the shortages, we are back to the good old “IRCTC” days. The tyranny of OTPs, slowly loading site and the fastest finger first routine are back. Those who are not IT savvy, have to make the daily trips to the centre and try for walk in jabs and of course deal with big lines there, that too during Covid times. The Cowin portal which at the outset is impressive is a gate keeper today. And for some strange reason it is available only in English language!

As I have written in my earlier posts, as far as Covid is concerned, there have been many unknowns. The magnitude of the second wave came as a big surprise and caught all of us in the back foot. I have argued that no government in the world could have planned and smoothly handled a wave which is 3X and 4X times the peak of the previous wave in terms of hospitalisation requirements. On this, the barrage of excessive criticism on the Indian Government has been a bit unfair and we should cut the government some slack on this.

Having said that, where the Government and here I mean the Central Government, has been found wanting is on the vaccination project front. In this project, there were lesser or no unknowns. Data of the population, the production capacities of the indigenous vaccine makers were all available right in front. Yet, we did not move on securing enough stocks of the doses for vaccination. It is not clear if it is executive decision making or bureaucratic sloth that has landed us in this situation. Either way, we missed the bus.

While the important aspect of arresting the second wave is in progress, the Central Government must shift its priority to bringing the vaccination program back on track. We are now seeing that the program of state governments procuring vaccines directly is not taking off. In response to the global bids floated by the Municipal Corporation in Mumbai (BMC), only suppliers of Sputnik have quoted. And there again, with the stringent supply conditions of the tender, I doubt any supply will happen in the near future!

Therefore, the onus is on the Central Government to ensure sourcing of the required doses of vaccines required to vaccinate at least 70% of the population by end of this year. That would mean making available over 160 crore doses from now till December. In a recent press conference, the government put out a table that said that the Production/Availability of vaccines from August to Dec is 216 crore doses. With this availability picture, has the central government placed the orders on the vaccine makers already at least for the approved ones? Are the approval process for the other vaccines on queue put on fast track? Has the government assessed the working capital requirements of the indigenous vaccine makers and committed the same? Is the supply chain secured for the production of the vaccines as per capacity? IS work happening on the Cowin site to make it more citizen friendly?

If the answers are yes, we have learnt from the past mistakes. If No, we have decided to live “Ram Bharose”.

Image Courtesy: Amul

Covid – Contending with the Waves of Uncertainty!

If at all there has been one thing which is consistent with Covid, it is its remarkable inconsistency.  From the time Covid entered our collective lexicon in February last year, every theory or conclusion related to its behaviour has been found to be inconsistent or invalid very soon after.  Like India was never affected by Bird flu or SARS virus, so we will not be affected by Corona virus (See the situation today). India is a hot country and in peak summers, Virus cannot survive (It did hit us through the last summer). India will be spared as we have better immunity for many diseases (Of course India was not spared).  During monsoons in places like Mumbai, Covid is going to create a havoc (There was no specific spike during monsoons).  Masks are required only if you have symptoms but hand washing and sanitising are most important to prevent the spread (Today, it seems it is the other way – Masks are most important and hand washing is not that important).  Once vaccines are found, that will be the end game for Covid (Vaccines were indeed found but the end game is still not in sight).  Once you take the two doses, you are safe (Now the latest theory is, we may have to take vaccines every year!). This was just to list a few theories on Covid which have got negated along the way.

We must keep this in perspective when we make our judgement on the way the municipal administration or State governments or the Central government or the Prime Minister have handled what is now called as the 2nd wave in India. Let us all be honest. Since the dawn of this New Year, all of us have in some way or other started moving towards leading a normal, pre-Covid life. We started – travelling out of our cities, taking vacation breaks, working from Office, wining and dining out, going to places of worship, having social get togethers, planning for house functions and getting domestic helps back in our houses, to mention a few normal/pre-Covid activities.

All of us were keen to put Covid behind us and lead a normal life. We all understand that it is important for economy to get back to normal which can only happen if consumption in all spheres get back to normal. We were all happy when GST figures reached pre-Covid levels and were delighted when it started exceeding pre-Covid numbers. All this when we also got the news that vaccines were available and we could see some light at the end of the Covid tunnel. We all celebrated and rejoiced about how India came out unscathed on Covid.

What we did at individual levels, companies did at their level as well with respect to businesses. And similarly the administration and Government did at their levels. In this period, we must not forget that farmer protests which in normal Covid times could be super spreader events were going on in most parts of North India. Yet, we didn’t see any spike in Punjab or Delhi or other states where farmers in large numbers were protesting taking limited or no Covid precautions. A full test match was held in Chennai with spectators watching it and there was no spike after that. Looking at these I guess, the Election Commission went ahead with the conduct of the polls in the five states in March and April. Ditto for the Uttarakhand government for the Khumb festival.  We all lowered our guard. Not just the government.

Today, however in India, we have been savaged by a Covid Tsunami. So, what we see all around are depressing news about deaths, sufferings and other collateral issues, all related to Covid. We have been hit by a lethal second wave which none of us saw it coming. This is where the first failure of the epidemiologists, experts and relevant authorities in the administration come into picture. All the while in the 1st Quarter of this year, I only saw experts explaining how India has flattened the curve and how we were moving towards herd immunity.  So, when other countries like the UK, USA and a few European countries were hit by a second wave, why was there no alert from the experts of a potential second wave in India?

In the mid of March, we could see suddenly numbers rising in states like Maharashtra and Kerala without any specific trigger like a super spreader event. When at that time, a few were enquiring with me on what’s happening in Mumbai, I mentioned that it is only a question of time the numbers start going up in other cities/states. And that’s what happened. So, when a person like me without looking at any regression models or analysis could predict that we are up to an imminent spike in numbers, how come the state governments and Central government did not realise that we are walking into a sudden burst if precautions are not put in place immediately.

Even in the 3rd week of March, if the Election Commission had announced strict regulations on campaigning or Khumb was made symbolic as it was done eventually, things would have been different. Or if all states including Maharashtra started what it is doing today in terms of restricting movements, we could have avoided the crisis. This is the second issue.

As some wise man said, “Before, you are wise. After, you are wise. In between, you are otherwise!” In hindsight everyone is God. Anyway, today lock downs have been put in place and I am sure, the numbers will start coming down in the next 4 weeks. Already the numbers in Mumbai are showing a declining trend day by day. But, once we reach a trough, again it will be time for “Unlock 2.0”. When that happens, we may once again at some point of time witness a third wave, unless by that time we have vaccinated a reasonable mass of people.

It is clear therefore that the key to prevent further waves, is vaccination. Or so we hope at this point in time, unless even this theory gets demolished. It is now apparent that the vaccination roll out has been patchy.  Just six weeks into opening up of the vaccination program to public, we have a shortage of both the vaccines.  And I am not joining the chorus of why India exported vaccines when we should have used it for Indians first. The external affairs minister has articulated recently that if we do not support other countries, we cannot expect support from other countries for supply of raw materials. This could be the official line. But the main reason why the government also decided on exports initially was the shelf life, in my opinion. The government cannot give this reason out for obvious reasons.

The shelf life of Covishield is six months from the date of production. As per Serum institute, by the end of December, it had already produced about 50 million doses of the vaccine. I must add here that it had started producing and piling up inventory even before the official approvals. Since the vaccination roll out in India was planned to be in phases starting first with the health and frontline workers for obvious reasons, the stock would not have been consumed before the expiry. Hence, exports meant to serve triple purposes as per me. Consumption before expiry, generation of good will with Vax diplomacy and fulfilment of commercial and licence related contracts for Serum.

A committee under Niti Aayog has been entrusted with the roll out of the vaccination program and it appears that the whole plan was based on “let’s cross the bridge when we get there”. How else can we explain the fact that the Central government had not secured supplies for the vaccine from the two approved sources at least to cover 60% of the adult population right at the beginning? Why is it that the companies were not committed working capital support right at the contract signing stage? If there was a clear plan of sharing of responsibility between Centre and states, it was never made transparent. And today we see that the whole vaccination has been opened up but without ensuring supply. From vaccine hesitancy, it is now a rush for vaccine. It is going to take at least till June for stabilisation of supplies. To me, more than not anticipating the second wave or being lax on taking actions after witnessing the second wave, the ill preparedness of the government on the vaccination roll out is the main issue.

While it is now clear that we as a country have landed our foot into a second wave land mine, the last thing we should see is politicking over this and the never ending blame game between the Centre and states. It is high time that the Centre and states work together in diffusing the crisis rather than pointing fingers on who is wrong at this stage. This is a collective failure of all of us, the society, the administration, the domain experts, the State and the Central government.  As common public we must now learn to be cautious throughout even if we have taken the vaccine, control our instincts to get back to normal lives soon and learn to deal with what could be waves of uncertainty in the coming months.

Having said that, in terms of accountability, the buck of course stops at the top, which is the Prime Minister. He must now quickly move towards establishing a separate ministry for Covid and have a competent minister and set of bureaucrats to man the same.  This ministry should be tasked with all activities related to Covid as an umbrella entity. Being pro-active should be the core mantra for this entity.  It should be acting on a WAAR footing – Watch – Anticipate – Act – Repeat.

As we have seen, unless we get out of Covid quickly, lives and livelihoods will be under jeopardy – caught in the ensuing waves of uncertainty.

Pic Courtesy: India Today

Budget -21, Reform push and Time to Market!

There have been budgets in the past which have sort of quickly moved away from the headlines. And there have been budgets which remained in the headlines but for all wrong reasons. This year’s budget, incidentally the 8th one from the Modi Sarkar presented by Nirmala Sitharaman has managed to hog the limelight for all the “right” reasons. The pun here is well intended.

Talking of the reaction to this government’s previous budgets, it’s always been muted and for obvious reasons. Ever since Narendra Modi became the Prime Minister way back in 2014 that too with a clear majority, the expectation has been that he will bite the bullet on many of the much needed, long pending reforms. Honestly, the previous budgets of the Modi Sarkar were mostly incremental budgets with some increased allocations here, some improved programs there and so on. “What’s the Big Idea”? ‘Where are the Big bang reforms?” were some questions hurled by the commentariat post every budget. It has been my observation that under Modi, the budgets have just become an annual statement of allocations and outlays while Big Ideas whether it was the Swachh Bharat Abhiyan or the Ujjwala Yojana et al were launched outside of the budget. But in this year’s budget, there has been a welcome change to announcing some “Big Ideas”.

The positive vibes around this year’s budget can be attributed to the announcement of few big ideas which have been reformist in nature, while keeping the budget free of any “bad news”. One is the announcement of the setting up of an Asset Reconstruction Company (ARC) which is a euphemism for a “Bad Bank”. Second, is the statement of intent on “privatisation” of two Public Sector Undertaking Banks and one General Insurance company. So far, governments have been taking umbrage under the term – Disinvestment without putting out the word “Privatisation” so openly.

Not just the budget, but the announcement has been followed up by speeches in the parliament and other forums by those who matter in the government, on the seriousness of the intent. In fact, as per news reports, Niti Aayog has recommended to cut the number of state owned Public Sector Undertakings (PSUs) to just 24 from over 300 that exist today. If this programme takes off, it will make Modi a reformist of “Thatcherian” proportions. If you recall, Margaret Thatcher way back in 1979, on assuming power systematically embarked on a reform program to revive the British economy. She deregulated markets, cut tax rates, removed exchange controls and consigned militant trade unions to oblivion. But, it is the privatisation of State owned corporations like British Steel, British Petroleum, British Telecom and British Airways that stays as her enduring legacy till today. So, what Thatcher achieved in the early 80’s in the United Kingdom is what Modi is embarking to do in India after forty years. That brings to the next point of this post which is the important piece of “Time to Market”.

In business, Time to Market is nothing but the time taken by a company to launch a product or a service from the date of firming up on an idea.  For companies, this is an important issue in new product introductions.  In businesses that are highly competitive or for that matter any business, you cannot afford to have a long Time to Market.  That would run the risk of your competitor getting ahead or consumer preferences changing that makes the idea less relevant or even redundant.  I believe that even in the matter of reforms for a government, a short Time to Market is critical. And as a country, our track record on that front is unenviable so far.

In the context of reform push, I believe there are three stages namely – Idea, Intent and Implementation. First, the idea is just floated in a budget speech or on important occasion/forum. Then the Intent is demonstrated when the idea is given a proper shape, laws are formulated if there is a need and resources are allocated.  Implementation is when finally the reform becomes a reality and is rolled out. So, in India if you see the history of Time to Market on important reforms, it doesn’t pose a pretty picture.

For example, take the case of a reform like Aadhaar. The idea and need for a unique citizens identity card was floated way back in 2001 by an Empanelled Group Of Ministers (EGOM) chaired by the then Home Minister L.K. Advani during the Vajpayee led NDA regime. It was only in 2009, when the intent was demonstrated by the UPA government led by Manmohan Singh with the announcement in the budget and then following it up with the set up if UIDAI (Unique Identification Authority of India) under the leadership of Nandan Nilekani. And finally, the first Aadhaar card was issued to a citizen in September 2010. So, from the idea to the launch it took a good 9 years. In the case of GST, from the time of the floating of the idea way back in 2000 to showing the intent in the budget in year 2005 to finally launching GST in India in 2017, it took seventeen years.

In the case of the policy of allowing 100% Foreign Direct Investment in retail however, from the stage of the Idea to Intent to Implementation, the landscape of retail has changed. India doesn’t still allow 100% FDI in multi brand retail. This was seen as an important reform in attracting FDI and employment generation a decade ago. But now with the advent of E-Commerce where 100% FDI is allowed in the marketplace model, 100% FDI in Multi-brand retail is no longer seen as a constraint. In other developing countries like Thailand foreign direct investment in retail gave a huge boost to the economy. But India missed that boom because of the dogma around FDI in multi brand retail which stretched the Time to Market on that reform.

Ergo my point is, if the reforms which have been announced in this budget have to make an impact, short Time to Market is critical. Having floated the Idea of a Bad Bank, it is important to follow up quickly with the formation of the ARC and eventually roll it out within this year itself so that the PSU banks can be freed of the stressed loans and they can get back to lending with more ease. Similarly, in the case of privatisation of PSU Banks, the idea has been floating for a while now. But this is the first time, the government has expressed its formal intent via the budget speech. The road to privatisation is not going to be easy at all with trade unions already gearing to pick up the gauntlet with the government. I though believe just as the mass VRS issue in PSUs like MTNL and BSNL etc. went through in spite of stiff resistance from trade unions, this time, the government may be able to pull it off with a few hiccups. Or so I hope.  Also, while the stock markets are on a high this year, the government can manage to get better valuations.

In the run up to the 2014 Lok Sabha elections, Modi repeatedly talked of “Less Government, More Governance” and “Government has no business to be in business” – thoughts which signalled a clear Rightward tilt on the economic philosophy front. However, till this budget speech, we didn’t see much of action towards withdrawing the government from running many businesses. This budget from that sense is critical in signalling the government’s intent towards moving away from running inconsequential businesses, which is a good sign. And, if the intent is translated into action in a reasonably short Time to Market, then it will be Narendra Modi’s lasting legacy in changing the economic course of this country.

Post Script: If Aandolanjivis are those who make a living out of protests, what about taxing them? And what would be the Time to Market for this idea? 😁

Thank God It’s a New Year!

In all these years so far in my life, never have I seen such wholesome relief in people on the passing by of a year. Year 2020 has been one of a kind. Not that there have been bad years before. But in the past, a year would have been labelled annus horribilis probably due to a natural calamity, a sad event/s, an economic bad spell and so on. Also, it so happens that a year turns out to be worse for some regions/countries in the world and better for others. But 2020 turned out to be a disaster for almost most part of the year due to the Corona Virus which did not spare any part of the world. The same time last year, as people ushered in another New Year with the usual sense of happiness and glee, none saw it coming. By April, the world was scrambling to lock itself down to save itself from the raging pandemic. Even as I write this, the pandemic is not behind us fully.

Any New Year usually brings in a ray of hope. A hope for better things to come.  2021 I guess, has been mankind’s most anticipated milestone. And people have not just been looking forward to a ray of hope but a landscape of hope. One just wanted to leave behind the horrors of living through a pandemic year and lead a normal life.  By the end of 2020 if you had asked me to name the phrase I hated the most, it was ‘New Normal’.  It still is.

Coming to India specifically, the year 2020 indeed turned out to be bad. Yet, I would reckon that we as a country came out of it relatively unscathed.  Of course the economy took a humungous hit. Of course lives were lost. Of course the common man had to go through hardships. Of course senior citizens had a tough time coping up. Of course people lost jobs. Of course migrant labour had to migrate without a hope. Of course earnings of people took a beating. Yet, if one looks at the situation now, we should consider ourselves fortunate to have bent the curve decisively, got away with fewer deaths per million compared to many other countries and be in a position where life seems to be getting back to the “Old Normal”!

Leaving aside data and statistics, there are other reasons that made me say that as a country we came out relatively unscathed.  First our size. We are a population of 1.3 billion. Second, most of the cities and towns in our country have a very high population density. Also, much of the population does not have the luxury of space. Third, our general civic standards though improving by the day, still has a long way to go.  Fourth, our propensity to not follow rules and not be disciplined overpowers our propensity to follow rules and be disciplined. Fifth, our overarching credo of ‘Chalta hai’ has ingrained in us an attitude to take things lightly without getting overly concerned. And finally, the lack of adequate medical infrastructure in the country. All this doesn’t at all augur well for a country like ours to handle a pandemic like Covid. Add to this, the complexities of being a democracy and a federal democracy in that where, a central writ cannot run across the country! Throw in the fact that this is the first time that a Covid like pandemic of this scale has stuck India because of which we don’t have established SOPs or tribal knowledge to handle the situation. All these are recipes for nothing else but social tension and unmitigated economic disaster.

The reality as it panned out has not been so bad.  There has been no visible social tension in the country. The only tension we see these days is “Social media tension” between those who support Prime Minister Narendra Modi and those who oppose him. In fact, the not so privileged have shown tremendous resilience in dealing with the crisis. During the last few months, I have been in constant touch with a cross section of common people who touch our lives and who would have been the most affected due to the extended lockdowns. They have all taken the unfortunate fallout of the pandemic in their stride and have got back to their normal lives now. None of them blamed the government for what it did or what it didn’t do. They all politely refused any offer of support and claimed that they were managing fine. This picture is totally opposite to what one gets to read in columns of the commentariat where the Modi Government’s lock down is being pilloried for what it would have inflicted on the poor.

Further, as an economy we seem to be bouncing back quicker and better than expected. To quote economist and famed columnist Swaminathan Anklesaria Aiyar from one of his recent columns, he says, “First, India has proved far more resilient than expected after the terrible first quarter of Covid. Second, India has been resilient despite having among the smallest fiscal stimuli among major nations.” Again, we have managed without actually doling out cash support which was what was touted as the silver bullet for stimulating the economy by almost all the top economists except those who were advising the Government.  Looking back, unlike a country like US where people like to spend, Indians are conservative in nature and would like to save for the rainy day. So, in a pandemic situation, I feel that people would not have spent even if money was transferred to their accounts. Instead, it would have only been kept aside for savings, which in the final run would have been detrimental to the cause of stimulating the economy. In that sense, the approach of the Government in providing free food grains to the needy or loan support for small businesses etc. seems wiser steps for a country like India.

The New Year has been rung in India with the best possible news of the approval of the vaccine for Covid.  Based on the last few months trend, it is clear that the manufacturing and allied industries are on a re-bound. With the dip in numbers and the availability of vaccine, hopefully, the services sector like Travel, Hospitality, Tourism, Food & Dining and related verticals will also see a quick recovery after which, we can say that we are reaching a “Normal” state.

As we segue into a New Year, my wish has become more grounded and guarded. As one exults “Thank God It’s a New Year”, here’s wishing one and all a New Year 2021 which will be just Normal and that will turn out to be an Annus Mirabilis!

The Mandi Vs Modi battle!

As a country, I believe that we are cursed to contend with one distraction after another, which keep our governments busy. If it was the Anti-CAA protests which were grabbing the headlines during winter last year, it is the farmers’ protests against the Modi Sarkar’s farm bills this winter. And in between, we have the Covid and its numbers to be pre-occupied with, still.

In the last few weeks, ever since the farmer’s agitation picked up steam, there have been many op-ed pieces from erudite authors which have by and large spoken in favour of the farm bills. And they have said that this is the 1991 moment for Indian agriculture. And yet, the farmers associations have stood their ground against these reforms. Irony dies when we see articles with pictures now of farmer protests in the past demanding the same reforms!

The opposition has joined ranks with the protestors in trying to push back the Modi government on the farm bills. And it has been pointed to us that many of the opposition parties including the Congress, which is now siding with the farmers in opposing the farm bills, have been votaries of the same proposals in the past. It is clear now that since the opposition cannot take on the government on the floor of the house, its strategy is to take on the government on the streets.

While there have been many pieces exposing the double speak of the parties, I would recommend all to read just this one authored by Gautam Chikermane for the ORF – “An intellectual biography of India’s new farm laws”. Read here:

This piece chronicles the various studies and reports tabled by expert committees under different governments’ right from the year 2000 and invariably the recommendations are similar to the very reforms the present farm bills have brought in. It thereby exposes the intellectual hypocrisy of not just the politicians, which to a large extent we have learnt to live with, but of the commentariat which is not coming out and expressing its views in favour of the farm bills strongly, though it was in favour of the same before.

As you can see in the said article, there has been a rare consensus among economists and domain experts on the issue of reforming the APMC Act and Essential Commodities Act. Therefore, it is a pity that we are seeing such virulent, stubborn opposition to the reforms from one section of the farmers’ universe.

In the past five years, I have consistently observed that the commentariat in India keeps shifting goal posts as per its whims and fancies.  In the beginning of the 1st term of Modi, the narrative was “Where are the big bang reforms?” When the Modi government started bringing in reforms it became, “Where is the consensus in bringing these reforms? Where is the consultation?” When reforms are brought in after consultation and building a consensus as in the case of GST, the narrative is, “Where is the execution?” So, clearly we are seeing a pattern of opposition for the heck of it irrespective of the merits of the case.

In the case of farm bills too, there are those who have been saying that there has been no consultation. It is clear as broad day light in the article that, there have been consultations with stake holders for 20 years now! I believe that the government must reach out to many of these experts who were in favour of these bills during UPA regime and enlist them to express their support for the reforms they were batting for in the past. This could include people like Montek Singh Ahluwalia, M.S. Swaminathan and the likes. Here, it could take a leaf out of UPA-1 rule when Sanjaya Baru, the then Press advisor to Manmohan Singh, reached out to Brijesh Mishra enlisting his support for the nuclear deal when BJP was opposing it tooth and nail. The Civil Nuclear deal discussions with the US started when Atal Bihari Vajpayee was the Prime Minister during the NDA rule. So, having an Ex-National Security Advisor to talk in favour of the nuclear deal when BJP was opposing the same, sort of punctured the opposition narrative.

Again coming back to the point of introducing the reforms after extensive consultations across the board, our experience has not been very good. During UPA, the land acquisition bill was brought in after extensive consultations and after building a broad consensus. The result is there for all to see. The bill never took off. It is a classic case of the operation being called successful while the patient was dead. The Modi government in the very 1st year wanted to fix this and brought in amendments which never went through. Finally, in the absence of a consensus, the amendments were not made and the bill continues to languish without serving the purpose of its existence.

Much of the infrastructure projects announced by the Modi Government are behind schedule or languishing in spite of having a very enterprising and well-meaning Nitin Gadkari as the minister at the helm. The main reason has been the delay in land acquisition essentially because of the rigorous clauses built in the bill that was brought in with a broad consensus.  So, any bill just because it is brought in with a lot of consultations and a broad consensus need not be the ideal bill.

In the parliament, the idea of consultations and building consensus effectively means putting the draft of the bills or amendments through select committees or standing committees. To borrow the words of HDFC Chairman, Deepak Parekh, “In India, when the government cannot commit, it committees!” Which effectively means extended discussions and delays. At the peak of UPA rule, when most of India wanted a decisive government with a majority on its own, it was precisely for these reasons. So, when Modi Sarkar which has now won a decisive mandate on its own twice over, takes the route of avoiding these long winded committees and brings in changes in laws on issues like the farm bills where discussions have been going on for 20 years now, we shouldn’t complain.

Building a consensus is often overrated and I concur with the latest statement by Niti Aayog Chairman Amitabh Kant that in India, we suffer from “too much” democracy. I sincerely hope that the government sticks to the main proposals and not roll back on the essence of the farm bills. In the meantime, it should use its communication firepower led by more amenable ministers like Gadkari to get the message across to the farmers’ associations and get them to pull back.  The Mandi Vs Modi battle is clearly a distraction for us at this time when the government must be focussed on handling the economic mandi (slump) on a war footing to bring the growth back on track.

Post script: The title for this post is courtesy my good friend Gopal Kutty Sasthri who popped this up during one of our chats on the topic and so due thanks to him.

End of a Nightmare!

The last few days, almost whole of the world was consumed by what was happening in America with respect to the presidential elections. In my memory, no other US presidential election was followed so much with anticipation and anxiety. Partly it could be due to the proliferation of the media and of course the monster called Social media. Also it could be due to the long drawn electoral process this time around which meant that people had to remain connected with this topic for a longer time than usual. All these notwithstanding, I doubt if a character called Donald Trump was not in the frame, the US elections would be followed with so much interest.

In 2016, when Trump won the elections and became the President, there was a sense of shock outside of America. May be even within the US. During conversations following that election, I remember many of my American friends being embarrassed about the fact a person like Trump has been elected by their country. These could all be liberals who couldn’t fathom how Trump with his idiosyncrasies could pull off a win. Though there were many reasons attributed to his win that time, it was important to respect the democratic will of the voters which elected a person like Trump.  It was believed that once in power, Trump will behave more responsibly and be an inclusive President. That was not to be.

In the recent past, world over we have seen many disruptions. But, I would say that the mother of disruptions has been the Trump Presidency. Trump put foreign relations completely on transactional mode with no considerations of the past. He displayed a fair amount of disdain and contempt for multi-lateral International bodies like the UN, WHO, WTO etc. He pulled out of agreements which America had committed to in the past. And much more all in the name of protecting America’s national interests. But to be fair to Trump, we can say that he was only following his agenda basis which he secured the mandate. And he was ticking off his poll promises one by one.

It is widely believed that Trump’s track record on the economy front has not been too bad till Covid struck. I am in no position to comment on this. But data on the GDP, unemployment, jobs etc. show that till the pandemic hit US, Trump era has been good for the United States from an economic perspective.

The real issue though, was his own personal conduct as the President of United States of America. One lost count of the inner presidential staff he fired during his term, at times through social media. Most of the days, the world woke up to his tweets that were disruptive in nature. He would in a seemingly innocuous style blurt out comments that are not expected out of any Head of a State. Trump would callously speak about personal conversations he had with other leaders taking everyone by surprise. For example, one day he will be in full praise of “his dear friend Modi” and the next day in a presser he would decry the high custom duties India levies on Harley Davidson motor bikes. Similarly, he will volunteer to mediate between India and Pakistan when the established position has been not to intervene. Trump became notoriously famous for this kind of “hit and run” diplomacy that would create chaos only for his team to clean up the mess through clarifications later on.

Trump’s unpredictability, his disdain for established conventions and a total lack of grace has been in full exhibition even in the last few days after the polling has been over. To the rest of the world, it comes as a complete shocker when a Head of a State calls his own country’s electoral process a fraud. Even after the election has been called in favour of his opponent, Trump continues to claim that he has won.

There are many in India particularly those belonging to the liberal intelligentsia clan who claim that the Indian Prime Minster Narendra Modi is similar to Trump in terms of personality. This comparison is nothing but prejudiced and completely preposterous. Apart from their contempt for liberals, I don’t think there is anything in common between Trump and Modi in terms of their personalities. As a Prime Minister, Modi’s social media communication has been extremely measured and calibrated. He seldom interacts with the press and even then, there has been no instances of embarrassing comments about leaders of other countries. Even on the diplomatic front, though Modi has challenged the status quo in many fronts, he has never tried to show disgrace in his conduct.

Even as the results of Trump’s imminent defeat was trickling in, there has been few articles by opinion leaders which said that Trump may be out but Trump’ism will continue to stay. In the sense, though Trump has been unseated, in terms of popular vote there is only a thin wedge that separates Trump and Biden. So, there is a large American population which believed in the way Trump ruled the country in the last four years. And that it would be difficult for any new incumbent to ignore the sentiments of this large base and completely move away from Trump’ism. Well, if this means being sensitive to the voice of even those who voted for Trump and taking steps accordingly it is fine.

I have no great insights into Joe Biden’s calibre or his past track record in governance. However, I am sure that whatever we have seen of Biden so far, he can never be an embarrassment to even those who did not vote for him, unlike Trump.  It was important that a sense of grace and order be brought back to the seat of the President of the United States and I am glad that it happened with the defeat of Trump. I am not sure if Biden’s term is a beginning of a dream for the world but the nightmare is over.

Post script: If Covid had not struck, they say that Trump’s re-election would have been near certain. So, there you are. If there was a silver lining to Covid, this is it.

Image courtesy: nytimes.com

“JUST” learning to live during the pandemic!

Vijay Yadav* is a small time vegetable and fruit vendor who has been carrying out his business in Mumbai since 2 decades now.  Ever since the lock down, in our apartment complex, he is one of the suppliers of fresh vegetables and fruits. Twice a week, we place order over WhatsApp to him and he delivers the same at the parking lot of our building. He informs us the due amount on WhatsApp and we pay the amount due to him through Google Pay.

22nd Aug, 2020 was Ganesh Chaturthi. Due to the current pandemic situation, we couldn’t go to the local market for Pooja related shopping (different types of Flowers, Garland…) on the eve of the festival. When we were wondering what to do, Meena*, our regular flower seller informed us to our pleasant surprise that she will home deliver whatever flowers and items we need and asked my wife to send the list over WhatsApp. On the 21st evening, the list was delivered at our ground floor. She informed us the amount and we made the payment to her through PayTM.

On 22nd Aug was also our Avani Avittam (Janeu changing ceremony) for which our regular Cheenu vaadhyar (bhatji) sent us the YouTube link to join him. From home, we completed the rituals and promptly sent the Acharya sambavana thro Google Pay.

In between we had to consult for a routine ailment with our Homeopath doctor.  We did the same over phone. He said he will send the medicines to our house within 1 hour. He has a tie up with Swiggy and the medicines were delivered at our doorstep. The doctor gave his UPI id for transferring his fees, which we did.

What is common in all these? It is that we and the other parties involved were able to carry on with life even during the lock down period without stepping out of our place, fairly smoothly. And if you look at it closely, this was made possible through a combination of Smart phones, Bank accounts (to which we could transfer the money) and more importantly the UPI platform through which we could transfer money real time into bank accounts of beneficiaries.

It was Dr. Arvind Subramanian, Ex-Chief Economic Advisor to the Government of India who in his 1st Economic Survey document coined the term – “The JAM Trinity” and said that the potential of Jan Dhan Yojana, Aadhaar and Mobile phone could be harnessed to plug subsidy leaks and ensure a more targeted delivery to those needy.  This was the beginning of Modi’s 1st term during which, the government gave a huge push to opening Bank accounts for the poor through the Jan Dhan Yojana and also advocated the use of Aadhaar for identifying the needy.  However, in the aftermath of Covid-19, I would tweak the JAM Trinity and say that it is the “Quad of JUST” which is helping to keep the bottom of the pyramid afloat during the pandemic.

If you look at the examples I have provided at the beginning, you would realise that even with the unexpected strike of the pandemic, what has been sustaining at least some fraction of the economic activity is a combination of

J (Jan Dhan Accounts) – through which we could transfer money to beneficiaries who are not so privileged like Domestic helps, small time vendors and so on.

U (UPI Platform) – without which money transfer to bank accounts through mobile wallets like Google Pay or PayTM for example, couldn’t be so easy and swift.

S (Spectrum) – as in the advent of 4G which has made data usage cheap and ubiquitous in India

T (Technology) – Without which all these would not have been possible at all.

In this four, I would like to focus on the UPI bit. United Payment Interface (UPI) developed by National Payments Corporation of India was launched in India in April 2016. But it was post the Demonetisation that UPI as a tool got its fillip in terms of adoption and usage. Just look at the numbers. From just 21 banks who were part of UPI in 2016 when it was launched, today it is more than 140. The transaction volumes have grown exponentially from 2.06 mn. in Dec 2016 to 1.49 bn. in July 2020. And in terms of revenue, it has gone up from Rs. 13.17 crore to Rs. 29.05 Lac crore in the same period!!

It’s been so much of a runaway success that Google (which is part of the UPI through its GPay product) has written to US Federal Reserve Board urging it to build a similar faster payment service platform in the US citing the case study of UPI.

As documented very well by Shankkar Aiyar in his book, The Accidental India, in post Independent India, almost all of the successful economic transformations happened as an answer to a crisis. Similarly, the success of UPI in India also, could be pointed towards the cash payment crisis situation that resulted due to Demonetisation in November 2016. While Demonetisation might not have yielded the originally intended objective of the government namely to suck out the black money from the system, I feel that it has delivered or still delivering other positive outcomes.

Among the top is the formalisation of the economy which is a Work in Progress. The huge success of UPI has made conducting business smoother and easier even during lock down times even for the micro business community. At the same time, the added benefit is the expansion of the formal economy where less and less transactions happen through cash.

The last few months ever since the pandemic struck, have been testing times for any country and its economy.  It’s my feeling that after the initial complete lock down phase of two months, Indians have accepted the reality and have started looking at ways and means of getting on with their lives even without any dole from the government in the form of cash support. Purely from the stand point of micro businesses, they have all tried to adapt their business models to at least survive and stay afloat. Accepting orders through WhatsApp, doing home delivery and equipping themselves with online payment options are some of these adaptations. And these may very well stay even after the pandemic is over. In that sense, while the media commentary (when not busy with Sushant Singh’s death that is) could be around doom and gloom due to Covid in India, the common man has learnt to live during the pandemic with the “Quad of JUST” and will to survive.

Postscript: Way back in November 2016, in the aftermath of Demonetisation I had written a post titled Cash Mukt Bharat (Read here) where I had fantasised of an India where cash transactions have reduced completely by 2025. We are in 2020. Looks like many things mentioned in that post have already become a reality.  Amen.

*All names changed.

Pic courtesy: Yourstory.com

Taming the Dragon!

This is intended to be a sequel to my last week’s blog– Return of the Dragon. If you haven’t read it, please read here.

The military standoff between India and China at the border is slowly turning into a diplomatic one with both sides waiting for other side to blink first. Marathon disengagement talks are going in parallel with coercive military build-up on both sides. And in India, we have set in motion a slew of things in an effort to “tame the Dragon”.  But what real options do we have to tame the Dragon?

I remember vividly that whenever we used to have these military tensions with Pakistan triggered by some terrorist attack, though we are a militarily and economically stronger nation, experts would say that a full blown war with Pakistan is not an option between two nuclear powered countries. At the same time, we were told that we must raise the cost for Pakistan to carry out terrorist activities, whatever that means. Since there is little economic activity going on between India and Pakistan, it doesn’t really make any difference to Pakistan even if we sever all economic ties.

Between India and China too, a full blown war is out of question considering the fact that we are both nuclear powers. The issue of longstanding boundary dispute can be resolved through talks and diplomatic efforts. But, since both countries cannot give up even a square inch of land, a solution to the boundary dispute is not coming any soon. Under these circumstances, the best option which is face saving for both is achieving Status Quo Ante!

At the same time, while pursuing diplomatic engagement to get the troops back to where we were before this round of escalation, it is necessary for India to raise the costs for China to deter it from indulging in border escalations.  This, I believe can happen only on the trade front.  On the trade front, I believe that China has more to lose than India if relations are spoilt.  And this is opposite to what the commentariat in the India media feel. That being the case, what are some of the options?

  • China is an exporting economy. For the past few years (coincidentally since Xi took over in 2012), the Chinese economy has been floundering, after years of high growth. Under the circumstances, it cannot shut business with a country like India which is poised to be the most populous country in the world soon. In 2019, we imported US$75 billion worth of goods from China. Those who say that this is miniscule compared to the total exports of US$2.5 Trillion China does, are missing the larger point. As globalisation weakens and Nationalism grows and in particular when large economies like the US, Japan and Germany are talking of de-risking from China in the wake of Covid-19, spoiling trade relations with India and denting the prospects for trade growth is the last thing China can afford. So, leverage on this aspect.
  • A quick look at the last quarter’s import data shows that Electronic Components, Telecom Instruments, Industrial Machinery, Computer Hardware and Peripherals are the top 5 categories of imports from China and take up almost 33% of total imports. As a country, we must roll out a solid, strategic plan for developing the domestic Electronic Hardware manufacturing industry. This cannot happen overnight. But can happen with a vision and a roll out plan in the next ten years. Considering the fact that the role of electronics, is on the continuous rise in every aspect of our life and every aspect of engineering, the scope for just catering to the domestic market and then emerge as a competitive, key part of global supply chains is huge. There has been talks in the past to build a globally competitive electronic manufacturing industry in India but this is the right time to translate those talks into actions on the ground.
  • Ever since, we lost lives of our soldiers in the border standoff, the cries of “Boycott China goods” have become louder and more visible. A total and real boycott of these is not neither feasible nor advisable under the current circumstances. Chinese components are a key cog in the Indian manufacturing wheel today.  Instead, whatever government does needs to be only “covert” and not overt. In short, kick off “Salaami slicing” in aspects of trade and commerce.
    • For example, for all government purchases, government cannot openly declare that it will not buy “Made in China” products. However, it can signal a preference to “Made in India” products.
    • Just last week, government made it mandatory for sellers to indicate the “Country of Origin” for their products offered on the GEM (Government E Marketplace) portal. While this was touted as a move to promote the Prime Minister’s Atma Nirbhar Bharat vision, that it was a move to identify products coming from China was not lost on trade observers. Government can do more covert actions like this.
    • For big infrastructure projects, go slow on Chinese companies. (There are many ways of doing this)

  • In the private consumption space, there is a groundswell of opinion among the common public against Chinese products. Usually this sentiment is very temporary. But now, as the government cannot take part directly in festering any Anti-China emotion, it can use the party, its loyal trade bodies and Non-profit bodies to do the job in keeping the sentiment alive for a long time. Though in terms of dollar terms, the reduction in imports in the consumer goods space may not be significant for China as a country, any reduction in demand and orders particularly with the weakening demand due to Covid-19, will affect the Chinese sellers. For example, for the upcoming festival season in India, even if the orders are reduced by half than usual for the many consumer items including domestic appliances, garments, plastics, gift items, decorative items etc. it will be significant blow.  And if that demand turns into orders for Indian manufacturers, it will also aid the economy here.
  • Creating stumbling blocks for Chinese origin businesses like more scrutiny of compliance matters is another way of covert signalling. For example, just last week, without citing any reason, India customs officials said that there could be delays in clearance of goods imported from China. Moves like these will raise the costs for those importing Chinese goods in India and indirectly act as a deterrent for promoting those products in India in the long run. Here, I would like to add that these moves cannot be sustainable in the long run. But, in the short term helps in messaging. And the Indian government doing this now is a smart thing to do. Manufacturing activity and demand in India is any way weak and tepid at this point in time. So, any delay of a few days here and there is not going the move the dial significantly. I am sure that this will be a short term prick rather than a long term change in process.

Now, there is a distinct possibility that China does retaliatory moves (we hear, it is already acting on delaying customs clearance of goods from India). But as I mentioned, today, India imports 5 times more than it exports. So, as of today, it hurts China more than it hurts India. Of course the imported goods are a part of the Indian economic activity and hence any delay or disruption affects those who are in that sector. It is a small cost to pay compared to the cost our defence forces pay with their lives at the border securing our sovereignty.

In conclusion, to tame the Dragon, we must first believe we can, punch above our weight and play to our strengths as a large consuming and growing economy. “Challenge is a dragon with a gift in its mouth. Tame the dragon and the gift is yours” goes a saying. Time to replace the word Challenge with China?