Our Geo-economic Interests Lie with the West as Well as the Rest

Over the past few weeks, I discovered a marked difference in attitudes towards the Ukraine war between those of my friends who had spent time in the New Delhi establishment and those who hadn’t. The Delhiwaalas—diplomats, economists, journalists and veterans—were more likely to argue that reports of Russian losses were part of information operations, the West was to blame for provoking Vladimir Putin, we depend on Moscow for critical defence equipment, and that India ought not take any position that would hurt Russia. This was the case across the political and ideological divide: as long as they were Delhiwaalas, they more or less held this view. I was thus not surprised when opposition parties mirrored the government’s position on this issue, revealing a rare non-partisan consensus in these polarized times.

Atmashakti Over Atmanirbharta: Learn Right Lessons from Russia Sanctions

Confirmation bias is the tendency to search for information that confirms one’s preconceptions. This bias is visible in the Indian debates on technology following the West’s stringent export controls restricting the Russian state’s access to cutting-edge technology.

Some tech companies have gone far beyond the remit of these controls, suspending their operations or restricting access to Russian citizens. For those who seek tech self-sufficiency, this war appears to bolster their case for everything from data localisation to domestic social media platforms and home-made drones.

How Western MNCs Weakened Globalisation by Taking Sides

The closing of McDonald’s in Moscow is bad news for the global economy. Whatever the military outcomes of Vladimir Putin’s war on Ukraine, its geo-economic consequences are negative for just about every country on the planet. Even if major economies manage to absorb some of the immediate shocks created by disruptions and sanctions, the global response to the war will shift public policies around the world in a regressive direction. I hope McDonald’s exit from Russia does not mark the end of a period of global growth and prosperity—India’s included—that began with the arrival of the golden arches at Moscow’s Pushkin Square in January 1990. But I fear it does.

India can work around Russia’s SWIFT expulsion. But there may be geopolitical costs

One of the most severe Western sanctions on Russia is freezing the Russian central bank’s assets held abroad. Russia has $630 billion in foreign exchange reserves. However, more than $300 billion worth of assets are held abroad in the Federal Reserve (US central bank) and the European Central Bank (ECB). Cutting off access to these funds to Russia can be a mighty blow.

The other big action underway is excluding Russian banks from the SWIFT network, which facilitates international payments. SWIFT (Society for Worldwide Interbank Financial Telecommunication) is a global messaging system that allows banks to communicate with each other in a secure manner, enabling safe transfer of funds. Based in Belgium and jointly owned by 2,000 banks and financial institutions, it is the underlying technology that enables global payments and has 11,000 international banks as members.

There’s a jobs crisis. Acknowledge it

Every year, India’s annual Budget is elevated from a mundane accounting exercise to a statement of intent and priorities of the government at the helm. The Budget speech made by the finance minister (FM) is scrutinised to check how many times a particular sector, industry or policy issue is mentioned to gauge the government’s priorities and preferences. Jobs, by the way, was mentioned three times in the Budget speech this year.

In the speech, the FM mentioned there were initiatives in the pipeline that could create six million jobs over the next five years. That is, an average of 1.2 million jobs each year. While there is a minor sense of relief that the government is finally taking cognisance of the jobs problem (instead of relying on pakora wallahs), unfortunately, the overwhelming feeling is that of inadequacy. The vague pronouncement betrays the government’s lack of appreciation of the magnitude of the jobs problem.

An analysis of measures to create jobs and boost industries : Union Budget 2022-23

This is a draft version of the article published in Prajavani, which is accessible here.

India's employment rate stands between 38% - 43%, against the global employment rate of 55%. According to CMIE data, India had 53 million unemployed people in December 2021. In the last few weeks, India witnessed violent protests by job seekers. As the Indian economy recovers from the pandemic, it must create enough jobs to avert an unemployment crisis. The Union Budget has some solutions to address the same, but it might not be enough.

Read the full draft here.

Career Impact Bonds? Financing upskilling to fill the world’s vacancies

he developed world is aging as life expectancy rises and birth rates fall. India has a different problem. With 18 million Indians turning 18 every year and with over 100 million Indians being surplus in the agricultural sector, 20 million Indians will need jobs each year. In contrast, India creates less than two million jobs a year. Can active promotion of emigration of Indians to the developed world be a solution to this problem? Read the full article here.

Pledges at Glasgow could change the Global Distribution of Power

This article was originally published in The Mint, as part of Nitin Pai's fortnightly column, The Intersection. India was perhaps the only big country at the Glasgow CoP-26 meeting whose commitments were entirely driven by environmental considerations, and which came at a substantial cost to its medium-term economic prospects. Other major players had upsides. The transition from fossil fuels to modern renewables, for instance, presents China with a massive economic opportunity, given its dominance in solar, battery and nuclear power. Europe can protect its domestic industries from foreign competition by imposing green standards and tariffs. Given its advanced research and development ecosystem, the US is sure to derive economic benefits from the emerging global market for green technology.While energy transition will certainly create opportunities for Indian firms and consumers, the challenge of raising the living standards of hundreds of millions of our people has become even more daunting. It is uncertain if high economic growth at the scale required to create the 20 million jobs we need every year is possible within the parameters of India’s carbon commitments.Moreover, it is hard not to be sceptical about rich countries’ promises to ease the decades of pain and sacrifice the rest of the world has to bear. The righteousness of the West’s most ardent climate advocates must be seen against their abject failure to make covid vaccines available to billions of people in need of them today. The pandemic, like climate, is an indivisible collective threat to humankind. So countries, societies and leaders who are effectively refusing to come to the aid of billions of real people in this generation can hardly be relied upon to help future generations. Talk of $1 trillion in green financing and assistance from rich countries must be taken with liberal pinches of organic salt, given that we are still waiting for them to part with the $100 billion per year they promised at Paris six years ago.New Delhi can neither rely on the rich countries keeping to their emission commitments nor on receiving compensation for sacrificing growth. Financial Times columnist Megan Greene warns that, “There are inevitable short-term economic costs that risk generating a backlash against efforts to fight climate change." Rapid decarbonization is likely to cause a supply shock, raise prices and raise public debt. It will create winners and losers, and the latter could push back, as they have done against globalization. Yet, the pain that rich country populations will suffer is a trifle in comparison to that in the developing world, where well-known growth paths are to be abandoned and unknown, risky routes embraced. Lacking power in the international system, governments of developing countries will be compelled to require sacrifices from people too weak to mount backlashes.This is only partially a story of the hypocrisy and self-serving righteousness of powerful countries. If agreements like Paris’s and Glasgow’s are inadequate and unreliable, it is because the political structure of the world is not optimized to formulate solutions for humankind as a whole. Most of the 200-odd independent nation-states that exist today do so on the basis of national self-determination, the idea that people who share a lot of things in common and have their own homeland have the right to govern themselves. Whether or not people are better off under this dispensation is debatable. We have seen nation-states trample on the liberties of minorities and individuals. Their international conduct wilfully threatens the very existence of humanity. Addressing common global challenges was not even part of the design specifications of nation-states, which is why a collective front against a virus or a holistic approach to tackling climate change is touch-and-go at best.Our failure to adopt coherent global approaches to a growing number of important issues, such as international terrorism, public health, environment, weapons of mass destruction, transnational technology platforms and cyberspace governance, is in large part due to political structures. The best we can do under the current international system is to evolve a stable balance of power that creates an global order that permits global solutions for global problems. This long chain of hope, tenuous at best, is broken in many places. Xi Jinping’s absence at Glasgow indicates that no serious effort is on to try fixing this.As unprecedented are the risks to human survival and prosperity today, so are the opportunities for overcoming them. But we need to rethink political structures. Within countries, mechanisms of representative democracy and bureaucratic administration need overhauling. Across countries, there is a case for large, thin continental federations like the Indian republic and European Union. And what do we do with the United Nations?Let us hope that CoP-26 will achieve its goal of reducing carbon emissions. But in doing so, it will exacerbate other geopolitical and economic problems. Imagine a world where some other country replaces the Gulf as the global hub of energy. Fuel we will get from the sun and the air. But the supply of technology and raw materials to convert it to electricity may be dominated by China. Such a world is a decade away and will arrive well before we update our political structures. So, in whose image will the 21st century be constructed?

What India Can Bring to COP26

As heads of different states and climate researchers head to Glasgow to attend the 26th Conference of Parties organised by the United Nations Climate Change Framework Convention(UNFCCC), the question of how to tackle the threat of climate change still remains unanswered. The global climate action plan requires a massive revamp, especially post the report released by the Intergovernmental Panel on Climate Change (IPCC) a few months ago. India and its active participation at the COP26 summit remain integral in the fight against climate change.Being a responsible climate leader, India can look to play the role of a mediator between the developing and developed countries. While increasing its own ambitions of reducing net emissions and improving clean energy infrastructure, India can look to support the states which are still dependent on traditional sources of energy to provide basic amenities to their citizens. Consistent efforts to ramp up clean energy production have made India almost achieve the target of 40% non-fossil fuel electricity generation capacity with 38.5% already having been installed in the country. This timely delivery of climate goals by India can also provide it adequate clout to call out the failure of the developed world to adhere to the agreed-upon climate goals.

Leaked Documents open a Pandora’s Box of Issues

The International Consortium of Investigative Journalists (ICIJ) is a non-profit organisation based in the United States. It is fully funded by donations, and donor details are available on its website, as are its annual reports. Its 2020 annual report says that its annual expenses were $4.7 million (about Rs 35 crore). The ICIJ has a small, core group of 280 investigative reporters who operate through various offices worldwide and is also supported by a network of members from more than hundred countries.Read the full article in Free Press Journal

On Semiconductors, India Needs to Reboot Trade Policies, Ecosystem to Build a TSMC

Talks have accelerated between India and Taiwan to build a state-of-the-art semiconductor manufacturing unit in the country. Reports have indicated that officials from both sides have met regularly to discuss the possible outcomes of Taiwan investing in a fabrication facility in India. The Taiwanese government and its major foundries, which hold the lion’s share of the world’s semiconductor manufacturing supply, have reportedly agreed to invest $7.5 billion in India to set up a long-pending fab in the country.

The Murky Waters of Kerala’s Knowledge Economy Mission

The Union, States, and other stakeholders can reap benefits from broad-based employment platforms like the Kerala Knowledge Economy Mission. But for such technological innovations to succeed, they require more nuance, engagement, and diversity at the design stage to cater to the needs of all of Kerala’s unemployed.

Read the article in The Bastion

Organic farming should not be an article of faith

Earlier this month, the Rajapaksa government imposed a state of emergency in Sri Lanka after its bungled response to a brewing foreign exchange crisis cascaded into food shortages. An army general has been put in charge of catching both hoarders of food and holders of foreign currency. Like a Greek tragedy, we know how things will unfold, but well-wishers of the Sri Lankan people are powerless to stop the avoidable suffering that lies ahead.

Running out of foreign exchange amid an economic downturn and with looming debt-servicing obligations, the Sri Lankan government imposed a slew of import controls earlier this year. Banning the import of automobiles, toilet fixtures, Venetian blinds, toothbrush handles and turmeric is one thing, but a complete ban on fertilizers is entirely another. Domestic production is critical for any food-importing country facing a foreign exchange crisis. In Sri Lanka’s case, it is even more important because it is a major exporter of tea. The fertilizer ban has left Sri Lanka both short of food and US dollars.Read the full article here.

How should India's Vaccine Mandate Policy look like?

The recent wave of Covid-19 infections across the United States has been a setback for employers, schools, and universities who were readying to open their offices and campuses. From a "no mask needed for the fully vaccinated" policy 50 days back to vaccines being made compulsory by both state administrations and private companies alike, the Covid-19 vaccine has become imperative for the recovery process from the pandemic.Given the population size of India and the current pace of vaccinations in the country, the threat of future waves of Covid-19 infections still looms large. Recently, employer institutions (both government as well as private) along with public service provider businesses in the country have mandated the Covid-19 vaccine for their employees and customers, respectively.But if there is a vaccine mandate issued in India, what would be the ideal strategy for implementing it?

India must look to BIMSTEC to drive economic growth

The Indian economy had seen sluggish growth even before the pandemic itself. Covid-19 has exacerbated the situation and the floundering economy has not been able to pick up growth as anticipated.There is a need to reinvent the way the economy is functioning to stimulate the necessary growth. India’s role as an export-oriented economy has never been bright. This is something the state can tap into. The Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) can help India and the region rebound from the slump and develop economic heft on the global stage.

It makes sense to extract value from underutilized public assets

This article was first published in The Mint.HLL Biotech, a government-owned company, has a state-of-the-art vaccine manufacturing plant near Chennai. It has been mothballed since 2012. Last week, the Supreme Court heard a petition pleading the court to direct the government to use it to produce Covaxin, amid the current shortage. Across the country, public assets like roadside parking slots, municipal grounds and advertising surfaces are free-for-all, often captured by the rich, powerful and unscrupulous. The police and defence services have parade grounds in city centres that are used only a few days every year. The true cost of these parades may not be visible to accountants but is staggering for economists.

I could cite more examples, but the scale at which India wastes its public assets boggles the mind. Imposing parking charges on a mere 1.5% of Bengaluru city roads could add 5% to its annual budget. Yet, oblivious to their own wealth, or unable to monetize it, India’s governments rely on taxes and devolved funds to fill their coffers.It is easy to blame corruption and inefficiency for the poor state of public services like policing, health, education, transport and so on. What a lot of people miss is that there’s only so much you can do when you are cash strapped. The simple truth is that governance and public services cannot improve unless public finances are substantially bolstered.That is why the National Monetisation Pipeline (NMP), announced by the finance minister last week, should be welcomed. Ambitious financial targets apart, to the extent that it creates public awareness that the government should extract value from its assets, it marks a desirable shift in thinking. Niti Aayog’s policy documents show how the monetization model can be adopted by state, municipal and rural governments. If the idea catches on, post-pandemic revenue-starved governments across the country could find new resources to finance higher demands on public expenditure.I know what you are thinking. What about corruption and cronyism, right? Well, yes, however well intentioned the policy is, however well designed the contracts are, corruption is inevitable. But if we allow this objection to have a veto, then we will only have corruption, cronyism and sanctimony, but no public policy of any kind. The practical solution, therefore, is to make the policy design corruption-resistant, insist on transparency, promote market competition and punish wrong-doers.‘Monetize assets but do not assign monopolies’ is a good rule of thumb. There are sensible things that can be done to prevent egregious outcomes: Do not shelter companies from competition, do not give away exclusive rights and do not fix prices. Some of these can be built into contracts, while others are broader statutory and regulatory issues.By leasing out assets instead of selling them outright to private investors, the NMP strikes a middle ground between statists and reformers. But this political compromise might be its biggest economic limitation. As anyone who has rented out a home knows, the tenant somehow takes less care of the property than the owner would like. The friend who borrows your vehicle somehow seems to return it in a poorer condition. Some of this is to do with the psychology of ownership, but some of it is objectively true. Owners and tenants have different incentive structures.Now the government faces the remarkable situation of ensuring that a private-sector lessee maintains an asset to standards the public sector itself is not capable of. Competition and market forces can help to some extent, but the private-sector management can just as well decide to cut costs by skimping on the maintenance of assets it doesn’t own. So the NMP implementation should allocate assets in a way that the lessee has a natural incentive for their upkeep.Ownership matters in other ways as well. If you determine that your asset is unprofitable, you could split it and sell the parts, reconfigure them in different ways, merge them with other parts, or perhaps even scrap them all. Where such creative destruction is necessary for viability, a long-term lease is a poor substitute for ownership.We are also likely to find that defining an asset clearly and delineating it physically is a tricky affair. The legal and physical boundaries of public assets are often unclear. Most assets are often surrounded by grey areas. These grey areas have well-developed interest groups that are invested in the status quo. Questions on asset boundaries and the resolution of ownership of grey areas can be vexing and time-consuming. Among other things, they will determine the kind of investor who will bid for the asset.When considering long-term relationships, getting good investors is more important than getting the highest price. This is something that our administrative system will struggle with. It is zealous about extracting the last paisa, but has few ways of ensuring discretion and good judgement.Ultimately, the NMP will deliver public value to the extent that the government shows itself to be a law-abiding player. It is just as well that the ghastly retrospective tax law was done away with before this new policy was announced. It has a better chance now.Nitin Pai is co-founder and director of The Takshashila Institution, an independent centre for research and education in public policy

India’s domestic politics makes China-Pakistan nexus more potent in Taliban era

The establishment of the ‘Islamic Emirate of Afghanistan’ on 19 August was announced through a tweet from the handle of its official spokesman, Zabiullah Mujahid. The common wisdom in India is that terrorist threats to India would increase because Afghanistan will be used as a haven, as it happened during the earlier period of the Taliban rule in 1996-2001 with the hijacking of the Indian Airlines plane in December 1999 being a prime example.

The only problem is that this time around India’s vulnerability has exponentially increased, not so much by the increase in the scale of threat as by India’s domestic political trajectory, which may have set itself up. It would not take much for India’s adversaries to light the fire that exploits modern India’s historically rooted communal fault line.

The setup was symbolised through the announcement by Prime Minister Narendra Modi that India would observe 14 August as ‘Partition Horrors Remembrance Day’. Former foreign secretary Shyam Saran described the announcement as a move aimed “to reopen the wounds of yesteryear, to reignite ugly passions, where past horrors are regurgitated so they may be re-enacted with renewed passion”.Read the full article in ThePrint

Case for an India-led Southeast Asian Solar Alliance

“Code Red” is how the Intergovernmental Panel on Climate Change (IPCC) warned humanity when it came out with its sixth Assessment Report on August 9. Nation-states across the globe have responded to the doomsday prediction with claims of working toward reducing their carbon emissions.The spotlight has indeed been put on alternative sources of energy, with the secretary-general of the United Nations, António Guterres, calling for a complete eradication of further investment in fossil fuels and transferring all future capital into renewable sources. This has elevated the necessity and importance of solar energy across the world.

Algorithmic audits are necessary to protect India’s gig workers

In the past few weeks, anonymous Twitter accounts such as Swiggy DE and DeliveryBhoy have made allegations regarding issues faced by delivery partners of food delivery apps. These include low payouts, opaque payout calculations and alleged cheating, unexplained differences in surge rates, order clubbing and assignments to avoid incentive pay, and zone extensions to avoid return bonuses.Swiggy and Zomato, which offer delivery work to more than 360,000 gig workers, have responded to these allegations by insisting that earnings per order are much higher than alleged, and that full-time delivery personnel earn over ₹20,000 per month.India’s gig economy is among the few sectors offering flexible work to unemployed millions. In her 2021 Union Budget speech, finance minister Nirmala Sitharaman mentioned the creation of a database of gig workers and extending social security to them. It is important, therefore, to examine these grievances and design policy mechanisms that protect worker rights.Read the full article on Hindustan Times

Why the govt shouldn’t decide what you pay for an air ticket

Have you tried booking domestic flights recently? If yes, you would have noticed a strange and unpleasant phenomenon. Not only are the ticket prices high across the board, but all airlines seem to be charging the same high price.You would have shrugged this occurrence off by blaming the government for raising taxes on fuel, and shelled out the ticket money anyway. Well, you are half-right. Indeed a government policy underlies the high ticket prices but it’s not the one you think. Turns out, a few restrictions that the Ministry of Civil Aviation had imposed since May last year, are still in place. These restrictions are playing havoc with the consumers, airlines, and airports. Here’s how.Airline ticket prices in normal circumstances are determined by demand and supply considerations. The price broadly reflects the scarcity of the seat you occupy. That’s why you would have encountered significantly higher prices closer to the travel date when fewer seats are available. This pricing situation changed in the wake of the first wave of Covid when the Union government started intervening in both the pricing and capacity of airlines. Specifically, the government put three restrictions in place.Read the full article in Times of India