The unbearable burden of oil tax

On April 20 there was a historic drop in oil prices in Texas. The price of West Texas Intermediate (WTI) crude dropped all the way, not just to zero, but $37 below zero. That means the seller was giving money to the buyer to buy oil. Unthinkable and unprecedented.Since then oil prices have recovered and WTI is trading at around $38+ per barrel. Its European cousin, called Brent Crude, is priced at $41 per barrel. This is roughly the import price that India pays. When the price was near zero, why didn’t we simply book an order for the entire year’s requirement? That’s called booking a future(delivery) contract. Alas, it doesn’t quite work that way. Besides, India’s oil refining companies, which import crude, aren’t really geared up for doing such sophisticated futures contracting. For instance, if they book a large futures contract at a low price, who’s to say the price won’t fall even further? The manager who booked such an advance contract may be hauled up by the anti-corruption vigilance guys for having defrauded the company. So India’s oil imports are done somewhat old-fashioned way, without too much speculation into the future. So whenever crude oil prices change in the world, the oil refining companies in India pay less or more depending on the fluctuation. Obviously, since the cost of refining crude oil into petrol or diesel is fixed, the price that they should ask at the petrol pump should also fluctuate according to global oil movements.Read More 

Viewing Contemporary India Through the Kautilyan Lens

Daunting challenges stare at contemporary India. It is time for introspection and course correction that demands the highest quality of statecraft. According to Kautilya, knowledge is the bedrock of statecraft and foreign policy is crafted on the concept of ‘correlation of forces’, a metric that takes into account everything that determines relative power.So, how does India fare from this Kautilyan perspective?You can find the article here

India can resist China by acting in concert with its adversaries

At an emergency cabinet meeting, the Prime Minister indicated that the border fighting did not constitute a threat to India. The strategic Chinese threat, he maintained, lies in the rapidly increasing industrial power base of China as well as the building of military bases in Tibet. The only Indian answer, he continued, is the most rapid possible development of the Indian economy to provide a national power base capable of resisting a possible eventual Chinese military move." Arthur Cohen of the United States’s Central Intelligence Agency wrote this in his 1963 study of border skirmishes that occurred in Ladakh in 1959. The Prime Minister he refers to was Jawaharlal Nehru.Read moreThis is part 1 of a 3-part series of essays for Livemint. You can read the entire series at:

• Part 1
• Part 2
• Part 3

The global upheaval caused by China’s premature power games

As a sign of its arrival as a major power, global developments this decade have largely been shaped by China’s acts of commission and omission, and by the world’s response to it. Although Beijing’s exercises of power took a sharper turn after the global economic crisis of 2007-08, China’s leaders had been preparing their country to assume the mantle of great power at least a decade before that. In 2003, the very first year of his term as party leader, Hu Jintao organised a “collective study session" of the entire Politburo for a historical investigation into the world’s great powers. His government then commissioned a slickly produced 12-part documentary, aired on state-run TV from 2006, that got a star cast of scholars to discuss the rise of great powers from Spain and Portugal in the 15th century to the US and Soviet Union in the 20th. One of the most important lessons they must have drawn is that great power status does not just settle on you, and must be fought for and won.

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This is part 1 of a 3-part series of essays for Livemint. You can read the entire series at:

• Part 1
• Part 2
• Part 3

Power is the only currency that will work in dealing with China

In January 2016, Xi Jinping, general secretary of the Communist Party of China—a position that outranks his commonly used job title of president—made an important speech assessing the global situation. China, in his view, was faced with “three unprecedented situations" and “three dangers". On the opportunity side of the ledger, it was “closer than ever before to being the centre of the world stage", he said; “It is closer to achieving its goals, and it now has the ability and the self-confidence to achieve its objectives." The dangers he spoke of were external aggression and internal division, an economic slowdown and political challenges to the party’s supremacy.Read moreThis is part 1 of a 3-part series of essays for Livemint. You can read the entire series at

• Part 1
• Part 2
• Part 3

Public lockdown discipline fast eroding, India risks becoming lax in Covid fight

India is in a crucial and especially dangerous phase of the coronavirus pandemic. With the relaxation of the national lockdown, public attention, media focus and the priorities of political leaders have shifted to other things. There is a sense — strengthened by Prime Minister Narendra Modi’s statement — that the lifting of the lockdown is progressive and linear, and Unlock 2 is sure to follow Unlock 1.

Cases are rising almost everywhere in the country, and the doubling rate is back to 18 days. Now, lifting the lockdown was necessary for reasons of survival, but it demanded that the administrative focus expand to ensure adequate physical and social distancing, hygiene, and contact traceability. It also demanded that people be put on notice that in case the course of the pandemic worsens, we should expect more containment zones and lockdowns. These did not happen. So while an admirably large number of people and businesses are acting responsibly, our encounters with non-mask-wearing people and crowded public places are increasing. The public discipline of the lockdown period is fast eroding and way too prematurely.

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Encouraging small sellers to get online must be a policy priority

The article was first published in Deccan Chronicle. Views are personal. At least 20% of Indian retailers were likely to wind up their business in the coming months. Because of restrictions in movement, it is hard for small sellers to maintain demand, and the only possible solution to that is to move online. Doing so at a national scale will expand the consumer base and better equip retailers to handle logistics.While moving online is a widely accepted solution for sellers, it comes at a monetary and compliance cost. If small retailers are to survive the pandemic, costs of moving online will need to be mitigated. Currently, instead of an incentive to move online, the pre-COVID tax regime has inadvertently installed exist entry barriers that act as a deterrent.

Separating economic and border issues

As we exit the lockdown and resume economic activity, we will have to observe certain protocols. Like social distancing. Or using hand sanitisers in office, public places, or even at home. These sanitisers are alcohol-based and usually come in dispenser pumps. The pump minimises human contact, unlike a tube or bottle. It is made of plastic, has 16 components, and costs less than Rs 20 if produced at scale. Here’s the rub: As reported by an online news outlet, we have not been able to find domestic manufacturers who can produce dispensers at a large scale, at this cost. We are facing a health crisis, and urgently need large quantities of dispenser pumps. There’s no alternative but to import from China.Take pharmaceuticals. We are the world’s leaders in bulk drug formulations, used by leading medicine makers of the world. But these formulations need crucial active pharmaceutical ingredients (APIs) as inputs. Without APIs, our pharma industry, both domestic and export, will be crippled. And 65 per cent of APIs are imported from China, worth $3.5 billion (i.e. about Rs 25,000 crore). When imports were halted in April and May due to the lockdown and stoppage of the sea and air cargo, there was near panic in the Indian pharma industry. This could threaten even our internal supply situation for medicines. And there is no realistic option of switching to any other supplier, at this cost or scale. Unless we risk rising medical costs.Read More

Indian unpredictability could make China rethink its game

The South China Sea is thousands of miles away from the Indian heartland. Very few people in our country pay attention to developments in that part of the world, and although it has a bearing on India’s national interest, it barely figures in our self-centred public discourse. There, over the past decade, China has incrementally occupied islands disputed by several South East Asian countries, built military infrastructure on several of them, imposed its political administration, and is on the verge of declaring an Air Defence Identification Zone (ADIZ) over the entire region, threatening military force against any aircraft that overflies without its permission. Read more

Time for Modi to take political stand on China. Military talks won’t deter the bully

n an earlier article on how China has crossed the Lakshman Rekha, I had noted that ‘diplomatic virtuosity is insufficient to resolve the issue unless it is accompanied by political sagacity and boldness’. Two weeks later, we saw talks through military and diplomatic channels between India and China, but there is not much sign of the role that political sagacity is playing. It is well possible and understandable that political moves beneath the surface are going on and the matter will be resolved through an agreement. The incident at Galwan, which has resulted in the tragic death of a Commanding Officer and 19 jawans on 15 June, is symptomatic of China’s continued violations of agreements and protocols.You can find the article here

Price controls are a terrible idea to tackle private-public healthcare gap in India

Even before the advent of the Covid-19 pandemic, sticker shock with respect to private hospital charges was commonplace in India. The perception and fear of being overcharged by private hospitals, especially through ‘unnecessary’ diagnostic tests and treatments, is widespread. Adverse health outcomes are frequently attributed to negligence or malpractice, and violent attacks on medical personnel by distraught relatives were common enough to warrant special legislation. In India, there is an environment of mutual distrust among the government, hospitals, and patients.

The novel coronavirus has entered the scene in this backdrop. No wonder that it has sharpened the sense of distrust to a breaking point. Last week, the Supreme Court heard a PIL filed by advocate Sachin Jain who argued that private hospitals, which have been given land free of cost, should not charge for Covid-19 treatment. In response to the petition demanding price regulations on private hospitals, the Court asked if private hospitals “were ready to charge Covid patients the rates fixed under the Narendra Modi government’s Ayushman Bharat scheme for their treatment.” Lawyers then submitted that private hospitals are in a poor financial position as a result of the Covid-crisis and that there was “no business left” as there was a drop in people visiting hospitals for treatments and this could lead to the closure of hospitals. The Court’s retort to this was surreal. “That is good,” the Bench said “You are doing it for a good cause.” It is yet to rule on the matter, but this exchange exemplifies the problem we have with the governance of our healthcare sector

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Now is the time for misinformation reform

This article was first published in Deccan Chronicle. Views are personal.One of the most evident changes brought about by the pandemic has been accelerated shifting our interactions online. This involves turning to the web not just our engagements with friends or colleagues, but also for questions and comments about the virus and the developments around it. For instance, running Google searches on whether the virus can spread through water, or engaging on Twitter about the latest numbers and how they can be controlled.Like many such transitions, there are multiple anticipated second-order effects of increased user interaction on platforms. Firstly, an increased number of searches around COVID-19 provides advertisers with an incentive to leverage that to their advantage. This includes advertising false cures for the virus, or masks, or immunity boosters. In addition, it also includes using controversial targeting options (such as anti-vaccine groups) to sell products.

Let us not dilute law on cheque bouncing

The Indian court system is notoriously clogged. There are more than three crore cases pending at various levels and stages. Justice delayed is justice denied. What do we do? Experts and bodies such as law commissions and industry chambers have recommended several judicial reforms. A big part of the solution is filling out all the vacancies in the judiciary so that there is a speedy resolution of cases. We also have to encourage parties to settle out of court as far as possible, a process called arbitration or mediation. If a case goes to trial in a court, what are the chances of the plaintiff winning? In India, it is not even 50-50. The process itself takes so long that the plaintiff loses at the beginning itself. Often the accused, or the defendant, can tell the plaintiff: go to court if you want. As if admitting a trial into court, means getting into a permanent traffic jam – the ‘taareekh pe taareekh’ syndrome. Imagine the following: what if the chance of the defendant being found guilty, or losing the case is 90 per cent?Then the defendant will try hard to settle out of court. This can happen if the pre-trial preparation is watertight and of excellent quality. So shoddy investigation and badly done prosecution can also cause the trial to fail. Indeed the pendency ratio of courts in India would vastly come down if the trials were speedy, and almost surely end up with the defendant losing, because of excellent pre-court preparation.Read More 

COVID-19 and Inter Service Cooperation

The COVID-19’s relentless journey has already covered 213 countries and territories. In Indian official circles, there is growing acceptance of the reality, that we will have to learn to live with it. The Indian economy has taken a massive blow and is reflected in the decision of a 20% cut across the board including the defence budget, for the first quarter. India’s national development process has suffered a severe setback and so will our capacity for military modernisation.You can find the article here

India is being forced to unlock during pandemic. But it’s no green zone yet

Unlike many other countries, India is gradually lifting the lockdown before the coronavirus curve has flattened. Covid-19 positive cases are now doubling every 17 days, a little slower than a week ago. With several state governments relaxing the lockdown, we should expect that the picture will worsen and that — at least initially — we will see faster growth in the number of cases.

Is the lockdown being relaxed too early? From a purely epidemiological perspective, yes. Yet, from an overall perspective, we have little choice but to reopen the economy and allow people to earn their livelihoods. With the Narendra Modi government unable or unwilling to provide income support and direct cash transfers to compensate people for the loss of income, the only option is to shift the balance towards greater economic activity at the cost of higher epidemiological risk.

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Removing Chinese apps from your phone is the opposite of self-reliance

This article was first published in Deccan Chronicle.The most important takeaway from Nobel Laureate Daniel Kahneman’s insights from ‘Thinking Fast and Slow’ is that the human brain has two systems, System one and System two. The former is good at ‘fast thinking’, which relies on our instincts and emotions to come to conclusions quickly. Kahneman refers to the latter as slow thinking, which is more deliberate and logical in its approach.If I ask you to compute two plus two for me, System one will immediately throw up the answer. But if I ask you to manually multiply five thousand nine hundred four by twenty-eight thousand four hundred and ninety, you will automatically engage System two.  There are some tasks to which System one is better suited, while there are others for which you need to rely on System two. When you end up using the wrong system for the wrong task, you will likely end up with the wrong answer.Read more.

Some out-of-the-box ideas for a fiscal stimulus

The pandemic and lockdown have deeply hurt the economy. This year the world’s economy will shrink by 3 percent, something that we have not witnessed in our lifetimes. India too may shrink as much if not more, since our lockdown has been more stringent than other nations. During April more than 120 million people lost jobs, and some of them permanently. More than ten million urban workers and their families reverse migrated to their villages or home towns, partly because they had lost their livelihoods. These workers will return to cities and factories after the re-opening of the economy, but also when there is an assurance of jobs. Else the rural areas are a better bet during the recession. There has been a bumper rabi crop (spring harvest). The procurement of wheat in Punjab, Haryana, and U.P. has been very successful, meaning farmers have received the minimum support price. Even Madhya Pradesh procurement is at record levels. Besides this income, the PM-KISAN scheme launched last year has been putting some money in farm households. Additionally, the small payment to rural women has helped, and so has the PDS foodgrain allocation through the ration shops, again benefiting the rural areas. Finally, there is the rural employment guarantee scheme (MNREGS) whose allocation has gone up to 1 lakh crore rupees, and which will certainly act as an additional income buffer for many families in rural areasRead more 

The role that compassion could play in India’s economic revival

To rebuild the economy, we must focus on rebuilding social capital. To rebuild social capital, we need greater compassion across society. So many of the humanitarian tragedies that unfolded over the past few months could have been avoided or mitigated had we shown more compassion: in making migrants feel safe, making food available, saving small businesses, and giving money directly to those who are in most need. This is not merely an indictment of our Union and state governments. It is an indictment of our society as a whole. Read more

What are China’s weak points?

What is common to PayTM, Ola, BigBasket, Swiggy, and OYO? Yes, they are all made in India startup success stories. Some of them have achieved global success too. Did you know the Ola taxi service was launched in London in February? And OYO rooms are available in almost a dozen countries other than India? However, the other common factor to all of them is that they are substantially funded by Chinese investors. As reported by the digital publication, The Ken, all the top ten startups of India, ranked by venture funding raised, have Chinese investment. Apart from the five mentioned above, these include the app-based self-learning platform Byju’s and a very successful logistics company called Delhivery. A startup needs angel funding in the very beginning, and venture funding soon thereafter. Indian banks cannot help. Once the startup becomes successful, its value increases. If its value exceeds billion dollars (which is roughly Rs 7,500 crore today), then it is called a unicorn. The Gateway House, a think tank, reports that 18 out of 30 unicorns in India have Chinese investors. These investors are crucial to the startup community, because in their earlier years these companies have been incurring losses, and these have to be funded by some rich uncle, at least to pay salaries. Since there are not enough Indians willing to patiently fund losses for the first few years of startups, the Chinese have happily stepped in. In the process, Indian companies have achieved scale, and some can become world-beaters. The Chinese investors will make handsome money, but that is because they took risks and were patient for all these years. Besides, eight out of 10 startups fail. So the investor makes up by hitting a jackpot on the ninth or the tenth that does not fail.Read More 

Xi’s Strategic Folly: Why a New National Security Law Highlights China’s Insecurities

This article was first published in The Diplomat.Xi Jinping’s move reflects Beijing’s insecurities over Hong KongLast week was among the most critical in Hong Kong’s history since the 1997 handover of the territory to the People’s Republic of China. On Thursday, the National People’s Congress (NPC), China’s top legislature, approved a draft decision to pursue enacting new national security legislation by a vote of 2,878-1, at its annual session in Beijing, with six abstentions. Over the past few days, there’s been a spate of demonstrations and crackdowns in the city amid concerns that the new legislation would be the end of Hong Kong’s autonomy.