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Archives for : March2018

From jobless growth to wary foreign investors, the dark clouds on the Indian economy are here to stay

There are three reasons to doubt the government’s belief that economic growth will rebound sharply.

 RN Bhaskar

The tea leaves predict more pain in the coming months for the Indian economy. This is notwithstanding the encouraging remarks made by the Economic Survey 2018 that it expects “real GDP growth to reach 6.75 percent for the year as a whole, rising to 7-7.5 percent in 2018-19, thereby reinstating India as the world’s fastest-growing major economy.”

There are three reasons for this author to take the claims of the Economic Survey with a pinch of salt.

First, yes, GDP will grow, but not because of actual economic growth. You can have jobless economic growth as well, as has been witnessed during the last few years of the previous government. If you have growth without job formation – so very critical in a populous country like India – that growth remains unsustainable. There are good reasons to believe that some of the economic growth witnessed in the data provided to the country could have been because of e-payments.

E-payments alone have the potential of pushing up economic growth by around 2 percentage points per annum over the next 4-5 years. But its contribution is concealed in the figure for services. Given the nascent form of this industry, it would be safe to assume that 1-2% of GDP growth came from merchant discounts paid on the value of the transactions. It might be worth remembering that even when one considers the (now extant) Rs 1,000 note, cash was always a cheaper option than e-payments. The cost of printing a Rs.1,000 note was Rs 34. The currency note was good enough to last out some three years (let us assume 1,000 days). According to date provided by the RBI, the note used to have a velocity of one transaction a day on an average. Thus over 1,000 days, the total cost of transacting through cash was only Rs 34 – which is the cost of printing the note.

When you consider e-payment, every transaction of Rs 1,000 could result in merchant discounts (MDR) of around Rs 10. Thus over a period of 1,000 days, the total MDR payout is Rs 10,000. Now compare the Rs 34 with Rs 10,000 and you will realise why GDP can swell with the introduction of e-payment.

There is a possibility that India’s GDP will continue to grow because of this MDR for the next few years. But it won’t create jobs unless the country focuses on forensics and systems audits as well.

Second, economic growth takes place when there is some investment for embarking on a new type of (or enhanced) economic activity. This is known as gross capital formation. India’s GCF has been declining as a percentage of GDP (see chart).


This does not augur well for healthy economic growth. In fact, this and a set of other figures has been brought out quite succinctly in a recent paper (20 February, 2018) by CARE Ratings. The only bright spot in the picture appears to be growth in capital goods.

capital goods

But even here the picture is a bit mixed. This growth came because of non-electrical machinery, computers and electronics. The big worrisome decline was in electrical machinery. This does cause anxiety because electrical machinery is what makes factories hum. A 15% decline on this front is naturally a bit disconcerting.

The most threatening of clouds appear to be those relating to new investments and new projects. This is where one suspects that cause is the slowing down on fresh foreign investments.


Much of foreign investment had begun to dry up because of the reluctance on the part of the Indian government to allow any investor to opt for international arbitration in a seat outside of India. The government wants such litigants to approach other centres of arbitration – outside of India – only after exhausting all available courses of legal redress within India first.

As pointed out previously, such a move has had the unfortunate, but expected, reaction of slowing down foreign direct investment into India. The last thing any foreign investor wants is to get bogged down by the cumbersome processes of India’s law enforcement and judicial processes. This is where reform is urgently needed. Since that is not possible, investors prefer to take recourse to a speedier judicial resolution in centres outside of India – as allowed by the Geneva convention to which India is a signatory.

India is believed to have allowed this benefit to Japan in the recently concluded CEPA (Comprehensive Economic Partnership Agreement) between the two countries where India is believed to have allowed Japan’s investment managers to opt for international arbitration in seats outside this country (neither the Japanese nor Indian bureaucrats are willing to confirm or deny this). But hardly had the ink dried on this agreement that the government slapped a taxation charge against Nissan. When the Japanese company tried to approach an overseas centre for arbitration, it was dragged to Indian courts challenging such a move. The matter remains in the courts at the moment.

Not surprisingly, the numbers relating to investments and proposals have been terrible. The number of proposals declined from 1,728 in 2016 to 1415 in 2017. This number could continue to fall, unless remedial steps are taken.

Even the intent to investment numbers registered a decline from Rs.3.53 lakh crore (or Rs.3.53 trillion) to Rs.3.09 lakh crore in 2017.

investment intentions

Naturally, this was bound to have resulted in actual investment in India (see chart). During the April-December period, total investments in new projects almost halved from Rs.9.21 lakh crore in 2016 to Rs.4.43 lakh crore in 2017. Projects completed also reduced by a third (see chart). The number of projects dropped swelled, while the number of projects revived held out no cheer at all.

investments in economy

There is a possibility that foreign investments in the biggest job producing areas will continue to shrivel, till the government agrees to allow investors the right to approach other judicial redressal centres. At the same time, the government should work hard to ensure that credibility in India’s redressal systems goes up. This is going to be extremely difficult if the government goes slow on the appointment of judges (in spite of the existing numbers being short of the sanctioned vacancies).

The mood in the markets has become so bad that private placement in the corporate debt market has shrunk.

public issues

Good companies did resort to debt markets because they could get better rates from investors than from banks. The banks, saddled with the leftovers, were a bit shy.

private placement

However, what is alarming is that these ‘leftovers’ could not raise money from debt markets either. The confidence that promoters showed in the past appears to have been shaken. And the manner in which government and the law enforcement authorities have gone about handling the Nirav Modi and Mehul Choksi cases leaves much to be desired.

Compare the manner in which Indian banks recover money from the approaches made by Standard Chartered Bank (Stanchart) in recovering the money owed to them by the Ruias of Essar. The amount owned to Stanchart was at least five times the amount allegedly embezzled by Nirav Modi. But there was no public outcry, no public shaming and naming, no move to involve either the police or the Enforcement Directorate. Stanchart is believed to have got Rosneft to acquire some of Essar’s assets and thus got its money back.

In fact, watching Stanchart’s moves, ICICI Bank and YES Bank threatened to file cases in the US for attachment of Essar assets, and both managed to recover some of the money that the Ruias owed them.

Indian government-owned banks and the law enforcement authorities have still not learnt the way to recover money without killing a corporate brand or a business activity. The government did this when it banned commodity markets to punish NSEL. It has done the same again this time as well. The only time the government protected a business was in the Satyam case. In most other cases, it has allowed the business to die, and often allowed the errant promoter to flee the shores of India, as outlined here.

Thus the country is confronted with a depressed market sentiment. People who want to invest in India have deferred their plans till they see improvements on three fronts.

They want to see an improvement in judicial redressal systems. In fact, it is surprising to see constitutional posts like Supreme Court judges and the chief Justice of India not being guaranteed a minimum tenure of five years, as is the case with other constitutional posts.

Till such systems are put into place, and till they have confidence in such systems, foreign investors want recourse to international arbitration in a seat outside of India. It is no use having the government declare that it has an arbitration centre in Mumbai, or that it will ensure speedy trials. It is for the investors to say that judicial processes are fair and effective.

Finally, most investors are also alarmed by the selective approach towards enforcement activities. Consider how the police swooped down on the Delhi CM’s residence in the case of a senior bureaucrat being slapped. Now compare this with the muted response of the government and the law enforcement machinery when another elected representative beat up a public servant 12 times and broke his spectacles. Even the courts did not take suo moto cognizance of the way rights and civil liberties were trampled upon. How does one explain the difference in tackling such effrontery on the part of elected representatives? It is this inability to check such brazenness that also worries investors.

The government appears to have forgotten that money is always skittish. It disappears at the first sign of trouble. Then, if it does choose to return, it will ensure that the risk-related charges will be high and that too after third party guarantees are put into place.

India is rapidly hurtling towards such a situation. The willingness to name and shame rather than resolve is a big problem. Consider how BOC Aviation, a Singapore company could – without too much of fanfare — get damages of US$ 9 million from Vijay Mallya. Yet the Indian government could not. Its inability to guarantee protection of rights and privacy is another factor that worries global players. Its penchant for naming and shaming horrifies investors. They know how much work is involved in building a brand, and how easily it can be damaged because of reckless government action – it is worth recalling the nightmarish moments Nestle had to go through in its battle against the food control authorities.

Will India learn to get back to basics and practice responsible judicial and law enforcement processes? Your guess is as good as mine.

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Data shows corporates are consistently favoured over rural India


Corporate India gets indirect subsidy equivalent to 60 per cent of government expenditure on rural areas

A recent analysis has revealed a shocking injustice being done consistently to rural India by the government with corporates getting subsidies at its expense.

The Inclusive Media for Change, a New Delhi-based non-profit has analysed the last seven Union Budgets. It has found that indirect subsidy, termed as “tax expenditure” that was given to corporate tax payers was around 60 per cent of the expenditure incurred by the Union Ministry of Agriculture & Farmers Welfare (MoAFW) and the Union Ministry of Rural Development (MoRD) put together in that year. In the analysis, “tax expenditure” is an umbrella term constituting special tax rates, exemptions, deductions, rebates, deferrals and credits.

The report also found that indirect subsidy given to corporates had been consistently increasing. From Rs 61,765.3 crore in 2011-12, it had increased to Rs 85,026.11 crore in 2017-18 (see ‘A gross injustice’).

The percentage of this indirect subsidy to total expenditure of agriculture and rural has also kept fluctuating. It was 69 per cent in 2011-12, rose to 88.7 per cent in 2012-13, again fell down to 66.7 per cent (2013-14), 68 per cent (2014-15) and again rose to 76.1 percent in 2015-16.

Besides indirect subsidy to corporate taxpayers, there are other tax incentives to non-corporate taxpayers (which include firms, organisations, associations of persons) and tax breaks and rebates on customs duty and central excise duty which surpassed the total expenditures of the agriculture and rural development departments by a huge margin.

According to The Inclusive Media for Change’s analysis, the total expenditure of the MoAFW and MoRD in financial year 2017-18 was Rs 1,46,388.08 crore. Meanwhile, in the same year, the total revenue impact of tax incentives was estimated to be Rs 2,03,983.74 crore (See ‘Tax incentives greater than government expenditure’).

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Rajasthan -Double the budget for health care, do away with privatization of public health facilities: Demands Jan Swasthya Abhiyan

Jan Swasthya Abhiyan Rajasthan held its meeting on 27th February 2018 at Vinobha Gyan Mandir in Jaipur after a gap of three months. It was attended by about 70 health activists, public health experts, academicians, lawyers and some PRI members from across the state. At the meeting, the state health budget for the financial year 2018-19 and the government’s increasing inclination towards privatization of public health facilities was discussed in detail. The members reiterated the concern that public health facilities in the state, and especially preventive and primary health care services, have for long been in a state of neglect and that there is an urgent need for adequate budgets to revamp and expand existing health and nutrition related services. The Abhiyan also expressed concern over increasing dependence of the state on health insurance scheme and PPP of public health facilities and cautioned the state that while this approach to health care may attract patients to seek treatment, but it would do little to reduce out of pocket expenditure on health or improve indicators such as maternal mortality, infant mortality, anemia, malnutrition etc.

In the meeting it was highlighted that while the overall state health budget has shown an increase in monetary terms from 10800 crores (RE) in 2017-18 to about 12813 crores in the current budget, yet in terms of state GDP it’s not any different from the previous budget. Abhiyan has for long been demanding that the state health budget should be increased to at least 2.5% of the state’s GDP, while it has been hovering at close to 1% since quite some years, which is grossly inadequate to deliver quality health care services to a population of 7 crores.  What is astonishing is that this fiscal year the budget for NRHM has seen a steep decline from 2158.62 crores in revised budget estimates of previous year to 1788.61 crores in the current announcements. This would certainly mean that preventive and promotive health care services in rural and deprived areas would evident huge setback.

At the meeting the issue around Bhamashah Swasthya Beema Yojana was also talked about. Many members shared cases where the patients faced innumerable problems while seeking treatment due to inability to produce the card or ill-treatment by the hospital staff. Some members also shared their experiences of visiting the PHCs that have been handed over to private bodies. The people of the village of the PHCs that are now running on PPP mode are protesting against this step. More PILs have been filed at the high court as well. And a stay order has been given by the court. The reason behind this protest is that these PHCs are not functioning well after they have been handed over to private bodies.

Participants voiced concern and shared instances about the slackness in the implementation of free medicines and diagnostics schemes of the state. It was mentioned that in the absence of effective monitoring, many doctors prescribe and push patients to buy medicines which are not included in the list of free medicines. Need was expressed that the campaign in support of free medicines and diagnostics should be intensified.

At the meeting another issue discussed was about the poor health, nutrition and pre-primary education of children in the age range of 3-6 years currently forced to either get admitted in private schools or attend highly ill equipped aganwaris.  After intense discussions, JSA Rajasthan decided to develop a position paper around the issue that admission of children in government schools should begin at age three instead of age six. Nursery trained teachers are recruited for these schools and Anganwadis should intensively work for pregnant & lactating women and children up to three years.

In conclusion, there was a consensus that there should be public engagement through discussions/dialogues/hearings around the issues discussed during the day. It was also decided that the pamphlet on free medicines and free diagnostics must be distributed as widely as possible to clear the myth among service provider and common citizens around medicines supplied free. It was also reported that GO was issued for reconstitution of drugs and therapeutic committees at district and block levels in Pratapgarh and Karauli districts with representatives of Prayas as members. It was also decided that in the future meetings, wherever possible, members would carry documentary evidences in support of the instances they shar

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Linking Aadhaar to recruitment cannot be mandatory, rules HC

.Punjab & Haryana High Court stays teachers recruitment for demanding
aadhaar till 28 March. A petition by Pradeep Deswal and Jagdeep Singh Jakharhas been filed senior advocate Ravindra Singh Dhull. It was heard by Justice Rajeev Narayan Raina.



Linking Aadhaar number to recruitment should not, prima facie, be a mandatory condition as it may violate equal opportunity and deny easy access to applicants applying for jobs online, the Punjab and Haryana High Court has ruled while staying the entire recruitment process of Maharishi Dayanand University (MDU), Rohtak.
The university had issued an advertisement on January 25 to fill posts of lecturer in different categories, including Assistant Professor (Law). The applications were to be submitted from January 25 to February 15.
The date was, subsequently, extended to February 28.
Taking up the matter, Justice Rajive Narain Raina asserted a novel matter had arisen in the case. In the ‘recruitment portal’ uploaded on the MDU’s website for direct recruitment to several posts, a column demanded Aadhaar number.If the number was not entered, the applicant could not move to step two. As such, the online application was rejected.
Justice Raina added some other method could have been devised by the university if Aadhaar number was required for thumb impressions or biometrics. This could have been done by making a provision in the software for enabling the candidates to continue to step two of the application form and apply on time.“Otherwise, they will be confronted with denial of employment opportunity, which is a very serious and sacrosanct right in a country where employment opportunities are fought on war footing,”
Justice Raina added.Issuing a notice of motion on a petition filed against the MDU by Pradeep Kumar through counsel Ravinder Singh Dhull, Justice Raina asserted an issue of public importance had arisen in the case. “In the meantime, there will be a stay on the entire recruitment process till further orders.
”The petitioner was seeking issuance of appropriate direction to the respondent-university to consider his application for the post of Assistant Professor (Law) as per advertisement dated January 25 without insisting on Aadhaar card.Dhull added the petitioner was not having an Aadhaar card.
Besides, the use of Aadhaar as a mandatory document was barred by the Supreme Court as per an order on December 15, 2017.

It was further stated by the counsel that the petitioner was fully eligible for the post and was presently pursuing PhD in the same university.

“Petitioner’s identity was not disputed and he was a student of the same university. However, the online portal of applying for the post is asking for Aadhaar Card as a mandatory document for applying for the post in initial step-1 of the application process. The petitioner was not having any Aadhaar Card and had not even applied for the same till date. He had submitted a representation before the vice-chancellor of the university that he may be allowed to apply without Aadhar card and mandating the same is prejudicial to his rights but nothing was done”, Dhull has argued seeking a stay on the selection process.

The court has stayed the teachers recruitment in Maharashi Dayanand
University (MDU). The next date of hearing is on 28 March.

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After 71 Transfers in 34 Years, Haryana IAS Officer Retires Without 6 Months’ Pay #WTFnews

Pradeep Kasni used to serve as an Officer on Special Duty (OSD) in Haryana Land Use Board, however, according to government records, the post does not exist any longer. Kasni has been living without a salary for the past several months.

Anuradha Shukla


Known for his honesty, IAS officer Pradeep Kasni is retiring on Wednesday after a career spanning 34 years and 71 transfers. Kasni has not received his salary in the past six months.

The bureaucrat used to serve as an Officer on Special Duty (OSD) in Haryana Land Use Board, however, according to government records, the post does not exist any longer. Thus, Kasni has been living without a salary for the past several months. This was revealed only after an RTI application.

Kasni has appealed at the Central Administrative Tribunal, which will decide on the case on March 8.

At the time of joining the Land Use Board, Kasni had asked authorities at the state government about the absence of staff and official files in his office. Failing to get an answer, he filed an application and sought reply under the RTI Act. Now, the Haryana government has admitted that the Board has not been in existence since 2008.

The Land Use Board was first introduced under the Department of Environment and later moved under the Department of Agriculture.

The Department of Agriculture later sent a proposal to the Centre to shut down the Board, which was accepted.

Yet, the Haryana government transferred Kasni to the defunct Land Use Board as its OSD.

Kasni is now fighting a legal battle for his rights, which he says will continue even after his retirement.

The 1984-batch batch Haryana Civil Services officer started his career with the Government of Haryana in 1984 and was later elevated to the Indian Administrative Services (IAS), while his wife Neelam Kasni worked as ADC to the Haryana governor and retired last year.

Pradeep Kasni was transferred the maximum number of times under the Congress regime of Bhupinder Singh Hooda, while under the Khattar government, he was transferred thrice in September 2016.

His hopes of getting any important assignment were dashed after being posted as the Divisional Commissioner of Gurgaon.

Meanwhile, he has been active in fighting for social issues while his father Dharm Singh was a known leader of farmer and labour movements, who had led the agitation in Riwasa against then Haryana Chief Minister Bansilal.

As a teenager, Pradeep Kasni would help his father in churning out articles against then Prime Minister Indira Gandhi in local newspapers.

Later in life the IAS officer organized public rallies in support of fellow IAS officer Ashok Khemka, who has a similar track record of numerous transfers.

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