"An Economic Strategy for India' - Some Thoughts

The report "An Economic Strategy for India' co-authored by some eminent economists including our former RBI Governor, Mr. Raghuran Rajan, has rightly suggested that our political establishment should desist from resorting to farm load waivers for political gains.

The report has endorsed the Telangana model of upfront cash support at the time of sowing -the Rythu Bandhu scheme as cure to farm distress, and handing out Rs. 4000 per acre to land-owning farmers.

Based on this limited information as reported in the newspapers, my thoughts are as follows:

a) Recent show of strength by some farmers who marched to Mumbai and Delhi, demanding loan waivers, is a matter of concern. But then what really are the concern areas, did those farmers participating in the march really represent the true nature of our agrarian distress and to what extent, and above all, would a single loan waiver for these very farmers cure all ills plaguing our agrarian sector? These questions need to be evaluated and brought to public discourse for an informed debate on the policy measures required for turning around our agrarian sector,

b) Telangana model has been feted by authors of this report. It would be worthwhile for our policymakers cutting across political ideologies,to institute a comprehensive study on the efficacy of such a measure, especially on the marginal farmers, who are most in need of remedial solutions,

c) Has any public sector bank or any financial institution done even a sample study on those farmers who have availed of loans, to verify if the amounts so disbursed to them have been spent judiciously and for the intended purposes? If so, what have been the findings of such a study?

d) How the farmers in Telangana deal with crop failures on account of various reasons, and what is the support mechanism evolved by the Telangana government for the same?

e) And finally, one of the key problems afflicting the agrarian sector is unfavorable prices for produce when compared to the price paid by the final consumers for the same produce. This needs to be fixed, and among the suggested of measures include breaking of the monopoly of APMC to procure agricultural produce, besides encouraging the industry to join hands with our farming community to ensure a win-win-win formula, that is a formula, which is beneficial to farmers, industrialists, and the final consumers.

All these are of tall order indeed, and would need the foresight of a statesmen at the helm of affairs, to take bold decisions for the benefit of our economy as a whole, key to which lies in our agrarian prosperity.

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Kartarpur Corridor event at Pakistan

In diplomacy, optics play a key role in forming overall perceptions of the intended audiences. And where optics are concerned, the historic Kartarpur Corridor event at Pakistan, was nothing short of a disaster.

No doubt Navjot Sidhu shares a good personal rapport with Prime Minister Imran Khan, and no one should have an issue if he wishes to take some credit for this historic event. But then, when our Union Cabinet had appointed two of our Union Ministers to grace the occasion, due importance should have been given to them. Imran Khan should have reserved his niceties for Sidhu to a low key, as he was on a private visit.

Secondly, let us not forget that this event was close on heels to the 10th anniversary of Mumbai attacks, and the perpetrators of such heinous attacks are yet to be brought to justice in Pakistan. How could an aide of one of the masterminds - Hafiz Saeed, was allowed to make an appearance and shake hands with Gen Bajwa? This optic has its obvious conclusions.

There is no point issuing such statements like, "If India takes one step forward to improve bilateral ties, Pakistan will take two", when actions and words in such an event were in stark contrast.

And at the very least, Sidhu should have politely countered his friend Imran Khan, that neither was he keen to contest elections in Pakistan nor was he aspiring to be our next Prime Minister right now. The fact that he did not do so, clearly puts a question mark on his intentions.

Going forward, let us remain optimistic about Prime Minister Khan being able to deliver on his intentions to mend fences with us. But at the same time, we also need to remain on high alert all the time to guard against any nasty surprises, as has happened in the past.

Finally, if by appointing Sidhu as our goodwill ambassador to Pakistan can make all the difference, then so be it.

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RBI and Finance Ministry

If the RBI's mandate is to ensure monetary stability, and Finance Ministry's mandate is to ensure fiscal stability, then can the monetary and fiscal stability co-exist without RBI and the Finance Ministry going hand-in- hand? Typical example, under normal circumstances, high taxes and less government spending should lead to lower interest rates to ensure the overall economic growth does not suffer.

Yes, there may be healthy differences between the two depending upon overall situation prevailing in the financial system as a whole. But at the end of the day, the Hon'ble Finance Minister is an elected representative of the people of India, and is answerable to our Parliament.

Thus, the top leadership of the RBI needs to be sensitive about the concerns expressed by the Hon'ble Finance Minister, and work out amicable solution/s to address the same.

High Oil Prices and Weakening Rupee- Options for India

The continuing mayhem in our stock markets, mainly due to sanctions on Iran by the US, resulting in higher crude prices and weakening rupee, needs to be viewed from the prism of wider geo-political implications. That this mayhem does not mirror the strong fundamentals of Indian economy at present is beyond doubt.

That higher crude prices driven by OPEC is not in the interest of even the US, is reflected by the following tweet from President Trump in April this year:

"Looks like OPEC is at it again. With record amounts of Oil all over the place, including the fully loaded ships at sea. Oil prices are artificially Very High! No good and will not be accepted!”

While abrogating the nuclear deal with Iran, as negotiated by his predecessor, President Trump made it clear that he was open to another such deal with Iran which according to him was just and fair.

Now, an opportunity for India in this crisis. We should:

a) Form a grouping of major oil importing countries as a counter to OPEC. The key objective of this grouping should include - setting an upper band of crude oil for OPEC, actively supporting each other to reduce dependence on oil imports from OPEC, and aggressively working on increasing the usage of alternative fuels and and associated technologies, besides assisting each other in oil exploration projects. Such a grouping is likely to have its impact on OPEC, by reducing their scope of maneuverability in raising oil prices. If nothing else, it is at least likely to bring differences of opinion in OPEC which is not a monolithic entity, and

b) Having good relations with both US and Iran, we should work aggressively on back channel diplomacy with both, to arrive at a win-win nuclear deal, which will assuage the concerns of Trump administration on the deal entered by Obama administration. Yes, this may mean tweaking some clauses of that agreement over which Trump administration has concerns. This would necessitate some quid-pro-quo by the US as well, but that would be in the its interests as well, if unlimited transfer of incomes from major oil importing countries including the US, to OPEC via reduced oil production and high oil prices has to be kept under check.

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Imran Khan's Intentions

Imran Khan's intentions are fine indeed where Indo-Pak relations are concerned, and as it is believed that he has the backing of Pakistan Army, we can draw some comfort that our bilateral relations can see much needed improvement.

Not too long ago, General Bajwa too echoed similar sentiments where our relations are concerned.

But, if history is any guide, then while we can remain optimistic but without letting our guard down.

The Simla Agreement of 1972 can serve as a reference point. That no one in Pakistan even mentions about it today, should say it all. Why can't Imran Khan make a mention about it boldly?

Then, can't forget the over-optimism created in the media when our then PM Rajiv Gandhi visited Islamabad for SAARC summit in 1988, and was welcomed by his counterpart PM Benazir Bhutto. Their youth and charm created so much of hype out here, that it appeared "no-brainer" that all was great with our bilateral relations. That a year later, terrorism raised its ugly head in Kashmir with able backing from Pakistan was a rude jolt for us.

Other rude jolts were to follow :

* the famed bus ride by our then PM Vajpayee in February 1999 was followed by Kargil war,

* the hijack of IC 814 in December 1999 saw the release of Maulana Masood Azhar who was granted shelter in Pakistan,

* the over-hyped Agra summit in July 2001 was followed by an attack on our Parliament in December that year,

* Impromptu visit by PM Modi to Islamabad was followed by Pathankot terror attack etc etc

Above all, no one knows if the perpetrators of Mumbai attacks would ever be brought to justice.

In a nutshell, our approach vis-a-vis Imran Khan's government (assuming he is sworn in as PM) should be one of cautious optimism, without letting our guard down, or once again engulfing ourselves in "smoke screens" created by our own illusions.

New Disruptions by Reliance Industries

Reliance Industries Ltd's 41st Annual General Meeting, has put not only the telecom, but also e-commerce, and home entertainment players on notice.

While the likes of Airtel, Vodafone, Amazon, Walmart-Flipkart, Netfix, and other smaller players in such segments are likely to up the game with aggressive strategies to further consolidate their respective positions, the key strategy for RIL would be to get the first mover advantage in 5G connectivity, besides fixed broadband fibre connectivity to reach millions of households, not only in metros but in tier 2, 3, and 4 cities as well.

The state-of-the-art IT infrastructure with focus on data analytics, artificial intelligence, supply chain management systems, and customer relationship management systems are the critical minimum requirements, as RIL transitions from a mainly B2B entity to a B2C entity.

Further, the transition from an oil and gas behemoth to a telecom and e-commerce conglomerate is going to be big challenge for the third generation Ambanis, who will need to change the culture at RIL to meet the aspirations of the bright talent needed to spearhead such a massive transition, which would be the key to such a transition.

Now, the million dollar question is, "How long can the Walmart-Flipkarts and Amazons keep bleeding themselves just to keep their market shares?"

While RIL is a public listed company, is sensitive to the expectations of its shareholders, and norms of corporate governance, the e-commerce biggies are not so transparent in their financial disclosures as of now.

And finally, it has set its sight on education, healthcare, and education as well, courtesy 5G related technologies. What's left for others?

ICICI Bank-Videocon Controversy

If ICICI Bank was just part of a Rs 40,000 crore loan extended to Videocon by a consortium of 20 banks, then why is the focus just on ICICI Bank? Was it the lead bank in the consortium, and was Ms. Kochchar the key decision maker on behalf of ICICI Bank where this decision was concerned?

While the jury is still out, as to whether or not there was a conflict of interest while extending loans to Videocon group is concerned, one wonders if a key business practice adopted by various banks, that is of strong relationship management with most of their important customers would now stand compromised, lest any such account turn NPA later on and fingers be pointed even in bonafide cases?