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Date:15-03-17

Use the mandate

PM Modi’s political capital should be leveraged to reform India’s product markets

As the third year of the NDA government’s term draws to a close, it is in a unique position. The political stock of Prime Minister Narendra Modi has soared higher than ever before. Moreover, following BJP’s historic mandate in UP, Modi in his victory speech pointed out that poor Indians wanted opportunities rather than doles. Modi has also promised a ‘new India’ by 2022, the 75th year of independence. Given that the NDA government has established a secure basis for itself now, it is time to act confidently and tune India’s economic engine, so that it can take advantage of the demographic transition it is currently undergoing. It should abandon incrementalism and move faster on the path of economic reform.

India is a country of young people and around a million of them enter the job market every month. Unless enough jobs can be found for them, the ‘new’ India will end up looking very much like the old. In terms of employment potential, organised retail offers enormous opportunities. Instead of opening up FDI in retail in a piecemeal manner, the best way ahead is to repeal all restrictions on investment. At one stroke, it will end lobbying and the search for loopholes in the law. This will bring in capital, technology and job opportunities.

India’s economy is overregulated. Instead of safeguarding consumer interests, the focus of regulation is on creating unnecessary obstacles to business.

Dismantling this perverse structure requires government to take on powerful vested interests. In this context, recent elections assume salience as Modi has the political capital now to bring about structural changes in India’s regulatory architecture. India’s factor markets – land, labour and capital – need to be freed for durable economic growth. This should be Modi’s priority now.

Date:15-03-17

Thank you, RBI; now lift the veil on old notes

The Reserve Bank of India (RBI) has officially lifted all limits on savings bank cash withdrawals after the note ban. This is welcome. Now is the right time to lift the veil of secrecy over how many old notes that had been held by the public came back to the banking system and how much money failed to come back. The money that did not come back is the amount of black money that people have been forced to extinguish, in order to escape investigation into tax avoidance and/or sources of the income. That would be a ready measure of the demonetisation scheme’s success in achieving the stated goal of destroying black money.

The RBI should also allow one more window for resident Indians to deposit their holdings of denotified currency notes. There are individuals, especially old folk only intermittently in touch with other people or reality in general, who failed to deposit their holdings of cash in time. There are others who have come into possession of wads of denotified currency that had been hoarded by their dear departed.

The 50-day demonetisation period for residents to deposit their old currency notes with banks ended on December 30. The result has been to see serious erosion of savings of some individuals, admittedly small in number but deserving of extra consideration because of the vulnerability of their age and finances in most cases. The funds coming in through a reprieve window could be subjected to extra scrutiny, to thwart misuse. The amounts are likely to be small, but the benefit to their holders, big.

The denotified Rs500 and Rs1,000 notes constituted 86.9% of the value of total currency in circulation. The RBI had said that Rs8.45 lakh crore was deposited and exchanged during November 10-27, but did not release any further data. The Budget offered some figures but not the full data. There is no reason to withhold information on deposits now that the possible political sensitivity of such data is pure conjecture, as the assembly elections are over and settled any questions about the political viability of the move once and for all.

Date:15-03-17

A lone IISc among schools of excellence

It is a moment of validation for the Indian Institute of Science, Bangalore, ranked eighth in the Times Higher Education Ranking of small universities. The 100-year-old institute has been for several years now ranked among the top 250 institutions, according to the Times ranking. For IISc, it is a moment of celebration, but not for the Indian higher education sector in general. Policymakers and regulators need to learn from IISc and develop a blueprint that can be replicated, scaled up and innovated across the country.

The core purpose of higher education institutions and universities is to create knowledge and value. This can be cutting edge research in science, technology, engineering and medicine, or research in social science, design of institutions or instruments that tackle social and economic questions.

A university must also be judged by the quality of the human resource it produces, and the impact it has on systems and policy. Indian institutions have typically concentrated on teaching, particularly at the undergraduate level. Academia has not deemed research and its dissemination, interaction with industry or policymaking, whether by advice or independent assessment, key concerns.

In part, this is a legacy of colonial policy that used higher education not to create knowledge but to produce capable cogs of their administrative set-up in the country. The increasingly globalised and now automated world requires a reorientation of the education system. India’s higher education institutions need to change from degree-doling units to knowledge creators, and this will require policy support. The IISc provides one model of making this transition with a modicum of success. There would be others. Policy must vigorously pursue excellence in higher education.

Date:15-03-17

सही वक्त

हालिया विधानसभा चुनावों में प्रधानमंत्री नरेंद्र मोदी के शानदार प्रदर्शन ने उन्हें इस स्थिति में ला दिया है कि वह उन आर्थिक और प्रशासनिक सुधारों को अंजाम दे सकें जिनसे निवेश और रोजगार में इजाफा हो। ये बातें सन 2014 के चुनावी वादों का हिस्सा हैं। इन सुधारों में से कई तो आसान हैं जबकि अन्य के लिए दीर्घकालिक एजेंडा तय करना होगा। बहरहाल देश के सर्वाधिक आबादी वाले राज्य उत्तर प्रदेश में मिले अभूतपूर्व जनादेश ने दोनों तरह के सुधारों को जद में ला दिया है। तथ्य तो यह है कि देश के आधे से अधिक राज्यों में पार्टी अपने बूते पर या साझेदारों के साथ सत्ता में है।

Date:15-03-17

खंडित जनादेश का नतीजा है गोवा का टकराव