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Policy&Politics

The Narendra Modi I knew

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During both the first and the last meeting with PM Narendra Modi, I had a view that was at variance with his. On both the occasions he heard me out, he concurred with me on each of these occasions. Yes, Modi was prepared to listen, ready to accept a difference of opinion. And this is the reason why I blame those around him for not presenting their views freely and frankly. There were several occasions when I found that officers with differing perspectives kept quiet or went with the flow. Yes, I did see him get angry on occasions. On one occasion, he gave a dressing down to Chairman, Railway Board, in the presence of other Secretaries. However, it was not on account of a difference of opinion. The poor performance of Railways had irked him. Contrary to the general impression, Narendra Modi spoke very little during the meeting. His grasp of the issues was phenomenal, and, more often than not, he came up with extremely practical solutions. His long experience as Chief Minister almost always came in handy. I enjoyed a great professional relationship with the PM.

However, I was never close to him as was reported first in the Hindustan Times and then in India Today. He always valued my opinion, though we occasionally had disagreements. He did start in right earnest as the Prime Minister, and the economy too seemed to be doing pretty well. Then where and when did it go all wrong? In my understanding, it all changed on the fateful night of November 8, 2016. Demonetisation was announced. Currency notes of Rs 1000 and Rs 500 were demonetised. My first reaction was elation. Working in the state of Uttar Pradesh, I had seen how a corrupt Chief Minister had accumulated cash. It was all so shocking. I thought that such politicians would lose their ill-gotten wealth. However, it was not to be. The mismanagement of the aftermath of demonetisation resulted in all this wealth returning to such people. The real sufferer was the common man. The economy tanked after that, never to recover. Ironically, the National Democratic Alliance went on to win the crucial state election in UP. In a way, it provided political legitimacy to a disastrous economic move. Only posterity will finally determine the damage caused by demonetisation, perhaps a good idea but very poorly executed. The environment had changed. The last “tea” session of the Secretaries with the PM that I attended epitomised the mood. As per the drill, the Cabinet Secretary made the opening remarks. This was followed by an open session wherein the Secretaries gave their suggestions.

Finally, the PM made the concluding speech. As mentioned earlier, this was a unique way of ascertaining opinions and suggestions. It had worked very well so far. However, on this day, after the Cabinet Secretary spoke, there were no comments/observations from Secretaries for a couple of minutes after the Cabinet Secretary had concluded. There was an unusual silence, reflecting a change in the environment. The PM had to stand up himself and ask the Secretaries to speak. After that, some Secretaries spoke, but the cat was out of the bag. The “free” communication channel appeared to have been frozen. The government was still doing exceptionally well on many fronts like national highways, rural housing, rural electrification, cooking gas and digital payments. This was paying political dividends. The government was appropriately taking credit for all that was happening. Unfortunately, it also took credit for what it had not done. I remember the Independence Day speech where, amongst the many not-so-correct claims by the PM, was the claim related to the setting up of Project Monitoring Group (PMG) by the NDA government. As I had set up the PMG during the previous government’s tenure, I wondered whether there was a need to make such and many other ‘incorrect’ claims when the government could legitimately claim to have done so very well on many fronts. As I now witness Narendra Modi from a distance after ceasing to be a civil servant, it makes me wonder why the government is or is not doing what it should or should not be doing: “Sab kuch babu hi karenege. IAS ban gaye matlab woh fertilizer ka kaarkhana bhi chalayega.

Yeh kaunsi badi takat bana kar rakh di humne? Babuon ke haath mein desh de karke hum kya karne waale hain?” (Will everything be done by the “babu”? Just because they have become IAS, they will run fertilizer plants as well. What sort of huge force have we created? What will we gain by handing the nation to “Babus”?) The Prime Minister made this statement in Parliament. Why did he do that? Ironically, much of what he said was not even factually correct. In any case, as the Prime Minister of the country, it was he who decided who was doing what at the senior level. Then why complain? His office, the PMO, primarily comprises officers from the Indian Administrative Services (IAS). He was still appointing officers from the IAS to critical posts like the Governor, the Reserve Bank of India. He was never prone to such outbursts in the past. He may not have realised it, but this one statement demoralized many young officers in the field. On every occasion I met the PM in a meeting or informally, his focus on technology was unwavering. He always emphasised the need for technology to drive the country’s development. Rightly so. Therefore, it is surprising that all Ministries in the Government of India still have not taken even the rudimentary steps towards using technology. Why do we see hard files on the officers’ tables and such files being carried around in the corridors of government offices? Charity has to begin at home, as they say. Someone in the PMO needs to muster the courage to tell the PM that the PMO needs to insist on receiving only digital files. Once this happens, the Ministries will have to digitise all the files.

This would be the first but critical step towards using technology to improve governance. It will also help the PM to assess the number of files, many of which relate to appointments at various levels, pending at the PMO. Why are Central Public Sector Undertakings being given step-motherly treatment? Why are they being deprived of regular postings of Chairman and Managing Directors? Why are the posts of other Directors not being filled? Why is money being sucked out of these CPSUs, and they are being pushed to raise expensive loans for their own expansion plans? It is becoming increasingly evident that the Centre and the States are at a ‘war’. Is it necessary? Cooperation with States worked in the coal sector as coal production reached record levels. Goods and Services Tax is another example where the approach of treating states as partners worked. The whole approach was masterminded by none other than the master-strategist, Arun Jaitley. There was a mission to engage with the stakeholders and convey a value proposition.

Assessing ground realities constituted valuable input in formulating policies and approaches to resolving issues. This was a game-changer. A ‘connect’ was established with each stakeholder, including the state governments. Why are we not looking at a similar connection with other policies? Why is there no independent evaluation of various programmes? This would help the government assess where things are going wrong and take corrective steps? There is no harm in assessing the ground reality when the government is doing so well on so many fronts. There are competent officers amongst the crop of Secretaries to the Government of India. However, shouldn’t the eco-system be such wherein officers can speak freely and frankly? The spirit that pervaded during 2014-16 (so evident during the quarterly tea sessions hosted by the PM) needs to be revived. The officers will have to be encouraged to speak, and ‘rewarding’ will have to go beyond allegiance and pliability.

Anil Swarup has served as the head of the Project Monitoring Group, which is currently under the Prime Minister’s Office. He has also served as Secretary, Ministry of Coal and Secretary, Ministry of School Education.

 

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Policy&Politics

Govt extends date for submission of R&D proposals

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The Government has extended the deadline for submission of proposals related to R&D scheme under the National Green Hydrogen Mission. The R&D scheme seeks to make the production, storage, transportation and utilisation of green hydrogen more affordable. It also aims to improve the efficiency, safety and reliability of the relevant processes and technologies involved in the green hydrogen value chain. Subsequent to the issue of the guidelines, the Ministry of New & Renewable Energy issued a call for proposals on 16 March, 2024.

While the Call for Proposals is receiving encouraging response, some stakeholders have requested more time for submission of R&D proposals. In view of such requests and to allow sufficient time to the institutions for submitting good-quality proposals, the Ministry has extended the deadline for submission of proposals to 27th April, 2024.

The scheme also aims to foster partnerships among industry, academia and government in order to establish an innovation ecosystem for green hydrogen technologies. The scheme will also help the scaling up and commercialisation of green hydrogen technologies by providing the necessary policy and regulatory support.

The R&D scheme will be implemented with a total budgetary outlay of Rs 400 crore till the financial year 2025-26. The support under the R&D programme includes all components of the green hydrogen value chain, namely, production, storage, compression, transportation, and utilisation.

The R&D projects supported under the mission will be goal-oriented, time bound, and suitable to be scaled up. In addition to industrial and institutional research, innovative MSMEs and start-ups working on indigenous technology development will also be encouraged under the Scheme.

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Policy&Politics

India, Brazil, South Africa to press for labour & social issues, sustainability

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The Indian delegation also comprises Rupesh Kumar Thakur, Joint Secretary, and Rakesh Gaur, Deputy Director from the Ministry of Labour & Employment.

India, on Thursday, joined the G20’s two-day 2nd Employment Working Group (EWG) meeting under the Brazilian Presidency which is all set to address labour, employment and social issues for strong, sustainable, balanced and job-rich growth for all. India is co-chairing the 2nd EWG meeting, along with Brazil and South Africa, and is represented by Sumita Dawra, Secretary, Labour & Employment.

The Indian delegation also comprises Rupesh Kumar Thakur, Joint Secretary, and Rakesh Gaur, Deputy Director from the Ministry of Labour & Employment. India has pointed out that the priority areas of the 2nd EWG at Brasilia align with the priority areas and outcomes of previous G20 presidencies including Indian presidency, and commended the continuity in the multi-year agenda to create lasting positive change in the world of work. This not only sustains but also elevates the work initiated by the EWG during the Indian Presidency.

The focus areas for the 2nd EWG meeting are — creating quality employment and promoting decent labour, addressing a just transition amidst digital and energy transformations, leveraging technologies to enhance the quality of life for al and the emphasis on gender equity and promoting diversity in the world of employment for inclusivity, driving innovation and growth. On the first day of the meeting, deliberations were held on the over-arching theme of promotion of gender equality and promoting diversity in the workplace.

The Indian delegation emphasized the need for creating inclusive environments by ensuring equal representation and empowerment for all, irrespective of race, gender, ethnicity, or socio-economic background. To increase female labour force participation, India has enacted occupational safety health and working conditions code, 2020 which entitles women to be employed in all establishments for all types of work with their consent at night time. This provision has already been implemented in underground mines.

In 2017, the Government amended the Maternity Benefit Act of 1961, which increased the ‘maternity leave with pay protection’ from 12 weeks to 26 weeks for all women working in establishments employing 10 or more workers. This is expected to reduce the motherhood pay gap among the working mothers. To aid migrant workers, India’s innovative policy ‘One Nation, One Ration Card’ allows migrants to access their entitled food grains from anywhere in the Public Distribution System network in the country.

A landmark step in fostering inclusion in the workforce is the e-Shram portal, launched to create a national database of unorganized workers, especially migrant and construction workers. This initiative, providing the e-Shram card, enables access to benefits under various social security schemes.

The portal allows an unorganized worker to register himself or herself on the portal on self-declaration basis, under 400 occupations in 30 broad occupation sectors. More than 290 million unorganized workers have been registered on this portal so far.

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Policy&Politics

India to spend USD 3.7 billion to fence Myanmar border

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India plans to spend nearly $3.7 billion to fence its 1,610-km (1,000-mile) porous border with Myanmar within about a decade, said a source with direct knowledge of the matter, to prevent smuggling and other illegal activities. New Delhi said earlier this year it would fence the border and end a decades-old visa-free movement policy with coup-hit Myanmar for border citizens for reasons of national security and to maintain the demographic structure of its northeastern region.

A government committee earlier this month approved the cost for the fencing, which needs to be approved by Prime Minister Narendra Modi’s cabinet, said the source who declined to be named as they were not authorised to talk to the media. The prime minister’s office and the ministries of home, finance, foreign affairs and information and broadcasting did not immediately respond to an email seeking comment.

Myanmar has so far not commented on India’s fencing plans. Since a military coup in Myanmar in 2021, thousands of civilians and hundreds of troops have fled from there to Indian states where people on both sides share ethnic and familial ties. This has worried New Delhi because of risk of communal tensions spreading to India. Some members of the Indian government have also blamed the porous border for abetting the tense situation in the restive north-eastern Indian state of Manipur, abutting Myanmar.

For nearly a year, Manipur has been engulfed by a civil war-like situation between two ethnic groups, one of which shares lineage with Myanmar’s Chin tribe. The committee of senior Indian officials also agreed to build parallel roads along the fence and 1,700 km (1,050 miles) of feeder roads connecting military bases to the border, the source said.

The fence and the adjoining road will cost nearly 125 million rupees per km, more than double that of the 55 million per km cost for the border fence with Bangladesh built in 2020, the source said, because of the difficult hilly terrain and the use of technology to prevent intrusion and corrosion.

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Policy&Politics

ONLY 2-3% RECOVERED FROM $2-3 TN ANNUAL ILLEGAL TRADE THROUGH BANKING: INTERPOL

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However, Stock highlighted the enormity of the challenge, noting that between 40% and 70% of criminal profits are reinvested, perpetuating the cycle of illicit financial activity.

In a press briefing held on Wednesday, Interpol Secretary General Jurgen Stock unveiled alarming statistics regarding the extent of undetected money laundering and illegal trade transactions plaguing the global banking network. Stock revealed that over 96% of the money transacted through this network remains undetected, with only 2-3% of the estimated USD 2-3 trillion from illegal trade being tracked and returned to victims.

Interpol, working in conjunction with law enforcement agencies and private financial sectors across its 196 member countries, is committed to combating the rising tide of fraud perpetrated by illicit traders. These criminal activities encompass a wide spectrum, including drug trafficking, human trafficking, arms dealing, and the illicit movement of financial assets.

Stock emphasized the urgent need to establish mechanisms for monitoring transactions within the global banking network. Currently, efforts are underway to engage banking associations worldwide in setting up such a framework. However, Stock highlighted the enormity of the challenge, noting that between 40% and 70% of criminal profits are reinvested, perpetuating the cycle of illicit financial activity. The lack of real-time information sharing poses a significant obstacle to law enforcement agencies in their efforts to combat money laundering and illegal trade.

Stock underscored the role of Artificial Intelligence (AI) in exacerbating this problem, citing its use in voice cloning and other fraudulent activities. Criminal organizations are leveraging AI technologies to expand their operations and evade detection on a global scale. Stock emphasized the importance of enhanced cooperation between law enforcement agencies and private sector banking groups. Realtime information sharing is crucial in the fight against illegal wealth accumulation.

Drawing inspiration from initiatives such as the “Singapore Anti-Scam Centre,” Stock called for the adoption of similar models in other countries to strengthen the collective response to financial crimes. In conclusion, Stock’s revelations underscore the pressing need for concerted action to combat global financial crimes. Enhanced cooperation between public and private sectors, coupled with innovative strategies for monitoring and combating illicit transactions, is essential to safeguarding the integrity of the global financial system.

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Policy&Politics

FM defends Atal Pension Scheme, highlights guaranteed returns

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Finance Minister Nirmala Sitharaman defended the Atal Pension Yojana (APY) against Congress criticism, asserting its design based on choice architecture and a guaranteed minimum 8% return. She emphasized the scheme’s opt-out feature, facilitating automatic premium continuation unless subscribers choose otherwise, promoting retirement savings. Sitharaman countered Congress allegations of coercion, stating the APY’s guaranteed returns irrespective of market conditions, supplemented by government subsidies.

Responding to Congress’s claim of scheme misuse, Sitharaman highlighted its intended beneficiaries – the lower-income groups. She criticized Congress for its alleged elitist mindset and emphasized the scheme’s success in targeting the needy. Sitharaman accused Congress of exploiting vote bank politics and coercive tactics, contrasting it with the APY’s transparent framework. The exchange underscores the political debate surrounding social welfare schemes, with the government defending its approach while opposition parties raise concerns about implementation and efficacy.

Finance Minister Nirmala Sitharaman’s robust defense of the Atal Pension Yojana (APY) against Congress criticism highlights the ongoing debate over social welfare schemes in India. Sitharaman’s assertion of the APY’s design principles, including its opt-out feature and guaranteed minimum return, underscores the government’s commitment to promoting retirement savings among lower-income groups. The Atal Pension Yojana, named after former Prime Minister Atal Bihari Vajpayee, was launched in 2015 to provide pension benefits to workers in the unorganized sector. It aims to address the significant gap in pension coverage among India’s workforce, particularly those employed in informal and low-income sectors. The scheme offers subscribers fixed pension amounts ranging from Rs. 1,000 to Rs. 5,000 per month, depending on their contribution and age at entry, after attaining the age of 60. Sitharaman’s response comes after Congress criticism alleging the APY’s inefficacy and coercive tactics in enrolment.

Congress General Secretary Jairam Ramesh described the scheme as poorly designed, citing instances of subscribers dropping out due to unauthorized account openings. However, Sitharaman refuted these claims, emphasizing the APY’s transparent and beneficiary-oriented approach. The finance minister’s defense focuses on three key aspects of the APY: Choice Architecture: Sitharaman highlights the opt-out feature of the APY, which automatically continues premium payments unless subscribers choose to discontinue.

This design element aims to encourage long-term participation and ensure consistent retirement savings among subscribers. By simplifying the decision-making process, the scheme seeks to overcome inertia and promote financial discipline among participants. Guaranteed Minimum Return: Sitharaman underscores the APY’s guarantee of a minimum 8% return, irrespective of prevailing interest rates. This assurance provides subscribers with confidence in the scheme’s financial viability and incentivizes long-term savings.

The government’s commitment to subsidizing any shortfall in actual returns further strengthens the attractiveness of the APY as a retirement planning tool. Targeting the Needy: Sitharaman defends the predominance of pension accounts in lower income slabs, arguing that it reflects the scheme’s successful targeting of its intended beneficiaries – the poor and lower-middle class. She criticizes Congress for its alleged elitist mindset and suggests that the party’s opposition to welfare schemes like the APY stems from a disconnect with the needs of marginalized communities. Sitharaman’s rebuttal also addresses broader political narratives surrounding social welfare policies in India.

She accuses Congress of exploiting vote bank politics and coercive tactics, contrasting it with the transparent and inclusive framework of the APY. The exchange underscores the ideological differences between the ruling Bharatiya Janata Party (BJP) and the opposition Congress, with each side advocating for their vision of social welfare and economic development. In addition to defending the APY, Sitharaman’s remarks shed light on the broader challenges and opportunities facing India’s pension sector.

Despite significant progress in expanding pension coverage through schemes like the APY, the country still grapples with issues such as financial literacy, informal employment, and pension portability. Addressing these challenges requires a multifaceted approach involving government intervention, private sector participation, and civil society engagement.

As India strives to achieve its vision of inclusive and sustainable development, initiatives like the APY play a crucial role in promoting economic security and social equity. Sitharaman’s defense of the scheme underscores the government’s commitment to addressing the needs of vulnerable populations and ensuring their financial well-being in the long run.

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Economic

Regulatory steps will make financial sector strong, but raise cost of capital

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India’s financial system regulator, the Reserve Bank of India (RBI), is demonstrating a serious commitment to improving governance and transparency at finance companies and banks, with the RBI’s recent measures aimed at curtailing lenders’ overexuberance, enhancing compliance culture and safeguarding customers.

While the global ratings firm has appreciated the RBI’s “diminishing tolerance for non-compliance, customer complaints, data privacy, governance, know-your-customer (KYC), and anti-money laundering issues”, it has cautioned that increased regulatory risk could impede growth and raise the cost of capital for financial institutions. “Governance and transparency are key weaknesses for the Indian financial sector and weigh on our analysis. The RBI’s new measures are creating a more robust and transparent financial system,” says S&P Global Credit Analyst, Geeta Chugh. “India’s regulator has underscored its commitment to strengthening the financial sector. The drawback will be higher capital costs for institutions,” Chugh cautions.

The RBI measures include restraining IIFL Finance and JM Financial Products from disbursing gold loan and loans against shares respectively and asking Paytm Payments Bank (PPBL) to stop onboarding of new customers. Earlier in December 2020, the RBI suspended HDFC Bank from sourcing new credit card customers after repeated technological outages. These actions are a departure from the historically nominal financial penalties imposed for breaches, S&P Global notes.

Besides, as the global agency points out, the RBI has decided to publicly disclose the key issues that lead to suspensions or other strict actions against concerned entities and become more vocal in calling out conduct that it deems detrimental to the interests of customers and investors. “We believe that increased transparency will create additional pressure on the entire financial sector to enhance compliance and governance practices,” adds Chugh. The global agency has also lauded the RBI’s recent actions demonstrating scant tolerance for any potential window-dressing of accounts.

These actions include the provisioning requirement on alternative investment funds that lend to the same borrower as the bank finance company. Amidst the possibility of some retail loans, such as personal loans, loans against property, and gold loans getting diverted to invest in stock markets and difficulty of ascertaining the end-use of money in these products, S&P Global underlines the faith of market participants that the RBI and market regulator, the Securities and Exchange Board of India, want to protect small investors by scrutinizing these activities more cautiously.

On the flip side, at a time of tight liquidity, the RBI’s new measures are likely to limit credit growth in fiscal 2025 (year ending March 2025). “We expect loan growth to decline to 14 per cent in fiscal 2025 from 16 per cent in fiscal 2024, reflecting the cumulative impact of all these actions,” says Chugh. The other side of the story is that stricter rules may disrupt affected entities and increase caution among fintechs and other regulated entities and the RBI’s decision to raise risk weights on unsecured personal loans and credit cards may constrain growth. Household debt to GDP in India (excluding agriculture and small and midsize enterprises) increased to an estimated 24 per cent in March 2024 from 19 per cent in March 2019. Growth in unsecured loans has also been excessive and now forms close to 10 per cent of total banking sector loans.

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