India Last Week: Aust 23-30, 2021

Asset monetization, Islamophobia in the background of Terror in Afghanistan

In a week dominated by the terror strike on Afghanistan that killed at least 170 people, including 13 US soldiers, the news in India would have looked humdrum, but for the sheer scale of a National Asset Monetisation Pipeline announced by the government: Rs 6 lakh crore. That number is Six followed by 12 zeroes, or Rs 6 trillion, which trills just right when the US Congress is preparing to reconcile a $3.5 trillion infrastructure bill —until you convert those rupees into dollars ($81 billion) or see those figures as proportions of domestic output (16% for the US, 2.8% for India).

Under the scheme, in return for cash upfront, the government would hand over to private operators assorted state-owned assets, ranging from highways and airports to mines, for a finite period, during which their new operators would sweat these assets to their maximum potential, improving capital utilization and income generation. At the end of the period, the assets would be handed back to the government.

The very fact that there are these many assets built up just in the government sector to be monetized disproves the thesis, put forward with naïve zeal by the Modi government’s supporters, that nothing much had happened in India in its first 70 years of Independence. But that is only a political inconvenience. The real problem with the capital recycling plan is execution capability, to prevent monopolies and rent-seeking behaviour.

Those who have studied the privatization of water utilities in different parts of the world have noticed that the exercise is a success in places where the regulatory capacity is sound enough to ensure that the privatized utility does not overcharge, ensures quality, does not deny access to the poor who cannot afford commercial rates and maintains the assets well. Where such regulatory capacity existed, such utilities were run efficiently in the public sector, too, and there wasn’t much of a case for handing it over to the private sector.

The terror strike on the Kabul airport, claimed by the Islamic State-Khorasan Province, makes several things clear. The American occupation was half-hearted and ineffectual: the Taliban ran an efficient poppy-growing, heroin-extracting drug trade, besides collecting rents from mining, right under the American noses that, otherwise, poked into the affairs of ordinary Afghans to their mortification. More extreme jihadi groups emerged and grew, and the Afghan government, the Americans and the Taliban were powerless to wipe out these challengers. America was unable to stop Pakistan’s Inter-Service Intelligence from helping and nurturing terror outfits as a means of obtaining unconventional strategic depth.

Senior figures in Pakistani politics gloated that the Taliban would apply themselves now to Pakistan’s obsessive, compulsive disorder, ‘liberating Kashmir from India’. The danger of jihadi fighters crossing over the Hindu Kush to stir up trouble in Kashmir is real enough. But the more potent threat is radicalization of the backlash against vicious Islamophobia in other parts of India. In Madhya Pradesh, a Muslim bangle seller was beaten up by a lynch mob. So exemplary was the police response that, two days later, a couple of toughs took it upon themselves to ascertain a biscuit seller’s identity, demanded his Aadhaar (a biometric unique identity document most residents have but falls short of proof of citizenship), and beat him up when he could not produce the document. When the state takes a lenient view of mobs assaulting members of a religious minority, it is not just the victims’ co-religionists who suffer. The less empowered in society at large turn vulnerable, in the face of those who can summon and deploy brute force to meet their ends. The rule of law and democracy get hollowed out.

The courts do offer resistance to both lawless bigotry and laws that build bigotry into the social norm. The Gujarat High Court had struck down the state’s ‘love jihad’ law, which purports to stop religious conversion by force or deception but effectively criminalises interfaith marriages in general. Last week, the government of the state decided to file an appeal against that order of the High Court. At the same time, a Bareilly district court released 12 members of the Tablighi Jamaat, who had been sent to jail in the initial frenzy over the group’s congregation in Delhi serving as a deliberate super-spreader of Covid.

However, the Courts are not uniformly enlightened. A Chhattisgarh high court ruling defended marital rape and the Madras High Court observed that failure to resist sexual assault is a sign of consent, in blithe disregard of the often petrifying psychosomatic effect of sexual assault on women.

Courts in India are prone to the caprice of trespass – into the legitimate realm of policy and regulation. The Madras High Court ordered that automobile insurance should commence for a period of five years. This would raise the cost of car ownership and depress car sales, at a time when the government is debating to bring down the goods and services tax on cars, to boost sales. Auto components are a vital, employment-intensive sector for India and stalled automobile sales hurt. The good news is that Tesla, the overhyped pioneer of battery-run electric cars under threat from nimbler Chinese rivals that the media ignore, is in talks with three major component makers in India to source parts.

Since the beginning of the financial year, that is, April 1, credit growth has been marginally negative, thanks to the deadly second wave of the pandemic. But Nomura’s Business Resumption Index has crossed the pre-pandemic level. The demand for office space is robust, especially in Tier 2 and Tier 3 towns, as is the demand for information technology talent. More startups are gearing up to go public, including in the US. ReNew Power, with 18 GW wind and solar assets in its portfolio, got listed on Nasdaq via merger with a Spac (a Special Purpose Acquisition Company). Earlier, an Indian healthcare startup, Glocal Healthcare Systems had also performed a Spac listing, merging with two other telemedicine forms to be listed as UpHealth.

The work from home (WFH) and digitization wave across the world, and the spurt in biotechnology research should boost demand in India for quality higher education in engineering, computing and the disciplines of biology, biochemistry, genetics, bio-informatics and pharmacology that interact to extend the frontiers of medicine.

The government has invited expressions of interest from companies to set up fabs in India to manufacture semiconductors. This is a sound move. The government has also liberalized the norms for people to use drones, allowing drones to operate without a remote pilot in certain zones and carry a payload of 500 kg. India might soon have busy executives zipping overcrowded slums and congested roads in airborne taxis.

The government further raised the age limit for people to join the National Pension System, from 65 to 70, and people can stay invested till they turn 75. The NPS was created primarily to wean civil servants off defined benefit pensions to the defined contribution model, so that the pension pot is funded and properly invested. But it also offers savers other than civil servants the opportunity to save at their pace, and invest in diverse asset classes and choose their own asset manager, all at a fraction of the cost of investing via a mutual fund.

In another sensible move, the government has launched national, as distinct from state-specific, registration of vehicles, with numbers beginning with the code BH, standing for Bharat. Initially, people with transferable jobs alone would be eligible to register their cars under this scheme, which would do away with the need to transfer registration to another state when the owner changes domicile.

Samsung was the only company, among the 16 companies in the run for obtaining subsidies under the government’s Production-Linked Incentive (PLI) scheme for making mobile phone handsets, and has claimed Rs 900 crore. Meanwhile, the Cabinet Secretary, the seniormost civil servant in the country, has written to all departments, noting that the PLI scheme is bereft of Indian-made content.

If imports dominate the ‘Make-in-India’ value chain, politics was dominated by internal crises for the Congress in Punjab and Chattisgarh, triggered by Rahul Gandhi’s effort to patronize a new line of leaders loyal to him, as distinct from the old guard who dominate the party. A colourful cricketer-turned-comedian-turned politician, Navjot Singh Sidhu has been appointed by Rahul Gandhi as the chief of the Punjab Provincial Congress Committee, much against the wishes of the incumbent chief minister, Captain Amarinder Singh. Sidhu has been trying to undermine the chief minister in various ways. The feud is guaranteed to affect the party’s prospects in the assembly elections slated for early next year.

The assembly elections in Chhattisgarh, another of the few states ruled by the Congress, are due only in 2023. The incumbent chief minister Bhupesh Baghel would have faced no problem but for Rahul Gandhi’s talk of a rotating chief ministership, which has turned the head of another leader, TS Singh Deo, who wants to be chief minister for the second half of the term. Baghel has outplayed Rahul Gandhi and his challenger, for the time being. But the Gandhi scion’s potential to sow the seeds of dissidence and death-wish is on display across the different state units of the Congress.

The BJP had recently resurrected from oblivion a strongman from the Konkan region, Narayan Rane, a defector from the Congress, where he could not quite rise to the top after his defection from the Shiv Sena, which had made him chief minister of Maharashtra for nine months in 1999. He made news last week, saying he would have slapped the current chief minister of Maharashtra Udhav Thackeray for a statement he had made, which riled the Shiv Sena, which rules the state in alliance with the Nationalist Congress Party and the Congress, sufficiently to arrest him. He got bail, of course. But, in Uttar Pradesh, a BJP leader has filed a case against Thackeray for a less-than-reverential reference he had made about the UP chief minister, Yogi Adityanath.

In Assam, a local separatist group fired bombs at a convoy of trucks and burnt six. India is, at the best of times, very much a nation still in the making, with diverse elements of schism immanent in the multiple identities that constitute the nation.

India delivered 48.4 million vaccine doses over 23-29 August. The number of active infections had dipped to 333,924, the lowest in 155 days on Monday, but the active caseload has climbed by 34,634 by Sunday. Forecasts of a third wave of the pandemic have been pushed back to winter.