India Last Week: September 20-26, 2021

Sensex crosses 60,000, Quad complements AUKUS

Some of the most significant events for India last week took place outside the country’s borders. No, we don’t quite mean India’s Prime Minister mingling with the high and mighty of global power at the annual meeting of the UN General Assembly and on its sidelines. For one, a startup founded in Chennai in 2010 and headquartered now in San Mateo, California, Freshworks, had a successful initial public offering, and listed on Nasdaq. For another, the US Fed, at its meeting last week, talked about tapering its asset purchase (read dollar creation) programme, instead of actually starting the taper. The Fed could start tapering in November and wind up asset purchases by the middle of next year and come to rate changes later. This has left portfolio flows to emerging markets undeterred, and India’s benchmark stock market index, the Sensex, crossed 60,000 for the first time.

Freshworks raised $1.04 billion, the share price rose one-third post listing, raising the value of the company to $13 billion. Two-thirds of the company’s 4,300 employees own stock in the company and 500 of them have become crorepatis (multimillionaires, one crore being 10 million).

This inspires many more young people to start up, existing startups to go public, and share wealth. Early investors in the company have made a killing and, armed with pots of gold, are looking around to strew that treasure. Venture capital makes out as if it does serious analysis of a startup’s business model, its team’s execution capability and the potential size of the market and such other metrics, but quietly follows a method summed up as spray and pray. Some of what you have sprayed would, hopefully, stick and generate fat enough returns to let you stop worrying about those bits that did not do anything of the sort.

Freshwork’s homespun CEO, Mathrubootham, is a diehard fan of Rajnikanth, and makes no bones about it. He studied at Sastra Engineering College, not at any Indian Institute of Technology. This matters, too, for smashing the myth that you need some elite markings to succeed in the startup ecosystem. A 17-year-old Chennai lad recently spotted that the ticket booking platform of the Indian Railways, developed and run by IRCTC, had a major bug, which could permit a hacker to steal personal data of the site’s users and even cancel their tickets or book them on journeys to anywhere from Kashmir to Kanyakumari. He might now be inspired to start up, rather than swot for an exam that would get him recruited into the smothering security of the civil service.

Other extraterritorial developments that matter to India were the formation of a new security pact among Australia, Britain and the US, dubbed AUKUS, and further strengthening of the Quad grouping of the US, Japan, Australia and India, with a meeting, in person, of the heads of governments of the four nations in the US. The Quad and AUKUS both are part of the strategic muscle that, it is hoped, would deter China from initiating conflict in the region. And that suits India just fine.

China was, naturally, furious. But France was apoplectic, at this turn of events. AUKUS was formed in stealth, of which the nuclear submarines Australia gets under the pact from the US and the UK are capable. The formation of the new Anglosphere in geopolitics, besides the Five-Eyes intelligence sharing grouping of the US, Canada, Britain, Australia and New Zealand, betrayed France, America’s oldest ally, who supported the colonists in their war of independence against the British. The French had had an agreement to supply diesel electric subs to Australia, and that contract drowned in the wake of the nuclear sub deal. But more than the commercial loss, what mattered to France was that it was kept in the dark about AUKUS and the cancellation of its submarine contract. France recalled its ambassadors from the US and Australia in protest. Biden called Macron to mollify him and publicly accepted that things could have been done more transparently. More significantly, Macron got Biden to endorse the notion that a new geopolitical identity for Europe and befitting strategic capability, which Macron had been batting for since Donald Trump treated the Nato as yet another platform to declare America’s greatness and the dispersibility of allies.

The Quad has committed to increase vaccine supplies, and to create a framework for building infrastructure that would contrast with China’s opaque Belt and Road initiative, which has produced unexpected results such as Sri Lanka having to surrender its Hambantota Port to the Chinese, after failing to service the loan it had taken on for that bit of China’s Belt and Road.

A different kind of development abroad with an impact on India is asymmetric lifting of travel restrictions. The US is lifting them for those who have been vaccinated twice. So is the UK, but the UK has not been willing, so far, to accept the vaccine certificates issued by Cowin, the centralized digital platform that tracks all vaccinations in India and issues certificates. This refusal to accept a vaccine tracking system far superior to anything that the UK has is certainly irksome, apart from the failure, so far, on the World Health Organisation’s part, to authorize India’s indigenously developed vaccine, Covaxin. That rules out those vaccinated with Covaxin from travel eligibility. The WHO is slated to take up Covaxin authorization on October 6.

The US Food and Drug Administration has cleared booster doses for the elderly, and the vulnerable, adding to further restrictions on Pfizer and Moderna vaccine availability for export outside the US. That means that India’s laggards in the vaccine development race, such as Zydus-Cadila, would still find a large market abroad. India has decided to resume vaccine exports from October.

Global oil and gas prices have risen, creating pain for Indian consumers hampering economic recovery around the world. It is to be hoped that Opec would loosen its production cuts and raise supplies. Climate change that prolonged the winter cold in the northern hemisphere and raised summer temperatures has increased energy demand, putting particular strain on gas supplies.

China’s regulators have barred trading and mining of cryptocurrencies, sending jitters down the spines of those who have invested in that asset.

India and Iran sent out a common message on Afghanistan, at the level of their foreign ministers, meeting in New York, seeking an inclusive government, and condemning outside interference, code for Pak intrigue. At the UN, Prime Minister Modi extolled Indian democracy, and democracy in general, while condemning countries that export terror, a not-so-intricate code for Pakistan.

The World Health Organisation suddenly worsened the quality of life across India, revising downward its norms for tolerable air quality.

Sebi’s T+1 settlement norms, shortening settlement of trade from the present two days after the transaction, T+2 in the jargon, pose a problem for global custodian banks used by portfolio investors that would have to settle payments earlier. This opens up an opportunity for blockchain-based solutions that enable immediate and transparent payments, in contrast to legacy settlement by the SWIFT inter-bank network, which minds time zones and working days.

OECD and ADB have cut India’s growth forecast for the current fiscal and the next one, incorporating the lull in economic activity imposed by the second wave of Covid. This has as much practical impact as someone discovering that he has been speaking in prose all along.

The GST Council has clarified that service exports by Business Process Outsourcers will not be taxed as intermediaries, but get the benefit of zero-rating as exports, paving the way for litigation-free refunds of input taxes paid.

India improved its rank on the World Intellectual Property Organisation’s Global Innovation Index, climbing two rungs to 46th. China ranks 12th, Singapore 6th, and South Korea has made it to the top 5. Clearly, India has a lot to do to become innovative outside the realm of social media mythmaking, in which Indians have little to learn from the rest of the world.

Facebook India has appointed a former IAS officer as its public policy chief, complying with intermediary guidelines under the Information Technology Act and drawing on the insight that you set a thief to catch a thief.

Last week, China announced completion of a key, 295 km segment of the Beijing-Lhasa expressway.

In a piece of disappointment for the Whatsapp factory that constantly parades foreign validation for outlandish claims of Indian superiority, Nehruvian perfidy or Muslim treachery, as the case may be, Washington DC-based non-profit, Pew Research Centre, released a report that said, in India, Muslim and Hindu population proportions have been more or less stable since Independence and that fertility rates were converging,

In continuing preparations for the Uttar Pradesh assembly elections early next year, chief minister Yogi Adityanath expanded cabinet, to accommodate more caste aspirations. However, all is not quiet on the religious-nationalist front. The head of the Akhil Bhartiya Akhada Parishad, Narendra Giri, died in mysterious circumstances. Another sadhu is under a cloud of suspicion. The Central Bureau of Investigation has taken over the case.

Large consignments of heroin have been confiscated from Mundra Port and off the Gujarat coast. India is part of the drug trafficker’s route out of Afghanistan, clearly. The port belongs to Adani, and some Modi critics have been quick to draw linkages that fly in the face of the simple reality that whether a port is public or private, customs clearance is done by government personnel.

Former Nepalese prime minister KP Sharma Oli revealed that in 2015, PM Modi’s envoy, then foreign secretary S Jaishankar, warned the government against adopting a new Constitution that did not reflect the aspirations of the Madhesis, whose ancestors had migrated from India’s plains. This was the beginning of the deterioration of India’s ties with Nepal, which is now trying out an unfamiliar brinksmanship between New Delhi and Beijing.

After a series of high-profile defections from the BJP to the Trinamool Congress in West Bengal, the party high command has removed state party chief Dilip Ghosh. That is a little strange — after all, the BJP claims the high command culture is entirely that of the Congress.

The Congress displayed its high-command culture in Punjab, micromanaging its cabinet formation, after having forced Captain Amarinder Singh to quit crying humiliation, and nominated a Dalit face as the new chief minister. Chief minister Channi then had to bear with the suggestion that he was a placeholder, as the Congress declared that Punjab would go to the polls under Channi and Sidhu, the latter being seen my most traditional Congressmen as an opportunist.

Rajasthan amended its Marriage Act of 2009 to make it mandatory to register marriages, and for parents to inform the authorities if their offspring were below the minimum age at the time of marriage. The move has spawned needless controversy, the BJP claiming the government was encouraging child marriage.

An indigenously developed helicopter-launched antitank missile, it was announced, is on the verge of getting certified for use. While this is heartening, the news of an army helicopter crashing in Udhampur, Jammu and Kashmir, killing both the pilot and the co-pilot, was not.

In the Dakshina Kannada part of Karnataka, Muslim vigilantes joined Hindutva ones in enforcing segregation of people from different faiths. Karnataka made news for a Scheduled Caste man being fined for entering a temple, to finance the cleansing rites this called for, according to the temple priest and village notables. They first have to deal with the police, however, for this rights violation.

Andhra Pradesh and Odisha were warned to prepare for Cyclone Gulab. Orissa has made significant progress in averting loss of life and property in natural disasters, since the supercyclone of 1999 that had killed 10,000 people (unofficial estimates are five times that much) and 300,000 heads of cattle. The state presents a case study in disaster resilience that is fast becoming relevant for all parts of India, given climate change and the rising frequency of extreme weather events.

Kerala saw the controversy over a Christian bishop’s remarks over narcotics jihad continue, although there were also multifaith solidarity meetings to denounce such communalization of a social evil. Kerala announced a plan to set up a series of digital de-addiction centres, given the prevalence of the problem.

Assam witnessed violence in the wake of government moves to evict encroachments on government land. A photographer engaged by the district administration to videograph the proceedings became the object of much watched photography when he jumped and stomped on the body of one of those killed in police firing. The chief minister of Assam blamed the radical Islamist group, Popular Front of India, for the violence.

One of the icons of India’s feminist movement, developmental sociologist, author and activist Kamala Bhasin passed away.

Protesting farmers have issued a call for a Bharat Bandh on September 27, Monday, with the support of Opposition parties.

The trial run of a national mission to map local cultures and create a database of arts and artistes has commenced, four years after it was announced.

The government decided to not conduct a caste census, much to the displeasure of BJP ally, Janata Dal (U). The government has also proposed to dilute the environmental clearance for nuclear plants by shifting clearance to the Atomic Energy Regulatory Board.

Judicial interventions

In the face of the government taking refuge in national security to justify refusing to come clean on deployment of spying software, Pegasus, the Supreme Court has decided to to set up its own inquiry into the Pegasus affair. The Court allowed women to take the National Defence Academy entrance examination to take place this November, rejecting the govt’s plea to postpone admitting women to the NDA to the next year.

The Court also dismissed a plea by the Padamanabha Swamy Temple Trust of Thiruvananthapuram, Kerala, against an audit of its finances for the past 25 years. The temple had made news when some of its vaults were opened to reveal unexpected treasure. The trust is headed by the erstwhile royal family of Travancore, whose vestigial eminence lives on in some circles of Kerala’s capital.

The Madras High Court has found a man guilty of abetment to suicide by his wife, who was hurt by his description of her as dark and ugly and demand for divorce, on a settlement of Rs 25,000, within four weeks of marriage.

In a development that would gladden many a corporate heart, the Income Tax Appellate Tribunal has ruled that it is perfectly fine to set off losses against gains across asset classes, shares vs real estate, for example.

Google has sued the Competition Commission of India over the media leak of a CCI director general’s report on alleged anticompetitive behaviour by Google.

The Economy: foreign companies control more than half the domestic entertainment TV market

Zee Entertainment Enterprises Ltd and Sony Pictures Networks India entered into an agreement to merge, with Sony holding 52.93% in the merged entity. The combine would have 27% share of the market. Together with Walt Disney’s 24%, foreign controlled companies will now own more than half the entertainment television market in India. Zee News is not part of the deal, foreign investment in news and current affairs being restricted.

The Deposit Insurance Corporation of India will pay depositors up to Rs 5 lakh for deposits in failed banks such as Punjab Maharashtra Cooperative Bank and 20 other cooperative banks.

Oyo Hotels and Homes eyes a valuation of $12 billion in a domestic IPO, where the company would raise some $1.2 billion. Founder Ritesh Aggarwal is not to sell any of his 30% stake.

Tata Power will raise $750 million for green business. This would have been impressive, had not Ambani announced an investment of $10 billion and the Adanis twice that much in green energy. Indians are increasingly used to large investment announcements in dollar terms, probably reflecting the role Foreign Portfolio Investors play in propping up market valuations of companies.

Air taxis are on their way, British Vtol announced an order to supply Marubeni with 200 craft, and German Volocopter GmbH would manufacture its offering with Geely in China, initially for 150 to be deployed in that country.

The Competition watchdog fined two beer companies United Breweries and Carlsberg for price fixing, while Anheuser Busch Inbev, while a colluder, was exempted for cooperation.

WPP has paid a fine of $19.2 million to settle Foreign Corrupt Practices Act charges for paying bribes in India during 2017, supposedly for ads for the governments of Andhra Pradesh and Telangana. Amazon is also investigating charges of corruption in its India operations. GST, demonetization of large currency notes and the Modi magic have not quite made corruption disappear, it would appear.

There has been some action in telecom. The government has asked the regulator, TRAI, to recommend new base prices for spectrum auctions, the current prices being seen to be too high. The Department of Telecommunications will ask the Supreme Court if it could allocate space communications spectrum without carrying out auctions. Bharti, which is the largest shareholder in OneWeb, a satellite communications company that hopes to offer satellite-based internet services in India, has asked for such administrative allocation. In 2012, the Supreme Court had cancelled 121 telecom licences saying that natural resources like spectrum can be allocated only via auctions. That erroneous judgment had tainted the incumbent Congress-led government with corruption charges running to lakhs of crore rupees.

A subsequent clarification the government sought from the Supreme Court on the narrow question as to whether auctions are always a pre-requisite for allocating natural resources had elicited a definitive response from a Constitution Bench that allocation of natural resources was a matter of government policy, and there was no particular sanctity to the use of auctions for such allocation.

The BJP had ignored this clarification, as it diluted the scam charge the public had bought into. To keep up with that disregard, it has to ask the Court once again a question that has been asked and answered.

After July’s customer acquisition numbers were revealed, Jio has 347 million active users, Bharti 346 million and Vodafone-Idea, 238 million.

A new tendency has come to light for small retail outlets to procure directly from cash and carry wholesalers or directly from companies. HUL’s Shikhar app now accounts for 10% of sales, and companies get an idea of what kind of goods are sold in what kind of markets. This is not good news for traditional distributors and wholesalers.

The Tatas have begun testing out their super app with their 700,000 employees, as part of a big push into digital business.

The Employees’ Provident Fund Organisation said 1.5 lakh members, net, had enrolled in July, swelling the ranks of formal sector workers.

Covid

India administered 51.6 million vaccine doses, and the active case load dipped below 300,000, the lowest for 191 days. Many more states have announced school reopening, with pressure mounting from education sector specialists and activists concerned about the impact of prolonged lockdown on the educational standards of the less well-off, who do not fare well in online education.