Author: cprindia

Watch the full video (above) of the panel discussion on ‘Article 370: The Road Ahead’ featuring Tilak Devasher, Member of the National Security Advisory Board and Consultant at Vivekananda International Foundation; Ambassador Shyam Saran, Senior Fellow at CPR and former Foreign Secretary; moderated by Yamini Aiyar; President and Chief Executive at CPR.

The panel examined the implications of the abrogation of Article 370 and 35A in early August on domestic and international politics. It explored questions related to national security, centre-state relations, geo-politics in South Asia, and Indo-US relations. It concluded with a discussion on the road ahead for India.

The question and answer session that followed can be accessed here.

Over the years, CPR faculty has closely studied the history and politics of Jammu and Kashmir (J&K). Former Senior Fellow, Late B G Verghese’s scholarship on J&K brought nuance and clarity to the complex discourse around the region. A primer written by him presents the story of Jammu and Kashmir post 1947, contextualising various events and issues, to help better understand the history of the region. The primer can be accessed here.

Against the backdrop of the contemporary political moment, CPR scholars have been closely watching and studying the implications of the Government of India’s recent move to abrogate Article 370 and Article 35A. Read the analysis in the curated media commentary below:

Risky moves in Jammu and Kashmir by Ambassador Shyam Saran
Ambassador Shyam Saran writes in Business Standard about the implications of abrogating Article 370, highlighting that ‘things may not go according to the government script’ and hence there is a need to evaluate and minimise risks. Saran sheds light on the risk of increased militancy and violence in the Valley and chances of the situation being exploited by Pakistan, leading to an increase in cross-border terrorism. He further highlights that downgrading Jammu and Kashmir’s status to a Union Territory, albeit temporary, will be seen as ‘demeaning and humiliating’ by the Valley’s population.

Global battleground after Operation 370 by G Parthasarathy
G Parthasarathy writes in Livemint about the international response to the abrogation of Article 370, shedding light on the immediate diplomatic offensive New Delhi launched to pre-empt any possibility of major power centres like Moscow, Washington, Beijing, Tokyo, London and Paris, issuing ill-advised statements like Donald Trump’s comments offering mediation during his meeting with Imran Khan in Washington. Against the backdrop of diplomatic pressure from Pakistan, Parthasarathy highlights that ‘India can tackle an international diplomatic offensive around Kashmir, but sensitivity on the ground is crucial’, given that what the region requires most of all, is ‘effective, sensitive, and corruption-free governance.’ ​

J&K move: The real test begins now by Brahma Chellaney
Brahma Chellaney writes in Hindustan Times about how ‘India will need to display political will to tackle Pakistan — which is emboldened by US support.’ Chellaney sheds light on Donald Trump’s Faustian bargain with the Taliban and Pakistan’s role in extricating the US from Afghanistan. Chellaney writes that through the abrogation of Article 370, India ‘has pre-emptively sought to safeguard its security before America hands Afghanistan back to the same terrorist militia it removed from power in 2001.’

No, Modi’s Kashmir policy isn’t new. He’s only continuing what Nehru started in the 1950s by Sandeep Bhardwaj
Sandeep Bhardwaj writes in ThePrint about how successive governments since the 1950s have eroded Kashmir’s autonomy and taken greater control of its governance structure. Bhardwaj points that the people of the state have been denied their democratic voice and highlights that ‘the ‘integration’ process has less to do with winning the trust of Kashmiris and more to do with finishing the nationalist project.’ He further explains that the Centre’s move will ‘undermine mainstream Kashmiri leadership; further alienate Kashmiri people; give a new propaganda tool to the militants; and offer diplomatic ammunition to Pakistan.’

India’s journey towards centralisation by Yamini Aiyar
Yamini Aiyar writes in Hindustan Times about how the abrogation of Article 370 and Article 35A has substantially weakened India’s federal aspiration, a dangerous development for Indian democracy. Aiyar points to how federalism is now positioned as an impediment to development and the undermining of the moral authority of regional parties to safeguard India’s federal system. Aiyar writes that ‘India is now firmly on the path to centralisation of power and may well be inching toward transforming into a unitary rather than federal state.’

The Morning After by Shyam Saran
Ambassador Shyam Saran writes in India Today about the domestic and international repercussions of India’s decision to abrogate Article 370. He points to the concern of the northeastern states regarding Article 371, which confers special status on northeastern states. He explains that downgrading Jammu and Kashmir’s status to a Union Territory could set a dangerous precedent and constrain the autonomy of states. Saran also highlights that widespread violence in the Valley and heavy-handed pacification will turn the international spotlight on the troubled region and diminish India’s standing, and thus the situation must return to relative calm soon, with heavy security presence thinned out.

India’s bold action, new posture take Pakistan and China by surprise by G Parthasarathy
G Parthasarathy writes in The New Indian Express about how in abrogating Article 370, India’s bold action directly challenged China’s control over territory ceded to it illegally by Pakistan, in Jammu and Kashmir, through reviving claims on Aksai Chin. Parthasarathy highlights that ‘Beijing now realises that India could well use this in future negotiations.’

Standing up to China-Pak Nexus by Brahma Chellaney
Brahma Chellaney writes in Open, the Magazine about how the constitutional change of abrogating Article 370 can enable India to tackle the Pakistan-China nexus more ably. Chellaney highlights that Beijing views the Indian portion of Jammu and Kashmir as India’s Achilles heel and Pakistan saw Article 370 as Indian acceptance that Kashmir is a disputed territory. He highlights that while in the short run, the security situation in the Kashmir Valley could worsen, over the longer term, the region’s greater integration and development are likely to contribute to the normalisation of the situation in the Valley.

Myths of Kashmir by Brahma Chellaney
Brahma Chellaney writes in Project Syndicate about how China and Pakistan have consistently undermined India’s territorial sovereignty in Jammu and Kashmir by defying fundamental international rules and norms. He highlights that while neither country has granted autonomy to its portion of the region, they have hypocritically protested India’s revocation of its special status. Chellaney states that until China and Pakistan change their ways, ‘India will have little choice but to take all necessary steps to protect itself.’

A frustrated Imran may step up offensive by G Parthasarathy
G Parthasarathy writes in The Hindu Business Line about how a combatant Pakistan will make the road to normalcy in Jammu and Kashmir doubly hard. Given the failure of efforts by Imran Khan to internationalise the Kashmir issue, Parthasarathy predicts that Pakistan could foment and revive violence in the region once curbs are eased.

The interplay between Kashmir and India’s democratic project by Neelanjan Sircar
Neelanjan Sircar writes in Hindustan Times about the health of Indian democracy in the light of the government’s Kashmir decision. Sircar highlights that ‘the litmus test for a democracy is not whether policy decisions have popular support. It is whether the policy decisions themselves are made through democratic procedure.’ He warns that democracies break down when masses start exhibiting anti-democratic preferences and when courts abdicate their constitutional responsibilities to block centralisation.

The Centre for Policy Research (CPR), Delhi in association with the Global Integrity Anti-Corruption Evidence Research Programme (GI-ACE) hosted a workshop focused on ‘Audit and Anti-Corruption Measures in India’ with a special focus on the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) and the Pradhan Mantri Gram Sadak Yojana (PMGSY). The workshop took place on Tuesday, 24th September 2019 and was conducted at CPR. The co-conveners of the workshop were Amrita Dhillon, who is currently Professor of Economics at King’s College London and Yamini Aiyar, President and Chief Executive of CPR.

The workshop sprung from a belief in the necessity to bring together government officials, policy activists, and researchers to deliberate on finding possible complementarities with two seemingly opposite methods of ensuring transparency and reducing inefficiency in government schemes. While policy activists have focused on the power of public audits as a forum to bring to light inefficiencies and corruption and have sought to formalise them into schemes thereby empowering beneficiaries, the government seems to have shifted to a technology based approach to deliver greater efficiency and target corruption. With a view towards securing a holistic view of this question, the workshop was successful in bringing together participants from the government, civil society, and academia. They ranged from organisations such as the Ministry of Rural Development, Comptroller and Auditor General’s Office, Indian Statistical Institute, Social Accountability Resource Unit, IDInsight, Azim Premji University, Accountability Initiative and the Brookings Institution to name a few.

The first session was chaired by Farzana Afridi from the Indian Statistical Institute and titled ‘Leakages in Central Schemes, Centralised Monitoring and Interaction with New Technologies’. It featured speakers from academia, policy practitioners, and the government who each sought to contextualise their experience within the ambit of either framing anti-corruption policy or studying its efficacy on the field.

Yamini Aiyar from CPR began the session by recounting her experience gleaned from having observed the implementation of MGNREGA since its inception and closely studied social audits in MGNREGA. She pointed to the importance of the scheme as an experimental ground for governance and citizen engagement through vehicles like social audits. However she also cautioned against an overemphasis on corruption at the cost of building state capability for effective implementation and the tensions between greater decentralisation and anti-corruption efforts. To reduce leakages, she underscored the importance of the need for enhancing capacities of the panchayats while roping in the government to be a part of the social audits which can be a rich source of feedback to judge the workings of their technological interventions. This was a point also echoed by Karan Nagpal, an economist at the consulting group IDInsight, who drew upon the firm’s groundwork experience as well as his own doctoral thesis research that emphasised the need to build capacity at the grassroots to overcome the difficulties that arise from a technological intervention.

The government officials who attended the session provided an invaluable insight into how the establishment looks at the issue of corruption through the lens of auditing and how technological innovations are conceived, adopted, tweaked and finally institutionalised.

Alka Upadhyay, Additional Secretary at the Ministry of Rural Development, detailed how the Ministry has moved to plug the main sources of leakages in MNREGA—namely wage siphoning, creation of fake beneficiaries and assets not getting created. According to her, aside from the oft cited Direct Benefit Transfer, an important technological intervention to obtain a finished asset has been geotagging- particularly in the PMGSY. She also highlighted the Ministry’s efforts to ensure transparency across multiple levels while still acknowledging that more needs to be done in this matter; an example cited was the possibility of making data on road maintenance mapped through geotagging and MIS publicly available thereby making it a powerful tool for social audits. Another area of improvement mentioned by her was in empowering citizen monitoring and building better mechanisms to track their complaints.

Sunil Dadhe—Director General of Audit (Central Expenditure)—sought to demystify the Audit approach to handling corruption. He explained the three approaches that Audit employs: a system-oriented approach which focuses on the system that creates a scheme where delivery doesn’t match expectations, a result-oriented approach which is focused on meeting pre-decided targets, and a problem-oriented approach which looks at specific instances that enhance audit risks. He highlighted the need to embrace technology in audits and bring about correlating data sets across various fields—something China has done to better combat air pollution.

An interesting point that arose during these discussions was the role of the citizen in demanding accountability. Keshav Desiraju, who retired as Secretary, Health & Family Welfare, spoke about how the state expects the citizen to demand accountability and is not predisposed towards providing it; a factor which perhaps explains the social audit falling out of favor as an anti-corruption measure.

The second session was chaired by Amrita Dhillon and titled ‘Accountability Initiatives’. The speakers in this session were practitioners and civil society activists from the social audit sphere who provided an incisive view on how grievance redressal works at the ground level and the multiple roles played by social audits as mechanisms for increasing awareness, providing a platform for complaint redressal and, formulating processes for grievance redressal against mistakes caused by technological intervention.

Rakshita Swamy from the State Accountability Resource Unit (SARU) built on the points made in the previous session by Sunil Dadhe and pointed out that Social Audit reports have great potential to be used in compliment to CAG audit reports—a practice already in place in Maharashtra and Andhra Pradesh. While highlighting the importance of an audit as a mechanism for spreading awareness and demanding accountability, they are also rich sources of qualitative data which can explain the ‘who, why, and how’ of scheme operations.

Anjor Bhaskar, faculty at Azim Premji University, drew on his fieldwork experiences in Jharkhand to illustrate the role social audits play as grievance redressal mechanisms when technological interventions create a plethora of new problems, probably most commonly seen with the stories of starvation deaths coming out of Jharkhand due to PDS denial caused from inefficient Aadhar linkage. Rajendran Narayanan, also at Azim Premji University, provided more detailed case studies expressing what he termed his ‘wariness about the techno-utopian way of making schemes efficient’. An interesting observation that Narayanan brought up was the use of messaging services like WhatsApp by frontline bureaucrats to convey decisions which obfuscates accessibility and erases trails which citizens cannot appeal against later.

A second point that Bhaskar sought to underscore was the availability of multiple datasets of rich data with the government but none of them are available for public scrutiny. The most obvious one he highlighted was the lack of Action Taken Report (ATR) availability in the public domain or on the internet. Another opaque avenue rich with data that he mentioned was the possibility of studying Gram Panchayat Development Plans (GPDP) to better understand the workings of the panchayat as well as its priorities.

Anindita Adhikari, currently a PhD student at Brown University, shared experiences from fieldwork conducted in Bihar as part of her ongoing doctoral thesis. She sought to explain the widespread adoption of Jaanch culture or a culture of inspections, often unplanned, random ones, comprising of surprise checks, individual checks, Lokpal inspections and, social audits. It was found that a lot of these random visits and checks are not explicitly audited but a way of maintaining a regular flow of work. However, it was observed that some of the reports coming out of these social audits were ambiguous and difficult to take action on. Another important factor was that panchayats were being kept out of the process of the social audits pointing to the need for giving them more formal responsibility when it comes to social audits.

The workshop culminated with a note of thanks delivered by co-convener Amrita Dhillon who drew notice to the breadth of topics covered throughout the day as well as appreciation for the sheer diversity of experts around the table. The daylong session was a fascinating, and rare, insight into a topic where two major stakeholders- the government and civil society are often at loggerheads, unable to see the other’s side. By bringing not just representatives from these two sectors, but also formal academics and private practitioners, the workshop helped foster substantive discussions based on a holistic understanding of the sector and generated avenues for further improvement, study, and implementation.

Getting around cities of the Global South usually involves travelling on cycle or in auto rickshaws, mini-buses, jeepneys and various such vehicles, all clubbed together under the term intermediate public transport or IPT. ‘Intermediate’, though, is a misnomer for auto rickshaws in Kolkata, where they function like a mainstream mode of transport.

A recently concluded study by Centre for Policy Research (CPR), Innovative Transport Solutions (iTrans) and Centre for Urban Economic Studies (CUES), Calcutta University, found that auto rickshaws are considered affordable, accessible, regular and safe, and comprise a significant component of the overall transportation network of the Kolkata. The study used GIS mapping to determine the routes and functioning of the IPT system in the city.

Why are auto rickshaws so popular in Kolkata?

High frequency operations, affordability and the convenience of doorstep-to-doorstep connectivity are some factors that make autos popular in the city. Almost 70 per cent of the respondents in the user survey used auto-rickshaws between every day and a few times a week while only 30 percent of the respondents used auto-rickshaws occasionally. The majority cited autos as the mode of choice for not just last mile connections but multiple legs of their daily commute. The study found that about 72% of the city’s municipal area is only half a kilometre away from an auto route.
The convenience of autos is also underscored by their intense usage even by those who own private vehicles. In a city where private vehicle ownership is low–12% of households in Kolkata own two-wheelers as opposed to 38% in Delhi and 8% own four-wheeled vehicles as compared to 20% in Delhi as per the Census. Interestingly, the study survey finds that 58% and 48% of daily auto users own four-wheelers and two-wheelers respectively. The emissions savings achieved by this set of users opting for a shared mode of transport over private vehicles is substantial; these savings are augmented by autos using LPG, a cleaner fuel than petrol or diesel and utilising less road space.
Auto rickshaws are also perceived as safe, even by women who use them for a variety of trips through the day as well as to commute to work. These results belie media reports that generally describe autos as unsafe and unruly; a narrative that needs to be re-examined in the light of this and other data.
Regulation of auto rickshaws in Kolkata:

As opposed to the on-contract, for-hire system in most Indian cities, auto rickshaws in Kolkata operate on fixed routes and on a shared basis. From a regulatory perspective, the West Bengal state transport department regulates auto-rickshaws in Kolkata through regional transport authorities (RTAs) that function at the district level, issuing route-based permits and other documents like fitness certificates, pollution under control certificates, etc. Operationally, auto-rickshaw operators are disciplined by the police and traffic guards.

Auto rickshaws’ responsiveness to user needs and processes that facilitate it:

A defining feature of Kolkata’s auto system is its responsiveness to user needs. Irregularities from the permitted routes–deviations, shorter routes and extensions, for example–emerge in response to changing needs, for instance the difference between peak and non-peak hour traffic, the need to service new areas of the city and to accommodate special requirements during Durga Puja festival in Kolkata. This last accommodation, in fact, is made under the aegis of the regional transport authorities (RTAs) and the police.

This responsiveness can be largely attributed to the evolution of a regulatory system that leverages informal stakeholders to fill gaps in the formal regulatory process that is currently inflexible. By mediating interactions between formal actors like the RTA and the auto-rickshaw operators, auto unions wield considerable power over the auto rickshaw system in the city. These formally registered–and usually politically affiliated–unions play a role in determining routes and fixing fares through the route committees set up by the RTAs.

While rent seeking behaviour in the form of agents who help operators negotiate bureaucratic process at the RTA, appear to be outside their purview, the unions play an important role in organising individual operators and representing them before the state. Vitally, unions coordinate the functioning of the auto-rickshaw stands at the local level, often through individuals called ‘starters’, streamlining aspects like frequency and resolving disputes with passengers.

In the peripheral areas of Kolkata, the study finds a proliferation of IPT options, chiefly the battery operated ‘toto’, which is thriving due to low costs and negligible regulation. With the recent inclusion of e-rickshaws under the mandate of the Motor Vehicles Act, 1988 in 2015, ‘totos’ are expected to become more accessible forms of IPT in the Kolkata Municipal Area (KMA), especially in the light of poor coverage of public transport. However, what kind of regulatory framework emerges for these ‘totos’ remains to be seen.

Study recommendations to strengthen the auto rickshaw system:

The report suggests that the auto rickshaw system be strengthened by primarily; i) rationalising permits and routes based on periodic data obtained by robust data collection systems; ii) improving regulatory efficiency at the RTA through digitisation and moving processes online; iii) and formalising currently informal processes of stakeholder consultation, among other methods.

Further, frameworks that enable improved coordination across district-level RTAs are necessary to achieve efficiencies, responsiveness as well as integration with the city’s transportation network.

At the user end, access to information like route maps and fare charts, improved design of physical infrastructure like stands; improved access especially for the differently abled; and the development of a system involving smartcards or coupons that eliminate the need for daily cash transactions would go a long way in improving passenger comfort.

The new national government begins its term against the backdrop of an agricultural sector estimated to be growing at just around 2 percent, a poor rabi season across many regions of the country, and a period marked by the collapse of farm gate prices across numerous commodities. It is estimated that farm incomes might be growing at the slowest pace seen over the last fifteen years1, even as there is a renewed policy vision of doubling them in a short span of time.2 After a long season of repeated protests by farmers, agrarian distress remains very much in the spotlight.

The policy debate was initially dominated by the two longstanding demands of farmers’ movements: higher, guaranteed Minimum Support Prices (MSPs) and farm loan waivers. More recently, the political focus has centred on the promise of introducing income support transfers for farmers and the rural poor, with a range of state and national schemes having been proposed and rapidly rolled out in the field. While these schemes deserve close attention, a much more urgent need is to take a comprehensive and systemic approach to agriculture. This must include prioritising the deep challenge of reforming India’s agricultural markets. Not only are agricultural markets a central element of the larger strategy to support and improve farmers’ incomes, they are at the very heart of Indian development and the dynamics of growth, distribution and equity. Agricultural commodity markets are the connective tissue in the economy: connecting agricultural production, circulation and consumption, interlinking livelihoods and logistics across the agrarian and non-agrarian sectors, shaping the relations between cities, small towns and villages, and those between local and regional markets for commodities and larger, national and global circuits of capital and commerce. There is therefore every reason to build on the existing momentum, knowledge and experience to forge a genuinely national agenda to reform India’s agricultural markets.

Importantly, this time there is a unique context that has opened up for the pursuit of such reform: the ambition to create a National Agricultural Market (NAM). Indeed, this is an idea that has featured in policy documents over the last few years, dating back to 11th and 12th Plan mid-term reviews and task groups. It subsequently featured in the Union Budget in 2014 and 2015, and was finally launched by the Central Government in the form of eNAM in April 2016.3

Historically, the regulation of agricultural markets in India, especially at the primary level where farmers sell their produce, has come under state legislative acts and under the management of local market committees. As such, they are characterised by variation and fragmentation across regions and commodities systems. The move towards designing and facilitating a national market for agricultural commodities is therefore a transformative shift. However, eNAM, envisioned as ‘a pan-India electronic trading portal which networks the existing APMC mandis to create a unified national market for agricultural commodities’ has led into this ambitious effort with a singular focus on getting select local mandis trading online.4 Even so, the process of trying to get eNAM off the ground has forced, at least to some extent, a deeper engagement with existing physical markets and the varying conditions under which they operate. This has made it quite apparent that if the vision behind a National Agricultural Market is to be realised, we need to start from the back-end first. For this to happen, the central government needs to take both a more contextual and more comprehensive approach to market reform.

Going back from the Dashboard to the Drawing Board

In its first phase of implementation, the eNAM scheme is reported to have networked 585 APMC mandis across 18 states.5 Of these, less than half (252 mandis) have shown evidence of any level of online trading activity.6 Field reports, including the findings of a high-level Government-appointed Expert Committee, provide a sense of the numerous challenges the initiative is facing on the ground.7 In many cases, computer terminals have remained in their boxes; in others, data from offline auctions or government procurement has been retrospectively entered into the e-NAM portal; some mandis have avoided moving high-volume commodities online due to delays in facilitating exchange; others only use e-NAM on a single day of the week or off-season before reverting to business as usual; and across the board there have been few takers for assaying and quality specification, with testing equipment remaining widely unused. In states where regulated markets are not the primary channel for local marketing and trade, mandi functionaries have struggled to attract buyers and sellers into market yards, let alone getting them to bid online. Where mandis are in fact dynamic hubs for local trade, open auctions or manual tendering are not always conducted in the first place or for all commodities; in such cases, moving buyers and sellers from no auctions to e-auctions is not an easy task. And even when auctions are common practice, enforcing a system of direct electronic payments for all transactions is a significant challenge for farmers, traders and commission agents with prior histories of credit advances and cash rotations. 8

All this is not to say that electronic auctions and other price discovery mechanisms on a trading platform that enables both local and long-distance buyers to bid on farmers’ produce is an inconceivable enterprise. On the contrary, there is little doubt and growing evidence that farmers and traders across the country are capable of integrating digital technology and online platforms into their marketing practices.9 It does, however, force us to contend with the reality that agricultural markets are at once highly specific, diverse and differentiated in terms of their structure and organisation—across agro-ecological regions, land regimes, socio-economic groups, commodity systems, agro-commercial networks, and regulatory histories and priorities.10 For instance, different commodities cultivated in the same field follow diverse post-harvest pathways of exchange, trade and processing. The same commodity also typically moves across different states and even within the same state through different channels and intermediaries, a significant proportion of which are not formally regulated. When it comes to regulation itself, there is no single agricultural marketing act across states, some states don’t have an act at all, and even a single state act is differentially implemented (and sometimes left largely unimplemented) across districts, blocks and commodities. Moreover, a great deal of regulatory work in agricultural markets doesn’t happen through legislative acts but through the issuing of ad hoc government orders and even more extensively through informal (but often highly organised) industry associations and trading networks. In this context, building a National Agricultural Market cannot begin or end with electronic integration: it requires an enormous degree of field-based data and analysis; significant institutional, infrastructural and logistical investment; and deep regulatory reform, synchronisation and capacity building.

Learning from the first phase of e-NAM implementation, there is a need for a reorientation in the approach: states should not have to ‘plug into’ the e-NAM via a software; instead, they have to substantively buy into and participate in the process of creating a National Agricultural Market.

The challenge of reforming agricultural markets

Agricultural marketing reform is the proverbial ‘hot potato’: vital, visible, and politically volatile. When it comes to taking on major regulatory and policy reforms to open up and invest in agricultural markets, there are two key sources of resistance that are usually raised.

First, historically, the local traders, commission agents and regional processors who have, in different regions and periods, gained from the dominant regulatory regime often exercise considerable local and regional political power. This makes it very difficult for state governments to initiate and sustain deep and wide-ranging reforms to open up agricultural markets to competition. Moreover, in many cases, these same market actors work across input and output markets, while also financing (through credit) both agricultural production and household consumption, making them especially difficult to dislodge through isolated or piecemeal market interventions.

The second is the political purchase of the Minimum Support Price (MSP) and procurement, the most publicly prominent means of state protection of farmers in markets. But we know that in the vast majority of states and commodities across the country where MSPs are not backed by procurement operations, their declaration has no effect on the prices that farmers receive for their produce.11 In the two states where the government has grown over the decades to become virtually the only buyer (i.e. wheat and paddy in Punjab and Haryana), it has effectively diminished or destroyed market competition—and crop diversification, reducing mandis largely to the role of seasonal procurement centres. And in states where public procurement is only partially and differentially implemented, it has tended to drive private trade undercover, generally to the detriment of those farmers who are already structurally constrained and unable to sell to state agencies for a variety of reasons (tenant farmers, sharecroppers, and farmers in regions where procurement mechanisms are weak). Moreover, public procurement has often ended up strengthening the hand of the commercially and politically powerful in regional markets by routing procurement through intermediaries (e.g. arhatiyas/commission agents in Punjab)12 or agro-processors (e.g. rice millers in West Bengal).13

These, then, have been the intended and unintended political consequences of state action—or as often, state inaction—in regional agricultural markets. However, they cannot continue to serve as reasons for resisting market reforms. There is now significant evidence to suggest that states need to change their approach to the status quo and at least some experience that demonstrates that they can find the will and the ways to do so. Following are a few recommended directions for policy and public investment in agricultural markets with a focus on strengthening the terms of exchange for farmers.

Strengthening primary markets through regulatory reform and public investment

There is now growing evidence that when farmers are actually able to choose between multiple market sites and options for the sale of their produce, they gain from improvements not only in terms of price, but also in other critical and closely related elements of commodity exchange, such as accurate weighing, reduction in marketing costs (for e.g. high rates of commission, deductions based on quality etc.), and timely settlement of payment.14 This is why regulatory reform to open up the current APMC mandi system to competition from multiple channels and sites of exchange—including local traders, private corporations, co-operatives, producer companies, and other physical and electronic spot markets—is so important.

At the same time, the removal of statutory restrictions without concomitant public investments in enhancing the system’s regulatory capacity and core market and logistics infrastructure is unlikely to yield sustained improvements. For instance, we have seen quite clearly from research in Bihar over the last decade that a blanket repeal of the APMC Act leads to both the proliferation of small, self-regulated private horticultural markets and staggering infrastructural holes in major agricultural markets in the state.15 We also have evidence that the presence and participation of farmers in competitive local wholesale markets is likely to increase the bargaining power of farmers even in bilateral negotiations with village-level traders and in contract farming arrangements at the farm-gate.16 Finally, we note that single-buyer channels (whether run by private corporations, state procurement agencies, regional processors, or farmers organisations) invariably open and close operations according to their own strategic requirements, tend to have strict quality standards and therefore higher rejection rates, and typically work with only select categories or networks of producers.17 This is of course perfectly understandable and to be expected given the different commercial logics at play. But, it also strengthens the case for ensuring that farmers have access to multiple market sites, and especially to inclusive multi-buyer local wholesale markets that operate around the agricultural year. States therefore need to open up the marketing system by removing the APMC/mandi-centricity of current agricultural marketing regulation while simultaneously increasing public investment in developing primary agricultural markets and in the state’s own regulatory capacity.

This will involve working systemically on the regulatory design and structure of agricultural markets and then comprehensively identifying and addressing commodity and region-specific market requirements, both of which will need greater resource support and institutional capacity at different levels of market organisation. But, perhaps most importantly, serious and sustained investment in reforming agricultural markets will require much greater clarity on the remit of the state in markets where it plays multiple, conflicting roles well beyond the scope of primary agricultural marketing legislation. This extends to a whole range of commodity trade restrictions (on sale, stocking, movement, and export) that governments routinely and usually idiosyncratically impose and lift in markets. The Indian state will also continue to play a role in the procurement, stocking and distribution of certain major commodities, but these roles must not disregard and distort the functioning of agricultural markets. A recent example of this was the attempt to punish private traders for buying commodities below MSP in Maharashtra. This kind of action will only shut down not strengthen markets for farmers.18 At the same time, any national agenda for agricultural reforms must necessarily include a full range of context-specific measures to address the multiple structural constraints that Indian farmers face in the production and marketing of their produce. This requires a much greater understanding of the complex interlinkages between agricultural production, marketing, and consumption and much deeper engagement with existing, expanding and intensifying forms of agricultural risk.

Farmers and markets: changing the terms of exchange

In the Indian context, where we have a vast and highly differentiated social and economic group of farmers, policies directed at strengthening the terms of their participation and exchange in markets must begin by understanding the structural constraints that different farmers, especially the large majority of small and marginal farmers, face in different commodity markets. These include constraints related to the ownership of and access to land (via a wide range of largely undocumented tenurial and sharecropping arrangements) and the extent and impact of the fragmentation of plots at the level of a single household. In recent times, the challenge of including landless farmers in income transfer schemes has rightfully received renewed attention, but tenant farmers, sharecroppers, and small and marginal farmers commonly experience a range of constraints in accessing resources essential for both agricultural production and marketing. Further, across regions, farmers experience diverse constraints and unfavourable terms in markets for credit, inputs, water, storage, transport and insurance, which in turn may be interlinked with agricultural commodity markets. Addressing these constraints requires engagement with a much larger set of agricultural institutions outside—but connected to—output markets for agriculture produce. Finally, even medium and large farmers in India rarely have access to risk mitigation instruments to support their participation in volatile domestic and global commodity markets.19 Each of these areas needs investments to support grounded research and analysis, a consideration of promising initiatives, policy design, and much greater institutional capacity and resourcing for context-specific implementation.

Diversification and scale: agro-ecology, agricultural markets and farmers institutions

The second critical relationship between production and markets involves farmers’ capacities to respond to markets by changing their production decisions, often referred to broadly as the challenge of diversification. Here, it is now beyond evident that we have long been suffering from the ecological and economic consequences of cereal-centricity (wheat and paddy/rice) in agricultural policy. Over the next several years, central and state governments must chart a course to help farmers through a complex cropping transition in different regions. This requires a change in our approach to agricultural research, subsidies, and to public procurement, which needs to be developed into a more dexterous and limited intervention that does not blunt responses to both market signals and to signs of agro-ecological depletion. Procurement could potentially be directed to primarily cover neglected and underdeveloped regions and prioritise nutritious commodities—especially pulses and millets—along the lines of recent initiatives in Odisha.20 States could also consider developing a framework for MSPs that incorporates risk and social externalities as proposed in the 2016 Committee Report on Incentivising Pulse Production.21 The very recent announcement of a set of incentives by the Government of Haryana to shift farmers away from the cultivation of paddy to other crops (such as maize, arhar, and soybean) is another sign that this is an increasingly urgent priority.22

Agricultural markets will respond to changing domestic and global consumption practices and this is critical to the dynamics of diversification and scale. But, significant public investment needs to be directed towards enabling Indian farmers—who are already, given all the constraints, highly responsive and adaptive—to make complex production and marketing decisions as both climate change and global commodity markets redefine the nature, frequency and extent of volatility for farmers across the country. This calls for a long-overdue revival of a broken public agricultural extension system and the building up of resource support institutions and networks at all levels. Our imagination of farmer producer organisations (FPOs) must also go beyond viewing them only as commodity aggregators and extend to the roles that they can play in deepening and defending the interests of farmers in local, national and global agricultural markets. For this, local agricultural knowledge and decision-making capacities must be supported and strengthened as farmers weigh increasingly diverse and complex information, select risk mitigation measures, make calculated trade-offs, and prepare for frequent changes and disruptions to their systems of agricultural production and marketing over the medium and long-term. Indian farmers already deal with all of this, day after day, season after season; the state must now take very seriously its role in continuously strengthening the terms of their engagement in agricultural markets.

Other pieces as part of CPR’s policy document, ‘Policy Challenges – 2019-2024’ can be accessed below:

The Future is Federal: Why Indian Foreign Policy Needs to Leverage its Border States by Nimmi Kurian
Rethinking India’s Approach to International and Domestic Climate Policy by Navroz K Dubash and Lavanya Rajamani
India’s Foreign Policy in an Uncertain World by Shyam Saran
Need for a Comprehensive National Security Strategy by Shyam Saran
A Clarion Call for Just Jobs: Addressing the Nation’s Employment Crisis by Sabina Dewan
Time for Disruptive Foreign and National Security Policies by Bharat Karnad
Multiply Urban ‘Growth Engines’, Encourage Migration to Reboot Economy by Mukta Naik
Schooling is not Learning by Yamini Aiyar
Clearing Our Air of Pollution: A Road Map for the Next Five Years by Santosh Harish, Shibani Ghosh and Navroz K Dubash
Protecting Water while Providing Water to All: Need for Enabling Legislations by Philippe Cullet
Interstate River Water Governance: Shift focus from conflict resolution to enabling cooperation by Srinivas Chokkakula
Managing India-China Relations in a Changing Neighbourhood by Zorawar Daulet Singh
Beyond Poles and Wires: How to Keep the Electrons Flowing? by Ashwini K Swain and Navroz K Dubash
Regulatory Reforms to Address Environmental Non-Compliance by Manju Menon and Kanchi Kohli
The Numbers Game: Suggestions for Improving School Education Data by Kiran Bhatty
Safe and Dignified Sanitation Work: India’s Foremost Sanitation Challenge by Arkaja Singh and Shubhagato Dasgupta
Safeguarding the Fragile Ecology of the Himalayas by Shyam Saran
Female Labour Force Participation: Asking Better Questions by Neelanjan Sircar
Towards ‘Cooperative’ Social Policy Financing in India by Avani Kapur
Understanding Land Conflict in India and Suggestions for Reform by Namita Wahi
Regulating New Technologies: Three Central Principles by Ananth Padmanabhan
1 Niranjan Rajadhyaksha, “The mounting challenge of a two-speed Indian economy.” Mint, 6 March 2019.
2 In 2016, Prime Minister Modi announced the goal to double farmers income by 2022-23 and constituted a high-level national Committee on Doubling Farmers Income.
3 Nidhi Aggarwal, Sargam Jain and Sudha Narayanan, “The long road to transformation of agricultural markets in India: Lessons from Karnataka.” IGIDR Working Paper, November 2006, p. 3.
4 eNAM website: www.enam.gov.in
5 According to the Doubling Farmers Income Report (Vol. 4), India has an estimated 6600 regulated wholesale markets yards (principal and sub-market) operated under 2284 APMCs. They estimate there are also approximated 23,000 rural periodic markets accessed by farmers.
6 https://enam.gov.in/web/mandis-online
7 The Report of the Expert Committee on Integration of Commodity Spot and Derivative Markets chaired by Ramesh Chand (NITI Aayog) has a section listing observations of the operational and infrastructural issues faced by eNAM, pp. 40-42. There have also been numerous field-based reports in the media of eNAM implementation across the country.
8 There is an extensive literature in history, economics and sociology on the interlinking of markets for credit and commodity marketing across Indian regions, especially the role played by arhatiyas or commission agents. Credit advances and delayed settlement are a common feature across most agricultural markets.
9 Aggarwal et al report on progress in Karnataka, the state currently with the most extensive experience with transitioning to e-auctions and interlinking mandis. “The long road to transformation of agricultural markets in India: Lessons from Karnataka”. IGIDR Working Paper, November 2006. There are also reports on Farmer Producer Organisations (FPOs) participating in futures markets through the NCDEX.
10 See for instance, Mekhala Krishnamurthy, “The Political Economy of Agricultural Markets: Insights from Within and Across Regions” in IDFC Foundation (ed.) India Rural Development Report 2013-2014, Orient BlackSwan, 2015. Also, PS. Vijayshankar and Mekhala Krishnamurthy, “Understanding Agricultural Commodity Markets” Introduction to special issue, guest-edited by the authors, of the Review of Rural Affairs, Economic and Political Weekly, vol xlviI No. 52, December 2012.
11 State procurement takes place in only a small number (around 22 of 26) commodities for which MSPs are announced and there are wide variations in the extent of procurement even for the two most extensively procured commodities, rice and wheat. See, for instance, Shoumitro Chatterjee and Devesh Kapur, ‘Six Puzzles in Indian Agriculture’, India Policy Forum 2016-17.
12 Sukhpal Singh and Shruti Bhogal, “Commission Agent System: Significance in Contemporary Agricultural Economy of Punjab”, Economic and Political Weekly, Vol. L, No. 45, 2015.
13 Barbara Harriss-White, Rural Commercial Capital: Agricultural Markets in West Bengal, Oxford University Press, 2008.
14 Shoumitro Chatterjee, ‘Market Power and Spatial Competition in Rural India’, January 2019; Dilip Mookherjee et al, “Middlemen margins and asymmetric information: an experiment with potato farmers in West Bengal”, Review of Economics and Statistics, Vol. 100, Issue 1, 2018; Devesh Kapur and Mekhala Krishnamurthy, ‘Understanding Mandis: Market Towns and the Dynamics of India’s Urban and Rural Transformations’, CASI Working Paper, 14-02, 2014.
15 Vijay Intodia, ‘Investment in Agricultural Marketing and Market Infrastructure: A Case Study of Bihar’. Research Report. National Institute of Agricultural Marketing, Jaipur, 2012. Sukhpal Singh, ‘APMCs: The other side of the story,” Hindu Business Line, 8 February 2015.
16 Sudha Narayanan, “Inflections in Agricultural Evolution: Contemporary Commodity Complexes and Transactional Forms in Interior Tamil Nadu”. Economic and Political Weekly 47 (52): 84–94.
17 Richa Kumar, “Elusive Empowerment: Price Information and Disintermediation in Soybean Markets in Malwa India”, Development and Change, Vol. 45, Issue 6, 2014. Mekhala Krishnamurthy, “States of Wheat: The Changing Dynamics of Public Procurement in Madhya Pradesh”, Economic and Political Weekly, Review of Rural Affairs, vol xlviI No 52, December 2012.
18 In 2018, the Government of Maharashtra tried unsuccessfully to introduce an amendment making it illegal for private traders to buy produce below the state-declared MSPs by imposing fines and a jail terms. The move resulted in the shutdown over major mandis in the state.
19 The need for better integration of spot and futures markets has been recently revisited by a committee led by Ramesh Chand and much more work is needed to design instruments that farmers can access and utilise to hedge their risks in agricultural markets.
20 The Government of Odisha launched a Millet Mission for the promotion and support of millets in tribal areas (http://www.milletsodisha.com) and in 2018-19, the state launched a millet procurement programme focused on ragi.
21 Arvind Subramanian, Report on Incentivising Pulses Production through Minimum Support Price and Related Policies, September 2016
22 In May 2019, the Government of Haryana announced a set of incentives on the input and output side (free seeds, cash transfers, MSPs) to encourage farmers to shift away from water-intensive paddy cultivation to crops such as maize, pigeon pea, and soybean.

India’s Coastal Regulation Zone (CRZ) Notification, 2011 is an important legislation that governs the land use on the first 500 m of coastal land from the high tide line of the sea in India. This law, which replaced the earlier original version – the CRZ, 1991 will soon be eight years old. Of these eight years, the environment ministry and other associated institutions have spent extensive time in the last four years in reviewing, revising and seeking to replace this regulation.

Since 2014, the environment ministry has reviewed at least five drafts of the Coastal Regulation Zone (CRZ) notification, 2011. File notings received from the ministry clearly tell that there have been serious internal debates within the ministry on amending this law, since a formal review was set up through the Shailesh Nayak Committee constituted in June 2014. The CPR – Namati Environment Justice Program has reviewed multiple drafts of the CRZ notification and analysed the discussions within the ministry related to aspects of tidal demarcation, width of the CRZ and No Development Zone (NDZ) and tourism enhancement on the coast. Even as a consensus was to emerge on these aspects, the ministry has continued to introduce amendments to the CRZ Notification, 2011 (see here). Throughout this time, there has been little public engagement on these revisions, despite requests and suggestions from the fishers, urban planners, dwellers of coastal cities, environmentalists and academics.

Quick recap: 2014-2018

Almost immediately after the new national government came to power a committee was constituted to review the CRZ regulation. The Ministry of Environment, Forests and Climate Change (MoEFCC) appointed Shailesh Nayak, the then Secretary Ministry of Earth Sciences to lead a six-member committee. The committee was constituted on June 17, 2014 to look into the “concerns raised by the state governments, examine errors and inconsistencies, and bring procedural simplification”. After examining the issues brought to it by the states, the committee prepared its report and submitted it to the MoEFCC in January 2015 (find the report here). This report was never made public by the ministry. However, it was disclosed following a Central Information Commission judgment, details of which are here.

In October 2014, the committee made a preliminary presentation before the ministry and since then a series of amendments to the CRZ Notification, 2011 have been issued. These amendments have systematically incorporated the suggestions made by the committee in the Notification (see details in our analysis here). At the same time the ministry has also revealed a Draft CRZ 2018 for public comments in April 2018. Specific aspects of this review and the details of the amendments have been publicised by researchers, journalists and fishing unions, there is still a lack of clarity of the thinking within the ministry of the road map for this law. Through this analysis, we present details of how the process of amending the CRZ law has progressed within the environment ministry. The analysis is based on file notings obtained through a file inspection carried out in October 2018 in response to an RTI application filed with the MoEFCC in June 2018.

What has been the process of CRZ review from 2014 till the issuance of the Draft CRZ Notification 2018?

In February 2015, report of the Shailesh Nayak committee was shared with senior officials within the ministry seeking their views on it. A senior official made an observation on the report to say that even before individual officers could finalise their views, the committee report needed further thinking. He later on added: “due to the new notification a lot of area will become potentially available for horizontal & vertical development. Analysis of the potential environmental impact of such an eventuality should be done along with the steps that we intend to take to contain/mitigate it before putting up the proposed notification for approval of MoS (Minister of State) EFCC.”

However, the internal process of reviewing the committee’s report appears to have gone ahead. In April and May 2015, two senior officials in the ministry shared their views on specific recommendations of the Committee. These views as presented below highlight the differences within the ministry observed on key recommendations of the committee. To address the divergence in viewpoints, the ministry, in the last four years, has considered multiple drafts of the new CRZ Notification to supersede the current notification. These drafts were reviewed by several senior functionaries within the ministry including the Minister, Dr Harsh Vardhan. Despite the multiple drafts, certain issues such as what should be the basis for deciding the width of the No Development Zone (NDZ) within CRZ III (rural areas) remained contentious and no consensus could be reached on these till as late as the end of 2017.

Divergent views of senior officials on the suggestions of Shailesh Nayak Committee

Recommendations of SN Committee Observations by senior ministry officials
NCSCM should demarcate the tidal lines (HTL/LTL). While one official observed that no method has been mentioned in the report for tidal demarcation and its revision, another held that “HTL demarcated by NCSCM shall be sacrosanct as it is based on uniform methodology, approved by the MoEFCC.”
Jurisdiction of CRZ should be upto 100 m or width of the tidal influenced water body whichever is less. Two officials felt that a CRZ of 50 m should be adequate as one noted that many of the areas within the 100 m range are already developed and “Tourism has huge potential in these areas”, the other observed “these tidal influenced water bodies do not generally get flooded beyond HTL.”
Backwater islands should have an NDZ of 10 m One official stressed on the point that even a 5 m buffer is adequate if provided with “stringent safeguards”
NDZ in CRZ III (rural areas) should be based on population density- 50 m for densely populated areas and 100 m for other areas While one official agreed with the suggestion, another contested this by saying, “There is no need for population based distinction as urbanization is a dynamic process and many CRZ III areas are adjoining municipalities and urban areas”
In between in April 2017, in a meeting of Committee of Secretaries it was decided that the Ministry of Law & Justice be requested to do away with the need to seek its approval on the draft rules and then again on the final rules while framing any subordinate legislation. Instead any subordinate legislation should require views of the Ministry of Law only once at the finalisation stage. The Ministry of Law & Justice accordingly requested the Ministry of Parliamentary affairs to make the change. The same was incorporated by the ministry of parliamentary affairs in May 2017, through O.M No. 2/5/2017-ME.

An inter-ministerial meeting was also organised on March 20, 2017 to take inputs on draft Marine Coastal Regulation Zone (MCRZ) Notification. The meeting was attended by the representatives from the ministry of shipping, urban development, tourism, agriculture and farmers’ welfare, rural development and the ministry of commerce. Find details of the meeting and concerns raised by these ministries here. In the end of 2017, the prime minister’s office was also appraised of the progress on the new notification. In April 2018, despite the unresolved issues and pending decision on and incorporation of certain suggestions, the ministry decided to publish the draft for public comments. It was decided that remaining changes could be put in the notification while finalising it.

Month Action
January 2015 Shailesh Nayak Committee submits its report with the ministry
February 2015 till end of 2017 Senior officials comment on the recommendations of the Committee and different versions of the new CRZ Notification
March 2017 Inter-ministerial meeting on a draft notification
May 2017 Amendments are made in Para 11.2 of the Manual of Parliamentary Procedure for framing of subordinate legislation
November 2017 PMO was appraised of the progress on suppression of CRZ 2011 with a new notification
April 2018 Draft CRZ Notification, 2018 is published in Indian gazette for public comments
How many drafts of the CRZ have been considered internally by the ministry?

Starting from the Draft CRZ Notification proposed by the Shailesh Nayak Committee, at least four more drafts have been considered within the ministry at different points in time.

January 2015 Draft CRZ Notification suggested by the Shailesh Nayak Committee
November 2015 Draft Integrated Marine Coastal Conservation (IMCC) Notification 2015
March 2017 Draft Marine Coastal Regulation Zone (MCRZ) Notification 2017
November 2017 Draft CRZ Notification shared with the Prime Minister’s office
March 2018 Draft CRZ Notification 2018 gazetted in April 2018
Besides, there have been slightly revised/modified versions of these drafts as well which the various members have looked into.

What do these drafts propose? How do they fare against the suggestions of the Shailesh Nayak Committee?

The draft suggested by the Shailesh Nayak Committee is available here. The Draft IMCC Notification, 2015 can be accessed here. After the IMCC 2015, came the MCRZ 2017. Read about this draft and how it compares against the Shailesh Nayak Committee suggestions suggestions here and here.

The MCRZ 2017 was further revised and shared with the Prime Minister’s office (PMOs) in November 2017. In this draft, according to the file notings, certain suggestions of Shailesh Nayak Committee were altered to accommodate the court directions and eliminate certain ambiguities. On comparing this draft against the suggestions of the Shailesh Nayak Committee, following points of divergence emerge.

Shailesh Nayak Committee Report Draft Notification shared with the PMO
In case of islands, No Development Zone (NDZ) should be 10 m In case of islands, NDZ should be 20 m.
In CRZ III (rural areas) with population density of 2161/sqkm and higher, the No Development Zone (NDZ) should be 50 m. For the rest, it should be 200 m. Recommendation was not accepted. As it was felt that the areas with densities ‘high enough’ could be reclassified by the state government as municipality.
Project proposals should be appraised according to the EIA Notification 2006. The draft suggested that projects in CRZ II (urban) and CRZ III (rural) would be considered by the state authorities. Proposals in CRZ I and CRZ IV would be examined by the MoEFCC
Permit temporary tourism facilities in NDZ of CRZ III subject to utilisation of 19% of the total area. The notification accepted the recommendation but excluded temporary shacks. However, while presenting to the PMO, it was shared that this exclusion would be discarded.
If a national highway passes through the NDZ area, tourism structures can be built on its landward side. This recommendation was not accepted in the draft. However, while presenting to the PMO, it was shared that this recommendation could be accepted.
Existing fish processing unit to be permitted to utilise 25% additional length area for modernisation purposes. This recommendation was not accepted in the draft. However, while presenting to the PMO, it was shared that this recommendation could be accepted.
The latest draft, which has also been issued in the Indian gazette for public comments, is the CRZ Notification 2018. To find out how the draft CRZ Notification 2018 compare against the Shailesh Nayak Committee report, see our earlier analysis here.

The above analysis is only a broad insight of the range of opinions and concerns raised within the ministry that reflect the extremely conflicting nature of coastal governance. What is important to stress here is that at no point during this review and revision process has the ministry proactively reached out to coastal communities, researchers, environmental groups and fishing unions seeking their participation in prioritising what a CRZ law should look like. This is despite requests. The file notings have made it clear that consensus even if sought only from within the ministry has been hard to come by. At various points of time the ministry could have opened up the space of coastal policy making for larger public inputs, beyond seeking comments on specific amendments. This might have muddied the conversation some more, but eventually has the potential of demonstrating a process of democratic decision- making.

This is part of 1 a blog series on CRZ revamp in making since 2014. In the second blog post, an analysis of over 400 submissions received by the ministry on the Draft CRZ Notification 2018 will be shared.

In the third and last blog post of the series, views of different members from within the ministry and stakeholders from outside on certain contentious issues will be presented.

About the Lecture

Making spaces for nature has been one of the accomplishments of Indian democracy most so in the half century since 1969. These executive and legislative measures complement efforts of extensive social movements that have made various dimensions of the environment critical in public life. But few would today demur if told that statist and market led efforts as also community led initiatives often fall far short of the level, extent, scale and depth of the environmental challenges especially so after the pace of economic change quickened over the last four decades. The explosive expansion of the mega city and the ability of market forces to undercut not only protective rings around resources or spaces is matched by other developments. These include environmental emergency in parts of urban India as in acute drought in Bengaluru or floods in Chennai and the pall of smog over north India’s plains.
Despite many bright spots, there are serious doubts if things can simply go on the old way. The ability of movements to halt haphazard and ill-planned development or enable their realignment is also uneven with the cases of Niyamgiri, Silent Valley or Subansiri set against the lure of rapid big infrastructure often with little care for the land or waterscape. Conversely, many issues such as glacier meltdown or oceanic pollution defy environmentalism in only one country.

Yet the green shoots of democratic dialogue and action beckon. Even in the past as in the US or Japan or India itself, the right to a habitable and safe environment was always about much more than making spaces for nature. The latter too matters. A democracy in the 21st century is about peace with nature as much as among ourselves: to begin on that journey needs us to look afresh at the present and trace out footsteps to a better future.

About the Speaker

Professor Rangarajan is a Professor of History and Environmental Studies at Ashoka University, Sonipat, Haryana. He has studied at the Universities of Delhi and Oxford and has taught at Cornell, Jadavpur and Delhi universities and the National Centre for Biological Sciences, Bengaluru. He was Director of the Nehru Memorial Museum and Library 2011-15. His first book Fencing the Forest (1996) as also the most recent co-edited, At Nature’s Edge, have been published by OUP. Other works include India’s Wildlife History (2001) and Nature and Nation (2015). Recent co-edited works include Making Conservation Work (Permanent Black, 2007), Nature without Borders (2014) and Shifting Ground (2014) (latter both by Orient Black Swan). In 2010, he headed the Elephant Task Force of the then Ministry of Environment and Forests.

This public lecture was hosted by the Initiative on Climate, Energy and Environment at the Centre for Policy Research. Watch the Q&A session that followed the lecture here.

India’s move to electrify every village and household in the country has been lauded as a success. Building on decades of targeted programmes and public investments by multiple governments, the country completed 100% village electrification in April 2018; a year after, it has electrified nearly all ‘willing’ households. Despite the time it took to get here, these achievements are important milestones in India’s development trajectory. But does connecting households to the electric grid resolve the electricity access challenge? The answer depends on whether electrons flow through the wires and whether all consumers are served equally and adequately.

For electrons to flow and for there to be power for all, a vital policy issue to be considered is about the role to be played by the Government of India (GoI). Given the concurrent status of electricity, can the sector be a ‘perfect crucible for making effective the cooperative-competitive federalism experiment that is now India’?1

Challenges of Electricity Access

Once connected to the grid, consumers face multiple challenges to stay plugged in and realize the full benefits of electricity services. From the perspective of the poor, there are three key challenges that need to be overcome: unreliable supply, poor consumer service, and unaffordable bills.

Although India has become power surplus, many homes, especially those located in rural and low-income areas, have to bear with intermittent and poor quality supply. While government reports indicate 16-24 hours of supply to all homes, several surveys find lower supply hours, particularly, in the evening hours. Prayas Energy Group’s Electricity Supply Monitoring Initiative found that less than 20% of rural locations receive continuous supply during 5-11 p.m. This pattern of unreliable supply can be explained by an inherent disincentive to serve the poor. While India’s average monthly household electricity consumption is as low as 90 kWh,2 most households consume less than 50 kWh.3 India follows a consumption slab-based tariff system, where initial consumption slabs are charged significantly below the costs. This is one reason why electricity distribution companies (discoms) lose more than 50% of their cost in supplying to low-consumption consumers.4

Metering and billing irregularities are common, particularly in rural areas. The human resources of discoms have declined even as their consumer base has increased, leading to lower frequencies of meter reading and billing. Many discoms raise bills once in two months. In several cases, the first bill after the connection is raised after several months. Accumulated dues are often unaffordable to low-income households and increases the likelihood of payment default and subsequent disconnection. Irregular billing also causes a trust gap between discoms and consumers. A recent survey in Uttar Pradesh finds that consumers who are billed monthly are more likely to pay on time and in full amount; but those who are not billed regularly do not believe that their bill is based on actual consumption and are likely to default on payment.5

A major barrier to electricity access remains the concurrence between economic poverty and energy poverty. At the launch of Saubhagya, seven states (Uttar Pradesh, Bihar, Odisha, Jharkhand, Assam, Rajasthan and Madhya Pradesh) accounted for two-thirds of the un-electrified households in India. These states are home to about two-thirds of India’s population living below the poverty line (BPL). Discoms in these states are already highly indebted, accounting for 42% of accumulated debts of all discoms as on March 2016. Discoms in these seven have higher losses and revenue gaps than national averages. Despite continued state government subvention (or payment to discoms), all these discoms have been consistently running at a loss, accounting for about 47% of the loss in the electricity distribution business. In 2015-16, subventions to discoms amounted to 10% of these seven states’ collective gross fiscal deficit and accounted for 40% of total subvention from all states. The recent push for financial turnaround of discoms through a centrally designed scheme – Ujwal Discom Assurance Yojana (UDAY) – has not achieved the desired results in many states.6 The fiscal space of these states and discoms is cramped by the need to accommodate the electricity subsidy. On the other hand, existing subsidized lifeline tariffs in these states are, ironically, higher than in states with high electricity access.7 Media reports suggest that 3.5 million households in Uttar Pradesh are unwilling to get an electricity connection despite the connection charge waiver and subsidized tariff at 50% of the actual costs.8

The Centre’s Helping Hand​

The responsibility for electrification has been shared by governments at the Centre and states. Successive governments at the Centre have played an important role through sustained policy directives, targeted programmes and financial support. Creation of a dedicated financing agency in 1969 – the Rural Electrification Corporation (REC) – helped boost village electrification in the 1970s and 1980s, when two-thirds of India’s villages were electrified. To address low household electrification, the Centre launched Kutir Jyoti Yojana in 1989, with budgetary allocations to provide single-point light connections to BPL households. Rajiv Gandhi Grameen Vidyuti Karan Yojana, launched in 2005, extended free electricity connections to about 22 million BPL households, in addition to others who paid for their connection; it also electrified more than a million villages by 2014. The last 18,000 villages were electrified under Deen Dayal Upadhyaya Gram Jyoti Yojana, launched in 2015. Between 2017 and 2019, the central government sponsored an aggressive household electrification drive – the Pradhan Mantri Sahaj Bijli Har Ghar Yojana (Saubhagya) – to connect more than 26 million households to the electricity grid. With multiple interventions spread over decades and multiple governments, the Centre’s thrust has been to connect villages and households to the electric grid, through funding the costs of erecting poles and stringing wires.

The state governments, with oversight on electricity distribution, have manoeuvred to keep electrons flowing through the wires. The key to the states’ approach is redistributive welfarism: charging commercial and industrial consumers higher rates to keep electricity affordable for farmers and low-income homes. However, the pattern of electricity provisioning has been intricately shaped by electoral priorities, creating perverse incentives for serving the poor. The result is a low-level equilibrium where the poor are locked into cheap but intermittent, low-quality electricity. Because quality is low, many consumers feel empowered to default on their dues. The forces of inertia have prevailed over reform interventions to rationalize prices and enable cost recovery. Moreover, intermittent supply impacts business competitiveness. A survey conducted in Bihar, Odisha, Rajasthan and Uttar Pradesh suggests that 40% of rural enterprises rely on non-grid electricity sources as grid supply is unreliable and expensive.9

The Centre’s thrust on connecting villages and households to the electricity grid has been realized, but is only a step towards universal access to modern energy. In 2014, a joint initiative between the Centre and the states – 24×7 Power for All – was launched. It had a state-by-state strategy and shared goal to ensure round-the-clock supply to all consumer categories starting from April 2019. Despite a strong political mandate, the goal seems to be far from realized. Achieving universal access to electricity will require addressing problems around reliability, affordability, quality of supply and service that are persistently present across states. The new government at the Centre will need to revive its helping hand to support its state counterparts in dealing with diverse electricity access challenges that are entrenched in state-level political economies.

The Way Forward

The challenges to universal electricity access at the state level and are, in part, beyond an individual state’s capacity to address. Given that the poorest states will have higher costs of universal access, the Centre needs to lend a hand. Simultaneously, the central government will need to steer planning and governance for better coordination and coherence across states. The Centre will thus continue to play a significant role in pursuing the goal of universal electricity access. Towards this, we suggest the following priority actions for the new government.

Beyond Redistributive Welfarism to Productive Power

To achieve universal access, India’s electricity policy needs a paradigm shift from ‘redistributive welfarism’ (that prioritizes subsidized costs for the poor while compromising on the quality of service) to ‘productive power’ (that empowers and enables the poor to pay for better quality service through productive use of electricity).

Last year, the government proposed a set of amendments to the National Tariff Policy (NTP). These were aimed at a shift away from consumer category-wise tariff to a progressive load and consumption-based tariff for all. While this will not address the cross-subsidy burden on large commercial and industrial consumers, it will make electricity affordable to small industries and entrepreneurs that are currently charged a cross-subsidizing tariff.

Implementing these proposed amendments to the NTP in a time-bound and phased manner to make electricity affordable for productive use by the poor will be an important step. Availability of reliable electricity is necessary, but not sufficient to mobilize its productive use. The Centre will also need to develop a broad strategy around ‘productive power’, seeking to promote rural industries and businesses (such as agro-processing and cottage industries) with the required financial and infrastructure support.

Revisiting the Definition of Electrification

The existing definition of electrification, set out in 2004, emphasizes the existence of a basic electricity infrastructure, keeping the focus on grid expansion and household access to the grid. Now that the grid has reached nearly all homes, it is important to revisit the definition, with a focus on ensuring access to reliable and affordable electricity for all.

Holding Discoms Accountable for Performance

Providing productive power requires that discoms are held accountable for performance. While the Electricity Act of 2003 (EAct) has made provisions for standards of performances (SoPs) to be met by the discoms, compliance and monitoring remain low, with significant discrimination across consumer categories. There is a need to implement a stricter legislative mandate for SoP compliance and equal treatment of consumers. Available technologies could be harnessed to monitor discoms’ performance in this regard. The Centre has been promoting smart meters for automation of billing and consumer accountability. These meters can also be used to monitor supply quality and for consumer information. In 2013, the Centre made an attempt to make discoms and the respective state governments accountable by presenting a Model State Electricity Distribution Management Responsibility Bill. Rajasthan is the only state government to have enacted this bill. Some of the provisions of this bill were included in UDAY, but without any legislative mandate. These efforts can serve as a template for developing a framework to hold the discoms accountable for their performance.

Better Consumer Protection

The EAct included provisions for consumer protection. While the institutions for consumer grievance redressal – Consumer Grievance Redressal Forums at discom level and Ombudsman at state level – have been put in place, these avenues remain dysfunctional and often influenced by the discoms.10 There is a need to strengthen these institutions to protect the interests of consumers, hold the discoms accountable, and build trust between the two. This will require raising consumer awareness on the existence of forums for grievance redressal and making these forums accessible to all. Regular analysis of grievance records is required to understand patterns and discoms’ performance. These analyses must be accessible to the public and used to make discoms accountable. The grievance redressal forums need to be redesigned to function independently from the discoms.

Alternative Service Delivery Models

The technological transformation in the sector, led by greater penetration of renewable energy, is likely to cause disruption in the electricity distribution structure. Discoms are likely to lose predictability in business and their significance as instruments of redistributive welfarism.11 There has been resistance to past attempts to restructure the distribution business for efficiency gain – through promotion of franchisees and cooperatives, and separation of carriage and contents. The future uncertainties in electricity distribution necessitate planning for alternative service delivery models to ensure that the poor are not left out. The Centre needs to play the role of a catalyst by steering the planning at the state level, without imposing a single, standard model. Diversity in approaches and models will be crucial to manage state-level economic forces and specific electricity demands.

Strengthening the Rural Distribution Network

While the electricity grid has been extended to all corners of the country, the distribution network in rural areas remains fragile and prone to frequent breakdown. Although rural areas presently have low energy demand, the potential for demand growth is high. Distribution networks will require significant upgrades to meet future demand. As the discoms have little incentive to invest in rural networks and many states lack fiscal capacity, the Centre will be required to continue investing in the rural distribution network, until such time as rural consumers climb onto the virtuous cycle of receiving better service and being willing to pay more for quality. The Centre has been supporting urban distribution network upgrades through successive programmes, such as APDP (2001), APDRP (2002), R-APDRP (2008) and IPDS (2014). Similar interventions are required to upgrade rural distribution and ensure quality supply to consumers based in rural areas.

The Subsidy Conundrum

Even though the key to electricity reform in India is tariff rationalization, there is no doubt that, for the time being, electricity supply to the poor needs to be subsidized. These subsidy needs are concentrated in poorer states with limited fiscal space. In an interesting development, in the proposed amendments to the EAct and NTP, the Centre has proposed to make subsidies a collective responsibility of the central and state governments. This is an important shift away from the earlier model where subsidy was the sole responsibility of the concerned state governments. If implemented, this would allow the subsidy-based approach to electricity to continue, with a shift from a rate payer-based cross-subsidy system to a tax payer-based fiscal subsidy system.

The Centre also seeks to promote direct benefit transfer (DBT) for subsidy payment to ensure better targeting. A reform in the subsidy mechanism, seeking to better target and rationalize subsidy, is an urgent need. But the proposed approaches are not free from limitations. Managing electricity subsidy demands with tax revenue will require the electricity sector to assert its claims for support in competition with several other possible uses of these funds; it will also limit the ability of states and regional political parties to make electoral use of electricity pricing, introducing political uncertainty. In addition, identifying and targeting legitimate subsidy demands to use DBT remains a challenge.12

The Centre’s past guidelines to reduce and eliminate cross-subsidies in a timebound manner and raise revenue from low-paying consumers have been resisted by states. Rather, cross-subsidization and the gap between costs and revenue have gone up in several states. The new government must prioritize the subsidy conundrum and develop a transition plan to gradually reduce subsidies without compromising essential service for the poor. It should consider state-specific political economy forces and must embed a strategy to promote ‘productive power’ to enable the poor to pay. Large-scale adoption of specific tools or solutions should be based only on successful pilot experiments, after careful consideration of the costs and benefits; a strategy to manage the costs to losers from subsidy reform must be included.

Erecting poles and stringing wires across a country like India is an important step. But the work remains complete until high quality reliable power that enhances rural productivity is made available to India’s poor. This must be the agenda, going forward.

Other pieces as part of CPR’s policy document, ‘Policy Challenges – 2019-2024’ can be accessed below:

The Future is Federal: Why Indian Foreign Policy Needs to Leverage its Border States by Nimmi Kurian
Rethinking India’s Approach to International and Domestic Climate Policy by Navroz K Dubash and Lavanya Rajamani
India’s Foreign Policy in an Uncertain World by Shyam Saran
Need for a Comprehensive National Security Strategy by Shyam Saran
A Clarion Call for Just Jobs: Addressing the Nation’s Employment Crisis by Sabina Dewan
Time for Disruptive Foreign and National Security Policies by Bharat Karnad
Multiply Urban ‘Growth Engines’, Encourage Migration to Reboot Economy by Mukta Naik
Schooling is not Learning by Yamini Aiyar
Clearing Our Air of Pollution: A Road Map for the Next Five Years by Santosh Harish, Shibani Ghosh and Navroz K Dubash
Protecting Water while Providing Water to All: Need for Enabling Legislations by Philippe Cullet
Interstate River Water Governance: Shift focus from conflict resolution to enabling cooperation by Srinivas Chokkakula
Managing India-China Relations in a Changing Neighbourhood by Zorawar Daulet Singh
Regulatory Reforms to Address Environmental Non-Compliance by Manju Menon and Kanchi Kohli
1 GoI, Economic Survey 2015-16, Volume I (New Delhi: Department of Economic Affairs, Ministry of Finance, Government of India, 2016), 162.
2 Radhika Khosla and Aditya Chunekar, ‘The journey towards energy savings begins from home’, Mint, 8 June 2018.
3 Ashwini Chitnis, Sripad Dharmadhikary, Shantanu Dixit, Srihari Dukkipati, Ashwin Gambhir, Ann Josey, Sreekumar Nhalur and Ashok Sreenivas, Many Sparks but Little Light: The Rhetoric and Practice of Electricity Sector Reforms in India (Pune: Prayas Energy Group, 2017).
4 Sreekumar Nhalur, Ann Josey and Manabika Mandal, ‘Rural Electrification in India: From “Connections for All” to “Power for All” ’, Economic and Political Weekly 53(45) (2018): 31-37.
5 Karthik Ganesan, Kapardhi Bharadwaj and Kanika Balani, Electricity Consumers and Compliance: Trust, Reciprocity, and Socio-Economic Factors in Uttar Pradesh (New Delhi: Council on Energy, Environment and Water, 2019).
6 Amandeep Kaur and Lekha Chakrabarty, ‘UDAY Power Debt in Retrospect and Prospects: Analyzing the Efficiency Parameters’, NIPFP working paper 244 (New Delhi: National Institute of Public Finance and Policy, 2018).
7 Ashwini K. Swain, ‘In a state of energy poverty’, The Hindu, 11 May 2018.
8 Utpal Bhaskar, ‘UP lowers electrification target, claims all households electrified’, Mint, 31 January 2019.
9 Shalu Agarwal, Nidhi Bali and Johannes Urpelainen, Rural Electrification in India: Customer Behaviour and Demand (Smart Power India & Initiative for Sustainable Energy Policy, 2019).
10 Ashish Khanna, Daljit Singh, Ashwini K. Swain and Mudit Narain, ‘Transforming Electricity Governance in India: Has India’s Power Sector Regulation Enabled Consumers’ Power?’, World Bank policy research working paper 7275 (Washington DC: World Bank, 2016).
11 Navroz K. Dubash, Ashwini K. Swain, and Parth Bhatia, ‘The Disruptive Politics of Renewable Energy’, The India Forum, forthcoming.
12 Ashwini K. Swain, Parth Bhatia and Navroz K. Dubash, ‘Power politics at play,’ The Hindu, 9 October 2018.

Can India Achieve Sustained Fast Growth? The Two Faces of Indian Capitalism
In the last few years, India seemed to have achieved the symbolic goal of growing faster than China (at least according to official statistics) and was frequently hailed as the fastest-growing large economy in the world (Figure 1). The Spring 2019 IMF World Economic Outlook forecast continued optimistic prospects, with a slight acceleration in growth to 7.5% by 2020, even as China and the advanced economies are projected to decelerate.

Figure 1: India overtakes China in the growth stakes

Source: World Bank

Is India’s fast growth sustainable? Recent economic data indicates declining consumption, anaemic private investment, diminished corporate performance, agricultural distress and slowing GDP growth. (Questions have also been raised over the statistical robustness of recent growth.) Rathin Roy, of the Prime Minister’s Economic Advisory Council, has raised the issue of structural problems leading to a ‘middle income trap’, linked to inequality and associated failures in productive employment growth.1 The 2018 Economic Survey also referred to the challenges of productive transformation, human capital and agricultural distress.2

India’s economy holds great potential, but there is a big risk that this will not be translated into reality. Relative to its income level, India has both a highly diversified economy and well-developed organizational capabilities in the business sector. These presage multiple opportunities to upgrade, reinforcing classic forces for ‘convergence’ as the country catches up with those at the technological frontier. These forces are complemented by the (potential) demographic dividend as young cohorts enter the labour force.

However, on current trends, India is en route to the Latin American path, in which episodes of fast growth tend to stall in the long run. Signs of Latin Americanization lie in the consolidation of what has been referred to as ‘oligarchic capitalism’, with its drawbacks of widespread informalization, rising extremes of inequality, and a corporate-financial nexus of bad assets that risks growth and macroeconomic stability.

Our interpretation of a middle income trap in this paper is an essentially political-institutional account, embedded in the nature of the relationship between the state and business and between the state and society. Indian capitalism has two faces: dynamic, competitive and productivity-oriented; and connected, rent-extracting and corrosive politics. Some sectors and companies are more ‘rent-extracting’ than others. But many face both ways. Large Indian companies – such as the Reliance and Adani groups – seem to have both high productivity and high levels of influence. Then, beyond the corporate business sector, there are immense numbers of self-employed, small and medium-sized firms in the informal sector.

These features resonate vividly with characteristics of Latin America capitalism. This can be seen as having three types of enterprise: connected plutocrats with major influence over the state system (such as Carlos Slim in Mexico, and other Mexican billionaires), the rest of the business sector (that struggles with regulation, poor infrastructure and weak skill development), and a very large number of small-scale/informal enterprises (with weak access to formal credit, legal recourse, infrastructure and modern productive support systems). Countries such as Mexico and Brazil had their episodes of fast growth and then got stuck in a mix of low productivity, inefficient social policy, and periodic macroeconomic crisis.

As in Mexico or Brazil, capitalism in India operates in a system that is characterized by both formal rules and less formal deals. ‘Deals’ refer to both broad understandings and particularistic relations between the state and business. But ‘rules’ also matter. Rules can be in tension with deals when the latter aim to subvert the former, but hybrid arrangements – such as when rules are applied in the implementation of deals – are common. Carlos Slim got his big break through the (legal) privatization of Mexico’s telecom company by the then president, Carlos Salinas. Most of Mexico’s other billionaires were also launched then. And this was when Mexico was already significantly richer than India today.

Rules matter when implemented well; they play the essential role of providing credible threats and penalties for unlawful deal-making, in addition to dealing with the array of concerns over standards, safety and protection. But an over-regulated, rule-based economy can crowd out investment and stymie growth. India’s economy has evolved from being a case study in over-regulation to, functionally, a hybrid of rules and deals. Of the business-politics nexus, it can be said that ‘the relationship can no longer be understood as either developmental or crony capitalist: it is both’.3

India’s major growth acceleration occurred in the 2000s. It involved a striking growth in aggregate – and, in particular, private – investment and exports. Both faces of capitalism were manifest. There were significant strides in business capabilities and capitalist institutions. However, even as GDP skyrocketed, India’s growth story was dogged by concerns over high-level corruption and rising inequality. A series of scams over natural resource allocation helped consolidate public anger around entrenched politician-business links, spurring a national anti-corruption movement. An elite coterie of Indians was seen to be pulling the strings of politics and business, and public sentiment rallied around these societal shifts.

While household surveys suggest inequalities are still much lower in India compared to Latin America, there is evidence of continued concentration of wealth and incomes at the top of the distribution. Combining tax data with household survey data, Chancel and Piketty estimate a large increase in the income share of the top 1%, matched by a corresponding decline in the share of the bottom half of the population (Figure 2).4 By this measure, the difference in income growth between the top and the rest of the distribution was even greater than in China and the US – both notorious for their inequality rise (Table 1).

Figure 2: The rising concentration of income in India

Table 1:

A more specific manifestation of growing inequality is the rise in wealth of India’s billionaires, almost all of which is fuelled by business success (Figure 3).

Figure 3: The wealth of India’s top ten billionaires rose rapidly between 2014 and 2018

Source: Forbes.com

A crucial heritage of the period of heady growth has been a dramatic rise in reported non-performing assets (NPAs) in the banking system. NPAs are products, at least in part, of past state-business links, especially between public sector banks and influential businesses. NPAs were over 14% of gross advances in 2018 for public sector banks, with a still-high 8% for net NPAs (net NPAs are net of provisions) (Figure 4).

Figure 4: A large rise in Non-Performing Assets, especially in public sector banks

Source: DBIE, RBI

This rise in NPAs, alongside recent setbacks to India’s shadow banking industry, is a crucial constraint to the flow of credit and private investment, which has stalled in recent years. Gross capital formation as a percentage of GDP is hovering around 31%, its lowest since 2003 (Figure 5). Reported new investment proposals have also been falling steadily since 2015 (Figure 6).

Figure 5: The rise and fall of India’s investment rate

Source: World Bank information base

Figure 6: The rise and fall in investment proposals

Source: CMIE

Resolving the NPA crisis, an increasingly important policy priority in recent years, is necessary but not sufficient. The informal sector continues to dominate the economy, with over 80% of non-agricultural workers employed by the informal sector and Micro, Small, and Medium Enterprises (MSMEs) contributing over a third of GDP. Yet the IFC estimates that formal credit channels account for only 16% of debt financing in the MSME sector.

The Urgency of Action
Why is a focus on the functioning of Indian capitalism so important for the incoming administration?

For every administration that fails to put in place the institutional and policy preconditions for dynamic, inclusive development, there is a permanent loss in productive and human potential. Failure to act now means another cohort of India’s youth being substantially ill equipped to participate in productive work, fostering further increases in inequality.

Even more critical is the risk of further entrenchment of business elites, with respect to their links to both the state and minority shareholders, creating an oligarchic capitalism that heightens resistance to future institutional transitions to dynamic, competitive capitalism.

Furthermore, the global economic context is much more anaemic than the ‘sweet spot’ of the early 2000s. Long-term growth is slowing throughout Europe and the US. Even China – the main autonomous source of growth in the global economy – is in the midst of both a long-term slowdown as its economy matures, and concerns over financial fragility.

Finally, global technological change will increase incentives for increased automation in the economy. This is likely to have profound effects on the work opportunities for India’s labour force, with as yet ill-understood consequences.

These developments will have major distributional dimensions that threaten political stability. The interaction between a consolidation of oligarchic capitalism and the less favourable global context is why the risk of a Latin American style middle income trap is so salient.

A Policy Agenda
Whether India realizes its growth potential or gets stuck in a middle income trap depends on both policy choice and institutional design. Avoiding the Latin American path of oligarchic capitalism and widespread informality involves building the basis for a dynamic, inclusive and competitive capitalism. This requires, in the resonant phrase of Raghuram Rajan and Luigi Zingales, ‘saving capitalism from the capitalists’.5 Rebuilding state-business relations in an open, competitive rules-based fashion is essential. We outline six complementary areas. The complementarity is critical, as is an overarching theme that without institutional deepening with respect to accountability, autonomy and transparency, these policies will be subverted.

(1) Resolution of NPAs: Critical to real credit flows, investor sentiment and the broader macroeconomic health of the system is the effective resolution of NPAs. While the Insolvency and Bankruptcy Code (IBC) has set out a sound framework to resolve NPAs and shift power from promoters to creditors, translating the promise of the IBC into practice remains a challenge. RBI data available until January 2019 indicates that resolution has been approved in 66 cases so far, unlocking INR 800 billion for creditors. But the pace of resolution lags the Act’s guidelines – egregiously, in some cases. In addition, continued vigilance is required to ensure that tight eligibility guidelines for potential buyers do not translate to increased corporate concentration in key sectors. Underpinning the broader NPA challenge is the need to sustain the autonomy of the central bank, whose independence must be protected and unchallenged by the executive.

(2) Competition: Dynamism and innovation require competition. Many sectors are already concentrated, and there are risks of further concentration – in the consolidation following resolution, and in the future via network effects in platform-based sectors. This is vividly illustrated by the debates in Europe and the US over platform-based companies. This requires an empowered, autonomous competition authority, and also continued innovations in regulation in the wake of technological change. Mexico actually created a strong, autonomous competition authority, with a dynamic head who could not be removed by the executive. But its action on anti-competitive behaviour (including of billionaire-linked companies) got stuck in the judiciary – with lessons for India. Infrastructure and natural resources are a special case: while auctions are an important step, implementation is again crucial. The most notorious Latin America-wide corruption scandal of the recent past, involving the Brazilian conglomerate Odebrecht, involved a series of contracts won in competitive auctions for PPPs. The Achilles heel was in the renegotiation phase, when concessionaires often extract big advantages. An alternative design is to make renegotiation also subject to credible, third-party scrutiny and decision-making with transparent processes.

(3) Better rules: Shifting the balance to rules-based interactions requires better rules. There has been a plausible focus on the ‘Doing Business’ indicators and healthy interstate competition on the rankings. However, international evidence finds that these notional measures are often completely unrelated to actual experience, which depends on implementation. The GST reform should help in the long term, but the costs of participation often still seem to outweigh the benefits, especially for informal firms. Of specific importance are the complex areas of land acquisition and labour policy. While there has been a tendency amongst economists to fetishize labour flexibilization as the missing ingredient for labour-intensive industrialization (it is no panacea), the goal has to be delinking social protection from the labour contract if inefficient informalization is to be discouraged; this is a specific bridge to comprehensive social policies.

(4) Facilitating implementation: The bureaucracy has in the past been in the production line of converting politican-business deals into the prevailing rules. With the (desirable) anti-corruption motif, there is widespread reference to the ‘chilling’ effects on approval, from both business and bureaucrats. Some reduction in the excessive legal risks for bureaucrats have come with changes in the 13(1)(d) regulation in 2018 – which previously criminalized bureaucrats for any loss to the government, even if there was no intent – but the effects are still unclear. Additional action, such as new third-party processes for contract renegotiation just referred to, can help. This is an area where concerted exploration of implementation design is important.

(5) Inclusion: Deepening institutional support for small-scale and informal enterprises will require a whole suite of policy changes across sectors and along the value chain. Providing more robust support to MSMEs, including those in rural areas, will require enhanced infrastructure provision (along the lines of the Pradhan Mantri Gram Sadak Yojana), a deepening of financial inclusion and access to credit, a data-driven reorientation of NRLM and urban skilling programmes, and finally, a revamping of CSR towards leveraging corporate comparative advantage in favour of supporting business enterprises instead of government programmes.

(6) Industrial policy: Finally, there is a potentially important role for sector-specific industrial policy. In this regard, India has both successes and failures. The auto industry has benefited from a series of state actions that led to a productive sector strongly integrated with global value chains, notably in Tamil Nadu. Sector-specific public goods, such as on National Automotive Testing and R&D Infrastructure Project, are also examples of successes. By contrast the Special Economic Zone policy often became associated with land deals. Effective 21st century industrial strategies require both close cooperation with the business sector and a focus on sector-specific public goods (rather than a bias towards protection or tax breaks), but also sufficient autonomy from business lobbies – or especially a politician-business nexus – to avoid consolidation of inefficiency and rent-extraction. Credible sunset clauses to support are one example of an instrument.

This is only an outline of policy domains. While the complementarity between them is vital, even more important is the way in which the state behaves in their implementation. And key to this are the checks and balances that lie at the heart of the accountability mechanisms that underpin state behaviour.

These are of two complementary kinds. First, there are checks and balances within the state: fundamentally in the independence of the judiciary, but also the full array of regulatory agencies, and the incentives that they face. India has had plenty of experience of accountability institutions, notably in the long-term independence of the Election Commission and the Supreme Court. Both, however, are increasingly seen as subject to influence, with critical actors in both taking unprecedentedly public measures to decry perceived threats to institutional autonomy and conduct.

Second, there is the pressure from civil society, whether (weakly and imperfectly) via periodic elections, or through ongoing civil society activism over state performance, via many mechanisms. This is heavily influenced by the availability of information, for which the various kinds of media play a central role. Unfortunately, the traditional media in India is largely owned by big business, and mostly supine on state business concerns.

There is room to strengthen both the mechanisms of accountability that belong with the state, and those that belong with civil society. What is needed is a genuine counterbalance in institutional and societal terms, complemented by strengthening, not weakening, of the capabilities of the state. For while India has a tradition of very high-quality individual state actors and a reputation for an overbearing state presence, a real issue is weaknesses in state functionality.

The Latin American experience shows that growth can occur for a while under conditions of oligarchic capitalism and widespread informality. India has immense economic potential, for which the business sector is crucial. However, unless there is a comprehensive agenda of policy and institutional change to create a dynamic capitalism, there is a risk of a Latin Americanization of India’s path that will consolidate a middle income trap of low productivity growth and entrenched inequality.

Other pieces as part of CPR’s policy document, ‘Policy Challenges – 2019-2024’ can be accessed below:

The Future is Federal: Why Indian Foreign Policy Needs to Leverage its Border States by Nimmi Kurian
Rethinking India’s Approach to International and Domestic Climate Policy by Navroz K Dubash and Lavanya Rajamani
India’s Foreign Policy in an Uncertain World by Shyam Saran
Need for a Comprehensive National Security Strategy by Shyam Saran
A Clarion Call for Just Jobs: Addressing the Nation’s Employment Crisis by Sabina Dewan
Time for Disruptive Foreign and National Security Policies by Bharat Karnad
Multiply Urban ‘Growth Engines’, Encourage Migration to Reboot Economy by Mukta Naik
Schooling is not Learning by Yamini Aiyar
Clearing Our Air of Pollution: A Road Map for the Next Five Years by Santosh Harish, Shibani Ghosh and Navroz K Dubash
Protecting Water while Providing Water to All: Need for Enabling Legislations by Philippe Cullet
Interstate River Water Governance: Shift focus from conflict resolution to enabling cooperation by Srinivas Chokkakula
Managing India-China Relations in a Changing Neighbourhood by Zorawar Daulet Singh
Beyond Poles and Wires: How to Keep the Electrons Flowing? by Ashwini K Swain and Navroz K Dubash
Regulatory Reforms to Address Environmental Non-Compliance by Manju Menon and Kanchi Kohli
The Numbers Game: Suggestions for Improving School Education Data by Kiran Bhatty
Safe and Dignified Sanitation Work: India’s Foremost Sanitation Challenge by Arkaja Singh and Shubhagato Dasgupta
Safeguarding the Fragile Ecology of the Himalayas by Shyam Saran
Female Labour Force Participation: Asking Better Questions by Neelanjan Sircar
Towards ‘Cooperative’ Social Policy Financing in India by Avani Kapur
Understanding Land Conflict in India and Suggestions for Reform by Namita Wahi
Regulating New Technologies: Three Central Principles by Ananth Padmanabhan
Back-end First: A National Agenda for India’s Agricultural Markets by Mekhala Krishnamurthy
In Need of Structural Repairs: The Social Justice Project by D Shyam Babu
1 ‘Can’t run world’s fastest growing economy on employment support… Must create employment: PMEAC member Rathin Roy’, Indian Express, 26 May 2019, https://indianexpress.com/article/india/rathin-roy-indian-economy-employ….
2 Government of India, Economic Survey of India 2017-18 (New Delhi: Government of India, 2018).
3 Aseema Sinha, ‘India’s Porous State: Blurred Boundaries and the Evolving Business-State Relationship’, in Business and Politics in India, edited by Christophe Jaffrelot, Atul Kohli and Kanta Murali, (New Delhi: Oxford University Press, 2019).
4 L. Chancel and T. Piketty, ‘Indian Income Inequality, 1922-2014: From British Raj to Billionaire Raj?’, CEPR Discussion paper 12409 (Washington, DC: Center for Economic and Policy Research, 2017).
5 Raghuram Rajan and Luigi Zingales, Saving Capitalism from the Capitalists: Unleashing the Power of Financial Markets to Create Wealth and Spread Opportunity (New York: Random House, 2003).

Bihar Election 2015: Commentary and Analyses
ELECTION STUDIES POLITICS

The Bihar state elections resulted in a clinching victory for Grand Alliance (Mahagathbandhan) and the return of Nitish Kumar as Bihar’s chief minister. At CPR, Neelanjan Sircar, Bhanu Joshi and Ashish Ranjan captured the election cycle through in-depth analyses based on extensive field work and data.

Their commentaries have been published as op-eds in a series in The Hindu and as working papers/data analyses on CPR’s website. Find below a complete chronological compilation to date:

Series on Bihar elections in The Hindu:

Bihar polls: the shifting goalposts​
It’s not about caste or beef, but vikas
How will Bihar shake out?
How Modi surrendered Bihar
​After Bihar, politics seeks a new normal
Working papers and analyses:

The Battle for Bihar: Understanding the Upcoming 2015 Election
“What do Bihar’s Voters Want?”
“How Will Bihar Shake Out?”