All Newspaper editorials in one place – February 14, 2024





February 14, 2024

Homeward bound

Quiet diplomacy without brinkmanship helped India’s case in Qatar


The release of all eight former Indian naval personnel from Qatar, just about three months after they were ordered a shocking death sentence, is a matter of great relief. Ever since the eight men — seven senior retired naval officers, and a sailor — who worked for the Qatar-based Dahra technologies, were arrested in 2022, the details of their case have been sparse. While their families denied reports that the men had been accused of espionage, possibly for a third country, namely Israel, the charges must have been serious enough to have invoked the death penalty. An appeals court did, in December, commute the death penalty to imprisonment terms, but upheld the conviction. It is to the government’s credit that it was able to bring about the release of all the eight, seven of whom have now returned. The success seems attributable to the strategies New Delhi employed: to pursue the case in court, showing respect to the Qatari legal system, while providing the accused with full legal support and counsel; avoid all escalatory rhetoric and public sparring; and, to take the case to the highest levels, with Prime Minister Narendra Modi discussing it with the Qatari Amir, Sheikh Tamim bin Hamad Al-Thani, during a meet in Dubai in December. That Mr. Modi announced an unscheduled leg of travel to Doha on Wednesday, after his ongoing trip to the United Arab Emirates, signifies his personal involvement and his desire to thank the Qatari Amir.


The Qatar case is a timely reminder of the importance of quiet diplomacy at a time of brinkmanship and geopolitical conflict, particularly when it comes to relationships where so much else is at stake. For India, Qatar is an important West Asian power, with increased heft during the Israel-Gaza conflict as an important interlocutor between the West and Hamas. For Qatar, ties with India are historic and dependable, consistent even when Qatar was boycotted by its Gulf neighbours some years ago. Qatar supplies India with a third of its natural gas import needs, and the signing of a $78 billion LNG deal last week may have been an early sign that the deal for the prisoners’ release had been sealed by then. More than 8,00,000 Indians provide important services to Qatar and bring in critical remittance earnings for India. New Delhi’s decision not to seek international intervention, as it did in the case of former naval commander Kulbhushan Jadhav, who has been convicted of espionage and terror charges in Pakistan, nor to counter Qatar’s charges with the kind of harsh diplomatic countermeasures seen in the aftermath of the Nijjar assassination case in Canada, eventually provided an outcome satisfactory for all.






February 14, 2024

Salutary reminder

Inflation should not undermine overall macroeconomic stability


Retail inflation data for January provides a clear reminder as to why the RBI’s Monetary Policy Committee opted last week to not only hold benchmark interest rates but also chose to remain resolutely focused on achieving durable price stability. While the data for Consumer Price Index-based price gains show the headline number having eased from December’s 5.69% to a three-month low of 5.10% last month, inflation readings for key food items including cereals, vegetables and pulses continued to stay elevated at 7.83%, 27% and 19.5%, respectively, despite moderating from December’s levels. Among the vegetables sub-group, 12 of the 19 items monitored by the Centre for Monitoring Indian Economy (CMIE) posted accelerations in year-on-year price gains last month from their readings in December, signalling that the underlying trend in inflation is persistently high. Cereals, which have the heaviest weight in the food group, also stayed stubbornly stuck in a higher trajectory, with the month-on-month inflation for the sub-group that includes the key staple of rice, barely nudging lower at 0.75%, compared with December’s 0.76%. Rice was the primary drag, with its price at non-PDS outlets accelerating both sequentially and on-year, by 1.02% and a six-month high pace of 13%, respectively. With a recent CMIE estimate for rabi sowing of rice, revealing a 2.7% drop from last year, the prospect of prices softening significantly in the near future appears remote.


The data on reservoir storage levels also add to the disquiet on the outlook for prices, particularly of food items. With water storage at 150 reservoirs showing live storage as on February 8 at 49% of capacity, and lagging appreciably behind both the year-earlier and average of the last 10-years levels, output of the rabi sown crops, including cereals and more particularly pulses, are at risk of being impacted. Given food’s large share in the overall consumption basket, food price gains pose a wider risk to overall price stability, both directly and through spillover to the prices of non-food items, as a research article by RBI officials concluded. The central bank’s survey of households’ inflation expectations found the median inflation expectation for three months ahead rose by 10 bps from the previous survey in November to 9.2%, with a greater share of respondents — 78% versus 74% two months ago — expecting inflation to accelerate in the near term. With talks between the government and some farmers’ groups breaking down and farmers threatening to intensify an agitation over demands that include assurances on a guaranteed minimum support price, policymakers face a challenge to ensure inflation does not rebound and undermine overall macroeconomic stability.





February 14, 2024

One by one

Movement of leaders, parties only in one direction, BJP’s, ahead of an important election, points to realpolitik with gloves off


Three high-profile desertions from INDIA and Congress and cross-overs to the BJP-led NDA, in quick succession in the run-up to parliamentary polls, underscore the state of political play. In Bihar, Nitish Kumar’s JD(U), a flag-bearer of Mandal politics, which was also being seen as a pillar of the national Opposition front, has walked back into the saffron fold. In UP, the RLD, rooted in an agrarian politics that was once seen, in local contexts, as a countervailing force to Hindutva, has tied up with the NDA. And in Maharashtra, former chief minister, Ashok Chavan, after 38 years in Congress, and having been targeted for alleged corruption by the BJP, has cast his lot with the BJP. All three highlight the BJP’s predatory politics — the party is determined to not just put together the numbers, but also to shore up total domination. But they also turn the spotlight on the continuing deshabille of Congress and the unchecked shrinking of INDIA even before it is fully formed.


The contrast only grows starker as the general election draws closer. The BJP shows agility and political imagination, and uses carrot as well as stick, weaponising its control of Central agencies like the ED-CBI now, and strategically holding out the Bharat Ratna then, to court parties and fold in constituencies that are not traditionally counted as its own, in order to spread its net wider, expand and layer its appeal. In Maharashtra, Chavan’s switch follows the split of both the Shiv Sena and the NCP, one of the two halves of both aligning with the BJP. And the latest Bharat Ratna announcements at the national level — Karpoori Thakur, P V Narasimha Rao and Charan Singh — underline the BJP’s incursions into political territory once thought to be dominated by ideologically differing if not antagonistic forces. This is after it has sealed its “core” promise of a Ram temple at Ayodhya with the grand consecration. On the other side, Congress is not all there to either guard its base or stitch up seat-sharing with potential INDIA allies — because its top leader Rahul Gandhi, who may no longer be party president but still runs the show, is on an ill-timed yatra. In a critical time, this manifests in a lack of urgency and unconscionable delays in the party’s decision-making. The AAP has already said that it will go it alone in Punjab and made a take-it-or-leave-it offer to Congress in Delhi. And in West Bengal, Mamata Banerjee has predicted, unflatteringly, that Congress may not win even 40 LS seats.


The unchecked weakening of the Opposition bodes ill for a democracy that, at any given point, and whichever the party or parties in government, requires a competitive polity to be the best version of itself. The movement of leaders and parties only in one direction, ahead of an important election, points to a realpolitik with gloves off, and to a polity in search of a new equilibrium.






February 14, 2024

The Mayotte dilemma

France’s decision to scrap birthright citizenship on the island speaks of a larger European anxiety over immigration


French interior minister Gérald Darmanin’s declaration of an “extremely strong, clear, radical measure” to address an immigration crisis in the French Indian Ocean island of Mayotte is an indication of the tightrope that France has been walking on the issue. In a country that grants citizenship through parentage (“droit du sang”) and birthplace (“droit du sol”), the new plan, announced by the minister and applicable only to Mayotte, scraps birthright citizenship — it “will no longer be possible to become French if you are not the child of a French parent”. Mayotte, which had voted in a 1974 referendum to remain with France and became a French department only in 2011, has been mired in protests against rising levels of crime, poverty and a steady influx of indigent migrants from neighbouring Comoros Island. Darmanin’s announcement came in part to assuage the weeks-long unrest in the island and has been taken up by the country’s right wing for implementation in mainland France too. The announcement reflects the Macron government’s larger struggle to strike an elusive balance between guaranteeing the rights of immigrants, migrants and asylum seekers and an increasingly restive French society caught in a flailing economy.


In recent years, France’s immigration policy, once among the most liberal in Europe, has reflected the country’s — and Europe’s — growing anxieties around the unprecedented migrant crisis, especially in a post-Covid economy. Last June, the shooting of a 17-year-old French-Algerian youth in Nanterre had seen protests across the country. While President Macron has insisted that France will continue to welcome international students and skilled labour in sectors facing shortage, his own weakened stature has seen a greater capitulation to the demands of the right wing, especially when it comes to immigration. The Mayotte announcement comes soon after a new immigration legislation that had sparked a rebellion in Macron’s government in December and found favour with the country’s right. It stands to, among other things, weaken the right to appeal for asylum seekers, introduce migration quotas that put a cap on residency permits and citizenship and potentially delay access to welfare benefits.


These policies also show that immigration is a subject whose complexity does not make for easy solutions. In December last year, the European Union reached an agreement to overhaul its asylum policies and limit the number of people coming in to protect its interests; the UK’s Supreme Court recently struck down the government’s plan to send asylum seekers to Rwanda. In a strife-torn world where resources are limited and the clamour for balance louder than ever before, there are no easy answers to this humanitarian crisis.






February 14, 2024

Don’t freeze

When it comes to the big games, Australia are simply a few miles ahead of their opponents, including India


For Steve Waugh’s Invincibles, India was the final frontier, the lone unconquered shore in their era of absolute supremacy. In 54 years, the indefatigable Australians have managed to win just one Test series in India. In ICC tournaments, though, Australia have been India’s final frontier. The defeat of the U-19 cricketers in Benoni, South Africa, was the third instance in seven months that Australia defeated India in the final of a global tournament. If the loss in the World Test Championship at the Oval is a distant, fading memory, the stumble in the 50-over World Cup final in front of shocked spectators in Ahmedabad is like an unhealed wound.


The fatalists would call it a jinx. Others might term it as a mental block. Some would say it is DNA. But when it comes to the big games and moments, Australia are simply a few miles ahead of their opponents in handling pressure and negotiating tough times. India, on the other hand, tend to freeze in those moments when icy veins and cool heads are required. It’s easier said than done because international sport is ultra competitive and even the slightest mistakes could be ruthlessly punished. Australia excel at that, borne out by the collection of 14 ICC trophies in their gallery. Even if they might not possess a glittering array of talent as they once used to, they inevitably rise above themselves in the knockout.


Nonetheless, a defeat in the final offers valuable lessons for the teenaged cricketers, most of whom would soon step into the intense world of senior cricket. The loss would sting, but it would also make them realise that nothing comes easy in professional sport. Despite the stumble in the final, there is considerable talent in the batch of 2024, a foundation for the coaches to work with, a potential to be harnessed into world-class packages. The defeat should only inspire them to breach India’s final frontier in ICC tournaments, that is, Australia.





February 14, 2024


Too few Indians get US citizenship. Why & how this must change


To most this bit of news seemed ho-hum – 59k Indians got US citizenship last year, per USCIS. Mexicans beat Indians. Filipinos were a close third. Lots of Indians live and work in US. Waves of Mexicans get there. Philippines used to be an American colony. So, no big surprises in US citizenship figures, right? Wrong. The surprise for India is – or should be – that so few Indians became Americans in 2023. Mexico (population: 129 million) comfortably left India (pop: 1.4 billion) behind. And Philippines (pop: 112 million) came close. Indians should by far be the largest group getting American citizenship every year. Here’s why and how.


European, non-European | America, as we know it, came about thanks to ruthless land-grab and a fair amount of ethnic cleansing by European colonialists. Those nasty bits done, slave trade added to the list, European settlers went on to found what became the world’s most powerful country ever. But non-European immigrants were almost always needed in a vast country with a dynamic economy. And from 1960s, when the de facto, whites-preferred immigration policy was changed, non-whites arrived in millions. In 1960, 75% of foreign-born Americans were Europeans. In 2018, that figure was just 11%. Indians were part of this dramatic change – but never in numbers that did justice.


Density is destiny | Thanks in part to immigrants, America isn’t as badly placed in terms of falling birth rates and aging population as some other rich countries. But population density per sq km in US, world’s third most populous country, is still just 37, far lower than UK’s 280, and a small fraction of India’s 485. America is full of empty spaces, states like Wyoming, Montana, two Dakotas. India is full of industrious people. Even those who don’t have good college degrees can turn small opportunities into thriving enterprises. Think of Indians manning Italy’s famous cheesemakers. Imagine hundreds of thousands of Indians in, say, Montana – it will become a powerhouse economy. America’s capital rich, resource-rich, technology-rich economy needs lots of people if the country is to retain its global pole position. India should be the main source. India will benefit, of course. Not just more remittances, and higher knowledge and skills diffusion. Indians will become a numerically powerful bloc in US, a voice and votes that can’t be ignored by American politicians.


Minister for immigration | To become America’s biggest source country for all kinds of talent India should put someone in charge of this. GOI should have a minister for immigration. His job will be to make sure many more Indians can legally immigrate to US. He should liaise with US govt and US states, armed with data on skills India can supply and work America needs doing, now and in near future. Economic logic is the best antidote to prejudice and bureaucracy. Govts of Haryana, UP recently launched efforts to send people to Israel, which needs workers. GOI should aim for a national, more sophisticated version of this. When millions more Indians become Americans, it’s good news for India and America.





February 14, 2024

A Daze Of Days

Too many days of this & that, all too confusing


In an appropriately smoochy curtain raiser to today’s Valentine’s Day, commemorating Cupid, yesterday was reportedly Kiss Day, a 24-hour period during which literally lip-service was supposedly paid to the act of osculation.


Fortunately for those who participated in the event with vim and vigour, the self-proclaimed moral vigilantes who like to have a bash at those having a different sort of bash relating to amore, Kiss Day seems to have been overlooked in a calendar chock-a-block with all manner of commemorative events dreamt up by marketing managers to make cash registers ring with gift-giving, from roses and candlelit dinners for two on Valentine’s Day, to presumably lip salve as a precautionary present against bruised labia on yesterday’s kissing spree.


Women’s Day is rightly celebrated. Friendship Day could similarly branch out into various forms of mateyness, including Pen Friend Day, Facebook Friend Day…


Caught in a daze of special days, a bemused individual might be excused for identifying Teacher’s Day not as a red-letter day for educationists, but one dedicated to a popular brand of tipple of Scottish origin. The observance of Chocolate Day last week might prompt the swadeshi-minded to promote indigenous confections by announcing a Barfi Day, a Jalebi Day and a Rabri Day. While Father’s Day and Mother’s Day are straightforward, things might get complicated if entrepreneurs come up with Uncleji’s Day and Auntieji’s Day, not to mention Cujjin-brother’s Day, all aimed at making you kith, if not kin, your money goodbye.






February 14, 2024

Veni, Vidi, VCs Back To First Principles

Reaction to global excesses at start of the decade


The VC industry is returning to first principles as the funding winter drags on into early spring. Higher interest rates, lower valuations and stock market volatility have made returning or raising capital more difficult, and conditions are expected to remain so in the near future. This has contributed to a more prudent approach by PE firms that have sharpened their focus on smaller startups in sectors with greater visibility on profits and better governance. This is a reaction to global excesses at the beginning of the decade when size had become the main yardstick of performance, overriding the specificities of business opportunity, unit economics and board oversight. As money-chasing late-stage startups that were poised for listing dried up, the VC industry has acquired greater responsibility for the ventures it is nurturing.


Not all lessons may have been properly internalised, though, given the insatiable investor appetite for AI, which is threatening to spill over into the PE market. As of now, the broader markets provide enough opportunity for investors to bet on AI, but as the new technology rapidly spreads into the nooks and crannies of various industries, the VC industry could be sitting down to feast after a famine. Some of the newfound prudence could abate as extraordinary returns make a comeback. The lessons from the funding winter should, however, not be lost entirely, a point made at last week’s ET Now GBS by more than one guest speaker.


Startups will emerge from the drought with stronger balance sheets, and valuations will be in closer alignment to revenues. Both entrepreneurs and investors have acquired a degree of sobriety that would have been hard to come by even a few years ago. Regulations to blow away excess froth are also in place. These may be building blocks for tighter rules when the next big wave of risk capital arrives. It may be sooner than anticipated. But, this time, we are better prepared.






February 14, 2024

Affirmative Action for Persons, Not Groups


Last week, the Supreme Court reserved judgment on whether a state government is empowered to make sub-classification in SC/ST quotas for deprived and weaker castes in these groups in admissions and public jobs. The issue before the top court was whether the Punjab Scheduled Castes and Backward Classes (Reservation in Services) Act 2006 — which provided Balmikis and Mazhabi Sikhs with ‘first preference’ reservation over 50% of the total seats reserved for SCs — is valid. The chief justice constituted a seven-judge bench after a five-judge bench in 2020 doubted the correctness of the decision in the 2004 ‘EV Chinnaiah v State of Andhra Pradesh’ case. In this case, a five-judge bench had set aside a similar law in Andhra Pradesh that created sub-classifications within the SC category. The Punjab government argued before the apex court that Chinnaiah had wrongly interpreted SCs as one homogenous class.


While the purpose of reservations is to help communities overcome generational and systemic hurdles, the bench correctly has said that any sub-classification will require a set of criteria. You can’t just dole out quotas ‘theoretically’. An efficient selection system is critical to ensuring that quotas benefit the last person, not just communities. It must consider parameters beyond SC/ST subgroup identities — such as family and individual wealth, income, education, rural or urban, and gender — to create a multidimensional index that objectively assesses comparative disadvantage within the SC/ST category.

Transparency is key to the quota process being effective for the purpose it was created. No point providing such affirmative action to, say, a wealthy dalit or denying it to a badly-off brahmin. In other words, individuals over groups.




February 14, 2024

Business as usual

Big-ticket consumption fared well in Q3, less so profit


India Inc is putting up a resilient show despite global headwinds and rising interest rates. An analysis by this newspaper of the Q3 FY24 numbers reported by 1,357 listed companies shows that they improved their revenue growth to 9.4 per cent in the October-December 2023 quarter, from 7.2 per cent and 7.3 per cent respectively in the preceding two quarters. Their net profit growth at 30.8 per cent slowed from 53.8 per cent as input cost benefits waned, but the absolute growth rate was well above historical levels.


Despite rising interest rates, the interest coverage ratio of non-financial firms was comfortable at 4.4 times. But a sectoral break-down of the results reveals that revenue and profit growth for India Inc was powered by different sets of sectors. In the last two quarters, weak revenue growth from some consumer-facing industries had raised doubts over whether the post-Covid surge in demand was losing momentum. Revenue numbers for the latest quarter, which captures festival season demand for 2023, allay such fears. Sectors such as consumer durables (24.3 per cent), new-age e-commerce (42 per cent), automobiles (21.7 per cent), retail (199 per cent), jewellery (23.6 per cent) and aviation (30.3 per cent) delivered strong sales growth, indicating that urban and big-ticket spending are in the pink of health. But weak sales growth for sectors such as FMCG (5.2 per cent) and ready-mades (0.7 per cent) suggests that spending on essentials remains sub-par, either due to a K-shaped recovery or a shifting share of the consumer wallet.


If consumer-facing sectors demonstrated strong revenue growth, core economy and industrial sectors reported a profit bounty. Large profit jumps in steel (310 per cent growth), cement (191 per cent), refineries (66 per cent), gas (135 per cent) and power (43 per cent) were the result of lower energy and freight costs, which may wane if global oil prices shoot up again. But for now, bumper profits in these capex-heavy sectors show that India’s large industrial companies are in good shape. This offers hope for private capex to regain momentum as and when capacity utilisation peaks. Banks and finance companies saw a slowdown both in revenues and profits thanks to regulatory speed-breakers, but revenue growth at 29 per cent was still suggestive of good credit availability. Listed realty companies reported a slide in revenues (5 per cent contraction) challenging the narrative on real estate recovery. Export-oriented sectors like IT services reported tepid revenue (7 per cent in Q2 to 3.7 per cent in Q3) and profit growth (4.4 per cent to 2 per cent).


There’s nothing in the Q3 earnings scorecard to disappoint bullish stock markets. But, as the Nifty50 is already trading at 20 times forward earnings when per share earnings are expected to grow at 13 per cent, there’s nothing to trigger bullishness either. Investors, especially those entering equities now, need to tone down their return expectations.






February 14, 2024

Deeper reforms

PLI alone will not bring in investment


The government’s production-linked incentive (PLI) scheme is the closest India has got to an industrial policy. Several PLI programmes have been designed for a subset of sectors that the government believes is relevant for India’s development and economic security. Some of these are clearly related to the green transition, such as the scheme for batteries. But there are others that are more traditional export-oriented sectors. One such is textiles, which is a well-known, labour-intensive sector that is relevant for employment growth. However, as this newspaper has reported, the growth of private investment in some of these sectors — including textiles, information technology hardware, and speciality steel — has been slower than anticipated. In fact, according to a review of the schemes by an inter-ministerial panel, investment has been lagging in several sectors. It is becoming increasingly clear that, even with the subsidies provided, there are certain sectors that require policy reform at a deeper level if they are to become properly competitive.


Textiles is one such sector. Its impact on job creation and livelihoods is undeniable. Indeed, the sustained growth and poverty reduction that have been achieved in countries like Bangladesh are a consequence of productivity in this sector. The government envisaged that putting some public money into incentivising increased production in this sector in India would lead to a takeoff. But that has not been the case. Although over Rs 10,000 crore has been set aside for this programme, which is focused on man-made fibre and garments, only a small fraction of that money has been disbursed. Indeed, there is no sign that it will re-energise the sector or cause a structural shift in employment patterns. Multiple tweaks to the programme have already been proposed and implemented — with reports earlier this month that the Union Ministry of Textiles was working on yet another revision. It is time to consider that the problem is not the exact parameters of the PLI scheme but the broader hope that it would serve as a shortcut, removing the need for deeper reform.


The reason some countries have done well on textiles and garments exports is simple: They have solid infrastructure, reliable trade policy with low tariffs on inputs, an employable workforce, and investor-friendly regulations. Of these four requirements, the Indian government has worked hard on building infrastructure and, to an extent, on easing regulations. However, trade policy has been noticeably unpredictable and workforce development has not happened as desired. Nor has there been judicial or administrative reform that provides business with confidence that regulations will be fairly enforced. It is not surprising, therefore, that there are few takers for the money on offer.


The government needs to stop discussing the large amounts of money set aside for the PLI schemes and engage actively with the concerns of potential investors in each of these underperforming sectors, from textiles to food processing. The PLI programmes themselves are clearly not solutions to underlying problems, and should not be considered to be open-ended offers, either. The danger is that if the government broadens eligibility, it may lead to unsustainable projects. There is only one formula for labour-intensive export growth: Creating business-friendly conditions.






February 14, 2024

Reprieve in Qatar

Development shows the relevance of effective diplomatic engagement


The hectic behind-the-scenes diplomacy that played a key role in ending the 18-month ordeal of eight former Indian Navy men imprisoned in Qatar on alleged espionage charges can be viewed as a reflection of strengthening economic ties between the West Asian powerhouse and India. The rapid change in the Qatari government’s stance from the death sentence in October last year to jail terms in December to freedom took place ahead of Prime Minister (PM) Narendra Modi’s two-day visit to the United Arab Emirates (UAE) on February 13. The PM reportedly played an active role in securing the release of these men, personally negotiating with Qatar’s Emir Tamim bin Hamad Al Thani on the sidelines of the COP28 summit in Dubai in December. Though this case has a happy ending, the episode has raised many questions about the complexities of geopolitical alignments in West Asia, highlighting the constant challenges India faces in managing them.


The official details of the charges against the Navy men have not been made public and the circumstances remain murky. They were employees of a Doha-based company called Dahra Global, a now defunct entity owned by a Qatari citizen, which reportedly specialised in training defence personnel. Reports say the eight Indian men were accused of passing on sensitive submarine-related information to the Israeli intelligence and the death sentence was passed just weeks after the war between Gaza-based Palestinian group Hamas and Israel broke out on October 7. Qatar is one of the militant outfit’s strongest backers. Although India has traditionally supported the two-state solution in the Israel-Palestine conflict, it has developed closer ties with Tel Aviv, which has become the country’s second-largest supplier of defence equipment.


India has historically enjoyed cordial relations with the array of West Asian powers, from Sunni Saudi Arabia to Shia Iran. In recent years, it has deepened this relationship as part of the rapprochement between the Arab world and Israel. In July 2022, in partnership with the United States, New Delhi signed on to the I2U2 technological collaboration among India, Israel, the UAE, and the US. Last year, the development of an India-Middle East-Europe corridor was announced at the G20 summit in New Delhi. Qatar, too, has emerged as a significant investor in India. Recently, Qatar Energy and Petronet signed a long-term deal, the biggest in recent years, to supply 7.5 million metric tonnes of liquefied natural gas (LNG) annually. Qatar accounts for half of India’s LNG imports and this deal is critical at a time when Europe is also exploring the region for similar deals to reduce dependence on Russian gas.


Qatar’s sovereign wealth fund also has significant investment in the Indian private sector, including the startup universe, while several Indian companies have a presence in Qatar. Economic ties between the two are strengthened also by a large presence of Indian workforce there. No doubt this symbiotic economic relationship and Mr Modi’s personal rapport with Emir Al Thani played a part in the reprieve for the Navy men and can be seen as a major achievement for Indian diplomacy. Nonetheless, the incident remains a reminder of the inherent fragilities of all geopolitical relationships.






February 14, 2024

Bury the MSP demand

Farmers are under severe stress but their demand for a legal guarantee for minimum support price has no merit


Farmer unions, especially from Punjab, are again restive after they forced the government to scrap three farm laws two years ago after a year-long agitation. Their tractors are headed for the borders of the capital after last-minute negotiations with ministers in Chandigarh hit a stalemate. With more than 200 farmers’ unions involved in the latest episode, The Delhi Police has imposed Section 144 across the national capital for a month. Their key demands are also similar to that of their earlier agitation, notably, a legal guarantee of minimum support prices for 23 crops, debt waivers, reintroduction of the land acquisition act of 2013 ensuring written consent from farmers and compensation at four times the collector rate, scrapping the Electricity Amendment Bill 2020, and compensation for farmers who died in the earlier agitation, among others.


While the Centre tried to meet them halfway with a consensus on some of the issues, there was no progress on the main demand for a legal guarantee for the MSP regime. The government’s offer to examine this issue through a committee did not find favour among them, with it considered a stalling tactic. The tenacity of farmers’ demands that the MSP regime be guaranteed in writing is a red line for any government regardless of its political complexion. There is no way that this demand can be conceded as it entails a huge fiscal cost. The problems with MSPs, which are a legacy of the green revolution since the late 1960s, are several.


They mainly benefit large surplus-producing farmers in the vanguard agrarian regions of Punjab, Haryana, and western Uttar Pradesh. They introduce a cost-plus determination to prices that is inflationary over the short-term. Such a regime also encourages cultivation of water-intensive crops like paddy in these regions which are facing ground water stress and the need is for crop diversification. Extending them to more crops besides wheat and rice also has serious implications for the exchequer if it’s backed by open-ended procurement. MSPs don’t insulate farmers from continuing market failures, volatility of prices, and sudden supply gluts, especially when bumper harvests are the new normal.


Farmers no doubt seek such legal guarantees to shore up their incomes as cultivation at the margin is getting increasingly unviable due to costlier inputs. There is a persisting narrative of agrarian distress as the average farmer is also now more of an agricultural labourer than cultivator, as the share of wages was as high as 40% in average household monthly income. Their income is also low compared to non-agricultural workers. On the wage front, the situation is grim as there has been only a sluggish annual real increase of 0.6% during the last nine years. To ameliorate this state of affairs, the Centre must continue to engage the protesting farmers and assure them that there are superior alternatives to a guaranteed MSP regime like deficiency payments that compensate them for the difference between the MSPs and the mandi price, if the latter rules at lower levels and does not entail physical procurement. Other non-distortionary options include direct income support like stepping up the instalments under the existing Pradhan Mantri Kisan Samman Nidhi scheme. Scaling such support will partake of a quasi-rural universal basic income scheme and ensure a guaranteed income in contrast to the MSP regime. The protesting farmers’ demands for a legal basis for MSPs in writing is a non-starter and must be buried once and for all.”


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