All Newspaper editorials in one place – February 27, 2024



February 27, 2024

Old beginning

Shehbaz Sharif’s political difficulties are compounded by the economic crisis


There was no level playing field in Pakistan’s general elections on February 8, in which the Pakistan Tehreek-e-Insaf (PTI), the party of jailed former Prime Minister Imran Khan, barred from fielding candidates on its popular cricket bat symbol, was pitted against the military-backed Pakistan Muslim League-Nawaz (PML-N). Still, voters backed the PTI, whose independents emerged as the largest bloc in the National Assembly with 93 seats, while the PML-N ended up second with 75 seats. While the results sprung a surprise for many, the post-election manoeuvres have hardly been surprising. The PML-N has joined hands with the Pakistan People’s Party (PPP) and several smaller parties to form a coalition government, which leaves out the PTI. Shehbaz Sharif, who became Prime Minister as part of an anti-Imran Khan coalition after the cricketer-turned politician’s government was toppled in a no-confidence vote in April 2022, will return to the post. Maryam Nawaz, daughter of Nawaz Sharif, leader of the PML-N (Mr. Sharif is the elder brother of Mr. Shehbaz), has become the Chief Minister of Punjab, while Asif Ali Zardari, the former President and leader of the PPP, is likely to replace Pakistan President Arif Alvi (of the PTI). The coalition has the full support of Pakistan’s generals, while the PTI, which had accused the military of rigging in dozens of seats, says it will stay in opposition and mount legal challenges to the contested results.


In many ways, the new alliance is a replica of the previous coalition government. Mr. Shehbaz was widely unpopular as Prime Minister under whose watch Pakistan’s economic woes have multiplied — inflation stands at a punishing 30%, while the economy is run on a $3 billion lifeline the IMF provided last year. Foreign exchange reserves, despite improving, still stand at a low of $8.2 billion. The new government will have to restart talks with the IMF for a bailout package. Even if a deal is reached quickly, it is not going to be a magic bullet for Pakistan’s debt-laden economy, which is facing repayments worth $70 billion over the next three years. Moreover, the country is also facing growing security challenges in its border region with Afghanistan. That Mr. Shehbaz, instead of Mr. Nawaz who had a history of confrontation with the military, was chosen to lead the coalition suggests that the member parties and the power behind the scene prefer status quo. But the voters did not want the status quo. Also, if the military hoped that Mr. Khan and the PTI would be sidelined after the election, that is not going to happen. Mr. Shehbaz’s challenge is to lead a difficult coalition through choppy political waters while taking tough decisions to pull the economy out of what he calls “the hole it has fallen into”. A tall ask indeed.





February 27, 2024

Home run

England’s Bazball challenged India at home, but it was clearly the better team


India in Tests, especially in its backyard, remains an indomitable force. It was England’s turn to become aware of this reality as Rohit Sharma’s men claimed the fourth Test at Ranchi with a five-wicket victory and a day to spare. The win helped the host seize the series at 3-1 with just the final Test at Dharamshala left to commence on March 7. Irrespective of the verdict in that last tussle, Rohit’s men will own the silverware and the bragging rights for this series which has been a riveting tale of ups and downs with India sneaking in the last word. It was never meant to be easy against a strong England unit with its Bazball style of approach, a method that hustled games along, session by session through calculated aggression, frenetic run-rates and maverick field settings. As if to sound an ominous warning, Ben Stokes and his troops grabbed the first Test at Hyderabad by 28 runs. Even the most seasoned English analysts, including former captain Michael Atherton, predicted England’s superiority and the reasons were obvious. Rohit did not have the services of Virat Kohli, away on paternity leave, and an injured Mohammed Shami, and he helmed a largely inexperienced batting order. Yet, India found new heroes, ranging from Yashasvi Jaiswal to Dhruv Jurel.


Most freshers prospered even while Rajat Patidar struggled. Some seniors too rose to the occasion. Spearhead Jasprit Bumrah bowled spells that threatened stumps and even new pacers including Akash Deep lent a sharp hand. Since within the cricketing lexicon, India is supposed to be a land of spin and slow turn, there was no discounting R. Ashwin, on a record-breaking spree, Kuldeep Yadav and Ravindra Jadeja. For all the muscular dynamics that England’s batters often revealed, India was always up to the challenge and it was an exhilarating experience. Skipper Rohit and coach Rahul Dravid leaned on the new batters even if the temptation to recall Cheteshwar Pujara must have lingered in their minds. Sarfaraz Khan, Jaiswal, with 655 runs so far in this series, and Shubman Gill had their moments and the captain too struck a ton in the third Test at Rajkot. Meanwhile, England, often threatening to run away with the game, realised that under the warm Indian sun and on abrasive pitches, patience was an essential virtue. Veteran James Anderson and an inexperienced spin attack kept testing the host’s willow-wielders. But men like Jurel, sharp behind the stumps and equally calm in front of it, ensured that India’s unbeaten run in home Test series, continued unhindered well past a decade.




February 27, 2024

More in store

New grain storage plan would almost double existing capacity, help farmers in more ways than one


Last week, Prime Minister Narendra Modi launched the world’s largest grain storage plan in the cooperative sector. PM Modi, who was speaking at the inauguration of a pilot project being carried out in 11 states by primary agricultural credit societies under this plan, said that the government is looking to “set up a storage infrastructure of 700 lakh metric tons”. Expected to fructify over the coming five years, this is likely to cost Rs 1.25 lakh crore. The government’s plan is ambitious. To put it in perspective — the Food Corporation of India currently has a storage capacity of 361.62 lakh tonnes and state government agencies have capacities of another 400.74 lakh tonnes as reported in this paper. This would imply that the government aims to almost double the existing storage capacity in the country.


This sharp increase in storage facilities would help at multiple levels — it will cut down losses due to lack of adequate infrastructure, and enable farmers to sell their output at an opportune time in terms of prices. At the same time, the framework of this new storage plan also points towards the increasing emphasis the government is placing on cooperatives. It had previously outlined a plan to establish two lakh primary agricultural credit societies (PACS), dairy and fisheries cooperatives in the country. The Union Budget 2023-24 flagged the initiation of the process of computerisation of 63,000 PACS with an investment of Rs 2,516 crore. The formation of a Ministry of Cooperation under Amit Shah is also indicative of this priority. The appeal of PACS rests in these societies serving as the last, but vital, link in the cooperative credit structure. A report by the Reserve Bank of India had pegged the number of such societies in the country at 1.02 lakh at the end of March 2021. These societies, which have a sizeable presence in the western part of the country, served “13.7 crore members and 5.4 crore borrowers”, it said. The disaggregated data shows that small and marginal farmers and others accounted for 81 per cent of these 13.7 crore members. Around 60 per cent of lending of district central cooperative banks is through these societies. However, as the study pointed out, of these one lakh plus PACs, only 47,297 were in profit.


This increasing reliance on cooperatives stems from the prime minister’s belief in their critical role in solving farmers problems “through group/collective strength”. PM Modi, while also outlining the expanding role of these societies, said, “As chief minister, I experienced the strength of cooperatives. The world knows Amul and Lijjat Papad.” This emphasis may also be an indication, though, of receding expectations of large-scale investments from the private sector in agriculture infrastructure and marketing.





February 27, 2024


The longer the war in Ukraine goes on, the worse it is for the region — and the world


It is said that swift wars are about strategy, long ones are about stamina. But the longer a conflict goes on, the worse it is for all the parties involved. As the war in Ukraine enters its third year, it is clear that Russia’s original assessment of a quick capitulation was a gross miscalculation. It is equally clear that while it has the means to engage in a prolonged conflict — Russia has regained lost ground recently — a decisive “victory” for either side is a chimera. Moscow’s relationship with Europe is at its lowest ebb, NATO has expanded into its neighbourhood and Russia is now a junior partner in its alliance with China.


Behind the jargon of geopolitics lies the tragic human cost of the war. According to President Volodymyr Zelenskyy, 31,000 Ukrainian soldiers have been killed so far (the Russians claim the figure is higher). The UN High Commissioner for Human Rights places civilian deaths at about 10,500 while US officials put the total number of dead and wounded at over 5,00,000. Nor is the fallout of the conflict limited to the region. Global supply chains — of energy, food and even capital — have been disrupted, disproportionately affecting people in developing and less developed countries. The fact is that Ukraine and Russia share a cultural, historical and even religious heritage. These could have been built upon had the relationship not been soured by revanchist notions of empire and geopolitical insecurity. Fatigue with the war is setting in, particularly in the West. At the two-year anniversary of the war on February 24, many Western leaders did join Zelenskyy in Kyiv, including the leaders of Italy, Belgium, the European Commission and Canada. However, notable absentees included US President Joe Biden and the leaders of the UK, France and Germany — Biden had attended the same ceremony last year.


For much of the early part of the war, there was criticism in some quarters of New Delhi’s stance. The crux of it was that India did not take a clear stand against Russia’s violation of its smaller neighbour’s sovereignty. Two years on, Delhi’s principled pragmatism stands vindicated, even as the West grows more divided on the issue: A large chunk of US aid, for example, has been stuck in the legislature. India has consistently called for peace while maintaining its historical ties with Moscow, even as its engagement with the US in particular and the West as a whole has widened and deepened. It is now more important than ever for both sides in the conflict to negotiate in good faith. February 2025 must not bear witness to another tragic anniversary.




February 27, 2024

Form is the story

Kumar Shahani’s films matched minimalism with neo-realism, formalism with quiet flamboyance


One of the hallmarks of Indian New Wave cinema was the interconnectedness of the arts even as it told stories of churn. Satyajit Ray’s films roped in Ravi Shankar or Birju Maharaj, Mrinal Sen had KK Mahajan giving shape to his cinematic vision, Ustad Bahadur Khan’s soundtrack formed the backdrop in many Ritwik Ghatak films. They left a quiet imprint, inalienable from the narrative. In Kumar Shahani’s Maya Darpan (1972), though, the flute of Hariprasad Chaurasia or the performance of the Mayurbhanj Chhau troupe stood out amid the structural formalism and slow tension of a feudal and patriarchal system caught in the throes of change. Like a poetic aphorism, these interludes cut through the film’s politics or its slow narrative pace, becoming a leitmotif in later films such as Khayal Gatha (1989), Kasba (1990), and Char Adhyay (1997).


Despite his excellent credentials — FTII graduate and Ghatak acolyte who apprenticed with French filmmaker Robert Bresson — Shahani’s road to success was long-drawn. But the delay owed as much to the filmmaker’s perfectionism as to the failure of critics and others to do justice to his cinematic idiom. Distinct from those who came before him in the genre, it matched minimalism with neo-realism, formalism with quiet flamboyance.


In an essay in Our Films, Their Films, an anthology of film critiques, one of the pioneers of Indian New Wave cinema, Ray, wrote, “To me Maya Darpan seems a combination of poor psychology and poorer stylisation. Even the sophisticated response to colour goes for nothing in a film that is so gauche in its handling of the human element”. Yet, for Shahani, who died on Sunday in Kolkata, the form, replete with digressions and asymmetry between plot and action, is what lay at the heart of the story. It spoke of change, incremental and insidious, creeping up on a society neither prepared for it nor understanding it, except in hindsight. Quite like his films and the place they hold in Indian cinema.





February 27, 2024

What Survey Shows

Importance of internal migration. Impact of volatile earnings on big farmers. A puzzle on education


Grand narratives of change in India usually end with a rural-urban divide. The divide persists. But the gap is narrowing.


20-year-story | Since 2004-05, there have been three consumption surveys. A common thread linking them is a narrowing gap between the average monthly per capita expenditure (MPCE) of rural and urban India. If urban MPCE in 2004-05 was 91% higher than rural expenditure, the difference by 2022-23 had shrunk to 71%.


Migration is key | Consumption data studied with data on rural households explains the change. Rural families with small landholdings now get more than half their income from non-farm sources. Economic migration, within states and across them, is beginning to show its impact on consumption. It’s narrowing the gap between rural-urban consumption expenditure.


Small but doing better | For agricultural households with up to 1 hectare of landholding, non-farming sources of income contribute more than 50% of total income. If a family’s holding is between 1-2 hectares, non-farming income is 42% of the total. In India, 93% of rural families own 2 hectares or less.


Smaller gap at the bottom | The rural-urban gap is narrowest for the lowest 20% of population. That’s because agricultural households with unviable landholdings have no choice but to look for other income.

Big farmers are restive | Consumption data provides evidence to support a strand of explanation for the reason traditionally dominant agrarian communities have begun to agitate for reservations. It’s landholders with mid-sized holdings who are more dependent on volatile farm income and perceive stagnation relative to other groups.


Eating more junk | Rural population now sets aside a greater proportion of its MPCE on nutritionally superior food such as milk, eggs, fruits and vegetables. But there’s a downside too. Both rural and urban consumers now spend more on processed foods than other kinds. These are damaging habits creeping in rather early in the journey up the prosperity curve.


Education puzzle | The most worrisome data point is a relative decline in education spending in both rural and urban MPCE since 2009-10. In the absence of unit-level data, it’s not possible to pinpoint the cause. But this trend is at odds with independent data on the growing shift towards private education from government schools. There’s a bigger premium on education than ever before. Why then is allocation for education shrinking?




February 27, 2024

Was It All Maya?

In BSP’s seeming implosion is a story of a party outmanoeuvred by rivals’ clever social engineering


Indian politicians are a doughty lot, capable of phoenix-like resurrection from electoral ashes. So, it may be too early to completely write off BSP chief Mayawati, once an icon of Dalit-centric politics. But ahead of Lok Sabha 2024, Mayawati’s party BSP clearly needs a miracle to survive.


Of her party’s 10 MPs, one’s nominated by Samajwadi Party already, another’s joined BJP, and two are said to be in talks with it. Two are hobnobbing with Congress. A couple are rumoured to be talking with RLD, which just exited its alliance with SP to join BJP.


No winning alone | Mayawati has accused her partymen of ‘straying’. Yet their ‘straying’ started after her unilateral call to go it alone in LS 2024 – because BSP’s always won on the back of alliances; Mayawati’s base is limited. So, it offers limited electoral returns. Contrast BSP’s 2019 haul of 10 seats (vote share 19.4%) when it fought in alliance with SP, with 2014, when it went solo and won no seats (vote share 19.8%). She abandoned SP soon after 2019. Cut to 2022’s assembly poll: BSP won 1 seat with 13% vote share. Quite a fall from its 2007 high of 206 seats of UP’s 403 with a 30% vote share.


Politics astray | Now, with RLD’s switch, Mayawati is eyeing west UP’s Muslim votes. Yet she suspended Danish Ali, who switched from Deve Gowda’s JDS to join her, because he didn’t toe the party line on triple talaq. And that’s the confusing message from her tightrope walk – BSP abstained from voting on triple talaq bill, supported scrapping of Article 370, sidestepped joining opposition parties over Pegasus, but welcomed repeal of farm laws.


Empty battles | Bulk of her voters have shifted en masse to BJP. This ‘labharthi’ vote is unlikely to return. India’s sole Dalit-headed party, which once brought electoral empowerment to the most marginalised sections, is still fighting – but it is hard to see for what.





February 27, 2024

India Gains With a Digital Services Tax

Duty waivers shouldn’t widen digital divide


New Delhi’s outreach to end a WTO agreement on duty-free trade in digital services would appear to be self-damaging. India is a major beneficiary of growth in services trade, and within that, the rise of digital trade, which has been allowed free access through a quarter century of tax moratorium. Tax forgone on import of services such as ecommerce, entertainment and software would be a fraction of the volume of India’s technology-enabled services exports that could face tariffs in retaliation. The point, however, is countries that are disadvantaged due to higher duties on manufacturing, say, microchips are unlikely to gain advantage in services like cloud computing.


The moratorium has served its purpose of keeping trade in digital services free without extensive rules over fair play. These rules are unlikely to be codified as long as the tax waiver remains in place. New Delhi has a strong case at Abu Dhabi 13th Ministerial Conference in seeking to sort digital services on a merit scale. Should games receive the same tax treatment as biomedical research? Both activities are increasingly being conducted online. A catch-all approach cannot be perpetuated. The question is: when do you insist on rules for digital trade?


India’s timing is right. Cross-border data flows are approaching almost half the value of global merchandise trade, which has an elaborate rulebook. There is some weight to the argument that small enterprises may lose productivity in a fragmented digital trade environment, but it actually strengthens the case for preferential treatment. Expectations from the WTO powwow in Abu Dhabi will, of course, be tempered by the scale of India’s ambition on digital trade rules. It would have made some headway by flagging the need for a terminal date for the duty moratorium to place the trade in digital services on a firmer footing. Trade does not benefit if duty waivers open up the digital divide.





February 27, 2024

Hope to Lower OOPE On Healthcare Front


High out-of-pocket expenditure (OOPE) on healthcare has been a significant worry for Indians. According to a 2022 WHO report, high OOPE on health impoverishes some 55 million Indians annually, with over 17% households incurring catastrophic levels of health expenditures every year. This high cost has serious cascading impacts, reveals a new AIIMS report. Households are often forced to significantly reduce the quantity and quality of major dietary items, such as fruit, vegetables, meats and eggs when a patient is at home. Rural areas are worst hit.


In 2023, National Health Accounts reported a reduction in OOPE from 69.4% in 2004-05 to 48.21% in 2018-19. The global average was 18.1% in 2019. Cost of medicines and hospitalisation are prime contributors to high expenditure. Central interventions like Ayushman Bharat and Pradhan Mantri Bhartiya Janaushadhi Pariyojana (PMBJP) have had positive impacts. However, there’s still a long way to go for several reasons. One, the public health insurance scheme Ayushman Bharat is underutilised, thanks to a lack of awareness of provisions and processes. Two, there is a rising incidence of non-communicable diseases such as diabetes, and cardiovascular and pulmonary ailments. And, three, there are continued challenges in controlling infectious diseases like tuberculosis and malaria.


Reducing OOPE will require higher public spending on healthcare, including strengthening the Jan Aushadhi Kendra network, improving primary healthcare and hiring an adequate number of medical personnel. Tackling the drivers of poor public health on mission mode — air and water pollution and sanitation, particularly handling and management of municipal waste — is required for lowering OOPE and better health outcomes.




February 27, 2024

Less than sweet

A higher FRP may not fix the sugar sector’s woes


The Centre’s announcement of an 8 per cent increase in the Fair and Remunerative Price (FRP) for sugarcane to ₹340 per quintal for the upcoming 2024-25 sugar season (October to September), strives for a fine balance between incentivising farmers to expand their cane area and keeping a lid on inflation. A hike in FRP was much needed this year because sugar production in India which was charting a smooth upward trajectory until 2021-22, has suffered a sharp setback in the last two years thanks to El Nino.


Total sugar output for the 2023-24 season is now estimated at about 330 lakh tonnes, down from 366 lakh tonnes in 2022-23 (394 lakh tonnes the year before). Though the sugar industry claims that the current year’s output will comfortably meet domestic consumption of 280 lakh tonnes, past instances of sugar output undershooting estimates at the fag end of the season seem to have prompted the Centre to err on the side of caution. Despite the 8 per cent hike in FRP this year, there’s not much danger of sugarcane eating into other crops or a spiral in market prices of sugar. The FRP for cane had inched up at an annual rate of just 3 per cent from 2017-18 to 2022-23, while support prices for other crops galloped much faster. The FRP of ₹340 per quintal is pegged to a high sugar recovery rate of 10.25 per cent, so farmers who supply cane with lower recovery rates will receive less.


More than the hike in FRP though, the sugar industry is likely to be hurt by curbs on exports and the ban on diversion of cane to ethanol. Sugar exports of 110 lakh tonnes and 65 lakh tonnes in the last couple of years had allowed mills to ship out their surpluses, without impacting domestic prices. This window of opportunity has been shut since October, with export restrictions extended. More than the export ban though, it is the Centre’s unexpected about-turn on the diversion of sugarcane to the ethanol blending programme that is an unkind cut. After setting ambitious targets for 20 per cent ethanol blending in fuel by 2025, the Centre has in recent years offered sops to sugar mills to set up over 730 crore litres of ethanol capacities, while pushing oil companies to lift ethanol at fixed prices. As recently as 2023, it was showcasing how cane-based ethanol had generated ₹94,000 crore in revenues over 10 years for the sugar industry, shaved over ₹24,000 crore off the oil import bill and prompted quick clearance of cane dues to farmers.


For it to turn around and ban the diversion of cane to ethanol, and allow only 17 lakh tonnes of existing stock this year to be put to such use comes as a bolt from the blue. If the Centre has done a rethink on its ethanol programme because of sugar output being more cyclical than it had expected, it needs to scale down blending targets. Such flip-flops without any roadmap for the future harms the industry and farming community in a way that a higher FRP cannot repair.





February 27, 2024

Consumption shift

Regular updates will better inform policy


The government last week released some findings from the Household Consumption Expenditure Survey. The National Statistical Office conducted a broad survey on consumption in over 260,000 households between August 2022 and July 2023. This was the first such survey with findings that have been made public in over a decade. Although such a survey was indeed conducted in 2017-18, the results have not been made public owing to issues related to data quality. The comparisons with the decade-old figures have made some headlines. For example, the proportion of rural households’ expenditure that goes on food has dropped from 53 per cent in 2011-12 to 46 per cent in 2022-23. The exact impact of the increased grain allocation from the government on this proportion is uncertain, so it may not be safe to draw any policy-relevant inference from this figure.


More interestingly, rural households saw their consumption expenditure increase by 40 per cent, and urban households by a third. While these are solid figures, it should be noted that the general growth rate of consumption does seem to be lower than the growth rate of nominal gross domestic product by a significant amount. This raises questions: Is India shifting to public investment- or state-driven growth, while compressing household expenditure? The national accounts estimate of private consumption expenditure per capita is about double the amount that emerges from the consumption survey. While this gap is not unusual, it does not help explain the broader macroeconomic question of whether consumption can still be classified as the driver of Indian growth. In general, comparisons with the previously released edition of the survey should be avoided, since the methodological changes between the two versions have been significant. The previous round asked questions about spending on fewer items; the newer version used digital methods of interviewing households and included more items.


While it may not be entirely sensible or easy to compare the results of this survey with one conducted over a decade ago, the decomposed data from this particular round will nevertheless be closely studied. For example, there are some disturbing results about inequality in expenditure. The bottom 5 per cent of India’s population in terms of consumption expenditure spend about a tenth of what the top 5 per cent do. The overall distribution is also skewed, with the median well below the mean. Geographical differences between states in terms of consumption expenditure are also marked. The dates of the survey — in post-Covid months, as consumption surged — have, however, led some analysts to suggest that its conclusions be taken with caution. If anything, the lesson the government should take is this survey needs to be made more regular so that it can better inform policy.


Thus, there is a need to increase the frequency of such surveys. Consumption patterns are changing fast enough that policymakers need more rapid and granular data in order to make the right decisions. Consumption surveys are used, for example, to rework the basket of goods relevant for the consumer price index. The next logical step thus would be to update the index to better inform the monetary policy. Besides, the changes in the consumption pattern suggest that even within the food basket, household spending on cereals is declining. The change in the consumption basket is a signal for producers. Instead of demanding guaranteed support prices, farmers should focus on items where consumer spending is increasing.





February 27, 2024

Laboured arguments

State job reservations are counter-productive


The Karnataka government has done well to backtrack on a law that would have required businesses, including multinationals, to display on a dashboard the number of Kannadiga employees they employ. The requirement, articulated in a statement by the state culture minister, caused consternation in Bengaluru’s corporate community. Former Infosys chief financial officer and current venture capitalist T V Mohandas Pai pointed out the rule would have restricted hiring practices and led to violence. He pointed to the vandalism that occurred two months ago after the state had proposed to reserve 60 per cent of a billboard or name-board for the Kannada language. But the issue is unlikely to recede anytime soon. Indeed, the tight market for quality jobs across India is raising competitive parochialism in employment across states.


Andhra Pradesh, Madhya Pradesh, Uttar Pradesh, Jharkhand, and Haryana have all passed laws requiring reservations for local candidates in both government and private-sector companies. Andhra Pradesh set the tone by guaranteeing a law requiring 75 per cent of jobs to be reserved for local candidates. Maharashtra and Tamil Nadu made similar announcements but these are yet to be translated into law. Ironically, these impulses are strengthening just as states are competing for private investment by hosting lavish investor summits. Yet few leaders have understood that restrictive hiring laws contradict a basic tool of business and commerce — the freedom and flexibility to hire — which companies need in the constant battle for talent. Forcing them to stay restricted to locals is a sure-fire way to repel them. Andhra Pradesh, which passed its law in 2019, was also the first to realise the limitations of the law — the shortage of qualified local candidates being the key —and has chosen not to enforce it. A challenge to this law is being heard in the Andhra High Court. Nevertheless, the prospect of grappling with another layer of the inspector raj is unlikely to raise investor confidence — more so at a time when investment options across the globe have opened up. This apart, such laws are harmful in the larger national perspective because they impact the fortunes of migrant workers, who typically travel from India’s poorer, underdeveloped states to the richer ones.


Both these issues figured in a judgment by the Punjab and Haryana High Court late last year. The court quashed, on constitutional grounds, the Haryana State Employment of Local Candidates Act, 2020, which mandated a 75 per cent reservation for local candidates earning up to Rs 30,000 a month in private-sector jobs. The court struck down the law on two counts: Article 14 of the Constitution, which guarantees equality before the law and equal protection; and freedom of trade and commerce under Article 19(1) (g). The court also pointed out such laws created barriers that were not intended by the framers of the Constitution. The state government has appealed against the ruling in the Supreme Court. Whatever the apex court’s ruling, the private sector would continue to face pressure on this account, especially given the contraction in government employment and inadequate job creation in general. Political parties, both in power and in the Opposition, must refrain from such promises. The focus must be on improving the business climate, which will attract investment and create jobs.





February 27, 2024

Partnership pays

Many Chinese firms are forming joint ventures with Indian players—that’s the way to go


Post the 2020 border clashes, India hardened its stand against Chinese investments. While a radical decision was taken to ban all Chinese apps—short video app, Tik Tok was very popular then—with regard to the manufacturing firms, a different strategy was adopted. Since Chinese manufacturers had struck deep roots in sectors like mobile handsets and automobiles, restrictions were brought in the foreign direct investment norms. These sectors are under automatic route, but the government tweaked the norms making it mandatory for countries sharing land border with India to seek prior permission for bringing further investments. The first casualty was China’s Great Wall Motor which had to drop its plan to acquire General Motors plant at Talegaon in Pune, as regulatory approvals did not come.


While global as well as local players had a strong footing in the auto sector, the curbs on Chinese automobile players did not affect the market, but the scene was different in the case of mobile handsets. Here the market was dominated by Chinese manufacturers, all of whom had assembly plants in the country. Apart from coming out with a production-linked incentive (PLI) scheme for smartphones for local as well as global players later in 2020, which saw Apple setting up its manufacturing base in the country, the government started asking Chinese players to open up their supply chain.


None of the Chinese players had participated in the PLI scheme. They only catered to the domestic market, and their supply chain, including their distributors etc comprised Chinese entities. It was a closed network. The government gave them a clear signal—open your network to domestic players and start exporting from the country. In the process, several cases of violations of forex and tax laws against some of the players were registered, which are undergoing investigation. The government’s strategy seems to be working now. Xiaomi has already entered into a pact with domestic contract manufacturer, Dixon and Optiemus for the manufacture of its phones. Reports suggest that other players like Oppo, Vivo, Realme, and One Plus are also in the process of outsourcing their manufacturing to domestic players. Such partnerships are good for domestic players as well as consumers. While Apple and Samsung are strong brands with manufacturing presence in the country, their combined market share will be around 25%, so the majority of the market is served by Chinese players. Technology, marketing and manufacturing pacts will thus benefit all stakeholders.


A similar development is also taking place in the auto sector. While Great Wall Motor had to relinquish its plans, the same was not the case with China’s MG Motors. The company has formed a separate joint venture with Sajjan Jindal’s JSW Group, under which the two will manufacture electric vehicles with technology and product support from MG’s parent SAIC. Chinese manufacturers have technology and their products are competitive on the price front, and hence, are popular with the customers. If the firms that are present in India are able to decouple from their Chinese parent by forming JVs with Indian players, open up their supply chains, it will be a win-win situation. They cannot afford to ignore the Indian market and India cannot just throw them out as they have struck a rapport with the consumers. Partnership is the way forward, which both sides seem to have realised with time.


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