All Newspaper editorials in one place – January 29, 2024





January 29, 2024

Ceremony, substance

India and France built on past agreements in a show of symbolism

Given the circumstances behind the invitation to the French President Emmanuel Macron, his visit to India last week was always going to be more about symbolism and ceremony than about substance. Mr. Macron, the sixth French President to grace the Republic Day celebrations, stepped into the breach when U.S. President Joseph Biden declined the invitation. In addition, India and France had in 2023 already sealed a number of agreements as they marked 25 years of their strategic partnership — a year that saw Prime Minister Narendra Modi and Mr. Macron meet a number of times. Not only had the two countries already announced a fairly ambitious “Horizon 2047” relationship road map but they had also stated plans for joint production of military hardware, cutting-edge technology transfers and new purchase deals for French aircraft, engines and submarines. Diplomats had their work cut out for them with the two sides having to prepare for the Republic Day visit with little time to spare, and with so many agreements already announced. Many even speculated whether India had “missed an opportunity” to extend invitations to other partners including from the South Asian neighbourhood or Global South, rather than getting a much-invited France.


As a result, it is understandable that many of the agreements announced after the Modi-Macron meeting in Jaipur, and their time together watching the Republic Day Parade, were essentially built on the road map. These included the “Defence industrial” road map, meant to expand on plans for the two countries to co-design, co-develop and co-produce defence hardware in the air, on land and sea, as well as a space-defence partnership. In addition, the two sides signed MoU documents on agriculture, digital health and science and technology cooperation. An assembly-line manufacture of civilian helicopters (Airbus-Tata) was a first, but a private B2B deal. The two sides also issued a joint statement on regional and international developments. India has been unable to find such common ground with other partners including the U.S. and Russia on these issues but was able to take shared positions with France on the condemnation of terror attacks in Israel, the need for humanitarian assistance in Gaza and Ukraine, and concerns over the Red Sea attacks. While they did not demonstrate progress in other areas of cooperation, including big ticket defence hardware deals being negotiated, nuclear cooperation for the long-delayed power project in Jaitapur and for small modular reactors, it is clear that each is a work in progress, demonstrating the continuity in a partnership built on a mutual respect for strategic autonomy, which Mr. Macron said at the presidential banquet was also driven by their shared commitment to “tradition and innovation”.




January 29, 2024

Momentous ruling

Israel must comply with ICJ’s order to prevent genocide, step up aid in Gaza


Despite the absence of an explicit call for a ceasefire, the ruling handed down by the International Court of Justice is a momentous one that binds Israel to its obligation to prevent acts of genocide in its ongoing military operations in Gaza. The UN’s highest judicial body has spelt out provisional measures after finding that “at least some of the acts and omissions alleged by South Africa to have been committed by Israel in Gaza appear to be capable of falling within the provisions of the [Genocide] Convention”. South Africa, which took on the extraordinary responsibility of making Israel accountable for its violations of humanitarian law, stands vindicated as the ICJ accepted its standing to approach the court and found its preliminary submissions tenable. The ICJ has directed Israel to take effective and immediate measures to ensure humanitarian assistance and basic services to Gaza. While Israel and its allies highlight the absence of an order to stop military action, it cannot be ignored that the order is tailored to achieving the objective of preventing genocide, a term that includes killing members of the targeted group, Palestinians, in this case causing serious bodily and mental harm to them and deliberately inflicting on them conditions of life aimed at bringing about the group’s physical destruction. The order is a moral and legal indictment of Israel for bombing health facilities, designated safe areas, and densely populated areas.


That most of the provisional measures were favoured by a 15-2 majority shows a high degree of consensus on steps to prevent genocide. A blanket order for cessation of hostilities may have been divisive — not many may agree that there can be no military response to a terrorist attack by non-state armed actors — and render it easy to ignore. The order makes it difficult for Israel to choose a policy of deliberate non-compliance. The world should goad Israel into complying with the measures, while carrying out legitimate military operations. Its leaders should avoid statements that may be seen as inciting genocide. The part of the ruling that asks for a report in one month on steps taken to implement the measures can only mean that Israel has to demonstrate progress on the extent of humanitarian aid it has permitted. An unfortunate development, with a suspicious immediacy after the ICJ order, is the suspension of global aid to the UNRWA, based on an Israeli allegation that 12 staffers were involved in the October 7 attack. This is no time to defund or wind down humanitarian work in Gaza even as a probe into their role is necessary.





January 29, 2024

Nitish’s nth switch

His political promiscuity points to limitations of Mandal in face of Mandir plus Mandal. Tejashwi has his task cut out


Nitish Kumar has switched sides again, for the second time in two years, his fifth crossover in a little over a decade, preceding his ninth time as chief minister. What he said against the BJP, after he left it again to join hands once more with Lalu Yadav in 2022, his statements against Yadav-led RJD after he broke, in 2017, the JD(U)-RJD Mahagathbandhan that swept to power in Bihar in 2015, his public disagreement with the NDA’s decision to anoint then Gujarat Chief Minister Narendra Modi its prime ministerial candidate, which led to his exit in 2013 from a 17-year-old alliance with the BJP — these are not the point. As eye-catching a figure as Nitish is, it may be more useful in this moment to look beyond him. For all his dramatic somersaults, Nitish is not the hero of this story whose central theme, and question, is this: In the face of a dominant Hindutva, and a Mandir politics that is aggressively Mandalising itself, what does the politics of social justice mean, what is its USP? What happens, going ahead, to the erstwhile flag-bearers of Mandal? Nitish’s political promiscuity in Bihar underlines the vulnerability of Mandal forces in Bihar and elsewhere, if they are not able to add layers to their core pitch, if they continue to rely only on bare-knuckled caste math, if they don’t join it to vocabularies of governance.


Because Nitish’s nth switch in Bihar points, most of all, to an RJD that, despite the seminal political achievements of Lalu Yadav, is looking unprepared for the future. It was the charismatic Yadav, who, almost singlehandedly, upended the caste-driven politics in a state of raging inequalities in the 1990s, and ensured that the more numerous backward castes would no more be denied their due share of political representation and power. Yadav’s political mobilisations rewrote the power game in his state. And yet, as his rivals and opponents adopted his lexicon and appropriated it, and as Nitish joined backward caste politics with an agenda of governance, Yadav himself became more and more mired in corruption cases while his family took over his party. His son Tejashwi has promised a make-over — in the last assembly election, he spoke of economic justice alongside social justice, and of the RJD becoming an A-to-Z, not just an M-Y, party — but it is a work in progress, much remains to be done. For now, Nitish, with a shrinking party of his own, is able to remain chief minister by re-joining a BJP that is casting its net wide in Bihar, and both can hold aloft a promise of “good governance” that the RJD is not seen to credibly make, shored up by a social coalition which includes backward castes and is broader than the RJD’s.


The loneliness of the RJD in Bihar and the BJP’s steady and sure progress towards emerging as the strong second pole in the state bears a larger message ahead of the Lok Sabha polls. The bid by the INDIA platform — which has also taken a body blow with Nitish’s flip-flop — to resurrect “social justice” as a plank needs to take into account the BJP’s inroads into that domain as well. It is no longer Mandal vs Mandir. It is also Mandal vs Mandal, and Mandir plus Mandal. And, both real and projected, good governance.





January 29, 2024

Growth with caveats

Incomes and consumption aren’t rising as much as GDP. This raises questions on sustainability of growth story


India’s GDP is projected to rise 7.3 per cent in 2023-24, but private final consumption growth is at just 4.4 per cent. The latter figure — for an economy that, unlike China, has traditionally been consumption-based as opposed to investment-driven — is also corroborated by other data. Hindustan Unilever, the bellwether for India’s fast-moving consumer goods (FMCG) sector, reported a 0.4 per cent year-on-year decline in sales revenue for the October-December 2023 quarter, with a mere 2 per cent underlying volume growth. Even within FMCG, there is a divergence between the premium-luxury and the price-sensitive mass segments, with the former products continuing to fly off the shelves. Also, the demand fragility seems more in rural than in urban areas. This is reflected in tractor sales falling 4.1 per cent in April-December 2023 over April-December 2022. Two-wheeler sales are up, but will still end the fiscal with numbers way below that of 2017-18 and 2018-19.


At the core of all this are incomes, which aren’t growing enough. The problem, again, is with lower and middle class households, especially in rural areas. Rural wages, according to economists at UBS Securities, increased 5.8 per cent year-on-year in October and November 2023. The growth, in nominal terms without adjusting for inflation, was even lower at 5.3-5.4 per cent for non-agricultural wages. Another indicator is MGNREGA. The flagship rural scheme has generated about 260 crore person-days of employment so far in 2023-24. With more than two months remaining, the fiscal is set to register the highest ever employment under the scheme after 2020-21 and 2021-22. For an economy that has supposedly fully emerged from the pandemic-induced shocks of those two years, the continued robust demand for MGNREGA work is striking.


If incomes and consumption aren’t rising as much as recorded GDP, it raises obvious questions on the sustainability of India’s current growth story. The Narendra Modi government can rightfully claim credit for its welfare schemes — public provisioning of essential private goods such as LPG and electricity connections, housing, drinking water, toilets and bank accounts — that have helped lift millions out of so-called multidimensional poverty. But as Ashok Gulati, a columnist with this newspaper, has pointed out, all these measures have no meaning if not accompanied by a reduction in poverty based on income and real wages. Without jobs and incomes, there can be no consumption or savings to fuel growth, investment and poverty reduction on a sustainable basis. With a per capita GDP of hardly $2,500, India’s focus should be on boosting investment, jobs and incomes.






January 29, 2024

INDIA Not Shining

Ayodhya, Karpoori honour made Nitish flip. Opposition in serious trouble. Cong yatras won’t help


Nitish Kumar’s return to NDA resets Lok Sabha 2024’s numbers game to 2019, music to BJP’s ears. New this time is existence of a pre-poll opposition alliance. That this bloc, INDIA, would perpetually be about-to-fall-apart during seat-sharing talks was conclusion foregone, though the trigger ultimately came from unexpected quarters.


Thin glue, cold comfort | Overall shaky seat-sharing talks coincided with twin events – Ayodhya spectacle and recognition of socialist Karpoori Thakur – both led by Modi. It proved too much for the thin glue of “defeat BJP” that binds INDIA’s constituents. INDIA co-founder Nitish, reading chai-leaves, found INDIA wintry cold to his PM ambitions, and an Ayodhya glow on all things poll-oriented.


Flips never flopped | Modi’s personalised recognition of Thakur threatened to saw through the social justice tree JDU long nurtured. Bihar’s caste survey by JDU-RJD govt revved up Thakur’s affirmative-action politics. Modi claiming that very source code triggered an existential crisis – not on ideology but as claimant to legacy. Nitish is known to jump ship the moment political seas turn choppy. At one level, it’s unsurprising he’d go all-out to grab electoral dividends the twin events promise.


Pre-poll alliances vote aggregators | INDIA was never on terra firma, but now it’s on quicksand. Pre-electoral alliances are important to winning seats. BJP though in a commanding position leaves no ground uncovered in the voter market, still tying up with smallest of parties to plug gaps in voter coverage. Lalu’s RJD in Bihar, and Akhilesh Yadav’s SP in UP have failed to counter campaigns that keep alive Yadavs’ ‘jungle raj’ history. Nitish was the bridge to lower-OBC, Dalit vote shares in Bihar, with spillover effect in neighbouring states as an INDIA ally. That bridge has collapsed.


Self-preservation | State parties have key common features – all are single-state parties barring AAP, and all are led by ‘strong-leader’ populists for whom self-preservation is priority. INDIA’s hefties all see in Congress a competitor. It’s why Mamata is saying khelbona (won’t play) in Bengal, and AAP won’t share seats in Punjab. Splits in Maharashtra’s regional parties Sena and NCP have left behind whittled versions, who will battle for survival.


Yatras not INDIA message | Congress meanwhile puts out its message via Rahul Gandhi’s yatras. Who is listening? Buzz on playing up ‘betrayal’ is an idea stillborn – voters least care, netas ‘betray’ all the time. And there’s just a few weeks to general elections. INDIA isn’t shining.




January 29, 2024

Poor Casteing Calls

What makes Marathas happy makes Kunbis unhappy, this is the sore truth of quota non-solutions


Has Marathas’ four-decade-long demand for quotas in government jobs and educational institutes finally been satisfied? CM Shinde and quota activist Manoj Jarange, currently playing the main leads in this abiding drama, are certainly acting like it has. But it’s a shifty performance.


Bounty of OBC certificates | Last year, Marathas with Nizam-era documents were gifted Kunbi (OBC) certificates. Now, a Maharashtra draft notification has been issued to enable such certificates for, first, male relatives of Marathas whose Kunbi lineage had been located. Second, relations on wives’ side also appear to have been similarly blessed as long as they are from the same caste.


Jarange’s appetite for fasting | Yet, it is clear that protests and political bargaining over Maratha quotas are far from over. Jarange’s own agitation has been such an on-again off-again affair. He gets wooed, breaks his fast, says his demands have been accepted, and then says promises haven’t been kept, and starts fasting again. There are easy ways in which his ask-horizon can be pushed out even further.


Kunbis’ crumbling cookie | Marathas are hardly the only ones with discontentment and a voice. OBC leader, state minister and NCP MLA Chhagan Bhujbal has given an early bird view of acerbic counter-protests: ‘Caste is determined by birth and not by affidavits…What if Dalits and Adivasis also demand that all their relatives be given a caste certificate?’


Court and money matters | If and when OBCs’ protests reach court, so will data about Marathas being a dominant class in society, including in the state legislature and cabinet. Of course none of this shields them from suffering agricultural distress or urban joblessness. But that govt quotas represent a meaningful rescue is a big lie, sold to them by politicians and activists, who are often in cahoots.




January 29, 2024

Transparency, Clearly Good for Capital Mkts

Short-term movements no guide for SEBI


Sebi has exempted a section of FPIs and extended the deadline for others for disclosing ownership, economic interest and control if they have over half their holdings in a single corporate group or have holdings in Indian equities in excess of ₹25,000 crore. These relaxations may lower the compliance burden for FPIs deemed to be ‘high risk’, but are unlikely to lower the current bout of volatility the market is experiencing. By Sebi’s own reckoning, the disclosure requirements would affect market behaviour on a scale much smaller than the FPI sell-off on display. Also, FPI sell-off this month has been more intense in stocks that are not at high risk in terms of concentrated holdings. Market correction is being driven by more fundamental domestic and global factors than by a tighter regulatory framework.


Which is why any further relaxation would be inimical to the stated intent of blocking a way to get around the minimum public float, which could lead to stock price manipulation. Concentrated FPI holdings with no identification of the last natural person behind layers of corporate anonymity can also be used to route investments into Indian equities from countries where prior government approval is required. Sebi’s effort to improve transparency and reduce stock price manipulation was not iron clad to begin with. FPIs can avoid having to share information by keeping their holdings slightly below the limits the market watchdog has set. Then again, India’s regulatory framework allows more than one interpretation of corporate control over group companies. Finally, identifying beneficial interest through money laundering laws may not be effective with FPIs.


To get to the desired outcome, rules — and not only the ones imposed by Sebi — will have to be progressively tightened. The effects on short-term market movements, if any, should not guide the regulatory response. India needs to enhance the efficiency of its capital markets. Greater transparency is a key requirement.






January 29, 2024

Her Body Politic Is Totally Her Choice


Last week, Delhi High Court reversed its January 4 order that allowed a widowed, 29-week pregnant woman to terminate her pregnancy. The order is based on the advice of an AIIMS panel, which said that the foetus does not show any abnormality, so foeticide is neither justified nor ethical. Earlier, GoI had sought a recall of the January 4 order, stating that it’s ‘imperative’ that the high court considers protecting the life of the unborn child. It referred to the Supreme Court’s judgment of October 16, 2023, in ‘X v Union of India…’, in which the apex court recalled its earlier order allowing termination of pregnancy beyond the stipulated period after an AIIMS panel’s opinion.


While the terms for abortion were liberalised in India after the Medical Termination of Pregnancy (MTP) Act was amended in 2021, it still does not recognise abortion as a woman’s choice that can be sought on demand, as is practice in 73 countries, including Nepal, Thailand and Cambodia. Instead, the Act allows termination only on medical advice. This caveat fails to consider three realities: abortion remains stigmatised in India, even among doctors; there is scope for increasing the upper gestational limit for termination, thanks to the advancement of medical technology; and denying women the right can push many to opt for unsafe abortions.


A 2016 Bombay High Court judgment on the condition of a prison inmate emphasised the right of a woman to control her body and fertility, and to decide what to do with their ‘own bodies, including whether or not to get pregnant and stay pregnant’. This forward-looking directive should be the guiding light on the issue. Abortion must remain a woman’s choice, as long as her health or life is not at risk.





January 29, 2024

Trump card

He looks good for a rematch with Biden in November


The controversial former US President, Donald Trump, has won the all important New Hampshire primary. Earlier, he had won in Iowa. Together, these wins suggest that he is most likely to be the Republican Party’s nominee against President Joe Biden of the Democratic Party later this year. This is despite all the charges of wrongdoing, convictions and general bad behaviour that flout currently acceptable social and political norms.


The American system requires all contenders to the top job to compete against others in their own parties. Trump had three challengers: Ron de Santis, Nikki Haley and Vivek Ramaswamy. Now he has just one, Haley. It’s highly unlikely that the Republican Party will choose her, an Indian-American, over Trump. Trump was hugely disruptive as president and has been extremely combative as ex-president. But politically he seems to be doing all right. This should make everyone think about liking or disliking someone as a person and preferring his or her politics. The two are very different as so many democratic societies have discovered over the last 200 years. Trump’s politics is preferred by many Americans because they hold certain beliefs about how America should be. These people don’t want social change. They believe American generosity has cost them their jobs.


Above all, they think their beliefs are valid merely because it’s they who hold it. This is the classic definition of conservatism. As a well known psychologist once said, “Any message that clashes with your prior beliefs… is overwhelmingly likely to fall on deaf ears”. This is true of all ‘liberals’ as well, who are the mirror images of conservatives. Politicians like Trump appeal hugely to the conservatives. They are practitioners of the art of mass politics where they set themselves up as champions of the unrepresented. Their faults and weaknesses then turn into virtues, and the punishment for illegal and unacceptable acts is perceived as malevolent persecution by their supporters. This happens everywhere. The trick is to turn this sentiment of sympathy and collective victimhood into votes. Trump seems to be doing just that.


The big mistake that Left liberals have made in all democratic countries is that, after dominating thought for more than half a century, they have forgotten that conservative people also vote. In America the extraordinary rise of Wokism has made even liberals uneasy. Next November they may not vote for Trump, and even stay away on voting day. This could help Trump, especially as concerns over Biden’s fitness could work against him. The prospect of another Trump presidency, provided he is not disqualified on account of the charges against him, could lead to a realignment of agendas on the global stage. India’s ties with the US could further improve, not least because of the rapport between Trump and Prime Minister Modi and likelihood of improved US ties with Russia. The worry though is over his views on movement of skilled people and work visas.






January 29, 2024

Margin pressure

Investment revival will boost credit growth


The Q3FY24 results of several private-sector banks indicate trends that may hold across the sector. There’s visible compression in the net interest margin (NIM). Banks also hold higher provisions against exposures to alternative investment funds (AIFs) as mandated by the Reserve Bank of India (RBI). The central bank’s stipulation about assigning higher risk weighting for unsecured loans has started slowing growth. Non-performing assets continue to be under control across most of the private sector at least — most public-sector banks are yet to declare results. IndusInd Bank is somewhat of an exception since it has high exposure in Tamil Nadu and collections there were affected by unseasonal rain and floods. However, this doesn’t appear to be a structural problem and rates of collection and recovery are expected to pick up.


Credit growth has been good for most banks. Expansion in retail credit and loans to small and medium-sized enterprises have generally outpaced corporate credit. Since overall credit growth has exceeded that in deposits in general, banks are now obliged to pay higher deposit rates to attract more funds. This is one underlying reason for the compression in the NIM, although most private banks have kept it within 50 basis points. Higher risk weighting for unsecured loans hurts lending in areas such as credit card revolvers and personal loans, which are high-growth and high-yield. This may, therefore, lead to lower growth in net interest income (NII) in the future. The HDFC Bank finances are an outlier. The merger gives the erstwhile HDFC access to low-cost funds. However, it may take a while before other benefits of synergies kick in. At any rate, the market was disappointed with the Q3 results of India’s largest private bank.


So far as non-interest income is concerned, that from the treasury has been low. This is not surprising since the policy rates remained unchanged and the rupee did not fluctuate much. Hence, bond yields were more or less stable. Operating costs have edged higher as banks have opened branches due to the highly competitive scenario. One area of interest is retail mortgages, where banks are going head-to-head with specialised non-banking financial companies. The recent policy action of the RBI has affected profits due to new AIF provisions. The management commentary at mo­st private banks, however, appeared confident. Credit demand is expected to continue to grow. Banks are betting the RBI will align its thinking with the somewhat dovish stance of the Fed and start cutting policy rates more or less as soon as the Fed does.


But so long as the monetary policy remains tight and credit-deposit ratios inch up, the compression in the NIM may continue. Guidance from several majors implies a further squeeze in the current quarter though the extent of that will not be high. A pickup in demand for corporate credit is awaited. This would compensate for a slowdown in retail-credit expansion. Theoretically, improving capacity utilisation should lead to an increase in corporate investment. The overall early corporate results, however, indicate that profit growth has not been high. The Bank Nifty, which is populated mainly by private banks, has underperformed in the past one month as investors have been unenthusiastic. Performance in the near team would depend on corporate credit picking up and monetary policy expectations. The Union government’s fiscal stance will also determine the near-term outlook.







January 29, 2024

Empowering panchayats

Local bodies need more predictable revenue flows


A new study of the fiscal position of panchayati raj institutions (PRIs) by the Reserve Bank of India (RBI) should enrich the policy debate. Any comprehensive study of India’s public finance must include all three levels of government — the Union, states, and local bodies. The RBI also published a report on the state of municipal finances in November 2022. These reports on local-body finances fill an important gap in the general understanding of governance and underscore the need for more decentralisation of fiscal powers. PRIs play an essential role in developing and executing various programmes in rural areas. Since over 65 per cent of the Indian population live in rural areas, the performance of PRIs can be critical in attaining broad development goals.


India is said to have had the panchayat system from an early age, and it was dismantled during the British period. While they were reinvigorated after independence, the 73rd Amendment to the Constitution in 1992 institutionalised PRIs at three levels. According to the latest available numbers (December 2022), India has 255,623 gram panchayats. It also has 6,707 mandal panchayats and 665 zila parishads. However, financial constraints have not allowed PRIs to realise their potential. These institutions have very limited fiscal powers and are almost fully dependent on the upper levels of government for support. As the RBI’s study shows, the average revenue per panchayat in 2022-23 was Rs 21.23 lakh from all sources — taxes, grants, and others. Their own revenue from local taxes and fees was just 1.1 per cent of the total during the study period. Further, the revenue expenditure of the panchayats is lower than 0.6 per cent of gross state domestic product for all states.


It is worth noting that while reporting by PRIs has improved over the years, the data is still patchy and researchers had to reconfigure the available information. Since PRIs are mostly dependent on grants, successive Finance Commissions have made recommendations in this regard. The Fifteenth Finance Commission, for example, recommended a fixed amount of Rs 2.4 trillion for the period under its review. What seems to have affected the performance of local bodies the most is the reluctance of state governments in providing financial support. Article 243 (I) of the Constitution requires the establishment of state Finance Commissions for sharing revenue between the state government and panchayats. According to estimates, most states are lagging on this account and the allocation has also been considerably low.


It is well accepted that governance decentralisation yields better outcomes. Leaders and officials at local level are in a better position to design and execute projects based on local needs. According to estimates, globally, about 10 per cent of tax revenue accrues to local governments. In some countries, such as Finland and Switzerland, it’s more than 20 per cent. However, to be fair, there are very limited avenues of raising revenue at local levels in India. Local bodies also lack the administrative capacity to raise fiscal resources. Therefore, as things stand, while there is a need to build administrative capacity at the grassroots, mechanisms need to be developed to give local bodies a predictable and meaningful flow of revenue. This will help them to plan and execute programmes more effectively.





January 29, 2024

Need growth impulses

Not just elections, but a slowing economy also makes some reliefs a priority for the interim Budget


There is a consensus among analysts that the interim Budget on February 1 wouldn’t stray from the fiscal glide path, despite the surcharged political atmosphere in which it is being delivered. A sharp reduction of 60-70 basis points in the Centre’s fiscal deficit appears to be on the cards in FY25, from the FY24 Budget Estimate of 5.9%, which looks eminently achievable. That would require another 70-80 bps cut to meet the 4.5% deficit target for FY26 under the current medium-term plan, while the FRBM-mandated 3% would still be a distance away. What brings about the unanimity of forecasts is the challenging debt dynamics. Remarkable policy resolve has been exhibited by the Centre in bringing its fiscal deficit down, from the bloated level of 9.2% in the pandemic-year FY21, while also keeping a focus on the spending quality even during the testing times.


Amid this fiscal consolidation, the Centre also sharply raised the ratio of its capital expenditure to the GDP (from 1.6% in FY19 to a budgeted level of 3.3% in the current fiscal). In other words, revenue deficit is being pared at a faster rate than the fiscal deficit. Of course, states have bested the Centre’s performance, by reporting a combined fiscal deficit below 3% in all years since FY17, except in FY21. Commendable tax effort is what enabled the Centre to walk the talk on fiscal rectitude. Gross tax buoyancy nudged close to 2, an all-time high, in H1FY24, and is poised to be at least 1.6 for the year as a whole. This indicates that without any new tax or hikes in rates, healthy revenue growth could be maintained in the short term. Buoyancy, however, seems to have peaked.


The robust growth of tax revenues in recent years came with the progressive trend of a steady increase in the share of direct taxes in gross tax revenues from 46.6% in FY21 to over 54% in both FY23 and FY24. Increased reliance on indirect taxes during the pandemic has been quickly corrected. At the same time, the government’s financial accounts have in recent years proved that taxes are not only the largest, but the most sustainable source of revenue. Other non-debt receipts like those from asset sales and sovereign rents charged for natural resources are exhaustible and relatively unreliable. While a large part of the telecom receipts this year are expected to be notional, the disinvestment target is set to be missed by a wide margin, with the plan for the next year too expected to be modest. The RBI’s transfers this year have been unexpectedly high, and may not decline much even in FY25.


The question that hangs over the policy-makers is whether enhanced public investments has taken the economy to a state where it would henceforth need less of it. It doesn’t seem so, and a slowdown is visible. The trade-off between fiscal consolidation and the need to keep a certain amount of fiscal impulse for growth in a slowing economy, which also faces uncertainties from the external world, is a difficult one. The situation calls for a rejig of the nature of fiscal support to growth, even as it is being regulated. The Budget for FY25 may have to provide support to household income/savings, and unveil more than a modicum of consumption stimulus, especially for the rural sector. That strategy also fits in with the political imperatives, ahead of the general election.





January 29, 2024

Too many security cameras, not enough safety


Civil libertarians in the US are celebrating the recent announcement by Amazon that law enforcement agencies will no longer be able to obtain Ring doorbell camera videos just by asking. Henceforth, the company will require a subpoena or a search warrant.


That’s great news. One needn’t be anti-cop to agree that government should jump through a hoop or two before seizing images people reasonably believe to be private. Yet we’re dealing here only with the tip of the proverbial iceberg. Doorbell cameras are only a small part of what’s been called “the banality of security”—measures that swiftly become so much a part of everyday life that they’re hardly noticed.


Supposedly, the growing video overwatch is making us safer. And maybe at some places—the White House, the airport—it really does. But do the ubiquitous cameras really contribute to our overall security? If not, we’re sacrificing a precious right to go about our lives without our every step being tracked.


The data are, at best, unpersuasive. Let’s start with the doorbell videos. True, there are neighbourhoods where residents insist that Ring and similar technologies have made them feel safer. There are also a handful of cases where the doorbell camera feed was a key piece of evidence. Overall, however, the available data don’t support the claim that the availability of Ring videos to law enforcement reduces crime.


Do other security cameras do more good? Consider a few examples. By now we’re all familiar with the devices mounted above intersections that are supposed to snap pictures of cars that run red lights. Putting aside the frequently raised question of their accuracy, there’s debate over how well they reduce accidents. Certainly the cameras lead to a decrease in right-angle collisions (one car strikes another broadside), but they also appear to increase rear-end collisions, perhaps by encouraging

more people to slam on the brakes. At the very least we can say that the cost-benefit analysis is complex.


What about the increasing network of anti-crime cameras that monitor public parks, streets, and the like? They’re apparently more successful on police procedurals than in real life, because the wrongdoers by and large don’t take them seriously. In the words of criminologist Eric Piza, “While laypersons (and even some ‘experts’) may assume conspicuous camera presence alone sufficiently communicates heightened risk, such causal mechanisms can be difficult to generate in practice.”According to Piza’s data, actively monitored video systems do have a small crime-reducing effect; passively monitored systems have none. But until AI brings Orwell’s “telescreens” to life, no government on earth has the resources to monitor every camera in real time.


Or let’s consider shopping. Most retailers have cameras now, but when asked, those in the industry consider security guards a much more significant deterrent to shoplifting. In the store as on the street, the cameras seem to have a crime-reducing effect only when they’re constantly monitored. True, what’s become known as “human activity recognition” might allow AI to monitor the cameras and predict by How people behave in the store which shoppers are likely lifters, and direct the security guards where to go. But that’s another road I feel queasy about travelling.


Privacy isn’t only about what people do behind closed doors. We all understand that we leave a digital trail as we make our way across the cyber world. It’s troubling, to say the least, that we nowadays leave so many digital trails when, minding our own business, we go through our daily routines. Maybe my attitude about privacy is old-fashioned. We live at a time, after all, when some 3 out of 10 young people support the installation of surveillance cameras in the private homes. This year marks the 75th anniversary of the publication of the novel 1984; and maybe those always-on telescreens are a lot closer than we think.


So by all means let’s celebrate Amazon’s decision to make it a little bit harder for government to get its hands on doorbell videos. But with respect to the rest of the banality of security, let’s bear in mind that we’re giving up an awful lot of privacy for a questionable improvement in safety.


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