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Analysis

India’s Sri Lanka challenge

From all accounts, India’s encirclement has begun with ruthless efficiency. Pakistan is gone. Maldives is about to fall. Nepal is almost there.

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My wife and I recently visited Sri Lanka on a holiday with friends. For both of us, it was the first visit after almost 15 years. At that time, the idyllic island country was caught up in a deadly civil war that claimed countless lives and devastated the economy. When Mahinda Rajapaksa assumed power as the Sri Lankan President, he made the elimination of the Tamil Tigers his foremost objective. After 30 months of relentless assaults, the 26-year-old civil war finally ended in 2009, with the killing of Tamil Tigers (LTTE) leader Velupillai Prabhakaran and the ruthless decimation of his supporters.

It is argued that widespread human rights excesses occurred and that the Tamils were openly discriminated against. This is true. Yet, what is also true is that the island country finally saw peace for the very first time after decades of unrest, uncertainty and terrorism. The Sri Lanka we visited was in complete contrast with the one I had grown accustomed to, with gun-toting security personnel everywhere. Now there was a sense of calm. Even impatience, at being held back for so many years. It is as if it was time to claim the life that had been long denied.

For India, the end of the civil war and of the Liberation Tigers of Tamil Eelam (LTTE) was good news. It had already declared the LTTE as a terrorist organisation, but domestic compulsions — with its allies in Tamil Nadu openly aligning with Prabhakaran — forced New Delhi to opt for covert support for the anti-LTTE military operations. Tragically, with the end of the civil war, history repeated itself and India, once again, lost its momentum. Today, we are on the brink of losing Sri Lanka to Beijing.

The Chinese presence in Sri Lanka is not covert. Far from it. You see them everywhere and the pace of the activity is hectic. Chinese dredging ships can be openly seen working at a furious pace. Work on the Hanbantota port has started. Chinese workers are everywhere, from shopping malls to pubs. Many are learning to speak Sinhalese. Hotels, roads and infrastructure, performing arts theatres, a swanky cricket stadium are not simply projects on the drawing board. People can see them. The importance of the visual should never be underestimated. And given the speed with which the Chinese execute projects, a real estate transformation is credibly under way.

Over a period of 12 years (2005–17), Beijing has poured in $15 billion into projects in Sri Lanka. The Chinese Ambassador conveyed an unambiguous message to India, which sees Chinese presence in Sri Lanka as an intrusion in its immediate sphere of influence, when he said, “No negative force can undermine the cooperation between Sri Lanka and China.”

For India, this is a disturbing development. Indian foreign policy has relied heavily on “time-tested civilisational links”. While this is undoubtedly appealing, there is an aspirational impatience among Sri Lankans that India failed to see and respond to with the scale, speed and imagination that only Beijing appears capable of.

It is common enough to hear Sri Lankans say how disgruntled and unhappy they are with the intrusive presence of the Chinese, who are loud and arrogant. It is like a deadly embrace but one that they find lucrative, if they wish to fast-track to a prosperous future. Artists impressions of future Colombo tell Sri Lankans that it will rival Singapore. It will bring in investments, tourism, employment and economic well-being. This can be seriously tempting.

From all accounts, India’s encirclement has begun with ruthless efficiency. Pakistan is gone. Maldives is about to fall. Nepal is almost there. And Sri Lanka is under an understandable hypnotic trance. India genuinely faces its most serious security challenge.

If India is to get its act together, it needs not only imagination but the speed and efficiency to deliver on its promises to offer Sri Lankans a future that the civil war denied them. For Indian Foreign Secretary Vijay Gokhale, India’s neighbourhood will be a disturbing challenge. The problem he would face is convincing the political, bureaucratic and corporate partners that India faces its greatest-ever security threat and one that we are on the brink of losing.

As the legendary chess player Bobby Fisher once remarked, “If you are playing the game, you play to win. But if you’ve lost the game, it’s because you took your eyes off the pieces and then, you deserve to lose.”

By : Amit Dasgupta

(Amit Dasgupta is a former Indian diplomat. The article is in special arrangement with www.southasiamonitor.org)

Analysis

Law catching up with Akhilesh-Mayawati as they ready for alliance

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Even as Samajwadi Party (SP) chief Akhilesh Yadav and Bahujan Samaj party (BSP) supremo Mayawati — sworn enemies till not long ago — are making all efforts to stitch up a united force in Uttar Pradesh against the Bharatiya Janata Party (BJP) for the 2019 general elections, the law seems to be catching up with both of them.

While the BSP supremo is on sticky ground with a recent directive of the Allahabad High Court not to spare anyone involved in a Rs 1,400 crore scam in memorials constructed under her watch, even as it sought a progress report from the Uttar Pradesh government’s Vigilance Department that is probing the matter, the SP chief is in choppy waters over a Comptroller and Auditor General (CAG) report which indicts his previous government in a Rs 97,000 crore scam.

According to a CAG audit, the mandatory utilisation certificates of works done between 2014 and 2017, involving Rs 97,000 crore, are missing. This amount was spent on 2.5 lakh works and projects, an official privy to the matter told IANS. Most matters pertain to the social welfare, panchayati raj and education departments in which more than Rs 26,000 crore was spent, but there is no certification of the works done.

Sources in the know of the full report say that, in most matters, the CAG suspects large-scale swindling and graft. What is surprising is the fact that while utilisation certificates were not given by many departments, subsequent installments were released. More than 2.55 lakh utilisation certificates are pending, casting serious doubt on governance under the watch of then Chief Minister Akhilesh Yadav.

On the other hand, four-time Chief Minister Mayawati also faces some fresh legal trouble. The Allahabad High Court this week sought a progress report from the government in the multi-crore monument scandal, which involved financial irregularities in the plethora of monuments and memorial parks built when Mayawati was in office from 2007 to 2012.

A bench of Chief Justice D.B. Bhonsle and Justice Yashwant Verma has given the state government one week to present before it the progress report in the matter in which the Lokayukta had inferred large-scale financial irregularities and corruption. The court gave these directions while hearing a public interest litigation (PIL) filed by Shashikant Pandey of Mirzapur, who has cited Lokayukta N.K. Mehrotra’s 88-page report on the matter.

This could trigger big-ticket trouble for the BSP supremo as there are a lot of financial irregularities under the scanner in the construction of Ambdekar Smarak Parivartan Sthal, Manyavar Kanshiram Smarak Sthal, Eco Park, Gautambuddha Upwan, Ramabai Ambedkar grounds and Smirit Upwan in the state capital Lucknow and the Ambedkar park built in Noida, adjoining New Delhi.

Other than the evidence submitted to the Lokayukta what could trouble Mayawati in this particular matter is that two others accused — her confidantes and former Uttar Pradesh ministers Babu Singh Kushwaha and Naseemuddin Siddiqui — are now ranged against her. Siddiqui is in the Congress and Kushwaha has floated her own party. Any word from them about the complicity of “Behen-ji”, as Mayawati is referred to by her supporters, in the matter could immensely impact the political future of the 62-year-old.

A dozen legislators, more than 100 engineers and government employees, officers of the Noida Authority, Rajkiya Nirman Nigam and the Public Works Department (PWD) were made accused in the scam. Mayawati had taken personal interest in construction of these monuments, named after Dalit icons and Rs 4,500 crore was earmarked for the projects in the state budget. After the report of the Lokayukta was submitted, the then SP government led by Akhilesh Yadav had lodged an FIR in the matter in 2014.

It was alleged that the pink stone used in these monuments was supplied from Mirzapur in Uttar Pradesh though in the books it was shown as having been purchased from Rajasthan and cartage charges were falsely billed. Crores of rupees allegedly went into the pockets of politicians and engineers in this. The Lokayukta, in his report, had also pointed out that while the labour and machines used for cutting stones were all from Lucknow, the payments made were 10 times what they should have been.

The state Vigilance Department is investigatng the matter. Soon after Akhilesh Yadav stormed to power, he had vowed to bring Mayawati to book but after some time the matter went into cold storage. Today, the two bitter rivals are talking of an electoral alliance in 2019. The BJP government too in the past one-and-a-half years has done precious little in the matter.

The BJP, rattled by the coming together of the two political rivals, which led to successive defeats in parliamentary and assembly by polls, will be more than willing to play this up, say political observers. First, because the processes have been started or raised by constitutional authorities — CAG, Lokayukta and the Judiciary — and hence it cannot be accused of political vendetta; and, secondly, because this will bring to the fore once again the “unholy nexus of the Bua-Bhatija to save their skins and sins”, a BJP functionary chuckled.

What and how much of an impact these issues will have on the 2019 elections is a matter of conjecture, but certainly the two issues have the potential to mar the initial attempts by the SP-BSP to emerge as alternative to the ruling BJP.

(Mohit Dubey can be contacted at [email protected])

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Analysis

Learning from diversity in regulation

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Pawan Agarwal is CEO, FSSAI,

Regulation has an unfortunate, negative connotation to it. It brings to mind an authoritarian image with regards to the government. That is definitely not how it should be. It must be accepted that regulation has a great positive impact on society and the economy. The economic crisis of 2008, which was effectively a failure of regulation, forcefully underlines this fact. One needs to see regulation as an enabler, even for businesses, and not as a deterrent.

It is only natural for a citizen to have inhibitions about the regulatory environment. However, such concerns can be allayed if the government ensures that the key elements for an efficient regulatory body are present. An OECD document, “Principles for the Governance of Regulators”, explains that the key elements for “better” regulatory outcomes are: Well-designed rules and regulations that are efficient and effective; appropriate institutional frameworks and related governance arrangements; effective, consistent and fair operational processes and practices; and lastly, high quality and empowered institutional capacity and resources, especially in the leadership.

Given that India has a very peculiar regulatory environment, due to the lack of uniformity and presence of diversity in the structures and functionality of regulatory bodies, it is necessary to not only ensure that the aforementioned necessary conditions are met, but that the regulatory bodies adapt with the dynamic environment and learn from one another. India has multiple regulatory authorities, which have been set up due to three primary reasons. One is for welfare, wherein they have been set up in the public interest; two, to counter anti-competitive forces; and, lastly, to prevent any form of market failure.

India’s regulatory environment took flight only with the advent of the economic reforms of 1991, which implies that the regulatory bodies are at a very nascent stage. For instance, the Telecom Regulatory Authority of India (TRAI) recently completed 20 years; the Food Safety and Standards Authority of India (FSSAI) completed 10 years; while the Central Electricity Regulation Commission (CERC) has also been functioning for 20-odd years.

The tricky role of a regulator is to ensure the participation of the citizens, involve them in the process and enable them in the movement towards a better society and economy. The recent mammoth task taken up by FSSAI with its Eat Right Movement, which nudges the citizens and consumers to change their eating habits, is one example of how a regulatory body has been able to impact social and behavioural change that will culminate in a healthier nation and involves citizens.

It is not only about involving the citizens but also ensuring that they are be able to trust the regulatory bodies. As a case in point, TRAI has strengthened its administrative set-up for the purpose of internal audits. Similarly, the Directorate General of Civil Aviation (DGCA) now has an in-house transparency officer to cater to the same concern.

In a similar spirit of improved transparency, the regulatory bodies have adapted themselves to the ongoing increased reliance on technology and shifted to online portals and apps. This has not only made the processes and mechanisms smoother but has also reduced cumbersome paperwork.

For example, TRAI has whole host of online portals and apps, such as TRAI Analytics Portal and the Telecom Commercial Communications Customer Preference Portal. FSSAI has also incorporated facets of the online revolution within its system, wherein the licensing and registration of businesses can be done online via the Food Licensing and Registration Systems (FLRS) platform.

Finally, given that the regulatory environment is quite new, it is also crucial to continuously update policies and ensure laws are amended to be in sync with the changing economic and social environment. TRAI recently released a draft of the National Telecom Policy 2018. This is a step that every regulatory body needs to follow.

For India, the regulatory environment is growing, and newer, more innovative techniques are being adopted for the larger social good and to make the economy more competitive. For growth to be sustainable, all the regulatory bodies should learn from one another, adapt to the changing global environment and keep implementing innovative methods to counter issues as they arise. Most importantly, they must function as accountable, transparent and independent authorities.

(Pawan Agarwal is CEO, FSSAI, and can be contacted at [email protected] Amit Kapoor is chair, Institute for Competitiveness, and can be contacted at [email protected])

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Analysis

Infrastructure and economic growth: Of multiplier and network effects

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economic growth

The need for infrastructure creation in India is now being widely debated and analysed. It would be prudent to try and better understand how infrastructure creation contributes to the economic well-being of a nation. Some of the fundamental questions that come to mind are: How much does infrastructure creation matter for an economy? What “multiplier effect” does infrastructure have?

Given the massive scale of infrastructure projects and, consequently, the public and private investment in such projects, it is worthwhile reiterating the economic, financial and social benefits of infrastructure creation. A better idea about the benefits that accrue from assets helps in making optimal decisions.

The link between infrastructure and economic growth has long been recognised. In a recent paper, titled “Growth and Infrastructure Investment in India: Achievements, Challenges and Opportunities”, Aswini Kumar Mishra, Kunapareddy Narendra, and Bibhu Prasad Kar have yet again established that a solid link between infrastructure and economic growth exists.

They find that not only do infrastructure investments have a “huge impact on national and local development, but also exhibits a very high rate of return, even compared to other investments, perhaps due to its spill-over or externality effects”. Two key takeaways from the paper are the “statistically significant” positive impact on growth that infrastructure investments have and the positive correlation among the various infrastructure sectors.

The second point implies that, for example, better transportation infrastructure helps the economy not just by contributing to growth directly, but also through assisting storage infrastructure in delivering better returns and eliminating wastage of goods. Warehousing infrastructure can add more value in an environment where the transportation linkages to the warehouses improve, and vice versa.

The ability to create great economic value from land at a significant distance from the centre of consumption depends on not just creating warehouse or light manufacturing infrastructure or growing crops on the land, but also on the ability to create facilities to transport goods so produced in the area to the consumption point. This ability to generate value through the “network effect” of infrastructure to create positive linkages between various assets is a crucial component to maximise the economic, financial and social value creation.

In the paper “IFC Economics Notes 1, The Impact of Infrastructure on Growth in Developing Countries”, Antonio Estache and Gregoire Garsous have some additional interesting takeaways. They maintain that the poorer a country, the more infrastructure matters to economic growth; but not surprisingly, they also conclude that the weaker the institutions (legal and administrative frameworks) in a country, the lower the growth payoff from infrastructure investments.

For an economy such as India, in which there is socio-economic movement as a significant part of the population continues to rise out of poverty to form the new middle class, the study points out the ability of investments to create infrastructure that the new middle-class entrants can utilise to improve their lives. Credible institutions, credible policies and an effective conflict-resolution mechanism matter more than ever in this context.

For the country to truly create the infrastructure that contributes to economic growth, strong institutions will be essential. In essence, “hard” infrastructure such as airports, seaports, railroads, telecom towers, power transmission networks and renewable energy can be created at a rapid pace with the optimal economic dynamics only when the so-called “soft” infrastructure of a robust regulatory regime is in place and fully functional.

While the direct impact of high-quality infrastructure is one that gets attention, the indirect advantages and “network effects” of infrastructure assets do not get as much attention, perhaps because they are harder to quantify. That said, finding the “correct” pace of infrastructure creation while working under the various constraints of regulations, financing and availability of skills is crucial.

While it is true that rapid infrastructure asset creation is needed, it is equally true that the necessary financing facilities must match the pace of such asset creation. It is essential that new assets are created with robust financing structures that can sustain over long periods of time. The recent issues in the infrastructure sector suggest that though avoiding low-quality assets is important, but it is equally important to avoid good assets funded using poor “capital structures”. Infrastructure assets do add significant economic value if countries can find the right balance between infrastructure creation and ensuring sustainability of financing.

(Taponeel Mukherjee heads Development Tracks, an infrastructure advisory firm. Views expressed are personal. He can be contacted at [email protected] or @Taponeel on Twitter)

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