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Dealing with the Dragon – Covid as an opportunity for India

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In most nations, massive economic changes take place every 70-100 years, changing the nations totally. Sometimes these changes destroy the nations, or they take them to the top. The US had earlier phases of growth when they grew 7-10 times post civil war and American reforms including the ‘New Deal’ designed by President Franklin Delano Roosevelt. This was a series of reforms enacted between 1933 and 1939 that lifted the US out of the Great Depression and restored hope to the American people. It focused on the ‘three Rs’ of relief for the vulnerable, recovery of the economy, and reform of the financial system (familiar words during Covid crisis). The US again and the UK, the western world restructured themselves also during IR 1.0 and IR 2.0 and grew 5-6 times.

With the help of the US, China did a total restructuring during IR 3.0 and grew eight times. India could only grow 2.5 times. The growth rate depended on the efficiency of restructuring. All countries have now entered very disruptive periods of IR 4.0 and 5.0 requiring huge changes, and also hit by Covid, they require major changes in the administrative, financial and market systems, just to survive. And these changes could later be used for enormous growth. In normal times, our democracy may not have allowed these changes, hence the opportunity. (I have described the earlier changes in my book, Containing the China Onslaught).

We could not join the American market bloc in 1972, though we were shortlisted by US experts, due to Nixon’s strong prejudice against Indira Gandhi, she having convincingly won the Bangladesh war despite Nixon’s support to Pakistan. Perhaps, even if offered, we may not have joined due to our philosophical non-aligned stand, which was compromising our growth. All nations, including India, have to change now to survive Covid and this gives us an opportunity to collaborate with the best nations, practices and consultants particularly in the democratic world, keen to partner us against the tributary communist nation China, threatening everyone. The US supported China under the mistaken impression that it was helping itself against their Cold War enemy, Russia, but China emerged as its enemy/competitor. It might be in the interest of the US and other democracies to prop up India, to regain the ‘balance of power'(Kissinger’s term to define/justify the illogical China policy), particularly in the East.

In the words of David McCullough, a Pulitzer Prize winner: “All crises are also opportunities for radical reform, for re-aligning priorities, and for tweaking policies in pursuit of the greater common good.” History has shown that those who navigated in these perilous times better, gained at the expense of others. Mao failed in his new deal post 1950, but then took the unbelievable decision to go to the US for help, and this changed China. India also at the time of foreign exchange crisis in 1991, turned the crisis into an opportunity and launched reforms, but at a low speed and commitment, and lost out hugely to China.

No one expected that Covid, a six month phenomenon would change the world and India irreversibly. Post-Covid India will be very different and if it is planned well, both by the central government and state governments, it can be a huge opportunity. Covid has ensured that we make these changes for our survival, and give up business as usual. Let me look at the compulsions of some changes, and start with the changes forced by the biggest impact of huge migration of labour and employment crisis first.

Labour exporting states like Uttar Pradesh, Odisha, Bihar, Jharkhand, Chhattisgarh, Rajasthan etc have compulsively received large-scale semi to no skilled human capital in their states during the huge labor migration. This is also the time that digitization has hit the world and India. This is a great time to have a large scale reform and reorganizing the government departments, and reorganizing industry and other institutions, for long time results.

A large-scale migrant population earns less that Rs 500 daily in urban areas. Securing 80 per cent of this income in 100 km radius from their native place should be the primary effort, e.g. Uttar Pradesh should focus on large-scale infrastructure connectivity projects and building up new cities for better absorption of talent pool.

The pandemic has exposed fault lines in the global trade and financial architecture, disrupting our travel patterns, global manufacturing value-chains, and governance systems. The crisis brings home some potent lessons: individual health outcomes cannot be divorced from the health and hygiene systems of the community and that national borders are no defence against threats from nature, and that collective global action is increasingly a sine-qua-non for our own individual protection from such events. The hope remains that the Covid-19 crisis brings about a global epiphany regarding the need for saner responses to the other formidable(and less immediately visible) threat: the effects of climate change. Once this episode is behind us, if its only legacy is to bequeath us a wiser and more deliberative approach to balancing the often-conflicting objectives of economic progress and environment protection, then much good would have come of it. India has already taken leadership position in this effort.

Like other countries, India is also seeking to steer a judicious path between the need to insulate the population, and to revive the economic engine. The rigorous national lockdown has succeeded in slowing the spread of the virus, and the current thinking in the government is to open the country for business in a carefully calibrated manner, focusing on reviving sectors like agriculture (this sector should have received huge attention, but did not). The Covid crisis ensures that only this restructuring will prepare the base for our rehabilitaion, and then manufacturing, and services; while isolating geographic hotspots and vulnerable groups. The most compelling requirement for reviving the economy is to effectively manage the emergence from the lockdown, ensuring that supply chains are reopened, that manufacturing and service enterprises are free to operate, while ensuring basic health hygiene.

The first charge on the government is to protect the lives and entitlements of the most vulnerable people at the bottom of the pyramid — a daunting task, given that the unorganised sector represents over 90 per cent of the workforce. India has millions of migrant workers, who are in acute distress, bereft of income support or home comfort. The first round of relief has rightly been the package of Rs 1.7 trillion for the vulnerable, along with measures like reopening Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) work. Much more needs to be done, and much more is expected, particularly a stimulus-cum-relief package that is imminent at the time of writing. There are demands and expectations that this package will be in the region of at least Rs 5-6 trillion, around 3 per cent of the country’s GDP. This package could encompass fiscal stimulus, liquidity in the system, tax deferral, credit-protection, and business-continuity and sustenance assistance for small enterprises. The agriculture sector, which constitutes around 15 per cent of the GDP, but more than 50 per cent population needs immediate relief, in terms of facilitating market access for the current rabi crop under harvesting, as well as funding support for farmers to commit to the imminent kharif crop, come June.

Apart from agriculture, sectoral stimulus packages and prioritisation of relief and rehabilitation measures are warranted, given the substantial damages inflicted on sectors like tourism, hospitality, transportation, which have very large employment absorption levels.

Another area of focus needs to be infrastructure, not just for creating assets for the future, but also for absorbing employment in sectors like construction. The government’s recently announced National Infrastructure Pipeline of around Rs 100 trillion, could be re-prioritised by frontloading projects that soak up relatively greater levels of employment.

Two perfect storms — the pandemic and geopolitical disruptions: We also need to think beyond measures to mitigate the impact of the crisis, and around opportunities that may arise for India from global disruptions. Much of India’s economic reform of the early 90s was forced on us on the back of a public-finance crisis, and we also need to think beyond crisis management now, about how we can further refine our economic policies and modernise our infrastructure, particularly around logistics, for fostering more inward investment. The convergence of two perfect storms — the pandemic and the geopolitics-driven disruptions recently seen in global trade and investment flows — maybe India’s opportunity to become one of the key nodes of the global value chain. We need to set up two national missions, with the same zeal and focus that went into improving India’s ease-of-doing business rankings; one around reducing process friction for inward investment, and another for improving the ease of undertaking trans-national trade.

We all tend to put our differences aside and come together when faced with an external challenge, and that is presumably the most important element for emerging stronger and better, a pan-national coming together around common goals: alleviating distress, protecting the population, and creating better futures for every Indian. Supply chains, demand centers, and labour corridors would need to be restored while the country ensures that lockdowns are sharply targeted in the locations and for the activities required to contain the virus. The following examples highlight a few of the dependencies across Indian sectors and geographies:

  • In the textiles sector, cotton is bought in the western parts of India, yarn is spun in the north and west, weaving takes place in the south, and apparel is manufactured in clusters in the north and south.
  • In the chemical industry, the acetic-acid value-chain supplies diverse industries, such as pharmaceuticals, pesticides, paper, food processing, and construction. Any blockage to its supply chain would therefore have ripple effects in many other seemingly unrelated sectors.
  • Electronics manufacturing requires inputs from sectors as diverse as metal working, plastic molding, paper processing, chemical processing, and electrical supplies. Disallowing activity in any of them would affect electronics-manufacturing output.
  • Six states (including Andhra Pradesh, Kerala, Maharashtra, and Tamil Nadu, which account for 30 per cent of construction activity) rely heavily on migrant construction workers from other states. Bottlenecks in the return of migrants would affect building activity in such states.
  • Half of all drivers engaged in freight movement across the country come from just 14 districts, according to an analysis. Restrictions on the movement of people from these districts could affect the ramping up of national logistics activity.

Skilling of population: Large-scale job loss gives an opportunity to the government to re-skill the population for better jobs. Government should prepare a plan to re-skill the semi-skilled workforce at nominal fee. This will not only reorganize the human capital for future needs but absorb the shock generated through the job loss. The proportion of formally skilled workers in India is extremely low, at 4.69 per cent of total workforce, compared to 24 per cent in China, 52 per cent in the US, 68 per cent in the UK, 75 per cent in Germany, 80 per cent in Japan and 96 per cent in South Korea.

According to the latest India Skill Report (2019), only 45.6 per cent of the youth graduating from educational institutions are employable. To address this mismatch, it is imperative to understand the ‘return on skill’ (ROS) concept.

Copying the success of TVE model in China: One major reform mechanism utilized early on were the Township and Village Enterprises (TVEs) which were market-oriented public enterprises under the purview of local governments based in townships and villages in the People’s Republic of China. It is important to remember that TVE refers to companies located in townships and villages, not owned by township and villages. This allows us to work under the framework of consumption and intrinsic motivations driving early growth (privatization), and contributes to why the TVEs were successful in China during the 1980s. TVEs have been hailed as one of the wonders of the reforms by Chinese and foreigners alike. Their initial success came at a pivotal opportunity where farmers’ incomes by the mid 1980s began to stagnate, and the best solution to increase income was to stimulate non-grain and non-agricultural production. In 1978 TVEs employed amount 28 million people, but between 1984 and 1997 they created nearly 100 million non-farm jobs. Local governments tended to and fostered the developments of these TVEs for they saw these entities as regular sources of revenues in resource-constrained environments. The TVE reforms also allowed for labour forces in the rural areas to more efficiently engage in industrial outputs rather than agricultural outputs.

Even Deng noted the unexpected results: “What took us by complete surprise was the development of TVEs… All sorts of small enterprises boomed in the countryside, as if a strong army appeared suddenly from nowhere.” The results seem quite clear for it fuels individual incentives; the decision to relax the state purchasing monopoly on agricultural goods (a hallmark of Mao’s failed policies) to make them available to local rural industry allowed for the efficient usage of excess rural labour, processed agricultural products, and diversified production of a range of consumer goods and products for export. Statistically, the results are justified as the growth rate was exponential in its explosives, with rural industrial output growing at 21 per cent per annum from 1978 through the early 1990s.

I am no expert in the sectors I have dealt with. I have only given a recommended a direction the country will have to work. It is gratifying to see that lot of work has been done, but we have to go further with the help of experts.

(Pradip Baijal is former Secretary, Disinvestment and former Chairman, TRAI. He is the author of Containing the China Onslaught)

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Column: Prime Minister sets the record straight – Spy’s Eye

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It is now clearly conveyed to the nation that India had put China on notice for its recent aggressive conduct on LAC and warned it of serious consequences of any further misadventure it might be planning against this country. Prime Minister Modi in his ”Mann ki Baat” on June 28, which is like an address to the countrymen, talked of India”s strong resolve in dealing with the military face-off with China on the LAC in Ladakh and gave out that ”a befitting reply had been given to those who cast an evil eye on India”s territory”. He added that ”India can handle friendly relations but also knows how to look into the eyes of anyone who challenged its sovereignty”.

Giving an insight into India”s strategy, the Prime Minister informed the people that among other things India was taking measures to become self-reliant in various spheres, including indigenous production of defence hardware to meet ”exigencies of national security and sovereignty”. India has since stepped up border infrastructure development on our side of the LAC as well as mobilisation of troops on the ground — apart from readying our Air Force and Navy for defensive action against any external aggression. The message given to China is loud and clear — stay off from giving any provocation by attempting to encroach on any point of disputed territory along the LAC. Defence of Ladakh is geared up in line with the declared stand of the Modi government that Aksai Chin had been illegally occupied by China and that this matter had to be set right. That India will stretch China on various fronts — economic and geo-political — is emerging as a strategic element of India”s long-term response to the current hostility of this neighbour.

While the situation on the LAC is still evolving, India has from its side confronted China with the demand of return to the status quo ante and engaged that country in border talks at the level of Core Commander on disengagement and deescalation. The government, meanwhile, is keeping up military and foreign policy endeavours to prepare for any aggravation. It is in this background that Prime Minister Modi, in a brief address to the nation on June 30, did not touch on China and confined himself to an announcement of extension of free ration scheme covering nearly 80 crore people for five months — till November end — giving them relief in a difficult time to see through Diwali and Chhat festivals. An added facility of using ration cards on an all- India basis was promised.

The Prime Minister reiterated the need for total caution during the Unlock-2 against corona. He came off as a compassionate leader who appeared to be giving priority to the internal scene relating to people in distress and by not bothering the latter with the issue of India-China tension on the border, also giving a message that his government was fully in control of things on that front. Since the majority of migrants belonged to UP and Bihar, what is the harm if the PM made a mention of the two major festivals of North India in his address to bring some cheer to this distressed lot? Hopefully, the sense of nightmare that crores of migrant labour experienced in the lockdown would be eased substantially — though the crisis of unemployment looming large for them would still confront them. Importantly, the Modi regime remains firm on building the economy indigenously by emphasising the idea of ”be vocal for local” and encouraging entrepreneurship and start-ups. Internal stability in India will be determined by the economic recovery.

Coming back to the issue of China”s aggressiveness on the border, it is clear that three aspects of the situation deserved to be taken note of in framing a long-term strategy of dealing with that country. First is the unmistakable fact that the intensification of cross-border terrorism in Kashmir by Pakistan and the military build-up on LAC started by China in the period following the abrogation of Article 370 by India, showed a new level of meeting of minds between these two allies against India — that was part of their bigger geo-political plan of acquiring a firm hold in the crucial Pak-Afghan-Kashmir tri junction. This territory anchored the superpower rivalry in the Cold War era for control of this region — a lesson China would remember as it positions itself as the other superpower in the present, conscious of the advantage it has of having Pakistan on its side. India has to weaken this alliance by carrying the anti-terror combat into the POK and damaging the CPEC where it would hurt China the most. China can create some more mischief on LAC in support of Pakistan but this is nothing that India”s army would not be able to handle.

Secondly, this is the moment for India to build the opinion of the entire democratic world against the dictatorial Chinese regime that was out to disturb world peace in chasing its blatant plans of dominating the world militarily and economically — as a new superpower. India must make it a point to highlight the role of Sino-Pak axis in fomenting terrorism of the Islamic radicals and using it as an instrument of political advancement through proxy wars and cross-border operations. For securing India”s interests in a peaceful and democratic Afghanistan, we should further strengthen bilateral relations with Russia, Israel and Iran in working for a place in the ”round table” convened to discuss that country”s future — at a time when the US is being expedient about accommodating the Taliban in power there. Fortunately, we have in the NSA and the EAM a very competent, experienced and knowledgable set of people who can achieve the international outreach that India presently needs to counter and override the challenge posed by the China-Pakistan combine.

Finally, it is in the realm of economic relations that India has to find ways and means of scuttling the economic power that China had tried to wield against its opponents, including India. In fact, the tough response of President Donald Trump on the US-China trade imbalance and the more recent US-led campaign against China”s alleged culpability in hiding information relating to corona pandemic from the world — India being on the side of the US in these matters — substantially accounted for the precipitate hostility of China towards India. India”s rightful offer to the businesses seeking to shift away from China, to relocate here added to the Chinese desperation which was reflected in the aggression on LAC. Tension on the borders was intended to project India as a land of conflict and distract global investors from this country. As important as the marshalling of defence preparedness against China, therefore, are the moves of India to battle with the latter on the economic turf. India has set the ball rolling by banning some 59 Apps of Chinese origin and linking it with the call for development of indigenous products and services to make India self reliant in all fields, including defence production.

Prime Minister Modi has clearly embarked on a comprehensive strategy of military consolidation, economic recovery and deeper collaboration with friendly powers to deal with the emerging challenges — particularly the threat posed by China in the immediate and long range. India”s relations with China of Xi Jinping can become irreversibly antipathetic unless China strikes a peace chord by retracing its steps in Galwan valley. People must rally behind the effort of Modi regime to safeguard national security and integrity — at a time when the corona pandemic has compounded the problems of the common Indian at home. Prime Minister Modi in his address on June 30 acknowledged the silent contribution of the farmer and the tax payer to the well-being of the nation. It is a matter of satisfaction for the nation that the Prime Minister has shown a rare capability of handling multiple crises with calm and confidence.

(The writer is a former Director Intelligence Bureau)

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50 hours and police still searching for Vikas Dubey

Ram Kumar Dubey, father fo Vikas, who was interrogated by the STF till late on Saturday night, maintained that his son was not present in the village when the incident took place.

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Vikas Dubey.

Lucknow: It has been more than 50 hours since gangster Vikas Dubey went missing after killing eight police personnel in an ambush in Kanpur, but the state police still has no clue about the whereabouts of the criminal.

All the phones of Vikas, his associates and relatives have been put on surveillance but the gangster has not used any communication tool so far.

The Yogi Adityanath government, on Saturday night, increased the reward on Vikas to Rs one lakh. A reward of Rs 25,000 each has been announced for his 18 accomplices.

Sixty police team are frantically searching for the man, who is now ‘most wanted’ in Uttar Pradesh.

On Saturday, the police razed the house of Vikas in Bikru village where he had killed the policemen in the early hours of Friday. Two SUVs and two tractors parked in the premises were also trampled upon by the same earthmover that had been sued to block the police team’s path when the incident took place.

The station house officer of Chaubeypur police station, Vinay Tiwari, was suspended on Saturday after a 12-hour grilling at the Special Task Force. Tiwari was found to have fled from the site when the encounter began. He is also suspected to have tipped-off Vikas about police action.

Ram Kumar Dubey, father fo Vikas, who was interrogated by the STF till late on Saturday night, maintained that his son was not present in the village when the incident took place.

“My son is innocent and I will fight for him right up to the Supreme Court. He is being framed for political reasons,” the father told reporters.

It has also been found that a phone call was allegedly made from the Chaubeypur police station to the local power sub station, asking them to disconnect the power supply in the village. The police team could not find an escape route when Vikas and his men fire at them because the area was plunged into darkness.

Two personnel of the sub-station have been detained for interrogation.

Meanwhile, in a related development, the police seized two cars and a motorcycle from Vikas’ Lucknow residence in Krishna Nagar area. An ambassador car seized from the house is said to belong to the UP Estate department and was earlier allotted to a principal secretary.

Vikas’ family claimed that it had purchased the vehicle in an auction but could not produce the papers to substantiate its claim.

The Lucknow Development Authority (LDA) is preparing to serve a notice to Deep Prakash, brother of Vikas who lives in Krishna Nagar and is presently absconding. LDA officials said that the map of the house was not passed as per records and if the owner failed to produce the relevant documents, the house would be razed.

Meanwhile, sources said that there was a strong possibility that Vikas had fled to Nepal or to some other state and would surrender in court when the furore over the incident subsides.

The state police have stepped up vigil around the courts to pre-empt any move by Vikas to surrender in court.

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Sagging electoral prospects behind Trump’s H-1B action

The real impact of the presidential proclamation, therefore, will be two-fold. First, as long as Trump is President, it will undoubtedly cause many international students, who are looking at the US as a potential destination for higher studies to reconsider their decisions.

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On June 22, US President Donald Trump issued an executive order suspending the entry of a number of non-immigrant work visa holders into the US till the end of the year. The visa categories affected include, most notably, H-1B, which has been used by more than a million Indian information technology professionals since the 1990s and L1 visa used by US companies to bring in workers from their Indian offices.

During his campaign for President four years ago, candidate Trump consistently railed against the H-1B programme. However, after he moved into the White House, Trump left the visa programme untouched in the first 43 months of his presidency, even as he delivered on most of his controversial campaign promises, such as the Muslim ban and dumping of multilateral treaties like NAFTA and Paris Agreement, through executive actions.

There were two compelling reasons Trump didn”t act on the visa programme until now. The US economy had been doing very well until Coronavirus hit the American shores early this year. And, the tech industry, which employs three-fourths of the H-1B visa holders, has been doing even better.

The second reason is the formidable lobbying power of the industry. The four most valuable companies in the world, Amazon, Google, Apple and Microsoft, and Facebook have historically used the H-1B workforce to augment their profits. They were not going to let it go without a fight.

The influence these organizations wield was evident when Trump spared H-1B in his first executive order to curb nonimmigrant work visa holders issued on April 22. According to reports, H-1B was to be part of that proclamation but the White House was talked out of it by the industry.

So, what has changed between late April and today?

A number of things, but primarily it is Trump”s dimming re-election prospects. A steady stream of polls in the past few weeks has shown that the incumbent is trailing badly in the race against presumptive Democratic nominee Joe Biden. The President”s handling of the Covid-19 pandemic — his initial refusal to see it as a threat and then his inability to provide the leadership to contain it — has shaken people”s confidence in Trump”s presidency.

Prior to the onset of the Coronavirus, Trump was banking on making the election a referendum on his stewardship of the economy. But the pandemic, which has claimed more than 125,000 American lives, has also eliminated up to 40 million jobs.

Although some of the jobs have come back thanks to the multitrillion dollar stimulus package, the re-opening plans promoted by Trump have not produced substantial results. Now, with parts of the country closing down again, and the deadly virus spreading in southern and western states, there”s no sign of the economy turning the corner before the November election.

Consequently, Trump needs to be seen as doing something to save the economy and American jobs. H-1B, which has been a bogeyman for the protectionists and economic nationalists, is an easy target during this downturn, even though study after study has documented that the visa programme actually helps create jobs. The administration claims that the executive order is going to save more than half a million American jobs without giving details.

It should be noted that the order mainly impacts petitioners who are outside of the US who have not gotten their visas stamped on their passports yet. As a result, it will only have little impact in the short term on those seeking work in the US.

The US Citizenship and Immigration Service issues roughly 85,000 new H-1B visas annually of which 20,000 are for those with US master”s degrees. Most petitioners in this category are already in the US and they will not have any problem in starting their jobs in October, typically the time new visa holders enter the work force.

According to immigration attorneys, a significant percentage of the remaining 65,000 visas are claimed by dependents of H-1B and L-1 visa holders, as well as foreign students who have graduated from US schools, but did not get the visa under the master”s degree quota. These groups will also not come under the purview of the executive order, as they are already in the country.

The real impact of the presidential proclamation, therefore, will be two-fold. First, as long as Trump is President, it will undoubtedly cause many international students, who are looking at the US as a potential destination for higher studies to reconsider their decisions. During the Trump era, the US has already been losing potential students to nations such as Canada, Britain and Australia.

Second, despite the massive job losses in the broader economy, there are still vacancies in the tech industry that will have to be filled to move its economy forward. The US tech sector has said for years that the country doesn”t produce enough skilled workers and the industry will suffer without the intake of manpower through H-1B and L1 visa programmes. If it becomes more difficult for these companies to hire foreign workers, they would probably outsource more and more of these jobs to foreign destinations, including India.

It is an irony that, while Trump is trying to bring manufacturing jobs back to the US, his nonimmigrant worker visa policy could force more high-paying service jobs offshore. What makes it doubly ironic is that this action which Trump has taken to try to save his job as President will not do so.

Given the current state of affairs, it is likely that on election day November 4, the American people will fire Donald Trump. After that, the decision on what to do with information technology visas in 2021 and going forward will be in someone else”s hands. And, Trump will have to find a new place of employment for himself.

The good news is Biden has already stated that his administration will lift the H-1B ban.

(Frank F. Islam is an entrepreneur, civic and thought leader based in Washington DC. The views expressed are personal)

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