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Analysis

Is your building earthquake safe? Probably not

Earthquake Resistant — Immediate Occupancy” in which the building may suffer some minor damage but there would not be any loss of life or property. “Rarely in the Indian real estate scenario buildings are designed to this category.

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Under construction buildings

Though earthquakes have wreaked havoc in many parts of the country, Indian real estate and infrastructure sector still has lots more to learn — and implement — to ensure the safety of life and property.

Although structural requirements and concerned technologies are incorporated in the building process, sector players say many modern technologies used worldwide are yet to be widely used in the country.

According to V.K. Gehlot, Director, National Centre for Seismology, “base isolation” and “dampers” are the major technologies to make buildings strong enough to resist seismic vibrations. But they are not widely used in India because of the cost involved and requirement of frequent maintenance.

Through base isolation, engineers decouple the building or the superstructure from its substructure which rests on ground, thus protecting the building during an earthquake.

Dampers on the other hand work as shock absorbers and minimise the magnitude of vibrations transmitted to the building from the ground.

The cost difference between a building with and without dampers is approximately Rs 350 per square feet, according to Major Sandeep Shah, Managing Director of Taylor Devices India.

The company is a manufacturer of earthquake-resistant equipment and he says “all developers” in the country are aware of the technology.

Shah said the company’s devices have been used in Terminal-2 of Chhatrapati Shivaji International Airport, Mumbai, lobby block building of Apollo Hospital, New Delhi, and New Udaan Bhavan at the Indira Gandhi International Airport, Delhi.

He pointed out that “at present none of the buyers are aware that by using dampers buildings can be protected and would remain habitable even after a major earthquake. That may be the reason why no one (buyer) is asking for such buildings.” But once they are made aware, Shah was sure they would want the technology in the building they are going to live in.

According to Aunirban Saha, Director (Marketing, Construction and Sustainability) of the Saha Groupe of Companies, “most of real estate projects are designed to the grade of ‘Earthquake Resistant — Collapse Prevention’ “. That means that in the event of a major earthquake, the building would not collapse and there won’t be any loss of life. However, the building itself would not be in a habitable condition and would need to be demolished and reconstructed, he explained.

The next higher standard is “Earthquake Resistant — Immediate Occupancy” in which the building may suffer some minor damage but there would not be any loss of life or property. “Rarely in the Indian real estate scenario buildings are designed to this category,” Saha added.

The highest category of structural safety is that of “Earthquake Resistant — Operational”. Under this, there would be no damage to the property or any injury caused to its occupants irrespective of the magnitude of the earthquake.

Saha said most developers go for the first category of “Collapse Prevention” as they find it more cost-effective. Most home buyers are not aware of earthquake-related safety grades, he added.

The higher structural grades, Saha said, made more sense in today’s market scenario for commercial real estate because such properties are preferred by big multinational companies.

According to Dikshu C. Kukreja, Principal Architect at C.P. Kukreja Associates, “all leading architects of India have the knowledge and skill about the technologies available to incorporate them in our designs and construction.”

Other than dampers, structural concepts such as bracing — where X-shaped braces strengthen the columns of the buildings — and couplers — where bars are joined together — help in absorbing movement during an earthquake.

Siesmologist Gehlot says that earthquake resistance should be enforced as a default, even for small structures. Today, when building a house, 95 per cent people do not bother about earthquakes. “Our usual way of construction is that we will give it to a mason and they will start constructing,” he adds.

All that needs to change, he emphasises.

By Rituraj Baruah

(Rituraj Baruah can be contacted at [email protected])

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Analysis

After 1,460 days of Modi rule, ‘achhe din’ yet to come

I do not blame this government for not being able to deliver ‘achhe din’. Which government since Independence has?

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Narendra-Modi

New Delhi: There’s only one year more to go for the BJP-led regime before another test at the hustings. But is the country any nearer to Prime Minister Narendra Modi’s promised ‘acche din‘ (good days)? Four years ago, the country had voted the present regime to power on hopes of better days in all socio-economic-political spheres. But despite some strong structural reforms like GST, and gut-wrenching changes like demonetisation, the jury may still be out on how good it has been, according to economists and others experts.

Despite India’s GDP growth of 7.2 per cent in the third quarter (October-December) of 2017-18, some economists feel that the demonetisation drive, avowedly taken to “cleanse the system” of black money, had ended up damaging the country’s economy instead.

“Demonetisation was a terrible mistake by the government, for which the common people paid the price. It has reduced people’s trust in the banking system, as they were denied their own money during the period of cash crunch. It takes so much time and work to build institutions and policies — it is so much easier and faster to break things,” Jayati Ghosh, Economics Professor at Jawaharlal Nehru University (JNU), told IANS.

The government decided to ban 1,000 rupee and 500-rupee notes on November 8, 2016, taking away 86 per cent of the total currency in circulation. “May be this move had served the government’s purpose politically, but economically it was a bad one,” Ghosh added.

Echoing similar views, Arun Kumar, former professor of economics at the JNU, told IANS that when the NDA government came in, the Indian economy was already on an upward trajectory. The quarter, in which the government took over, the growth climbed to eight per cent. In October 2016, India was the fastest growing economy in the world when China slowed down a bit.

“But then the government administered a shock to the system with demonetisation. It had a negative impact on the unorganised sector that comprise 45 per cent of production and 93 per cent of employment in the country. According to some estimation, 50-80 per cent of that got damaged,” he said.

Kumar, who is now Chair-Professor with the Institute of Social Sciences, added: “Government did no survey at that time and hence no data is available. Even data from International Monetary Fund and World Bank, which rely on government data, do not show any estimates (on impact).”

After demonetisation, credit off-take in the country declined sharply. “Between November-December 2016, it was at historic low of 60 years. Investment into the country also took a big hit,” he said. However, Ranen Banerjee, Partner & Leader, Public Finance and Economics, at PricewaterhouseCoopers (PwC) has a different take on some of the benefits flowing from the action.

“Demonetisation had positive impact as far as digital payments were concerned. It shot up sharply during that period but came down subsequently. The level is still higher earlier. But demonetisation as a measure did not deliver all the results that it was supposed to deliver,” Banerjee said.

The government’s other major thrust, though, on Goods and Services Tax (GST) — rolled out on July 1 last year, got better billing. Economists are hopeful that it will bring in beneficial changes once the hiccups are over. Banerjee says GST would change the entire landscape of tax compliance in the country by creating a multiplier effect. “GST was a bold move which is showing positive results,” he added.

Ghosh, though, thinks GST goes against the grain of federalism. “A unified system is not so necessary in a federal structure — for example, the US does not have it and still has a very modern economy. In a federal structure you have to allow states to have some money raising power. Further, GST implementation has been really bad.”

Kumar said: “Introduction of GST has hit the unorganised sector badly. Even in Malaysia where GST was introduced in 2015-16 at 26 per cent, government decided to scrap it. The organised sector is rising at the expense of unorganised sector. Disparity is rising.”

Industry chambers have by and large welcomed government initiatives, especially the decision on GST. “The overall economy is strong with GST having settled down and reforms firmly on the right path,” Chandrajit Banerjee, Director-General of Confederation of Indian Industries (CII), told IANS.

Over the last four years, according to him, the government had systematically addressed major “pain points” for the economy such as ease of doing business, non-performing assets of banks, foreign direct investment rules, infrastructure construction and exit of failing enterprises.

“The government’s mission-mode development campaigns have delivered notable results, adding to overall growth multipliers. The firm level and sectoral level numbers look promising for the next year in terms of orders booked and capacity utilisation,” said CII’s Banerjee.

Former economics professor at Indian Statistical Institute, Dipankar Dasgupta, who holds that the economy was yet to recover from the hit it took because of demonetisation, says that on GST he was hopeful that with time it will stabilise. “In the other countries where it was introduced there were teething problems too,” he said.

The government also took up the job to cleanse bad loans of banks. It is pumping in Rs 2.11 lakh crore as capitalisation, spread over two years. But a number of banking scandals and rising non-performing assets (NPA) may have reduced the faith of people in the bank system, after the shock of demonetisation. “We have declining deposits in the banking system due to people’s rising mistrust,” says Ghosh. Dasgupta says recapitalisation should be followed with caution so that it does not widen the fiscal deficit.

The government, though, has got support in its effort to tackle the issue of NPAs. The bankruptcy law has put everyone on notice. “People are taking the issue of NPAs seriously trying to resolve it. Companies are opting for out of court settlement. Propensity to comply has increased as borrowers know that there will be consequences on not servicing a loan,” Banerjee of PriceWaterhouseCoopers said.

Yet, overall the promise of the golden pot at the end of the five-year rainbow, as promised by Modi in his of speeches — where he had painted the BJP rule in attractive hues — has not materialised in four years. BJP’s best salesman may have oversold the hope. “I do not blame this government for not being able to deliver ‘achhe din’. Which government since Independence has?” asks Dasgupta rhetorically.

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Analysis

Four years of PM Narendra Modi: What worked, what didn’t and what still can

In the 2018 budget, the government was widely expected to announce a National Employment Policy, which would lay a comprehensive roadmap for job creation, but that did not happen.

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Narendra Modi

On 26 May, Prime Minister Narendra Modi completes four years as the head of India’s first majority government since 1984. While campaigning for the 2014 general elections, Modi’s Bharatiya Janata Party (BJP) had made a slew of promises to end the 10-year rule of the Congress-led United Progressive Alliance. A corruption-free regime, 10 million new jobs a year and doubling farm incomes by 2022 were among those promises.

With less than a year to go before the next election, VCCircle takes a look at the Modi government’s four big achievements and failures during its tenure and four major opportunities it can still tap into.

Hits

Goods and Services Tax: Although the landmark legislation that overhauled the country’s indirect tax regime had been in the works for more than a decade and a half, the Modi government does deserve credit for getting the GST implemented in July 2017. However, the GST was not without its controversies that stretched India’s federal fabric to the hilt, resulting in strained centre-state relations at various junctures.

Moreover, what finally emerged was a complex multi-slab system instead of the one tax regime it was initially envisaged to be, even as key commodities like fuel and liquor remain outside the ambit of the GST. Further, owing to implementation glitches, tax numbers took a hit, at least in the initial few months following the GST rollout. Yet, the implementation of the GST did alter the country’s indirect tax regime for good.

Insolvency and Bankruptcy Code: The Modi government can pat itself on the back for implementing a comprehensive bankruptcy law, India’s own version of the Chapter 11 regulation in the US Bankruptcy Code. Ever since its implementation in 2016 though, the IBC has been the subject of legislative and regulatory tinkering by parliament, the Insolvency and Bankruptcy Board of India and the Reserve Bank of India.

These encumbrances notwithstanding, available data analysed by BloombergQuint show that operational creditors have overwhelmingly outnumbered corporate debtors in using the provisions of the law—by as much as 87%—so much so that the latter are beginning to pay them even before they trigger the IBC.

Also in the news have been 12 large cases of defaulters as identified by the RBI. Just last week, debt-laden Bhushan Steel was acquired by Tata Steel for Rs 35,200 crore, making it the first big settlement under the IBC, with several other big deals set to close in the coming months.

No allegations of big-ticket corruption: The Manmohan Singh-led UPA was under fire during the last leg of its tenure as several of its ministers and members of parliament were embroiled in corruption cases. The Modi government can take some heart from the fact that no one among its top leadership or the cabinet has been accused of serious corruption thus far.

Rival political parties and some media reports have sought to target BJP leaders, but the charges haven’t really stuck enough for investigating agencies to get involved. Having said that, the Modi government has been accused of being in cahoots with some top industrial houses and going soft on high-profile defaulters like diamond merchants Nirav Modi and Mehul Choksi and former liquor baron Vijay Mallya.

Aggressive foreign policy: In March, the Foreign Policy magazine reported that, until then, Modi had made 35 foreign trips as prime minister, having visited 53 countries, rubbing shoulders with nearly all of the world’s top leaders. Although Modi has been accused by foreign policy wonks of conflating action with achievement, he has succeeded in making significant rapprochement with key neighbors like China, evidenced by the amicable settlement of the Doklam standoff, which was threatening to snowball into a major armed skirmish.

However, Modi’s Pakistan policy and his overtures of peace, including an impromptu visit, have not paid off, as the Pakistani intelligence and army continue to back insurgent groups in the Kashmir valley. Moreover, the government’s trade policy, too, has seen average success at best, with the country actually reducing tariffs and ceding ground much beyond what the World Trade Organisation guidelines had demanded.

Misses

Make in India /Startup India: The Modi government had promised to make India a global manufacturing hub catering to both the export and domestic markets. The government followed through on this promise by launching its flagship ‘Make in India’ programme in a bid to significantly boost local manufacturing and creating a new skills development ministry to provide vocational training to unskilled youth. It also launched a much-hyped ‘Startup India’ programme with the ostensible goal of making India the startup capital of the world, just like Israel.

But none of these initiatives seem to have gone very far. In fact, how dismally India has done in export terms is borne out by the fact that the country’s trade deficit with China remains skewed in the latter’s favour by a ratio of four to one. According to a status report on the Startup India website, only 74 startups had been identified to receive tax benefits as of January first week.

Black money: On 8 November 2016, Modi banned the use of high-value notes, sucking 86% of the currency in circulation in one swoop, with the ostensible aim of delivering a body blow to black money hoarders. But the government had perhaps not factored in the fabled Indian ingenuity to subvert the system. So, while the government had hoped that as much as a third of India’s unaccounted wealth would go out of the system, in the end, nearly all the currency found its way back, riding pillion on hundreds of thousands of poor Indians who acted as mules, for a cut, filling up their hereto dormant Jan Dhan accounts, or simply exchanged cash over the counter. The move brought the country’s informal economy to a standstill and dented growth.

Bad loans: This was a problem the Modi government inherited and promised to resolve. Bad debts—now at more than Rs 9 trillion—continue to weigh heavily not just on government-controlled banks but also on its fiscal health. Last year, the government implemented a massive Rs 2.11 trillion recapitalisation plan to keep public-sector banks afloat. But its efficacy is in doubt, especially after Punjab National Bank was hit by a Rs 13,000-crore fraud.

The government also merged the State Bank of India with its subsidiary banks, and could merge several of the remaining 22 state-owned banks among themselves. But it remains to be seen whether these measures will take the massive load of bad debt off their books. It can, however, be safely said that the next regime too will inherit this problem, only at a much bigger scale.

Agriculture: One of Modi’s key poll promises in 2014 was to double farm incomes by 2022. Instead, farm incomes have fallen in real terms, primarily on account of food price deflation and the breakdown in the cash-based rural economy in the wake of the November 2016 demonetisation. In fact, if one compares India’s real GDP growth to expansion of its farm sector, the latter has consistently lagged the former since 2012.

Moreover, the 2018 pre-budget Economic Survey notes that on account of climate change, farm incomes could see a further 25% decline in the long term. Not only has farm distress exacerbated the issue of farmer suicides, it has also brought farmers on to the streets, as happened in Mumbai, when in March this year 20,000 farmers converged upon India’s wealthiest city demanding a complete waiver of loans and power dues. Farmer unrest could cost Modi dearly especially in areas of rural Maharashtra, Karnataka and even Uttar Pradesh, where the BJP’s rival political parties could be quick to cash in on it.

Opportunities

Direct Tax Code: After GST, the Direct Tax Code is the other big tax reform that the Modi government is reportedly looking at implementing. News reports say a draft bill could be introduced in the upcoming monsoon session of parliament. The code could introduce new income tax slabs and cap the corporate tax at 25%.

With these changes, Modi aims to bring some cheer to middle-class Indians by reducing their actual tax outgo and make corporate houses more competitive by reducing their tax liability. If he does manage to pass the direct tax code, the BJP could reap rich dividends in the 2019 elections.

GDP growth: India’s economic growth slumped in the quarters following demonetisation. However, the momentum seems to be back in the recent past, with the December quarter clocking 7.2% growth and India reclaiming the tag of the world’s fastest-growing economy from China. The Modi government would do well to try and keep this momentum going.

But there are some risks ahead. Global crude oil prices have topped $80 a barrel and are unlikely to go down by much in the near term. This could hurt the balance of payments, and lead to a spike in inflation and interest rates. In fact, consumer prices in April rose 4.58% reversing a three-month slide. The Modi government will have to keep its fiscal math in check amid a tough global economic scenario before the next general elections.

Infrastructure (Roads/ Railways// Power): In September 2017, Modi and his Japanese counterpart Shinzo Abe laid the foundation stone for the Ahmedabad-Mumbai bullet train project, which is to be completed by 2022. Although the Modi government has been criticized for prioritising the Rs 1.1 trillion project over other necessary development projects, it does underscore the fact that India’s infrastructure needs an urgent facelift.

In fact, the 2018 Economic Survey says India faces a $526 billion infrastructure investment gap by 2040. In October last year, the government had said it planned to build 83,000 km of roads at a cost of Rs 7 trillion. Railways, power and ports are the other major infrastructure sectors where the government will invest in a bid to kick-start the country’s sputtering economy. Now, if only it could follow through with these lofty promises.

Jobs: If the Modi government plays its cards well, this could well be its biggest trump card yet, even as four-fifths of its time in office is already gone. In 2014, during its election campaign, the government had promised to create 10 million jobs a year. Instead, it ended up creating less than a million in the four years it has been in power.

In the 2018 budget, the government was widely expected to announce a National Employment Policy, which would lay a comprehensive roadmap for job creation, but that did not happen. The government could usher in such a policy now to focus on employment-intensive sectors, especially in the small and medium enterprises space.

Credit : VCCircle

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Analysis

Modi gets real on China: Wuhan summit demonstrated that a weak economy gives India few cards to deal

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Kapil Sibal

The informal summit at Wuhan between Prime Minister Narendra Modi and President Xi Jinping must be seen in the context of changing global equations. China with its trade volumes and economic clout is seeking to challenge American supremacy.

In recent years, China has undergone a period of tepid growth. The launch of its One Belt One Road (OBOR) initiative is an attempt not only to fuel growth but also influence our neighbours. It has invested or committed more than $150 billion in the economies of Bangladesh, Maldives, Myanmar, Pakistan, Nepal and Sri Lanka. This along with the Chinese project in Pakistan’s Gwadar Port showcases the real intent of the Chinese to symbolically encircle India.

On the other hand, President Donald Trump has struck a blow to globalisation with his ‘America First’ policy. On the trade front, Trump seeks to create tariff barriers to reduce China’s over $200 billion trade surplus.  Trump wants access to Chinese markets and seeks to persuade NATO allies to share defence costs. His sanctions against those who deal with Russia and pulling out of the Iran nuclear deal will have implications for India and global trade.

Illustration: Ajit Ninan

China recognises this. The overbearing presence of the Chinese in our neighbourhood and Trump’s non-sentimental approach both to trade and diplomacy are factors that have led to Wuhan. Modi, after almost 4 years of unchartered, unguided and inconsistent policy towards China, has realised that it is time to have a quiet bilateral dialogue.

Neither the optics lapped up by captive channels when Xi was feted on the Sabarmati’s banks, nor the flexing of muscle in response to Chinese expansion at Doklam has paid dividends. Modi realised it was time to distance himself from the Dalai Lama and seek Chinese collaboration to deal with outstanding issues. Our economy requires investments in key sectors.

China has penetrated the Indian economy in telecom, power, engineering and infrastructure and has shown interest in setting up industrial parks. India’s digital payment company Paytm is 40% owned by Chinese. Chinese firms such as Harbin Electric, Dongfang Electronics, Shanghai Electric and Sifang Automation either supply equipment or manage power distribution networks in 18 cities in India. This move forward with the Chinese has come towards the end of Modi’s five-year term.  Photo ops and expansive statements clearly are no substitute to hard-nosed diplomacy.

In dealing with China, we must accept a few truths.

First, the Chinese will never give up on their all-weather friend Pakistan. The Chinese will not support our candidature at the UN high table, nor will they agree for us to be a part of the Nuclear Suppliers Group. While they have access to our markets, they are loath to reciprocate and open up their markets including in the IT sector. A recent decision by the Chinese to allow some of our pharmaceutical companies to do business and export generic drugs to China is one way to deal with the imbalance of our bilateral trade that is tilted in favour of China.

We must also recognise that we need to collaborate with and not confront China because between us, we host 2.5 billion people and we are the two largest players in this part of the world. On many issues at international fora, we have to take positions consistent with our developmental needs. As a democracy, we have greater political affinity with the US, and in the context of global power equations we need to collaborate both with the US and Japan.  However, our economic interests, given our developmental needs, have greater affinity with China. We must maximise our leverage considering fast-paced developments in global trade.

The Indian and Chinese statements at Wuhan show both a divergence in emphasis and a meeting of minds. While terrorism is an issue addressed elaborately in our statement, the Chinese referred to it only once. They will pay lip service in their response to terrorist activities launched across the border but will not condemn Pakistan. During the Doklam crisis only Japan issued a statement in India’s support; Trump was silent. The other difference is that while the Chinese talked about investments in India, we emphasised the importance of balanced trade.

While India sought mutual trust and ‘predictability and effectiveness in the management of border affairs’ this was missing from the Chinese statement. The Indian statement seeks an environment in which both sides can manage to control tensions and not let them spiral out of control, but the Chinese statement has been more assertive on sovereignty. China has not addressed the issue of its $71.5 billion trade surplus in 2016-17.

Much of foreign policy is dependent on a country’s economic situation. Diplomatic options are enhanced when an economy has the potential to grow at a fast pace. Any country which seeks to add muscle to its foreign policy must have the economic leverage to do so. In this context, it is difficult to match China.

Even in our bilateral relationship with the US, Americans have kept their economic interests paramount. Reduction of H1-B visas and the insistence by Trump on economic justice to Americans makes us suspect the US may not be the steadfast partner we can wholly rely upon. We need a calibrated and institutionalised policy response to China and other countries; not a personalised policy where institutional memory and positions are sidelined.

I hope Modi has realised that and the Wuhan meeting is a step in that direction.

DISCLAIMER : Views expressed above are the author’s own.
Courtesy: This article is published in TimesOfIndia on 21st May 2018
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