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187

TUESDAY, AUGUST 6, 2019

GOVT SCRAPS SPECIAL STATUS MARKETS FALL 1% ON TRADE
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mint
primer
J&K’s Article 370:
Clause for peace
is now laid to rest
BY DHIRENDRA TRIPATHI
The Centre has scrapped Article 370 of the Constitution that gave
Jammu and Kashmir (J&K) special status. It also bifurcated the state
into J&K and Ladakh, saying both will be treated as Union territories.
Mint delves into the history of the state after the Centre’s radical move.
J&K—battling fronts, redrawing contours
J&K is India’s only Muslim-majority state. It is broadly divided into three
regions—the Kashmir valley, the plains of Jammu and the hilly Ladakh.
AFGHANISTAN
CHINA
Jammu
and Ladakh
Kashmir
PAKISTAN Himachal
Punjab
INDIA
Source: Census 2011
22 889 67.2% 15.7
Districts Sex ratio Literacy rate
vs India’s 943 vs India’s 73%
T
he Narendra Modi government
has added a landmark chapter
to Jammu and Kashmir’s his-
tory, with the state no longer having
its own Constitution or a separate flag.
1 WHAT’S THE HISTORY
OF J&K’S ACCESSION?
Jammu and Kashmir was a princely
state ruled by Maharaja Hari Singh
when India gained independence. It
was a Muslim-majority state led by a
Hindu king, who had his own ambi-
tions of leading an independent state
attached neither to India nor Paki-
stan. He remained undecided until
October 1947 when Pashtun tribals,
joined by the Pakistan army, entered
the valley to dethrone him. Hari
Singh also faced rebellion from sec-
tions of his own army. It was then that
he agreed to J&K becoming a part of
India under the Instrument of Acces-
sion to seek its help so that he could
keep his throne. The Indian Army
thwarted the Pashtun attack. Indian
records show J&K’s accession was
signed on 27 October 1947, after
which the army was rushed in. Paki-
stan contests the accession, saying
Hari Singh wasn’t in control of the
state on that day and that the Indian
government, led by then prime min-
ister Jawaharlal Nehru, had already
pushed in its army and forced the
king to sign on the dotted line. Paki-
stan’s objection broadly lay in the
accession of a Muslim-majority state
to a Hindu-dominated country that
contradicted the two-nation theory
on which it was founded.
2 WHAT IS PAKISTAN-
OCCUPIED KASHMIR?
As the Indian forces were busy push-
ing back the Pakistan army to regain
control of the territory they had lost to
m MINT CURATOR
Japan’s flying car gets off the ground, for a minute
Ma Jie
feedback@livemint.com
TOKYO
I
t was caged and only hovered for
about a minute, but it flew: a new fly-
ing car. Made by NEC Corp., the
vehicle is essentially a large drone with
four propellers that’s capable of carry-
ing people.
The Japanese electronics maker
demonstrated the machine, flying
without a passenger, at a Tokyo suburb
on Monday. Powered by a battery, it
rose briefly to about 3m above the
TUESDAY, AUGUST 6, 2019
LIVEMINT.COM
DOLLAR EURO
₹70.74 ₹79.05
₹1.13 ₹1.62
222,236 sq. km
Area
12.54 million
Population
73% 37%
Rural Female
population population
11.9% 7.4%
Birth rate ST SC
(live births per 1,000) population population
AHMED RAZA KHAN/MINT
the enemy, Nehru approached the
United Nations Security Council on 1
January 1948 to help resolve the dis-
pute. On his request, the UN passed a
resolution calling for a ceasefire and
asking Pakistan to withdraw from the
territory it had occupied. The UN res-
olution also called upon India to hold
a plebiscite in J&K so that the people
of the region could determine who
they wanted to be with. Pakistan
never vacated these areas it had occu-
pied and, thus, India never held the
plebiscite. Pakistan-occupied Kash-
mir (PoK), which India’s western
neighbour calls Azad Kashmir, is
divided into two parts, Jammu and
Kashmir, and Gilgit-Baltistan. India
and Pakistan have fought three wars
over Kashmir—in 1947-48, 1965 and
1999 (the Kargil war).
3 WHAT IS ARTICLE 370?
Article 370 of the Indian Consti-
tution gave special status and treat-
ment to J&K and its citizens. Article
370 was incorporated in the Constitu-
tion in 1949, two years after the state
had acceded to India. It was signed
between Hari Singh and Lord Mount-
batten, the then Governor General of
India, with Nehru’s blessings. Barring
defence, foreign affairs, finance and
communications, the Centre needed
the concurrence of the state govern-
ment to frame laws impacting it under
Article 370. Article 360 of the Consti-
tution gives the Centre the right to
declare financial emergency in a state,
but Article 370 prevented the Centre
from doing so in the case of J&K,
except during war or external aggres-
sion. The Article gave the state its own
Constitution and a flag with various
concessions granted to it.
TURN TOTO
TURN BACK FLAP
PAGE 94
AP
The car rose briefly to about 3m above
the ground before settling down again.
ground before settling down again.
For the past few years, Japan has
seen the emergence of a small, passion-
VOL. 2 NO. 187
GOLD OIL
₹36,140 $61.16
₹799 $0.73
QUICK EDIT
Manic
Monday
Equity markets began the week
on a jittery note, with bears
tightening their grip as security
concerns at home and the trade
war overseas looked poised to
escalate. The Sensex slumped
over 1%. The rupee slid sharply
against the dollar. Part of the
fall was due to a tense Jammu &
Kashmir after the Centre
revoked Article 370 of the Con-
stitution. A consolation was
that India wasn’t alone. Markets
tanked globally on US Presi-
dent Donald Trump’s declara-
tion that more import tariffs
were on the way.
That triggered a rush for safe-
haven assets. In India, longer-
horizon factors were also in
play: the economy’s deepening
slowdown, for example. The
volatile political situation has
had its own effect. To counter
downward trends, the govern-
ment should push ahead with
reforms. Some of its controver-
sial tax proposals could also do
with a revisit. On this, it’s a relief
that the finance minister has
said the government is ready to
hear investors out. The budget
proposal to raise the minimum
free-float of listed firms to 35%
of total equity has weighed
stocks down, too. Surely, a roll-
back or two could backstop
market sentiment without
hurting the budget arithmetic.
MINT METRIC
by Bibek Debroy
Three seventy and much more,
Changes like never before.
While some fume and fret
A new course has been set,
With baffled bewilderment next door.
QUOTE OF THE DAY
Article 370 should have been
revoked much earlier. But it
needed political will. And the
Modi government has the
political will to do it.
AMIT SHAH
HOME MINISTER
ate flying-car community that believes
Japan has the engineering expertise
and right environment to foster a global
flying car industry.
Although Monday’s demo is among
the first by a major Japanese corpora-
tion, NEC isn’t planning to mass-pro-
duce the car. NEC engineers and Carti-
vator, which it sponsors, spent about a
year developing the model. It’s about
3.9m long, 3.7m wide and 1.3m tall, and
weighs about 150kg. It’s being tested in
a large 10m-by-20m cage that’s 2m tall,
to make sure it doesn’t fly out of control
and cause damage. BLOOMBERG
Sheikh Abdullah, prime minister of J&K, is greeted by supporters on his arrival in New Delhi on 30 April 1964. HT

FROM FRONT FLAP there are fears that Pakistan will again prop up the terrorist
group Taliban in that country to foment trouble in the

4 WHAT IS ARTICLE 35(A)?

Article 35(A) was signed between Nehru and Sheikh
Abdullah, then the prime minister of the state, in 1954 after
the state had become part of India in 1947. It gave the state
government the power to define who its resident was. The
Article came with retrospective effect, defining a resident of
the state as one who had been living there for 10 years. This
meant that one could not buy property in the state if one
wasn’t a resident there, irrespective of religion. It also meant
that while people could vote in the Lok Sabha elections, they
could not in municipality or state elections. Indian laws also
did not apply on matters of inheritance of property when a
Kashmiri woman married a non-Kashmiri. The Supreme
Court’s decision to scrap Article 377 that decriminalized
homosexuality also did not apply to the state.
region. India cannot afford to be a mute spectator to the
goings-on in its neighbourhood and the Modi government
might have been compelled to act accordingly.
7 WHAT ARE THE MAIN POLITICAL
FORMATIONS IN THE STATE?
J&K broadly has three geographical areas—the troubled val-
ley of Kashmir, the plains of Jammu, and the hilly Ladakh.
The Congress and the BJP are the main national parties in
the state. BJP has a strong presence in Jammu and Ladakh
but lacks mass support in the valley. There are three promi-
nent regional parties—Farooq Abdullah’s National Confer-
ence, Mehbooba Mufti’s People’s Democratic Party and
National Panthers Party. There are other political forma-
tions, too, in the state but they have chosen to stay away from
taking part in the elections in the state for many years. These

5 WHAT IS THE OUTCOME OF THE GOVT’S

DECISION TO SCRAP ARTICLE 370?
The government has scrapped Article 370, and with it goes
include the pro-Pakistan All Parties Hurriyat Conference, a
political platform that has stood for a J&K state separated
from India. Then there are terrorist organizations like Lash-
Article 35(A), taking away any special status for J&K. The kar–e-Taiba and Jaish-e-Mohammed, which derive their
scrapping of Article 370 means that one would be able to set- support from Pakistan, and are active in the state. Several
tle in J&K, take up a job in the state, buy property there, and leaders from these organizations are accused of amassing
enjoy the same laws on property inherit- personal wealth at the cost of the locals.
ance that citizens in other states do. The Now, any Indian citi-
government has even gone a step ahead. It
has proposed a bifurcation of the state into zen will be able to 8
WHAT IS THE BROADER
MESSAGE FROM THIS?
J&K and Ladakh, a Hindu-majority area. settle in J&K, take up This decision, that follows the banning of
J&K has also lost its status as a state, as both instant triple talaq, could be a precursor to
areas are now Union territories (UTs). J&K a job there and also the Uniform Civil Code, another avowed
will be a UT with a legislature, while buy property objective of the BJP. Often, a UT is con-
Ladakh will not have a legislature. Thus, verted into a state to meet the aspirations
J&K will be run like Delhi, with powers divided between the of the people. This is the first time that a full-fledged state has
lieutenant-governor (LG) and the chief minister, while been bifurcated into two entities which are not even states
Ladakh will be run like Chandigarh with the LG as its head. but UTs. This means vastly reduced political heft and powers
The decision to scrap Article 370 was done through an exec- for its politicians. The biggest message of this is that J&K is
utive order of President Ram Nath Kovind. The government off any agenda for a bilateral dialogue with Pakistan, only
has already cleared the more difficult test of getting it extending India’s consistent stand that J&K was its integral
approved in the Rajya Sabha. Given its numbers in Lok part.
Sabha, getting the nod there is a foregone conclusion.

6 WHAT LED THE GOVERNMENT TO TAKE

THIS DRASTIC STEP?
The Bharatiya Janata Party (BJP) has stood for the scrapping
of J&K’s special status and promised this in its 2019 election
manifesto. The step taken by the government comes in the
wake of a couple of events. US President Donald Trump had
recently said in a meeting with Pakistan Prime Minister
Imran Khan that Indian Prime Minister Narendra Modi had
requested him to mediate in the dispute, a statement New
Delhi vehemently denied. The Indian government’s con-
stant stand has been that the Kashmir problem is a bilateral
issue. Besides, the US is withdrawing from Afghanistan and
9 CAN THIS BE CHALLENGED IN COURT?
Yes, it can, and, in all likelihood, will be challenged in
the Supreme Court. The argument against the decision will
most likely be that Article 370 clearly states that the Centre
can frame laws concerning J&K only after consulting the
state assembly. Those opposed to the move would argue
that there is no legislative assembly in the state at present,
and, thus, the Centre cannot take a decision like this unilat-
erally. On this, the Centre can argue that there was an emer-
gency situation in the state and that the security of the
country was at stake. It can say that it took the advice of the
governor Satya Pal Malik, the current constitutional head
of the state.

MUMBAI IN NUMBERS
U MUMBA ON THE Back to winning ways?
Mumbai's performance in Pro Kabaddi
COMEBACK TRAIL IN PKL 25
Won Loss Tie
HOWINDIALIVES.COM 20
15
WHAT IS IT? 10

1 The only time U Mumba, Mumbai’s

Kabaddi team, emerged winners over
the first six seasons of the Pro Kabaddi
5
0
1 2 3 4 5 6 7*
League. Seasons
*Season 7 is ongoing Source: Prokabaddi.com

WHY DOES IT MATTER?

U Mumba had reached the finals in the first three seasons of the league, losing to
Jaipur Pink Panthers in the first edition, and to Patna Pirates in the third. After that,
however, they went through a relative slump in form. Now, under the captaincy of
the Iranian Fazel Atrachali, U Mumba are trying to recapture the magic of those
heady initial seasons. The team can be forgiven for believing it is back in form.
They stand second in the points table, behind only Jaipur Pink Panthers, despite
having lost three of their first six games in the ongoing seventh season. This year’s
tournament, which began on 20 July, will go on till 9 October. The first of the
twelve legs (each with 11 matches) started in Hyderabad; the second was held in
Mumbai, and the third is on at Patna. The Mumbai team now takes on Bengal
Warriors on 9 August.
Howindialives.com is a database and search engine for public data

PEANUTS by Charles M. Schulz

 MUMBAI, NEW DELHI, BENGALURU, KOLKATA, CHENNAI, AHMEDABAD, HYDERABAD, CHANDIGARH*, PUNE* VOL. 2 NO. 187 Rs 6.00 24 PAGES

PLAIN
FACTS
THE REAL ESTATE SLUMP MAY INTEREST RATES ARE UNLIKELY
TUESDAY, AUGUST 6, 2019
LIVEMINT.COM
NOT BE OVER JUST YET uP2 TO GO DOWN uP9

Article 370 is history Article 35A dropped BJP is centre stage Markets, rupee slide
Article giving special status to Jammu and Non-Kashmiris, those without ‘permanent The party has emerged as a pole around The Sensex and Nifty dropped by more
Kashmir revoked with immediate effect residency’, can now buy land in the state which the new narrative is being formed than 1%, while the rupee lost over 1.5%

Govt scraps special status for J&K

Rajya Sabha creates history as it passes bill abrogating Article 370 governing Jammu and Kashmir; the state will now be split into two Union territories
m MINT GRAPHITI I NS I D E
Gyan Varma & Shaswati Das will be carved out as a separate Union ter-
NEW DELHI ritory without a legislative assembly. MISSION KASHMIR ¡The full integration of Jammu
Effectively, the people of Jammu and and Kashmir

T
he Narendra Modi government
on Monday revoked the special
status granted to Jammu and
Kashmir, fulfilling a promise
made by his Bharatiya Janata
Party (BJP) but drawing protests from
some opposition parties.
Later in the day, the Rajya Sabha
approved the scrapping of Article 370, a
status the state had enjoyed for over 65
years. The Lok Sabha will likely approve
the changes when it takes up the bill on
Tuesday.
The step, the first ever in India’s history
that a state has been reduced to a Union
territory, is likely to reframe the Kashmir
debate, particularly with respect to the
dialogue with Pakistan and also within the
country.
The Upper House approved the resolu-
tion that scrapped all the clauses of Article
370—which provided special status to
Jammu and Kashmir—and simultane-
ously approved a bill that bifurcates the
state, wherein Jammu and Kashmir will be
converted into a Union territory with a
legislature, while the region of Ladakh
Kashmir will be governed by a new admin- See Page 16
istrative set-up in which the power of law Home Minister
and order will rest with the Lt Governor,
who is appointed by the Union govern- @AmitShah Ji’s ¡Mufti, Omar detained after
ment. The importance of the passage of speech in the Rajya RS scraps Article 370
the Jammu and Kashmir Reorganisation See Page 20
Bill, 2019 can be understood from the fact Sabha was
that Prime Minister Modi, who was extensive and
present in the House, rose to congratulate ¡New Delhi covers diplomatic
home minister Amit Shah after the gov- insightful. It bases, briefs UNSC countries
ernment successfully piloted the bill accurately See Page 11
through the House.
While the issue was being discussed in highlighted the
the Rajya Sabha, India simultaneously ¡Repeal of Article 370 points
launched a diplomatic offensive, briefing
monumental to a political realignment
key diplomats of countries comprising the injustices of the See Page 10
UN Security Council to contain any past and coherently
adverse reactions.
The briefing comes against the back- presented our PM Narendra Modi congratulates home minister Amit Shah after the passage of the J&K bill. ¡Spotlight on 10 other states
drop of Pakistan condemning India’s vision for the sisters that have special status
move to bifurcate the state. Article 370, WHAT DID THE RAJYA SABHA DO? WHAT HAPPENS TODAY? See Page 11
enacted in 1954, lays down that except for and brothers of IT PASSED J&K Reorganisation Bill that THE LOK Sabha will take up the bill today.
matters related to defence, foreign affairs, J&K. Do hear. seeks to scrap Articles 370 and 35A. It Once it approves the bill, the state can be
communications and finance, and issues cleared the J&K Reservation (2nd Amend- split into two Union territories—Jammu ¡Changes in IAS cadre, books
specified in the Instrument of Accession NARENDRA MODI ment) Bill to extend 10% quota to eco- and Kashmir, which will have a legislature, and flags in the offing
PRIME MINISTER nomically weaker sections in the state. and Ladakh, which won’t have one. See Page 10
TURN TO PAGE 18

Markets fall 1% on trade war, weakening yuan

Nasrin Sultana & in the border state. 2013, from its Friday’s close of
Monday blues
Ravindra Sonavane The Sensex fell 418.38
Mounting trade tensions 69.60.
points, or 1.13%, to end the between the US and China The local currency opened
MUMBAI day at 36,699.84. added to the unease of inves- at 70.06 and touched a low of
37,200 tors. 70.72 a dollar. So far this year,

I
ndian benchmark indices
shed more than 1% on Mon-
day as adverse local and
global factors—including the
scrapping of the special status
of Jammu and Kashmir, weak-
ening of China’s yuan, and
escalating global trade ten-
sions—left investors on edge.
BSE’s benchmark Sensex
fell 418.38 points, or 1.13%, to
36,699.84, while the National
Stock Exchange’s 50-share
Nifty index declined 1.23% to
10,862.60.
37,100 37,118.22 The aggressive sell-off in it is down 1.3%.
(Previous close)
37,000 stocks started after the Union Multiple issues are weigh-
36,900 budget was presented on 5 ing on Indian stocks, said
36,800 July. Since then, the Sensex Vinod Nair, head of research at
36,700
36,667.87
(open) has slumped 8% as foreign Geojit Financial Services Ltd.
36,600
36,500
portfolio investors (FPIs) “Concerns of a political crisis
36,699.84
36,400 started dumping shares after developing in Jammu and
9.15am 3.30pm the budget raised a tax sur- Kashmir and no further cues
Source: Bloomberg
charge on the “super rich” that on exclusion of surcharge to
PARAS JAIN/MINT
also applies to FPIs. FPIs added to the volatility in
On Monday, India scrapped The rupee on Monday the market. Selling was broad-
Article 370 of the Constitution weakened the most since Sep- based, despite late recovery
that grants special status to tember 2013. The rupee ended witnessed in auto and banks
Jammu and Kashmir, a move at 70.74 a dollar, down 1.6%, its
that may intensify the unrest steepest fall since 3 September TURN TO PAGE 6

DON’T MISS
Flipkart set to take on Amazon
with free video streaming service
Deepti Chaudhary Prime and Hotstar.
deepti.c@livemint.com “It’s still a small number.
BENGALURU The pricing is too high for a
customer base that is accus-

FM holds meeting
with bank chiefs
Nirmala Sitharaman met
the heads of several
banks and reviewed
their performance.
See Page 18
Warburg pledges
stake in IDFC First
Warburg Pincus has
pledged its entire 9.86%
stake in private lender
IDFC First Bank Ltd to
raise funds. See Page 3
‘Sustainability at
expense of growth’
Axis Bank CEO Amitabh
Chaudhry says the bank
is ready to sacrifice
growth for sustainability.
See Page 6
W
almart’s Flipkart
unit is set to intro-
duce a free video
streaming service to draw new
users from small towns and cit-
ies in India and take on rival
Amazon’s Prime Video service.
Flipkart is eyeing the next
200 million consumers who
are coming online. The com-
pany believes that most con-
sumers are introduced to the
internet through online vid-
eos. Hence, video content and
entertainment could play a big
role in getting consumers to
come and buy online.
“We believe that great con-
tent, if made available to a
wider base of consumers,
especially the ones who are
new to e-commerce but not
internet, can bring them on
board on an everyday basis and
help take away any anxiety
that they may have towards
online shopping,” Flipkart
group chief executive Kalyan
Krishnamurthy said in a state-
Kalyan Krishnamurthy, Flipkart
group chief executive. AFP
ment on Monday at the launch
of Flipkart Videos, a curated
range of movies, shows and
entertainment series. Custom-
ers, he added, should not pay
extra for premium content.
The video content offering
is focused on three primary
aspects: it’s free, curated and
personalized.
Experts say the content
market is still evolving, consid-
ering the number of customers
paying partly or fully for sub-
scriptions to Netflix, Amazon
tomed to free or cheap con-
tent,” said Devangshu Dutta,
chief executive of retail con-
sultancy Third Eyesight. “Also,
there is a lot of fluidity in terms
of the platforms used. In India,
content and pricing will be
critical.” He added that both
Netflix and Amazon Prime are
“Indianizing” their content in
a big way. Pricing dynamics
are being worked out as well.
Amazon India started its
Prime video service in Decem-
ber 2016 and has since devel-
oped a strong fan base with hit
shows such as Made in Heaven
and Mirzapur.
The big question is—will
people watching the particular
content eventually buy the
products on the platform? It
needs a mental switch—the
mindset while shopping is
very different from what it is
while watching a movie or a
series.
TURN TO PAGE 6
02 TUESDAY, 6 AUGUST 2019
MUMBAI PLAIN FACTS

The real estate slump may not be over just yet

A recovery in the real estate sector, where project stalling rates have spiked, may be as prolonged as the slowdown without a significant price correction
Sneha Alexander this trend though credit flow m MINT GRAPHITI
sneha.a@livemint.com to the sector did not dry up as Chart 1 Chart 2 Chart 3
MUMBAI dramatically as in the West. New projects in the real estate sector have Stalling rates have been soaring in After a prolonged slowdown, bank
However, at least the specula- commercial real estate
been declining since 2007 lending to real estate rose last year

F
ifty years after bank tive capital in the sector was no
Value of projects (in  trillion) Value of stalled projects as a proportion of total projects Year-on-year growth (in %)
nationalization, India longer forthcoming as expec- under implementation (in %)
2.5 70
is today witness to a tations of investors about the 25
unique form of returns from the sector got Commercial 60
Stalling rates in commercial
nationalization of real revised. 2.0
20 real estate surpassed that of
50
residential real estate in 2012 21.46
estate, thanks to the Supreme Unsurprisingly, project Commercial Residential and has been rising since
Court. launches in the sector have 40
1.5 15 Commercial Residential
To provide relief to home- been declining steadily since 30
buyers, the apex court has the peak of 2007, according to Residential 18.66
1.0 10 20
asked state-owned National data from the project-tracking
Building Construction Corp. database of the Centre for 0.55 10
Ltd (NBCC) to take over the Monitoring Indian Economy, 0.5 5 9.06
5.27 0
housing projects of two finan- or CMIE)(see chart 1).
cially troubled real estate As fund flows dried up, 0 -10
0 0.22
giants Amrapali and Unitech. project stalling rates spiked. Apr 2008 Jun 2019
Mar 2000 2012 Jun 2019
The licences of these two The stalling rate for commer- 1995-96 2018-19
real estate groups have been cial estate projects accelerated
revoked, with the court hold- since 2012 as the economy Chart 4 Chart 5
ing them responsible for slowed and demand for office Land acquisition and lack of funds are the Since fiscal 2014, house prices have fallen in Delhi
diversion of funds and for not spaces declined (see chart 2). major reasons for stalling in real estate but have risen in Mumbai and its suburbs
delivering projects on time Construction of commercial Proportion of stalled projects in the quarter to June 2019
47.9%
Compound annual growth rate between fiscals 2014 and 2019 (in %)
after receiving real estate, which
money from is mainly for leas- Kalyan Dombivali 7.3
homebuyers. ing, is funded pri- Land acquisition
problem
Mumbai 6.6
The court’s marily through
orders may have
come as a pun-
PLAIN own equity and
external debt. Lack of clearances
Thane 6.1

ishing blow for FACTS
the developers
but it is not clear
whether homebuyers can
cheer yet, given that NBCC’s
ability to deliver such projects
on time remain untested
(bit.ly/2YHy8r0).
The broader crisis in the real
estate sector also does not
appear to be over yet, suggests
an analysis of the available data
on the sector.
The roots of the crisis can be
traced to the real estate bubble
in the years leading up to the
global financial crash of 2008.
The crash led to a global credit
freeze and real estate projects
across the world were gutted
as lenders did their best to
avoid this sector.
India was no exception to
Unlike the res- (non-environmental) 25.6% Mira-Bhayandar 5.3
4.2
idential sector,
these projects do
14% Lack of
Others*
Navi Mumbai
Noida 2.1
Lack of funds promoter
not have customer advances as interest Ghaziabad 0.2
a source to fund and complete
the projects, said Shashank
4.5% *includes NA and Delhi -1.8
Jain, partner, deals, at Price- Note: There were no
3.8% 2.3%
natural calamities
Gurugram -1.9
Lack of 1.9%
waterhouseCoopers. stalled projects due
to fuel, feedstock or environmental Data for fiscal 2019 includes only the first
Private equity firms, which clearance Unfavourable three quarters
raw material supply
were earlier betting on real problems. market conditions Source: CMIE Capex, RBI, NHB Residex
estate developers to take a lead
AHMED RAZA KHAN/MINT
in development, have also
turned cautious, he said. slowed and bank deposits since then, especially in resi- the delay in land acquisition holder should be prepared to projects.” 2014 and fiscal 2019 (up to
The shock of demonetiza- soared post demonetization, dential real estate, but lending and lack of funds (See chart 4). take a hit or make compro- Ultimately, a lot rides on December 2018), according to
tion, followed by two new reg- banks outsourced lending to to commercial real estate is The lack of funds has also mises. where house prices head. data from the National Hous-
ulatory changes, the goods and non-banking financial compa- still showing tepid growth (see forced developers to enter bar- Banks and financial institu- Despite the slump in the sec- ing Bank Residex.
services tax (GST) and the Real nies (NBFCs), which in turn chart 3). ter deals with smaller contrac- tions have to take a haircut in tor, most localities haven’t A significant correction can
Estate (Regulation and Devel- stepped in to fund real estate Unsurprisingly, the lack of tors to take over parts of their the loans given, developers seen much of a correction in pave the ground for a
opment) Act, only served to developers (bit.ly/31mBCMX). funds continues to be one of projects, in a desperate bid to and owners have to forgo house prices (See chart 5). V-shaped recovery in the sec-
bring in more uncertainty and However, the NBFC crisis last the major reasons behind exit those projects profit/ surplus cash flows, and In Delhi and Gurugram, tor. In the absence of that, the
ensured that the slump in the year squeezed that channel of stalled projects even today. (bit.ly/33bzauD). even homebuyers should be there have been mild correc- recovery in real estate is likely
sector continued. finance as well. The two big reasons cited by “It’s a challenging situa- prepared to pay more, if tions but not in Mumbai or any to be as prolonged as the slow-
As bank credit to the sector Bank lending has picked up investors for stalled projects is tion,” said Jain. “Every stake- required, for the completion of of its suburbs between fiscal down.

m TWITTER DASHBOARD How grouped notifications improve productivity

MINT
Who are the most influential Indian political leaders on Twitter? How active were they last week? What resonated with their Sneha Alexander
followers the most? Presenting the Mint dashboard of Twitter activity, which uses data extracted from the micro-blogging
benefits of batching.
website to answer these questions for 20 most followed leaders across four categories in the political firmament
sneha.a@livemint.com To do this, they employed a
MUMBAI sample of 237 Indians through
Tweets and retweets Followers (in million) an online labour market and

S
Most retweeted This Weekly This Weekly martphones are now modified each participant’s
Politician Party topic week change week change indispensable to modern notification system. Partici-
life, with research reveal- pants were divided into four
MEMBERS OF PARLIAMENT - TREASURY
ing that people spend almost groups receiving notifications
NARENDRA MODI Sharing his TV appearance on Man vs Wild 29 11.5% 48.99 0.3%
BJP three to five hours a day on in different forms.
@narendramodi
their phones and One group Batching the delivery of notifications on your smartphone at
ARUN JAITLEY Criticizing opposition to Triple Talaq Bill 15 15.14 0.1% m
BJP 150.0% check their phone received notifica- infrequent intervals could improve productivity, finds a study
@arunjaitley
around 2,617 times a
AMIT SHAH*
BJP PM Modi's tweet on Man vs Wild 27 35.0% 14.46 0.5% day. SNAP FACT tions quo;
in the status
another not experience greater produc- Facebook are based on
@amitshah This heavy usage, received batched tivity and improved attention. increased screen time and user
RAJNATH SINGH Comparing India's missile names with Pakistan's 15 -31.8% 13.46 -0.9% and especially the frequent and notifications every hour; According to the authors, this engagement, which they sug-
BJP
@rajnathsingh unpredictable notifications, another received batched noti- was because of the associated gest, comes at the cost of well-
SMRITI IRANI
BJP Man vs Wild show featuring PM Modi 129 0.0% 9.57 0.3% take a toll on mental well-being fications thrice a day; and anxiety arising from the fear of being and productivity. They
@smritiirani and productivity. One simple finally, the last group did not missing out. recommend regulations to pro-
MEMBERS OF PARLIAMENT - OPPOSITION solution could be to group noti- receive any notifications. While this suggests that mote a balance between profit-
RAHUL GANDHI* fications together and have The researchers found that batching notifications at infre- making and well-being of
INC Accusing BJP over Unnao rape victim's accident 7 75.0% 10.21 0.6% them delivered at intervals the third group who received quent intervals can help main- users.
@RahulGandhi
through the day (a process notifications in three batches a tain a balance of being notified Also read: Batching smart-
SHASHI THAROOR Priyanka Gandhi on Unnao victim 77 28.3% 6.98 0.1%
INC called batching), suggests new day was the most productive, and not being distracted, the phone notifications can improve
@ShashiTharoor
research. enjoyed the best mood and authors argue that there are well-being (bit.ly/2YqNTmO)
KAPIL SIBAL NA# 0 NA# 2.15 0.1% In the study, Nicholas Fitz were the least stressed. Inter- also wider implications of their Snap Fact features new and
INC
@KapilSibal
and others conduct a two-week estingly, those who did not results. The profits of technol- interesting reads from the world
DEREK O’ BRIEN Magsaysay award to Ravish Kumar 62 19.2% 1.21 0.0% experiment to estimate the receive notifications at all did ogy firms such as YouTube and of research
TMC
@derekobrienmp
SHARAD PAWAR NCP leaders joining BJP 25 400.0% 1.23 0.2%
NCP
@PawarSpeaks
CHIEF MINISTERS
NITISH KUMAR* Review meeting of revenue and land reforms dept 9 50.0% 4.96 0.2%
JD(U)
@NitishKumar m NEWS IN NUMBERS CORRECTIONS AND
YOGI ADITYANATH
BJP Passing of Triple Talaq Bill 16 -36.0% 4.70 1.3% CLARIFICATIONS
AFP
@myogiadityanath
DEVENDRA FADNAVIS
88% 7 Mint welcomes comments,
BJP Man vs Wild show featuring PM Modi 153 -65.6% 3.65 0.2% What is it? The increase in deforestation What is it? India’s suggestions or complaints
@Dev_Fadnavis
of the Amazon in June compared with a rank in Thailand about errors.
MAMATA BANERJEE Public outreach initiative of Trinamool 52 40.5% 3.47 0.3% year ago, according to Brazil’s National Open after the
TMC
@MamataOfficial Institute for Space Research, or INPE. 2019 edition, Readers can alert the
newsroom to any errors in the
VIJAY RUPANI PM Modi's tweet on Man vs Wild 276 711.8% 2.42 0.2% Why is it important? The revelation of which concluded
BJP paper by emailing us, with your
@vijayrupanibjp this data by INPE led to a public row on Sunday. full name and address to
PARTY CHIEFS between the institute’s head, Ricardo Why is it feedback@livemint.com.
ARVIND KEJRIWAL Galvão, and Brazilian President Jair important? The
AAP Congratulating Ravish Kumar for Magsaysay award 19 26.7% 15.20 0.2% Bolsonaro, who accused INPE of using rank is up from 8. It is our policy to promptly
@ArvindKejriwal respond to all complaints.
AKHILESH YADAV
misleading data to discredit him. Galvão While all attention was on B. Sai Praneeth, Readers dissatisfied with the
SP Zomato's tweet on food having no religion 9 200.0% 9.74 0.2% was sacked on Saturday. hoping that he would repeat his 2017
@yadavakhilesh response or concerned about
Tell me more: The Brazilian government victory, it was the Indian men’s doubles Mint’s journalistic integrity may
CHANDRABABU NAIDU* Criticizing AP govt over Polavaram Dam completion 25 78.6% 4.37 0.1%
TDP argues that a month-by-month increase in team that won the championship. write directly to the editor by
@ncbn sending an email to
deforestation is misleading, and a yearly Tell me more: Satwiksairaj Rankireddy
NAVEEN PATNAIK Odisha Rasagola's GI tag 14 -12.5% 2.58 0.1% metric should be used for comparisons. and Chirag Shetty (in pic) became the asktheeditor@livemint.com
BJD
@Naveen_Odisha
Galvão, however, insists that sharply rising first Indian pair to win a BWF Super 500 Mint’s journalistic Code of
KT RAMA RAO** Reassuring Telugu students at NIT Srinagar 19 -91.8% 1.82 0.3% deforestation in Amazon was undeniable. badminton tournament.
TRS Conduct that governs our
@KTRTRS newsroom is available at
*Appear in multiple categories, included in most relevant role. **Working party president. #Kapil Sibal did not tweet last week. www.livemint.com
Data for the week to midnight of 4 August 2019 Data compiled by howindialives.com Data and text compiled by Howindialives howindialives.com is a search engine for public data

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First published in February 2007 to serve as an unbiased and clear-minded chronicler of the Indian Dream.

VAMAN VASSUDEV KAMAT (EDITOR); PUBLISHED/PRINTED BY SHARAD SAXENA ON BEHALF OF HT MEDIA LTD, 9th Floor, Tower 3, Indiabulls Finance Centre, Senapati Bapat Marg, Elphinstone Road (West), Mumbai-400013
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 03 PLAIN FACTS TUESDAY, 6 AUGUST 2019
MUMBAI 03

TWITTER@CAPITALFIRSTLTD

Based on Monday’s closing

price of ₹41.1 per share,
the Warburg stake is worth
around ₹1,940 crore.

Warburg Pincus
pledges stake in
IDFC First Bank
to raise funds
Swaraj Singh Dhanjal
swaraj.d@livemint.com
MUMBAI

G
lobal private equity
major Warburg Pincus
has pledged its entire
9.86% shareholding in private
lender IDFC First Bank Ltd to
raise funds, two people aware
of the development said,
requesting anonymity.
Warburg holds 471.73 mil-
lion shares in IDFC First Bank
through an entity called Clover-
dell Investment Ltd. Based on
Monday’s closing price of ₹41.1
per share, the Warburg stake is
worth around ₹1,940 crore.
Warburg pledged the shares
with Citigroup, Barclays and
Standard Chartered to raise
funds, said the first person.
“The funds mobilized by
Warburg through the loans
will be used to return capital to
limited partners (LPs, investor
in a private equity fund) of the
funds managed by Warburg.
PE firms generally do this to
provide liquidity to LPs in a
fund which is nearing its life, as
well as for other reasons,” he
added.
According to the second
person, Warburg has mobi-
lized around $150 million by
pledging the entire IDFC First
stake.
Warburg Pincus, Barclays,
Standard Chartered and Citi
declined comment to Mint’s
queries.
In 2012, Warbug had
acquired a 42.73% stake in
Capital First (before the
merger with IDFC Bank), for-
merly Future Capital Holdings
Ltd, from Pantaloons Fashion
and Retail Ltd.
Subsequently, in October
that year, it had bought an
additional 24.43% stake
through an open offer.
In May 2017, Warburg sold a
25% stake in Capital First
through an open market trans-
action to several global and
domestic investors, including
Singapore’s sovereign wealth
fund GIC Pte. Ltd.
In December 2018, IDFC
Bank and Capital First merged
to form a combined entity
with assets of ₹88,000 crore
under management and a dis-
tribution network of 194 bran-
ches.
As on 30 June, the bank had
total assets of ₹1.12 trillion
under management with retail
loans comprising 40% of the
asset base.
The bank’s gross non-per-
forming assets (NPA) stood at
2.66%, while capital adequacy
ratio was at 14%.
It had 279 branches as on 30
June.
India has been a major
investment destination for
Warburg—one of the earliest
global PE firms to invest in the
country. In recent times, it has
made several large invest-
ments across insurance,
microfinance, logistics, educa-
tion financing and real estate.
In March, Warburg Pincus
had announced the acquisition
of an 80% stake in education
financing company Avanse
Financial Services Ltd from
Wadhawan Global Capital
group.
Warburg’s other recent
investments in India include
leading a $65 million round in
logistics startup Rivigo, a $200
million commitment to set up
a shopping mall platform with
realtor Runwal Group and a
plan to jointly invest ₹3,000
crore with Lemon Tree Hotels
to develop student housing
and co-living spaces.
04 TUESDAY, 6 AUGUST 2019
MUMBAI MARK TO MARKET

S&P BSE Sensex Nifty 50 Nifty 500 Nifty Next 50 Nifty 100 S&P BSE Mid-cap S&P BSE Small Cap
CLOSE PERCENT CHANGE CLOSE PERCENT CHANGE CLOSE PERCENT CHANGE CLOSE PERCENT CHANGE CLOSE PERCENT CHANGE CLOSE PERCENT CHANGE CLOSE PERCENT CHANGE

36,699.84 -1.13 10,862.60 -1.23 8,831.95 -1.25 25,601.75 -0.81 10,970.05 -1.17 13,376.45 -1.26 12,284.63 -1.69
PREVIOUS CLOSE OPEN PREVIOUS CLOSE OPEN PREVIOUS CLOSE OPEN PREVIOUS CLOSE OPEN PREVIOUS CLOSE OPEN PREVIOUS CLOSE OPEN PREVIOUS CLOSE OPEN

37,118.22 36,842.17 10,997.35 10,895.80 8,943.95 8,866.90 25,811.25 25,639.60 11,100.45 11,001.60 13,546.92 13,514.85 12,496.35 12,490.03
HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW HIGH LOW

36,844.05 36,416.79 10,895.80 10,782.60 8,866.90 8,765.20 25,728.10 25,728.10 11,004.40 10,887.45 13,514.85 13,255.68 12,490.03 12,173.14

m SHORT TAKES
The great tumble
With no friend in sight, India stock
markets may face further derating
The Chinese yuan has sunk past 7 against the
US dollar, which complicates policy for
several Asian central banks.
China yuan (in ¥/$)
7.1
7.04
7
Clifford Alvares & Aparna Iyer of direction is a dangerous combina- market. We have lowered the Nifty’s
6.9 clifford.a@livemint.com tion,” says veteran market expert Ajayearnings by about 7-8% because of an
Taking a hit
6.86 The MSCI India Index has been undershooting the emerging markets index
Bagga. “After today, we are expecting overall slowdown in the economy and
in 2019 so far as selling by foreign institutional investors has intensified.

I
6.8
ndian equity markets have no some reforms as the focus comes back corporate earnings,” Naveen Kulk-
6.7
friend left either domestic or for- on the economy.” arni, head of research at Reliance MSCI index
115
Telcos eign. Domestic investors are The more pressing problem has Securities Ltd, said over phone. India EM
103.93
performanc
6.6 e diverging
miffed about the tax rules, while been a lack of earnings, as is evident Analysts at Morgan Stanley India 110
2 Jan 5 Aug in face of foreign investors are worried that from the disappointing first quarter Co. Pvt. Ltd noted that the global
Source: Bloomberg Jio’s growth: the latest move on Article 370 will results. Barring some consumer trade war will lower international 105
SATISH KUMAR/MINT Fitch stoke tensions with neighbouring goods companies, earnings growth growth. “If the US lifts tariffs on all
100
bit.ly/2ZzhWVL countries. The ongo- imports from China to
ing trade war between BETWEEN A ROCK AND A HARD PLACE 25% for four-six 98.95
Yuan’s slump puts Asia’s the US and China is months and China
95

central banks on alert making things worse. ONGOING tensions MORE pressing MARKETS could takes countermeas- 90
On Monday, the over the trade war
between the US and
problem has been a benefit once Centre
lack of earnings, as is brings focus back on
ures, we believe we will 31 Dec 2018 2 Aug 2019
Base value taken as 100 Source: Bloomberg
China’s decision to weaken its currency amid Nifty index declined China weighed on evident from dismal economic slowdown, enter a recession in 3
an escalating trade war will put Asian central 134.75 points, or 1.23%, market sentiment first quarter results according to analysts quarters,” said analysts SATISH KUMAR/MINT

banks on the defensive as they gauge how
much monetary-policy easing their economies
can withstand. The yuan broke through 7 to
the dollar on Monday after the People’s Bank of
China set its daily reference rate weaker than
6.9 for the first time since December. That
pulled down Asian currencies from South
Korea to Thailand and worsened a sell-off in
stocks.
The market turmoil may give Asian policy-
makers reason to pause just as the Federal
Reserve’s rate cut last week gave them space to
pursue looser policy. New Zealand, India and
the Philippines are still likely to proceed with
their rate cuts this week, but future policy
action across the region will become more
uncertain. Toru Nishihama, emerging-market
economist at Dai-ichi Life Research Institute
Inc., said, “The regional central banks have to
be more cautious across Asia as a rate cut
under this environment would add to down-
ward pressure on their currency.” BLOOMBERG
ECB sees subdued revival
in trade as risks appear
in a sea of red that at the firm in a note to That said, the currency’s biggest Indian markets are at the receiving
enveloped most clients. problems arose because of the Chi- end of a barrage of negative news and
emerging markets (EMs). Indian mar- has been poor. Banks, which were The trade war has already hit the nese yuan, which dropped past a key a positive counter to tip the scales is
kets have been underperforming the supposed to lift earnings, haven’t exchange rate. The rupee breached level against the dollar. A weaker Chi- crucial. Global developments will
MSCI EM Index so far in 2019 (see been able to help. the 70-mark against the dollar, and nese currency could hit the competi- weigh on sentiments, but what the
chart). Besides, markets across geograph- there is a real danger that it could slip tiveness of Indian goods in interna- market needs is a revival in earnings
The scrapping of Article 370 not- ies are under stress because of the further. The risk perception of rupee tional trade. Analysts believe that if of companies. Some relief is expected
withstanding, escalating US-China escalating tensions between China assets has undergone a change every these escalations persist, both in the from the Reserve Bank of India in the
trade tensions have been bogging and the US, and the slowing growth time geopolitical risks associated global markets and the domestic geo- form of a rate cut on Wednesday. A
down markets. “There is no earnings rate in emerging market economies. with the country’s neighbours have political space, the rupee could stimulus from the government would
growth. A lack of stimulus and a lack “This is leading to a derating of the resurfaced. weaken beyond 71 to a dollar. not hurt.
PMI: Reversal in India’s services There is neither smoke nor fire in
sector activity may be temporary ITC’s June quarter financial results
Harsha Jethmalani
Back in favour
Pallavi Pengonda taxation could be due to share loss Agri business Ebit increased at a
harsha.j@livemint.com pallavi.p@livemint.com to illicit/smuggled volumes, higher slower pace of 4%. Depreciation
New business inflows into India’s services sector have risen
competitive intensity in select sub relating to new properties impacted
at the fastest pace since October 2016.

B C
usiness activity in igarette-to-soap maker ITC segments and perhaps some change hotels’ profitability, resulting in an
New Business Index New Export Business 54.7
The European Central Bank (ECB) painted a India’s services sector 55 54.1 Ltd’s shares touched a new in consumer preferences.” Ebit decline of 21%. For better or
dire picture of global trade prospects as the reversed to an expan- 53.9 52-week low of ₹257.65 on Cigarette revenues increased by worse, contribution from these seg-
53
US-China dispute over tariffs entered a new sion in July from a contraction the National Stock Exchange on 6% helped by volume growth and ments to profits is relatively smaller
phase over the weekend. While some high-fre- recorded in June. The IHS 51 Monday. Not without reason. Its price/product mix. On the other at the moment and as such doesn’t
quency indicators point to a small recovery in Markit Services Purchasing June quarter results, announced hand, ITC’s fast-mov- move the needle dra-
trade in the near term, the process is going to Managers’ Index (PMI) rose to 49 50.9 post market hours on Friday, are far ing consumer goods Volume growth of matically for ITC.
be “mild” and proceed gradually—in part due a one-year high of 53.8 in July, 47
from inspiring. business (non-ciga- the cigarettes biz, Overall, the com-
to a subdued outlook for investments, ECB said from 49.6 in June. Volume growth of its mainstay rettes) saw a like-for- which accounts pany’s net profit of
in an article released on Monday. A PMI reading above the 45 cigarettes business, which like revenue growth of for 86% of its ₹3,174 crore is margin-
Jan 2016 Jul 2019
The warning comes after another flare-up in 50-mark separates growth accounted for as much as 86% of the 8%, which is hardly ally better than Bloom-
Source: IHS Markit overall June quar- berg’s consensus esti-
a trade conflict between the world’s two largest from contraction. company’s overall June quarter extraordinary. How-
economies. On Monday, Beijing let the yuan This sharp improvement PARAS JAIN/MINT
Ebit (earnings before interest and ever, it is in keeping ter Ebit, is a key mate of ₹3,153.70
tumble to the weakest level in more than a dec- was largely led by new busi- be short-lived. This is because GDP and given that now even tax) is a key disappointing factor. with the broader disappointment crore. Note that a
ade and asked state-owned firms to suspend ness inflows, which grew at India’s domestic consumption corporate profits’ share in “ITC’s Q1FY20 missed slightly trends of consumption whopping 54% growth
imports of US farm products after President the fastest pace since October demand and investment sce- GDP is coming under pres- operationally as cigarette volumes slowdown being wit- in other income to
Donald Trump threatened the country with 2016. Anecdotal evidence sug- nario is unlikely to see a mas- sure,” it said in a report on 2 grew 3% year-on-year (versus our nessed in the economy. ₹620 crore helped ITC’s June quar-
fresh tariffs after talks between the two coun- gested that new business was sive recovery in the near term. August. 4% expectation), and cigarette Ebit Revenue growth from other busi- ter net profit growth substantially.
tries stalled. The slowdown in trade has been secured from the public and Also, on the global front, there Further, private investment grew 8% yoy (1% below estimate),” nesses—hotels, agri, and paper- The company’s shares eventually
felt particularly by countries with a large man- private sectors, as are fresh fears is at best expected to remain said Varun Lohchab, an analyst at boards, paper and packaging— was closed lower by 1.7% on Monday, a
ufacturing base in sectors such as electronics well as domestic The euphoria may with respect to the flat in FY20 and government Jefferies India Pvt. Ltd. in double digits. The paper business day when the Nifty 50 index
and auto-making, said ECB. It’s mirrored by a and international be short-lived as US-China trade capital expenditure is set to Kotak Institutional Equities’ ana- posted an Ebit growth of about 12%. declined 1.2%. The stock trades at
deceleration in investment. BLOOMBERG markets, accord- investment war. contract. Also, India’s decision lysts point out, “A modest volume However, Ebit growth in the other about 23 times estimated FY20
ing to the survey. scenario and According to to steadily increase import tar- growth despite two years of stable two segments lagged relatively. earnings. Agreed, ITC’s valuations
New exports
demand may not Ambit Capital Pvt. iffs against the backdrop of
are not as demanding as that of
Coming off the rails work rose for the Ltd, both con- global trade growth coming Muted show some other consumer goods’ firms.
fifth straight see a recovery in sumption and under pressure is likely to hurt But, the risk of an increase in ciga-
MTR Corp. is sliding away from last month’s the near term ITC’s Q1 FY20 cigarette volume growth at 3% is the lowest in the
month in July i n v e s t m e n t its exports over the next 12-18 rette taxes lingers.
record high in Hong Kong. past four quarters.
and the pace of growth are likely months, said Ambit Capital. Cigarette volume growth (year-on-year in %) “We believe that the slowdown of
35
MTR Corp.
growth was the to come under While the Reserve Bank of 8 7.5 7.5 cigarette volumes and a possible tax
30 fastest since this measure was pressure in FY20, so a turn- India is expected to respond hike may cause downsides to earn-
Hang Seng Index 6
25 introduced to the survey in around appears distant at this by loosening the monetary 6 ings. The recent stock underper-
20
September 2014. point in time. policy further, the measures formance limits downsides, but a
In a rub-off, employment “Private consumption, may not be enough to stoke 4 tax increase in the near term would
3
15
indices and optimism among which accounts for 60% of demand quickly. 1.5 be negative, putting further pres-
2
10 13.22 services provided showed India’s gross domestic product Hence, the jury is out on sure on its volumes/ Ebit,” wrote
5 month-on-month improve- (GDP), is headed for a pro- whether services will bring 0 analysts from Emkay Global Finan-
ment in July. longed slowdown given the India the cheer that it has Q1 FY19 Q2 Q3 Q4 Q1 FY20 cial Services Ltd in a report on 4
0 Source: Jefferies India
That said, this euphoria may declining share of wages in always brought. August.
-5 SATISH KUMAR/MINT

-10 -5.64
-15
2 Aug 2018 5 Aug 2019
Base value taken as zero Source: Bloomberg

Hong Kong’s safest stock

SATISH KUMAR/MINT

Sterling and Wilson Solar initial share sale: quality at a handsome price
falls as protests hit MTR R. Sree Ram of which derive sizeable overseas
Steady margins That said, given the short exe- ingly being awarded through
sreeram@livemint.com revenues from EPC (engineering cution cycles of solar power pro- competitive bidding, suppress-
One of Hong Kong’s safest stock bets is veering procurement and construction) Sterling and Margins (in %) jects, it is crucial that the order ing tariffs, analysts fear profita-

S
off the tracks. MTR Corp. had the best risk-ad- terling and Wilson Solar work, although from different Wilson Solar’s Gross Earnings before interest, tax, book is replenished quickly. Note bility of the industry stakehold-
profitability has depreciation and amortization*
justed return of any Hang Seng Index member Ltd’s initial public offering sectors. 14
that excluding other income, the ers will be compressed or capped.
this year through Friday, shows data compiled (IPO) will test investor Even so, Sterling and Wilson’s remained largely 12.1 12 company’s profitability has According to one domestic
stable despite 12
by Bloomberg. Shares of the government- appetite for large issues. shorter execution cycles limit the 10 remained stable despite the market observer, the pressure
the steady
owned rail operator, a stable dividend payer After receiving an approval to working capital requirement, decline in solar 8 steady decline in tariffs across the ultimately comes on EPC. “We
relatively immune to the US-China trade dis- raise ₹4,500 crore, the promot- thereby offering superior tariffs. 6 7.8 globe. This was helped by high are living through a revolution in
6.9
pute, fell 3.4% on Monday, extending a loss ers of the company have decided returns. Furthermore, sizeable 4 exposure to overseas projects, the costs of renewable power
from an 18 July record high to 13%. The shares to sell shares worth ₹3,125 crore. revenues come from overseas, 2 which are more remunerative technology. Lower costs will
had risen 35% from the start of the year to that At the higher end of the price where execution risks are com- 0 than projects in India. boost wind and solar genera-
FY16 FY17 FY18 FY19
peak, with volatility well below peers. band of ₹780, the price-to-earn- paratively lower. The promoters’ *Excludes other income Source: Company
Even so, Sterling and Wilson’s tion’s share of the power mix
The decline has coincided with an escalation ings ratio works out to about 20 presence in a number of markets, Ebitda margin (excluding other from the current 6% to a much
in anti-government protests and violent times FY19 earnings. As such, industry relationships and PARAS JAIN/MINT
income) of 7.8% is lower than higher level in coming years.
clashes in Hong Kong, including in under- there are no direct listed peers for project management expertise ity,” says Deepak Agrawala, exec- annum in the last three fiscal 11.6% clocked by L&T and 10.5% This will create both opportuni-
ground stations and on trains. Demonstrations Sterling and Wilson in India. helps Sterling and Wilson Solar, utive director (investment bank- years. The robust growth and by KEC for FY19. Ebitda is short ties and disruption in the indus-
have run for nine straight weekends. The share Nonetheless, these valuations are which partly explains the IPO ing) at Elara Capital (India) Pvt. steady profitability underscores for earnings before interest, tax, try,” Alex Whitworth, research
slide also came right after the company similar to Larsen and Toubro Ltd valuations. Ltd. Sterling and Wilson’s competi- depreciation and amortization. director at Wood Mackenzie, said
reported a HK$2 billion ($256 million) provi- (L&T), and significantly higher “It is not easy for a normal EPC Revenue and profit, on an tive advantage in utility scale Further, as projects in the in a recent note on renewables in
sion for a troubled rail project. BLOOMBERG than KEC International Ltd, both company to build such capabil- average, have grown 44-72% per projects. overseas markets are increas- Asia-Pacific.

Mark to Market writers do not have positions in the companies they have discussed here
 CORPORATE TUESDAY, 6 AUGUST 2019
MUMBAI 05

Govt plans
consumer
safeguard
regulations
Forbidding e-tailers from influencing
pricing among proposed regulations
ANIRUDDHA CHOWDHURY/MINT
Saritha Rai
feedback@livemint.com
BENGALURU

I
ndia is proposing a series
of consumer safeguards
that forbid e-commerce
companies such as Ama-
zon.com Inc. and Walmart
Inc.-owned Flipkart Online
Services Pvt. from influencing
pricing, adopting unfair pro-
motion methods or misrepre-
senting the quality of goods
and services.
E-commerce companies
must self-declare compliance
and also provide a way for cus- The key guidelines require
tomers to contact them platforms like Amazon and
directly, said the proposed Flipkart to declare all details
e-commerce guidelines for about their sellers.
consumer protection 2019,
published on the department a comprehensive set of rules
of consumer affairs website. for the world’s fastest growing
The department invited par- e-commerce market. “The
ties to provide feedback by larger e-commerce policy is
September 16. being drafted and is expected
Among the key guidelines to take several months, so the
are those that require plat- government is taking immedi-
forms like Amazon and Flip- ate steps to enhance protec-
kart to declare all details about tion of consumer rights,” said
their sellers including address, Sachin Taparia, chief execu-
website and email address. tive officer of LocalCircles
The platforms are also India, a social community
required to display which helped
terms of contract CONSUMER gather inputs from
with the seller SAFETY consumers through
relating to return, polls and surveys.
refund, exchange, FIRMS are required After the formal
warranty, delivery to display terms of
contract with seller
consultation is
and mode of pay- relating to return, completed by mid
ments. refund, exchange September, the
Earlier this year, government is
India tightened E-COMMERCE firms likely to include the
to provide a way for
rules for e-com- customers to proposals in its
merce platforms contact them Consumer Protec-
after complaints directly tion Act, Taparia
from small shops said.
and domestic sell- The draft guide-
ers. Amazon and Flipkart are lines seek to protect personal-
now banned from striking ly-identifiable information of
exclusive arrangements with customers and set a 14-day
sellers, offering deep dis- limit for payments toward
counts or holding any business refund requests. Counterfeit
interest in online merchants products cannot be listed on
on their websites. Groups rep- e-commerce websites or com-
resenting small traders have panies could be held liable.
continued to allege that large The government proposed
platforms prioritize and sell that every e-commerce entity
products of a favoured few publish the name and contact
vendors with whom they have details of its grievance officer,
commercial linkages. who would have to address
The proposed consumer complaints within one month
safeguards could come in from the date of receipt.
handy as the country works on BLOOMBERG

Indifi raises funding

in round led by CDC
M. Sriram startups, both marketplaces, as
sriram.m@livemint.com well as those that lend from own
MUMBAI books, have been struggling to
raise funds, after a string of

F
intech startup Indifi has defaults by lenders, including
raised ₹145 crore in a Series Dewan Housing Finance Corp.
C equity round led by CDC Ltd and Infrastructure Leasing
Group, the development and Financial Services Ltd.
finance arm of the UK govern- While digital lending startup
ment, said a senior executive. Capital Float had to call off talks
The fundraise comes at a time with South Africa’s Naspers for a
when domestic lenders have potential fundraise, digital lend-
been bogged ing marketplace
down by a severe The fund-raising Rubique had to
liquidity crunch. comes at a time halve its workforce
Existing inves- when domestic due to scarcity of
tors, including lenders have equity capital.
social impact Founded by
been bogged
funds Omidyar angel investor
Network and Ele- down by a severe Mittal, along with
var Equity, and liquidity crunch Siddharth Maha-
venture capital not and Sandeep
firm Accel Part- Saini, in 2015,
ners, participated in the round. Indifi provides loans to small
“Like all fintech startups, we businesses in travel, e-com-
were also hit by the NBFC crisis, merce and retail. Indifi provides
and are the first small and loans of ₹1-50 lakh, with an aver-
medium business fintech len- age ticket size of ₹5 lakh, to
der to raise external funding in enterprises that have an annual
the past year,” said Alok Mittal, turnover of ₹50 lakh to ₹10
co-founder and chief executive, crore. Along with lending from
Indifi, in a phone interview. own books, it also acts as a mar-
“Raising external capital has ketplace, to lend to businesses
been very hard,” Mittal said, by tying up with other lenders.
referring to the liquidity It currently has ₹300 crore of
squeeze in the market. Lending assets under management.
06 TUESDAY, 6 AUGUST 2019
MUMBAI CORPORATE

‘Ready to sacrifice growth in some

segments to pursue sustainability’
ANIRUDDHA CHOWDHURY/MINT

Rajrishi Singhal & Shayan Ghosh acceptable to us. When we look at

our portfolio, we try to see the con-
MUMBAI Need to become centration and so we will not focus
more conservative there but on areas where we are

P
rivate sector lender Axis
Bank, which reported
close to doubling of its
June quarter net profit,
has also chosen to ramp
up its provisions to cover future
risk from stressed loans. This
marks a material change in the
bank’s approach to the risk-reward
matrix. In keeping with this new-
found caution, Axis Bank has
decided to take a conservative
approach and has drawn red lines
around certain kinds of exposures,
or even certain kinds of assets.
Amitabh Chaudhry, its new man-
aging director and chief executive
appointed in January, says the
bank is ready to sacrifice growth in
certain segments to pursue sus-
tainability. Edited excerpts:
You have been at the helm of
Axis Bank since January this
on how we run our
biz... This transition is
key to creating a
different kind of
long-term institution.
AMITABH CHAUDHRY
Managing director and chief
executive officer, Axis Bank
to higher-quality and higher-rated
assets. We also announced pretty
under-penetrated. As part of the
restructuring exercise, we
announced a separate group for
multinational companies, a mid-
corporate group or loans between John Flint’s tenure as HSBC Holdings’ chief executive officer
₹250-700 crore. The mid-corpo- abruptly ended after just 18 months. BLOOMBERG
rate group tends to be riskier than
some of the others.
However, we believe there is a
part of the mid-corporate group
HSBC ousts CEO Flint,
where we can put on some very
good quality assets.
So, it is about making these port- Indian
seeks new chief to face
smartphone
folio choices as to who you will deal
with and what kind of financing
you will do. We have already pulled
market
grew 5% in
Q2: CMR
‘complex environment’
credit underwriting out of our busi- bit.ly/2T6ow3x
ness and it is a separate stream. The Harry Wilson, value, has grappled with a
chief credit officer of the bank Stefania Spezzati & declining stock price, a high-
reports to me and so his responsi- profile sexual harassment case
Ambereen Choudhury
bilities are around ensuring that at its investment bank and a
Bank has stopped giving negative auto dealers. We have looked at the credit quality remains intact. LONDON failure to hit cost targets, lead-
surprises to the market in terms of that to make sure that the inventory You have reported 16% cor- ing to a new program to elimi-

H
year. What are the things significant restructurings effective our risk profile—credit, market and is being turned over. In some cases, porate credit growth in the SBC Holdings Plc nate jobs and questions from
that the bank has achieved in 3 April. Despite that, we have been compliance risk. We need to we are continuing to expand our June quarter. Where is this abruptly ousted its chief auditors about how these goals
this period? able to deliver on credit growth. become more conservative on how franchise with them and, in others, demand coming from? executive officer after would be met.
We have achieved some things I do believe very strongly that as we run our business, including pro- we are also tightening our stan- Most of the loan growth is com- just 18 months, citing an Shares in HSBC fell as much
in the last six months we pivot to higher- visions. In that process of change dards. We are continuously moni- ing from refinance and working “increasingly complex” envi- as 2.1% before recovering to
and some things nec- mint rated credits, given the and transition, if it toring our portfolio capital as new investments have ronment, and announced a trade 1.3% lower at 11:03 a.m in
essarily will take more
time. Firstly, what is
INTERVIEW long-standing rela-
tionship Axis Bank has
means that we have to ‘We’re monitoring for the last couple of
sacrifice growth or not
definitely slowed down. We are new round of job cuts. London. HSBC, which makes
our portfolio for quarters…there is an also doing some financing from The exit of John Flint, a most of its money oiling the
happening in the economy is not with most key corporates in India, do certain transactions, the past couple of increased line of resolutions under the National 51-year-old who started at wheels of trade between East
helping because some of the signs our ability to reach them and grow it is fine. This transition quarters…there is stress there, but I Company Law Tribunal (NCLT) HSBC as a trainee, highlights and West, has also faced
are quite negative. At the same our asset pool is quite large. While is key to creating a dif- don’t think it is process. I do not see these changing tension with chairman Mark repeated questions about why
a line of stress, but alarming and is
time, the response from the mar- the economy is slowing down and ferent kind of long- in a hurry and there are no signs Tucker, known to be a hard- a business heavily skewed
ket, the people in the bank, my col- there are signs where some of the term institution. it is under control under control at this that would indicate that invest- charging executive who was toward some of the world’s fast-
leagues and even people looking at sectors are under stress, the econ- Have you imposed at this stage.’ stage. ments are going to come roaring the first outsider to fill the post est-growing economies can’t
Axis Bank as a career opportunity omy is still growing and so our certain conditions Are there any par- back. The number of NCLT trans- in the bank’s 154-year history. make better returns.
has been quite positive. We knew it opportunities will continue to be on financing of ticular sectors actions have also slowed down and They clashed over style—with One of Flint’s key promises
was a long haul. there. auto dealers? that you will avoid? hopefully, the new amendment will Flint focused on issues such as was that revenue gains would
Given the lacklustre credit How would you balance risk Our auto portfolio comprises We will not take certain kinds of lead to faster movement and there- conduct and Tucker taking a outpace cost increases, a trend
environment, how do you and growth in assets? giving money to consumers to buy exposures and there are red lines fore, more resolutions are more data-driven approach the bank refers to as positive
plan to grow your loan book We will not grow at any cost and vehicles. Axis Bank also has a pretty around what kind of project expected. This could lead to more and priorities, as Flint failed to jaws. He failed to achieve that in
at the current pace? we have to get the sustainability large supply chain portfolio and a finance we will do, what kind of financing opportunities. address the slow-growth US his first year at the helm,
We are trying to pivot ourselves part of the franchise right. Axis decent part of that is coming from structures and securities will be rajrishi.s@livemint.com business, say people familiar though the bank said Monday
with the matter. that first-half adjusted jaws was
Tucker was also increasingly a positive 4.5%. HSBC plans to
at odds with Flint over the axe more than 4,000 posts,
CEO’s focus on chief financial
expanding in Flint’s exit officer Ewen Stev-
m SHORT TAKES Flipkart set to start a free streaming service China, according highlights tension enson said in a call
to the people.
HSBC was in an
with chairman
Mark Tucker—
with analysts,
warning that sen-
uncomfortable
State Bank of India seeks bids for they clashed over ior executives will
FROM PAGE 1 accounting firm PwC. spot over Wash- be a focus of the
Videocon’s overseas oil, gas assets Subscription-based video- ington’s legal and the firm’s China cutbacks.
MINT According to Krishnamur- on-demand platforms are pro- political tussle expansion plans HSBC expects
Mumbai/Beijing: State Bank of thy, the focus is on attracting jected to grow at an average with Chinese severance costs to
India (SBI) has invited bids for customers, particularly those yearly rate of 23.3% to reach technology com- range from $650
overseas oil and gas assets of Vid- in the age group of 20-30 and ₹10,712 crore between 2018 pany Huawei Technologies million to $700 million in 2019,
eocon Industries Ltd, a newspaper those who consume a lot of and 2023. Co., a major client of the bank. with annualized savings of a
advertisement showed on Mon- user-generated and profes- The 34 companies present US prosecutors drew on similar amount, according to
day, as the government seeks to sionally created content. in the cluttered market com- HSBC’s relationship with Hua- an investor presentation.
recover billions of dollars in loans “We want to ensure that a prise US platforms such as wei to build its case against an “Our sense is the climate is
from the beleaguered firm. user keeps coming to the plat- Netflix and Amazon Prime executive at the telecom com- getting increasingly complex,
Consumer electronics firm Vid- form every day. Over time, we Video, as well as Indian servi- pany, the Financial Times challenging, and that we both
eocon Industries has outstanding will figure out how this ties ces such as ZEE5, Voot, Eros reported last month. agree a change is needed to
loans worth around ₹60,000 into the e-commerce ecosys- Now and ALTBalaji. Tucker denied any personal- really make the most of the
crore from its financial and opera- tem, but today that’s not the In the meantime, Flipkart is ity clash with Flint or disagree- opportunities ahead of us,”
tional creditors. India’s economy objective. Its just to ensure Walmart unit Flipkart is eyeing the next 200 million consumers launching its service in Hindi ment over job cuts, adding on a Tucker said in an interview.
needs external capital flow to grow at 9% and touch $5 trillion in that the consumer is hooked to who are coming online. PRADEEP GAUR/MINT with a Hindi-language “audio media call that there had been For his part, Tucker, the
the next five years, C. Venkat Nageswar, deputy managing Flipkart,” Krishnamurthy said visual guided navigation” to “absolutely” no pressure from former CEO of Prudential Plc,
director of International Banking Group, SBI said. REUTERS & PTI in an interview. tomers. Hence, companies try may add to a group’s revenues, enable easy on-boarding for China over the CEO’s role. rejected talk that he assume the
Dutta, however, believes to add as many products or ser- but operationally it has to be new consumers. Noel Quinn, head of global post at HSBC. “Under no cir-
that there may be another rea- vices to the customer relation- managed with a very different It is also redesigning its app, commercial banking, will cumstances” would he take the
Former Myntra CEO Narayanan son for Flipkart’s video ship as possible,” he said. business mindset,” said Dutta. which will allow users to assume the CEO post on an job, he said in a call. The CEO
streaming service. “It may be According to Dutta, the India’s video streaming access their preferred lan- interim basis, HSBC said along hiring process would take six-
joins Medlife as co-founder less expensive or more profita- metrics and operating levers of industry is set to grow at an guage, curated entertainment with its first-half earnings. to-12 months, and consider
MINT
ble to service existing custom- merchandise and streaming annual average pace of 21.8% content and content feeds During Flint’s short tenure, both internal and external can-
ers by expanding the share of content businesses are very to reach ₹11,977 crore by 2023, through the navigation bar at the 2,35,000-employee bank, didates, he said. BLOOMBERG
wallet than to acquire new cus- different. “Done well, content according to a report by global the bottom of the home page. Europe’s biggest by market feedback@livemint.com

Indian markets tumble 1% on weakening yuan, trade war

Bengaluru: More than six months after his exit from Wal- FROM PAGE 1 The Chinese currency fell
mart-owned Myntra, Ananth Narayanan is back as a chief
executive officer (CEO), this time with e-pharmacy plat- while IT stocks held on to the
past 7 per dollar for the first
time since 2008 amid specula-
Yuan slips beyond 7 per dollar
form Medlife, the company said on Monday. Narayanan will gains due to a weakening tion that Beijing was letting its
be involved in the company’s day-to-day operations, rupee,” said Nair. currency weaken to counter for the first time since 2008
besides handling fundraising and mergers and acquisitions. The NSE’s India VIX index, US tariffs.
This comes at a time when Medlife is in talks with multi- which tracks investors’ per- In a currency war, politi- Tian Chen mid-May, after Trump
ple financial and strategic investors to raise over $150 mil- ceptions of volatility for at least cians nudge their central feedback@livemint.com abruptly escalated the
lion. Narayanan had recently invested an undisclosed a month ahead, surged 8.92% banks to cut borrowing costs HONG KONG trade war with new tariffs
amount in the company, and has also been recognized as a on Monday to touch 16.54, the so as to push down the on Chinese goods. Beijing

co-founder. “This (Medlife) felt to me like Myntra at very
early stages—with a $100 billion market (opportunity) and
two percent penetration,” said Narayanan. VARSHA BANSAL
Deloitte quits as auditor of
cash-strapped DHFL
New Delhi: Deloitte has quit as the auditor of cash-strapped
ANIRUDDHA CHOWDHURY/MINT Dewan Housing Finance Corp.
Ltd (DHFL), people familiar
with the matter said. Commu-
nication regarding Deloitte
quitting as DHFL’s auditor has
been sent to the ministry of cor-
porate affairs, one of the people
said.
Another person confirmed
that Deloitte has quit, but with-
out citing any reasons. How-
ever, DHFL officials denied to
have received any such com-
munication from Deloitte. PTI
highest in two-and-a-half
months. The index at elevated
levels indicates investors
expect a major correction at
least over the next month.
The Narendra Modi govern-
ment’s scrapping of Article
370 may have far-reaching
repercussions on the restive
state of Jammu and Kashmir,
as the abrogation suspends the
clause that allowed all laws to
be first be ratified by the state
assembly, which currently
stands dissolved.
Meanwhile, overseas mar-
kets were also under pressure
on Monday. Stocks in Japan,
China, Hong Kong and Korea
fell 1-2.8% after US President
Donald Trump on Thursday
slapped a 10% tariff on China’s
remaining $300 billion of
exports to the US.
exchange rate. Trump wants
more rate reductions from the
US Federal Reserve and a
weaker dollar.
China’s decision to weaken
its currency amid the escalat-
ing trade war will put Asian
central banks on the defensive
as they gauge how much mon-
etary policy easing their econ-
omies can withstand. That
pulled down Asian currencies
from South Korea to Thailand
and worsened a sell-off in
stocks.
“First, the Fed became the
second major central bank
(after ECB last week) to disap-
point markets, as it delivered a
less than dovish cut of 25bps
(basis points). To add to the
woes, Trump announced
another round of tariffs on the
last remaining tranche of Chi-
The aggressive sell-off in Indian stocks started after the Union
budget was presented on 5 July
nese imports. China has
already warned of retaliation
and now all eyes will be on how
China reciprocates, and every-
thing else will likely take a
backseat for now, in our view,”
said Nomura Research in a
note.
The Reserve Bank of India is
widely expected to cut interest
rates in its monetary policy
review on Wednesday.
Analysts at Ambit Capital
Pvt. Ltd said that with growth
in wages and corporate profit
at multi-year lows, consump-
tion is likely to stay weak in
MINT
FY20/21. “Even as we are yet to
articulate our FY21 GDP fore-
cast, we highlight that an eco-
nomic turnaround appears
distant at this point. In fact, the
rising credit stress emanating
from the retail segment is a
deeply worrying trend that has
emerged over the last fort-
night. In view of all these head-
winds, we urge clients to adopt
a strongly defensive strategy
with respect to India,” it said in
a note on 2 August.
(Bloomberg contributed to
the story)
nasrin.s@livemint.com
T
he yuan plunged
beyond 7 per dollar
for the first time
since 2008 amid specula-
tion Beijing was allowing
currency depreciation to
counter President Donald
Trump’s latest tariff threat.
The exchange rate tum-
bled 1.3% to 7.0344 a dollar
at 4:45 pm local time after
the People’s Bank of China
set its daily reference rate
at a weaker level than 6.9
for the first time since
December. The offshore
yuan sank as much as 1.9%
to a record low, while the
Shanghai Composite Index
closed 1.6% lower.
The yuan declined 0.9%
in mainland trading last
week, its biggest loss since
pledged to respond if the
US goes ahead with a plan
to impose a 10% tariff on a
further $300 billion in Chi-
nese imports.
“It appears that the tar-
iffs hike suggests the return
of tit-for-tat moves and a
suspension of trade talks,
and the PBOC sees no need
to keep the yuan stable in
the near term,” said Ken
Cheung, a senior currency
strategist at Mizuho Bank.
The tumble exacerbated
losses in Asia’s financial
markets. The MSCI Asia
Pacific Index dropped 2%,
while the MSCI Hong Kong
Index slid for a ninth day as
protesters moved to shut
down the city with a gen-
eral strike. BLOOMBERG
 Facebook boosts customer acquisition for
emerging ecommerce businesses
Peachmode, Bewakoof.com and MYGLAMM leverage Facebook Dynamic Ads to scale customer acquisition
F
ashion commerce is a fast grow- users which resulted in a 92% incremen-
ing space that is expected to be tal reach over previous performance
at USD 257 billion by 2022*. The campaigns and a 51% uplift in sales.
key growth driver for the fash- “As a direct-to-consumer brand,
ion businesses is consumer
penetration and Facebook has enabled
emerging e-commerce players to scale
developing competency in high-scale
digital customer acquisition is critical.
We were looking for more efficient ways
by helping them acquire new customers to reach potential customers, and the
in a short period of time. efficiency of running dynamic ads to
MyGlamm, the direct-to-consumer broad audiences allowed us to scale our
beauty brand, wanted to reach more acquisition efforts at a faster rate. The
users to drive business. They used result: hyper-charged growth at effec-
Facebook dynamic ads to prospect new tive costs,” said Malaika Mahtaney, Chief
Right on track: Strong results on customer acquisition across businesses
Results
30%
Lower Cost Per
Acquisition for new
customers
20%
Higher Margin
Products Sold
3x
Reach New Customers
Today’s business world is a little like instant
noodles. Something is always cooking
every two minutes.
Deals That’s why we always keep you two steps
ahead with the latest news on mergers,
acquisitions, and everything in between.
Marketing Officer, MyGlamm. out their brand, price, and offer type. regional markets, targeting a specific audience targeting ensured that the
Similarly, Bewakoof.com, the fashion These ads ran across both Facebook and audience and increasing the business ads were shown only to a net new
and lifestyle brand leveraged dynamic Instagram and return on ad spends grew volume by three times. Our audience audience. This allowed the brand to
ads to reach a large audience eight times. size has witnessed a growth of 40% grow and reach three times more
based on products that con-
sumers would find most rel-
evant. Dynamic ads helped
mint Prabhkiran Singh, co-
founder of Bewakoof.com
said, “Since our inception in
in the past six months. Additionally,
the Dynamic ads prospecting offered by
Facebook has helped us get 40% lower
new customers at a 30% lower cost.
“Facebook has helped us reach new
customers using dynamic product
them optimise performance 2012, we have constantly cost per acquisition.” ads, while controlling the acquisition
for their campaigns based FACEBOOK worked towards enhancing Peachmode, the traditional Indian costs. Its precise user tar geting
on parameters such as price, our digital performance. fashion website, started a new dynamic across demographic, locations,
stock availability, offer types etc. In addi- Location insights garnered through product ads campaign on Facebook interests has led us to achieve a
tion, their creative communication was Facebook data have been instrumental which helped reach new customers at great ROI,” said Director Anupam
personalised with overlays, which called in helping us penetrate into different a very low acquisition cost. The broad Tulsyan, Peachmode
Results Results
40% 51%
Conversion uplift on
Increase in reach, back of Catalog based
delivering ads to over Dynamic Ads
4 Mn users every day
92%
8x Incremental reach over
performance ads that
Return on ad spends
had been running for
the last 5 months (Jan-
May 2019)
40% *Based on Zero Friction Future
Lower cost per study by KPMG & Nielsen in
acquisition partnership with Facebook
Created by Mint Brand Cell
Because your love for your
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THE MOST AWESOME BUSINESS DAILY THERE IS.
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08 TUESDAY, 6 AUGUST 2019
MUMBAI MARKETS AND FINANCE

Rising debt, finance costs TIME FOR RESERVE BANK TO STEP

ON THE PEDAL TO DRIVE GROWTH
take a toll on RIL’s shares
EXPERT
VIEW
Stock also comes under heavy selling pressure on lower refining margins SAMEER NARANG

Nasrin Sultana & Kalpana Pathak m MINT GRAPHITI

Respond to this column at
feedback@livemint.com
MUMBAI Downward trend
Shares of Reliance Industries have fallen 17.9% since May. On Monday, the index

S A
hares of Reliance Industries Ltd heavyweight closed at 1,143, down 3.48% on BSE. fter three consecutive rate cuts of 25 basis points
(RIL) have fallen 17.9% since May, (bps) each, markets are pricing in another 25 bps The downward risks to growth are high, calling for a 50
(in ) RIL's debt-to-equity ratio for the
with the index heavyweight com- 1,450 rate cut on 7 August, when the monetary policy basis points cut in interest rates that will go a long way in
1,391.8 past five fiscal years RBI imposes
ing under heavy selling pressure. committee of the Reserve Bank of India meets. However, changing the negative sentiment. PRADEEP GAUR/MINT
1,400 FY15 0.74 ₹50 lakh
The stock fell 3.48% on Monday fine on SBI
is there a case for a 50 bps rate cut? Let us look at the global
FY16 0.78
to close at ₹1,143.00 on the BSE. FY17 0.75
and domestic economic backdrop and evaluate. fiscal deficit of 3% of GDP in FY21. This is in line with the
1,350 bit.ly/2YSA8Nf
In May, the RIL stock fell 4.46%, fol- FY18 0.75 First, the global backdrop. Since RBI’s last rate cut, a global narrative of passing over the mantle of reviving
lowed by a 5.85% decline in June, and a FY19 0.74 number of central banks, such as Australia, Indonesia, growth to central banks. RBI has remained ahead of the
1,300
6.87% drop in July. This, despite the stock 0.72 0.73 0.74 0.75 0.76 0.77 0.78 Korea, Russia, Turkey and, more importantly, the US, have curve in the current economic cycle. Not only did it pro-
featuring on the radar of buyers from the reduced rates. Going forward, the US Federal Reserve will vide the much-needed liquidity to the economy, but it has
1,250 RIL's net worth over the past five fiscals
start of this year. Since January, RIL has stop its balance sheet contraction and the European Cen- already reduced policy rates by 75 bps, and changed its pol-
(in  cr) 324,644
risen 2% thanks to a 10.68% gain in March— tral Bank will be expanding its balance sheet again. Central icy stance to neutral and then to accommodative.
1,200 289,798
its biggest monthly increase this year. 258,511 banks are reacting to adverse economic data from Asia and However, the much-needed transmission is lacking as
218,482 231,556
In a report released on Monday, Credit 1,150
Europe triggered by trade tensions. US President Donald consumers and NBFCs/HFCs moved to banks for addi-
Suisse downgraded the stock to underper- 1,143 Trump has upped the ante in the tariff war with China by tional credit requirement, and banks were forced to raise
form from neutral and slashed its target 1,100
declaring 10% tariff on goods not being subjected to tariffs deposit rates to get incremental deposits to lend. However,
price. The brokerage said given RIL has 30 Apr 2019 5 Aug 2019 right now ($300 billion). Manufacturing activity is slowing, with persistent surplus liquidity by RBI and decline in
FY15 FY16 FY17 FY18 FY19
been free cash flow (FCF) negative for six Source: Bloomberg as supply chains are moving to ensure lowest possible deposit rates by a few large banks, transmission will be visi-
Source: RIL annual report 2018-19
years and given margin pressure in refining taxes. ble. While transmission will
and petrochemical (high supply), FCF is PARAS JAIN/MINT Since November 2018, India’s exports have also seen a Manufacturing help in ensuring pass-through
likely to be negative for FY20-21. its annual report. The company made a named. dip as global trade decelerated. Together, manufacturing is slowing as of earlier rates, the real rates
RIL’s total liabilities have already capital expenditure of more than ₹1.32 tril- After RIL posted its June quarter results, and services exports, constitute almost 20% of gross still remain on the higher side,
climbed to $65 billion in FY19 from $19 bil- lion in the last fiscal year. It ended the year analysts at Jefferies said that Q1FY20 was domestic product (GDP) and are likely to face significant supply chains thus impeding a sustainable
lion in FY15, comprising 40% of its enter- with a gross debt of more than ₹2.87 tril- noisy, as expected, while core performance headwinds in the wake of lower global growth. are moving to recovery. Lower EMIs will help
prise value. Total interest cost has risen to lion. In the June quarter, RIL posted gross was soft, with lower refining margins, On the domestic front, consumption has been the key ensure lowest the consumers in either saving
$4 billion in FY19 from $1.2 billion in FY15. refining margins of $8.1 per barrel while its petchem volumes, and telecom average driver of the economy. Since FY12, the share of consump- possible taxes or consuming more.
Credit Suisse analysts cut RIL’s FY21/22 petchem production declined 10% quarter- revenue per user (Arpu). In June quarter, tion in GDP has increased by more than 300 bps. Lately, Even if the RBI cuts rates by
earnings per share (EPS) target by 5% to fac- on-quarter. Arpu for its telecom business came in at share of investment has also been inching up. However, another 50 bps, the policy rate
tor in lower refining and petrochemical “We have not seen this kind of weakness ₹122. During the quarter, RIL’s revenue the upcycle has turned from Q3FY19 onwards. High fre- will be at 5.25%, thus ensuring a 1.5% to 2% range of real
margins. “Our enterprise rose 22.1% from ₹1.41 trillion in quency data shows a decline in two- and four-wheeler policy rates over expected inflation over the next two
value of $141 billion values NEGATIVE OUTLOOK the year-ago period to ₹1.72 sales, while services activity is also showing signs of decel- years. RBI’s own estimates project CPI inflation at 3.3% and
refining at six times FY21 EV/ trillion in the first quarter of eration as fewer goods are being transported and consum- 3.7% for FY20 and FY21. Notably, for the last two years,
EBITDA, petrochemical at CREDIT Suisse has RIL’S total liabilities FIRM’S total interest fiscal 2019-20. ers cut back on spending. inflation has been lower than RBI’s mandate of 4%. Struc-
seven times FY21, retail at 22 slashed the stock’s
target price and has
have already climbed cost has risen to
to $65 billion in FY19 $4 billion in FY19
It had said that with FCF Real estate sector has been impacted as housing finance tural factors suggest a benign inflation environment.
times FY21, Jio on eight times downgraded it to from $19 billion in from $1.2 billion uncertain, EPS is at risk, and companies (HFCs) did not have enough liquidity to lend to Global oil prices are unlikely to move up because of posi-
FY25,” Credit Suisse analysts underperform FY15 in FY15 valuations rich, it has under- the sector (10% of GDP). Capacity utilization levels, which tive supply shock by US shale oil and move to renewables.
Anubhav Aggarwal and Sayan- perform rating with lower lia- were increasing, may see a drop again, thus pushing The global food grain stock-to-use ratio is at the highest
tan Maji said in the report. bilities post the InvITs offset investment revival a little ahead. What explains the change level in almost nine years. In India, too, we have large food
RIL’s burgeoning debt is also an over- in both refining and petrochemical mar- by lower EV in telecom and retail. in domestic economic cycle? Tightening liquidity and now stocks. In a slowing domestic and global economy and fis-
hang. In the last fiscal year, the company’s gins probably in the last three-four years. In July, Reliance closed a ₹25,215 crore credit standards seem to have impacted demand. Dis- cal consolidation, core inflation is also unlikely to increase
finance cost more than doubled to ₹16,495 Also, the first-quarter earnings were deal with Canada’s Brookfield Asset Man- bursements by non-banking financial companies as pricing power is limited.
crore from ₹8,052 crore in the previous muted. The petrochemicals margins are agement to sell its 49% stake in telecom (NBFCs)/HFCs have come off. Banks have tried to fill up Given the above backdrop, time has come for the RBI to
year. under pressure even though they remain tower assets, and for Brookfield to also take the gap, but the deeper reach of NBFCs/HFCs has meant step on the pedal to drive growth as upward risks to infla-
“The increase was primarily on account flattish because of their efficient cost. The over the Tower Infrastructure Trust. not all borrowers have been able to get access to credit. tion are limited, but downward risks to growth are much
of the commencement of digital services fact is that from here on, growth is very dif- Currently, RIL has 22 buy ratings, 9 hold So how do we kick-start growth? One way is to expand higher. This calls for a 50 bps cut in interest rates, which
business, petrochemical projects at Jamna- ficult in the near term,” said an analyst from ratings and 5 sell ratings on Bloomberg. the fiscal deficit. However, the government has indicated will go a long way in changing the negative sentiment.
gar and higher loan balances,” RIL said in a domestic brokerage, who declined to be nasrin.s@livemint.com that there is limited fiscal room as of now as it is looking at Sameer Narang is chief economist at Bank of Baroda.

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 TUESDAY, 6 AUGUST 2019
MUMBAI 09

REPORTAGE | TALKING POINTS | IDEAS | INSIGHT | THE BOTTOMLINE

INTEREST RATES ARE

UNLIKELY TO GO DOWN
Despite yet another imminent repo rate cut by the RBI, don’t expect lower lending rates by banks. Here’s why

(Left to right) Union finance minister Nirmala

Sitharaman, RBI governor Shaktikanta Das
and former economic affairs secretary
Subhash Chandra Garg. MOHD ZAKIR/HT

Vivek Kaul LENDING OUT ALL DEPOSITS 2018-2019, this had jumped to 11.6%. growth of banks). Falling household sav-
mint
NO TRANSMISSION
feedback@livemint.com
T here are multiple reasons as to why
bank lending rates haven’t fallen. For
Clearly, the competition for savings has
increased majorly over the last five years.
SHORT
STORY The three reasons as to why bank lending
ings need to finance the deficits of the cen-
tral government, state governments as

O
n 31 July, the Federal one, the credit deposit ratio of banks has This further explains the reluctance of rates haven’t fallen despite repo rate cuts.
well as borrowing by the public sector.
Reserve of the US, the gone up in the last two years. The credit banks to cut interest rates on their depos- This overall borrowing is referred to as the
American central bank, deposit ratio of banks is obtained by divid- its and hence, their lending rates. The WHAT Chart 1: Credit-deposit ratio (in %)
80
public sector borrowing requirement.
decided to cut the federal ing the total loans give out by banks interest paid on many small savings As economists Sajjid Z. Chinoy and
funds rate by 25 basis divided by the total deposits they have. schemes is around 8% or more. Invest- The RBI has cut the repo rate 78 Toshi Jain of JPMorgan wrote in a recent
points (bps) and lower the target range to Around two years ago, the credit ment in some of these schemes even thrice since the beginning of 2019, research note: “If one were to add the (fis-
each time by 25bps. Currently, it 76
2 to 2.25%. The federal funds rate is the deposit ratio was around 72%. In 2019, the allows for a tax deduction. Interest rates 76.3 cal deficit of the central government), and
interest rate at which one bank lends ratio has constantly been over 77%, falling on fixed deposits, as of now, typically stands at 5.75%. But this cut 74 the combined deficit of the states (which
funds maintained at the Federal Reserve below this level only in July and once range around 7%. hasn’t really translated into a cut have expanded sharply in recent years),
72
to another bank, on an overnight basis. before that. As of 19 July, the ratio was at The government can of course change in lending rates by banks. 72.1 off-balance-sheet borrowing (e.g. the FCI)
70
One basis point is one hundredth of a per- 76.3%. What does this mean? For every the parameters on which interest rates on 26 May 2017 19 Jul 2019 and borrowing by all central public sector
centage point. ₹100 raised as a deposit, the banks have small savings schemes are decided and Source: Author calculations on data from RBI enterprises, India’s total public sector
A lower federal funds rate is expected to lent out ₹76.3 as loans. Once we take into align the interest rates on these schemes WHY Chart 2: Net deposits raised by small borrowing requirement (PSBR) remains
lead to slightly lower short- to medium- account a cash reserve ratio of 4%, which with interest rates on bank deposits. Nev- savings schemes (in  cr) 1,16,453
above a hefty 8.5% of gross domestic
term interest rates in the US. banks need to maintain with the central ertheless, it is in the interest of the govern- In 2019, the credit ratio of banks 1,02,628 product (GDP) in both 2017-18 and
At lower interest rates people are bank and a minimum statutory liquidity ment to offer a higher rate of interest on has been over 77%. And with a 2018-19. Furthermore, this is likely a
67,435
expected to continue borrowing and ratio of 18.75% that banks need to compul- the small savings schemes and get more CRR of 4% and an SLR of 18.75%, 52,465 lower bound, because it does not include
the banks have been lending out 32,226
spending, and the economic recovery of sorily invest in government securities, money coming into these schemes. state public sector enterprises on account
the US, more than a decade into the finan- banks have been lending out almost all almost all deposits raised, leaving of data constraints.”
2014-15 2015-16 2016-17 2017-18 2018-19
cial crisis that broke out in 2008, is the deposits. THE FINAL DESTINATION no room for interest rate cut. Source: www.indiabudget.gov.in and www.cga.gov.in So, while the total borrowing of the
expected to continue. In this scenario, it has not been possible
Along similar lines, and with consumer for banks to cut the interest rates on their
price inflation at a relatively low 3.2%, the deposits and in the process on their loans.
T he money collected by the small sav-
ings schemes goes into the National
Small Savings Fund (NSSF). Up until a few AND
Chart 3: Household savings and PSBR*
% of GDP
24
governments and its companies has gone
up slightly over the years, the household
savings needed to finance them have
Monetary Policy Committee (MPC) of the The weighted average term deposit rate of years ago, the NSSF money was invested 20 Household savings fallen dramatically. In this environment,
Reserve Bank of India (RBI) which meets banks as of December 2018 was at 6.87%. in government securities. Now a lot of it is The banks also compete for 16 Hypothetical space expecting interest rates to fall majorly is
during 5-7 August , is widely expected to By May 2019, it had fallen by two basis lent out to public sector enterprises. Take deposits with the small savings 12 for private investment equal to not knowing the basics of supply
cut the repo rate, the interest rate at which points to 6.85%. the case of the Food Corporation of India schemes, many of which have an 8
Total public sector borrowing and demand.
interest rate of 8% or more. 4
the Indian central bank lends to banks. Interestingly, the credit deposit ratio (FCI). As of 1 April 2018, the FCI owed the 0 Finally, when it comes to tax revenues,
The demand for a repo rate cut has been has fallen in July primarily because credit NSSF ₹1.21 trillion and as of 1 April 2019, Investment in these schemes 13 14 15 16 17 18 19 the government hasn’t started this year on
made across the spectrum, from politi- growth has slowed down. the FCI owed NSSF ₹94,000 crore. The even allows for a tax deduction. *Public sector borrowing requirement Source: CSO
a good note. The gross tax revenues of the
cians in Delhi to fund managers in Mum- What might also possibly help banks is NSSF lending money to the FCI is a recent government have gone up by just 1.4%
bai. The central bank has cut the repo rate the falling stock market. If investors move phenomenon. It started only in 2016-2017. between April to June 2019, in compari-
thrice since the beginning of 2019, each their money from stocks to fixed deposits, How does this help the government? happening for a while now. In 2018-2019, In 2019-20, the FCI expects to borrow son to the same period last year. If this
time by 25bps. Currently, the repo rate the deposit growth is likely to improve, The FCI primarily buys rice and wheat the total food subsidy that the FCI had to ₹1.91 trillion from the NSSF. These bor- trend continues and it is likely to continue
stands at 5.75%. But this cut hasn’t really and along with a falling credit growth, directly from farmers. Having bought the claim stood at ₹2.61 trillion. Given that, the rowings can happen only because of the given the economic slowdown, the central
translated into a cut in lending rates by banks might just be pushed to cut interest rice and wheat it sells the grains at a very allocation towards food subsidy was only inflows into the NSSF, which depend on government will have to borrow more, if
banks. The prevailing belief is that high rates. But a falling stock market and a fur- low price through the public distribution ₹1.02 trillion, the FCI is likely to end up the investments made into small savings it wants to meet the expenditure target
interest rates are holding the Indian econ- ther slowdown in lending is clearly not system to meet the needs of food security. getting less than ₹1 trillion of that. This schemes. These investments benefit from that it has set for itself this year.
omy back. something the policymakers would want. The government needs to compensate the basically means that the government the fact that they offer a higher rate of In a slowing economy, it is more than
In January 2019, the Along with this, the FCI for this to ensure that the organization would continue to owe the FCI more than interest than fixed likely that the govern-
weighted average lend- banks also compete for remains a going concern. It does so ₹1.60 trillion. deposits. Hence, the ment will want to meet
ing rate of banks on their While the total borrowing of deposits with the small through the allocation for food security In order to continue to be in operation, higher rate of interest on If investors move their money its expenditure target.
outstanding loans had the governments and its firms savings schemes from made in the budget. the organization needs to borrow this small savings schemes from stocks to fixed deposits, This basically means
stood at 10.38%. In May the post office. See Chart Let’s take the case of 2018-19. As per the money from somewhere. Of this, ₹94,000 benefits the government that the government will
2019, the latest data has gone up slightly over the 2 which plots the collec- revised estimate, an allocation of ₹1.71 tril- crore has been borrowed from the NSSF. and helps them show a the deposit growth is likely to have to borrow more
available, it was at years, the household savings tions under the different lion was made towards food subsidy, but The rest of the borrowing will happen lower fiscal deficit. improve and, along with a and that in turn, will put
10.41%. Hence, despite small savings schemes with tax growth not happening as from the normal banking system. All this Given this, it is unlikely further pressure on
the RBI cutting the repo needed to finance them have run by the post office, expected, an allocation of ₹1.02 trillion borrowing should technically be on the the interest rates on falling credit growth, banks interest rates.
rate, the interest rate on net of withdrawals. was made. A lower allocation towards food books of the government given that it these schemes are likely In short, lower inter-
outstanding loans of fallen dramatically Deposits raised through subsidies basically meant that the FCI owes this money to the FCI. But it is on the to fall majorly, and in might cut interest rates est rates are not just
banks has gone up, small savings schemes wasn’t adequately compensated. In the books of the FCI. turn, the banks can’t about the central bank
instead of coming down. have gone up big time. process, the government expenditure was Not just the FCI, the NSSF has lent reduce their interest rates either. reducing the repo rate, there are many
If we look at fresh loans, the weighted In 2014-15, they were at ₹32,226 crore. kept under control. Once the expenditure money to other public sector enterprises other factors involved here. And right
average lending rate for banks has fallen By 2018-2019, they had jumped by 361% to was in control, the fiscal deficit could also as well. Clearly, a good inflow of money FALLING HOUSEHOLD SAVINGS now, none of these factors seem to suggest
from 9.97% to 9.86%, during the period. A ₹1.16 trillion.
fall of 11bps is clearly not enough to get In 2014-2015, the net deposits raised by
more people interested in borrowing and small savings schemes formed just 4.3% of
be kept in control. Fiscal deficit is the dif-
ference between what a government
earns and what it spends.
into small savings schemes (which goes
into the NSSF) is necessary to keep this
going and help the government show a
A nother factor that needs to be kept in that interest rates are likely to go down in
mind is that household savings of a major way.
Indians have been falling over the years Vivek Kaul is an economist and the
spending. the term deposits raised by banks. By The funny thing is that this has been lower fiscal deficit than is the reality. (this is also responsible for a slower deposit author of the Easy Money trilogy.
10 TUESDAY, 6 AUGUST 2019
MUMBAI GLOBAL
ARTICLE 370
Jammu and
ARTICLE OF FAITH  OCT: Singh
 JAN: Pakistan
 JUL: Sheikh
Scrapping Articles 370 and 35A was the BJP’s poll gains control of
Kashmir
plank. On Monday, Rajya Sabha cleared the bill 1947 merges the state
with India
1948 1949 the western Abdullah, three other
colleagues join the
seeking abrogation of Article 370 moved by SEP: Pakistan- MAR: Singh JAN: A UN-brokered districts, including
Ladakh through an the present-day Indian Constituent
home minister Amit Shah. The people of Jammu supported militia appoints an interim effort leaves India with Assembly and
Instrument Pakistan-
and Kashmir will now be governed by the same invades Jammu and government Kashmir valley, most of negotiate special
of Accession occupied
laws that apply to other Indians. Here’s a brief Kashmir, ruled by with Sheikh Abdullah Jammu province, and status for J&K
history of Article 370. Maharaja Hari Singh as the prime minister Ladakh Kashmir

REPEAL OF ARTICLE 370 POINTS EXPERT

VIEW
TO A POLITICAL REALIGNMENT S H R E YA M I S H R A

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BJP may now push for two other controversial issues—a uniform civil code and building a Ram temple in Ayodhya HOW LEGISLATION
Anuja & Gyan Varma REDEFINES INDIA’S
NEW DELHI
Congress’ chief
RELATION WITH J&K
T
he Bharatiya Janata
Party’s (BJP’s) success in whip in Rajya
T
revoking Article 370, he fifth of August 2019 will go down as a historic day, not
which granted special sta- Sabha resigns only in India, but also the world. The Constitution (Applica-
tus to Jammu and Kash- tion to Jammu and Kashmir) Order, 2019, has removed the
mir, signals a political realignment, over party stand special status accorded to the state of Jammu and Kashmir under
as this is the latest in a string of key Article 370 in Part XXI (Temporary, Transitional and Special Pro-
bills for which the ruling BJP-led visions) of the Constitution of India. By extension, Article 35A has
National Democratic Alliance (NDA) Anuja also been repealed, as it was introduced as part of The Constitu-
has got parliamentary sanction. anuja@livemint.com tion (Application to Jammu and Kashmir) Order, 1954, which was
The BJP leadership has carried NEW DELHI implemented under the presidential power under Article 370.
out its core agenda by revoking Arti- The move has garnered criticism from some quarters that have

T
cle 370 just two months after return- he Congress on Monday interpreted this Order to be an imposition on the residents of the
ing to power with a huge majority in suffered a setback after erstwhile State of Jammu and Kashmir (J&K). On the other hand,
the Lok Sabha, with the remaining its chief whip in the the Order mentions that the president has made it with the con-
two controversial issues—of an uni- Rajya Sabha, Bhubaneswar currence of the “government” of the state of Jammu and Kash-
form civil code and the construction Kalita, resigned from the party mir. It is notable that the government and the legislative assem-
of a Ram temple at the disputed site and the Upper House citing the bly of the state have not been in existence since 20 December
in Ayodhya—in the works. opposition of the Congress to 2018, when President’s Rule was imposed in the state and, subse-
The Union government on Mon- the scrapping of Article 370, quently, extended on 3 July 2019. Inevitably, significant reper-
day pushed through the revocation which gave special status to cussions are to ensue, following the implementation of the Order.
of the special status of Jammu and Jammu and Kashmir. First, S.1 (2) of The Constitution (Application to Jammu and
Kashmir with support from alliance Janardan Dwivedi, a close Kashmir) Order, 2019, mentions that it shall come into force “at
partners and a divided Opposition. aide of former Congress presi- once”, which can totally transform existing laws.
The Nationalist Congress Party dent Sonia Gandhi and a Second, S. 2 of the Order includes an amendment to Article 367
(NCP) and the Trinamool Congress former general secretary in of the Constitution, and mentions that all references to “this”
(TMC) staged a walkout. However, charge of the party, also told Constitution (meaning The Constitu-
the Bahujan Samaj Party (BSP), the ANI: “My political guru Ram There will be tion of India) in the context of Jammu
Aam Aadmi Party (AAP), the YSR Manohar Lohia ji was always no separate and Kashmir shall now be construed as
Congress Party (YSRCP), the Telan- against this Article. A mistake “the” Constitution. Herein lies the
gana Rashtra Samithi (TRS), and the of history has been corrected Constitution landmark implication, as it means that
Biju Janata Dal (BJD) supported the today, albeit late.” for Jammu there will be no separate Constitution
government on the issue. Kalita resigned when the and Kashmir for the state of Jammu and Kashmir
“I do not know whether the BJP is Rajya Sabha was discussing the from now on from now on.
able to set the narrative because of Jammu and Kashmir Reorga- Third, the office and the designation
its own success or the dismal failure The NDA’s gradual consolidation in Rajya Sabha has happened at the cost of the Congress being increasingly isolated, nisation bill and the opposition of the Sadr-i-Riyasat of J&K shall no
of the opposition, which has not particularly in terms of gaining issue-based support from other Opposition parties. was divided. “I have resigned longer be in place, as the governor of Jammu and Kashmir will be
been able to get its act together,” said from the Rajya Sabha member- the only authority.
Sandeep Shastri, national coordina- The day spelt trouble for the Con- country,” Shastri said. and provide adequate financial ship today. #Assam,” Kalita Originally, Article 370 (3) gave power to the President to
tor of Lokniti Network, the research gress in the Upper House, especially The isolation of the Congress in resources to all the regions of the wrote on Twitter. declare the article inoperative or operative with exceptions and
programme of the New Delhi-based after its chief whip, Bhubaneswar Parliament and the growing internal state. We reiterate our position since “The ideology of Congress modifications, subject to obtaining prior recommendation of the
Centre for the Study of Developing Kalita, resigned over the party’s troubles follow a leadership crisis the time of the Jana Sangh to the today looks like it is commit- Constituent Assembly of the state of J&K before issuing the noti-
Societies (CSDS), and pro vice-chan- opposition to Article 370. after Rahul Gandhi resigned as party abrogation of Article 370,” its mani- ting suicide and I do not want fication. The Order replaces “Constituent Assembly of the State”
cellor of Jain University, Bengaluru. “Non-NDA parties supported per- president two months ago. The Con- festo for the Lok Sabha elections to be a part of it. I do not want to with “Legislative Assembly of the State”, which, in the absence
All key alliance par- gress is yet to find some- read. accept this whip and I am of a Legislative Assembly, can be interpreted as authorizing the
ties, including the All This is not democracy, this is one for the post. The The development also comes just resigning from the Congress,” President to eventually unilaterally convene the Order.
India Anna Dravida authoritarianism, the handiwork party will hold a meeting months ahead of key state elections he said in the letter referring to The repeal of Article 35A has removed the concept of “perma-
Munnetra Kazhagam of its top decision mak- in Jharkhand, Maharashtra, and the whip to ensure party law- nent residents of the state of Jammu and Kashmir”, which means
(AIADMK), supported of insecure rulers who daren’t ing body on 10 August. Haryana, slated to be held later this makers attend Rajya Sabha that the restrictions on citizens residing outside the state of J&K,
the legislation. The only even have a proper debate Senior party leaders year. The scrapping of Article 370 during the discussion on Arti- with regard to employment, acquisition of immovable property,
exception was the Janata RAMACHANDRA GUHA said the developments could be the BJP’s key campaign cry cle 370. settlement and scholarships, and other aid, shall no longer be
Dal (United) led by Bihar Historian in Parliament and the for the state elections. Kalita’s resignation is likely valid. The repeal, read with Entry 32 of the Union List could also
chief minister Nitish BJP’s growing political Elections in J&K were scheduled to severely impact the Con- have important consequences with respect to “property of the
Kumar, whose members walked out haps because, outside Jammu and dominance could trigger more inter- to be held later this year, but the gress not just because he is a Union”. This would provide a great boost to the economy, and
during voting in the Rajya Sabha on Kashmir, there is a larger sentiment nal strife and desertion from the Election Commission will take a call key face from the North East trade, commerce and tourism could really flourish.
Monday. that this issue needed to be resolved. party. on the issue once the parliamentary and has headed the party’s A petition challenging the constitutional validity of the Order
The NDA’s gradual consolidation Whether it will happen through this “In the last five years, we have and administrative proceedings are Assam unit for more than a may not pass muster with the court easily, as the Order does not
in the Rajya Sabha has happened at route, or not, the BJP is seen doing made all efforts to ensure peace in over. Related bills, such as the one decade, but also because he seem to have any technical flaws, as explained above. Perhaps, it
the cost of the Congress party being something. There is also this feeling Jammu and Kashmir through deci- on the reorganization of Jammu and was a key organization man would soon be appropriate to call the state of Jammu and Kash-
increasingly isolated, particularly in among such parties that they cannot sive action and a firm policy. We are Kashmir, is likely be sent to the Lok with quite a few responsibili- mir the erstwhile state of Jammu and Kashmir.
terms of gaining issue-based support oppose it, given the popular senti- committed to overcome all obstacles Sabha on Tuesday for approval. ties. Shreya Mishra is assistant professor of law at Maharashtra
from other opposition parties. ment for the issue in the rest of the that come in the way of development anuja@livemint.com National Law University, Nagpur.

Withdrawal of special status to J&K affects bureaucratic cadres, books, flags

Prashant K Nanda in any of the nine union territories and national body in the field of thematic maps Jammu and Kashmir had lost out on sev-
prashant.n@livemint.com three states under the AUGMUT cadre,” and atlas making under the ministry of sci- eral fronts over the years and that the pro-
NEW DELHI said a J&K cadre bureaucrat currently ence and technology, will be required to posed changes will benefit them. “Girls
posted at the union government, request- show the delimitation of the region into who are born in Jammu and Kashmir are

B
eyond the changes to land and terri-
torial legalities, the abolition of Arti-
cle 370 and bifurcation of Jammu
and Kashmir will have an immediate
impact on three things: bureaucratic cad-
res, books, and flags.
Since Jammu and Kashmir will not be a
state, the J&K cadre for the Indian Admin-
istrative Service (IAS) and the Indian
Police Service (IPS) will have to be
scrapped. Instead, this civil services cadre
will be part of the AGMUT cadre—the
acronym for Arunachal Pradesh, Goa,
Mizoram and Union territories (UTs).
“IAS, IPS and the Indian Forest Service
cadres in the civil service will change
immediately. All of us who represented
J&K cadre now will no more represent
that region, and instead will be open to
postings across the country. Practically,
existing officers like me can now be posted
ing anonymity.
Since the state is set to stand divided
into two UTs, history and geography
books for schools and colleges, as well as
key official documents need to be revised
quickly. Instead of 29 states and seven
union territories, these books will now
have to show 28 states and nine UTs.
“As a government body, whatever the
parliament decides, we have to incorpo-
rate in books,” said Hrushikesh Senapaty,
director of the National Council of Educa-
tional Research and Technology
(NCERT). “The academic year 2019-20
has already begun, so it will be tough to
make changes in books now. The revised
books will, however, be ready before next
year,” Senapati said.
Not just NCERT, over two dozen state
school boards and universities will also
have to make the changes in their books.
two Union territories. denied property rights, and that is gross
Since Jammu and Kashmir will no injustice. Had this injustice been
longer enjoy autonomy, and addressed even before we
its special status will be Since the state is took it up today, this kind of
scrapped, its official flag will set to be divided upheaval (in the Upper
also be taken down. The state into two UTs, House) would not had hap-
so far has had the freedom to books and official pened,” said Sitharaman.
fly two flags—its own state Union minister Jitendra
documents need
flag and the Indian national Singh said: “This day, 5
flag. The red-coloured flag to be revised August, has already gone
with three stripes reflects the quickly down in the history of India
three regions of the state— as a day of redemption, resur-
A file photo of PM Narendra Modi with trainee IAS officers at the Lal Bahadur Shastri Kashmir valley, Jammu and gence and rejuvenation. Arti-
National Academy of Administration in Mussoorie. Since Jammu and Kashmir will not be Ladakh. The plough in the flag represents cle 370 was a miscarriage of history and
a state, the J&K cadre for the IAS and IPS will have to be scrapped. PTI farmers. Having been made the official gravest blunder in the post independence
flag of the state by the state constituent era. It is time to repent that and rework it.
In the Rajya Sabha, Congress leader mir Reorganisation Bill that seeks to scrap assembly in 1952, the flag has been repre- We had to wait 70 years for it. We have no
Ghulam Nabi Azad said the Union govern- Article 370, Article 35A and bifurcate the senting the special identity of the state. right to deprive the youth of Jammu and
ment decision will wipe out “one state” state into two UTs. Moving beyond what was discussed in Kashmir to be beneficiaries of initiatives
from the map of India. He was speaking Besides, the National Atlas and The- the Rajya Sabha, Union finance minister taken by the Modi government.”
during a debate on the Jammu and Kash- matic Mapping Organization (Natmo), a Nirmala Sitharaman said women in Shaswati Das contributed to this story.

V OICES OF D EMOCR ACY

Separate status led to separatism. No
dynamic nation can allow this to continue. A
historical wrong has been undone today.
ARUN JAITLEY
SENIOR BJP LEADER
The abrogation of Article 370 hasn’t just
made accession null and void but also
reduces India to an occupation force in J&K.
MEHBOOBA MUFTI
FORMER J&K CHIEF MINISTER
Shameful that you turned J&K into a non- Finally martyrdom of thousands for
entity by making a Lt Governor there, so complete integration of J&K into Indian
you can appoint a clerk sitting here in Delhi. Union is being honoured.
GHULAM NABI AZAD RAM MADHAV
CONGRESS LEADER AND LEADER OF OPPOSITION IN RAJYA SABHA BJP NATIONAL GENERAL SECRETARY
 MARKETS AND FINANCE TUESDAY, 6 AUGUST 2019
MUMBAI 11
ARTICLE 370
 OCT: Constituent  AUG: Sheikh
Abdullah is
assembly inserts
Article 306A in the
1950 1953 dismissed as PM 1954 1964 1965 2019
Constitution. On 17 JAN: MAR: Jana Sangh of the state;  MAY: Article 35A is brought NOV: J&K assembly AUG: AUG: Articles 370 &
November 1952, it Constitution of leader Syama Prasad Bakshi Ghulam in via a presidential order changes the posts of Indo-Pakistan 35A are scrapped;
comes to be known India is enforced Mookerjee, against Mohammed  J&K constituent assembly 'Sadr-i-Riyasat' and war begins J&K is bifurcated into
as Article 370 in Jammu and autonomy, is arrested replaces him ratifies accession of the state PM to governor and two separate Union
Kashmir while entering J&K to India CM, respectively territories

SARVESH KUMAR SHARMA/MINT

NEW DELHI COVERS DIPLOMATIC Spotlight shifts to 10

other states that have
BASES, BRIEFS MEMBERS IN UNSC special category status
Utpal Bhaskar & Shaswati Das
Foreign secretary Vijay Gokhale and other senior foreign ministry officials have briefed all 15 members of UNSC NEW DELHI

W
ith the abolition of
Elizabeth Roche Article 370 of the
elizabeth.r@livemint.com Constitution, the 10
NEW DELHI states other than Jammu and
Kashmir which enjoy special

I
ndia on Monday launched a diplomatic category status have come into
offensive briefing key diplomats from the focus, say political analysts.
countries currently in the UN Security Coun- These are Arunachal Pradesh,
cil (UNSC) to counter any adverse reactions Assam, Himachal Pradesh,
to its decision to revoke the special status Manipur, Meghalaya, Mizo-
granted to Jammu and Kashmir under Article ram, Nagaland, Sikkim, Tri-
370 of the Indian Constitution. pura and Uttarakhand. Security forces stand guard in
The announcement of the revocation of the “This (abrogation) might Srinagar. Abolishing Article
special status to Kashmir was made by home serve as a template for other 370 has been on the BJP’s
minister Amit Shah in both Houses of Parlia- special category states,” said agenda for long. REUTERS
ment. Article 370, enacted in 1954, lays down that Arvind Kumar, assistant pro-
except for matters related to defence, foreign fessor at the Centre for the no answer was found. It was
affairs, communications and issues specified in Study of Social Exclusion and the only state having its own
the Instrument of Accession of Jammu and Kash- Inclusive Policy, Jamia Millia Constitution and a separate
mir, Parliament needs the state government’s Islamia. flag. This is not the case in
ratification for all other laws. So far, residents of “This might set a precedent other states which may have
the state lived under a separate set of laws, but Kashmir has been a prior- some special provision in the
including those related to citizenship, ownership ity for the Bharatiya Janata Constitution,” said Sandeep
of property and fundamental rights. Party. Never before a state has Mahapatra, the only right-
New Delhi’s move refashions the contours of been downgraded. You don’t wing former president of the
the discourse on Kashmir—nationally as well as do this in a democracy. You Jawaharlal Nehru University
internationally. As a Union territory of India and don’t go to war against your Students’ Union (JNUSU).
not a “dispute” with Pakistan, it changes the own people. One can’t have a The Union home ministry
dynamics of India-Pakistan engagement over military solution to a political did not offer an official com-
Kashmir. situation,” said Neera Chand- ment.
The briefing to diplomats comes as Pakistan hoke, a former professor of Abolishing Article 370 has
condemned home minister Amit Shah’s move to political science at Delhi Uni- been on the BJP’s agenda for
bifurcate the region—Jammu and Kashmir versity. long. “We are committed to
which will have a legislature and Ladakh region Special category status was overcome all obstacles that
without a legislature. According to a person granted in the past by the come in the way of develop-
familiar with the development, foreign secretary National Development Coun- ment and provide adequate
Vijay Gokhale and other senior officials of the cil on the recommendations of financial resources to all the
Indian foreign ministry briefed all 15 members of India will have to look at Pakistan raising the Kashmir issue at all possible fora, including at the forthcoming session of the UN General Assembly in the Planning Commission to regions of the state. We reiter-
the UN Security Council. September, said analysts. REUTERS states that needed special con- ate our position since the time
“In the light of interest expressed by members sideration. The of the Jana Sangh
of the diplomatic community in New Delhi, sen- “As a party to this international dispute, Paki- Officials and analysts in New Delhi were confi- and Pakistan would sort out this problem bilater- features include: However, some to the abrogation
ior MEA officials are briefing the envoys of sev- stan will exercise all possible options to counter dent that the move would not in any way negate ally. So, the UN is a closed matter,” Mansingh (i) hilly and diffi- experts believe of Article 370,”
eral countries, including P5 (US, Russia, Britain, the illegal steps.” India’s claims on regions of the state that are said. cult terrain; (ii) that removing BJP said in its
France and China) on proposals related to Article “Pakistan reaffirms its abiding commitment to under Pakistani control. Recalling that Pakistan had made moves to low population special status to 2019 election
370 of the Indian Constitution and administra- the Kashmir cause and its political, diplomatic “This is an internal matter of India. India has extend its sovereignty over Gilgit-Baltistan some density and/or a manifesto.
Jammu and
tive reorganization of Jammu and Kashmir that and moral support to the people of Occupied complete sovereignty over the state of Jammu months ago, Mansingh said that this was an ille- sizeable tribal “Congress did
were introduced in Parliament,” the person cited Jammu and Kashmir for the realization of their and Kashmir and therefore, this is perfectly legal gal move given that all of Jammu and Kashmir population; (iii) Kashmir is a the same. There
above said. “It was highlighted that the proposals inalienable right to self-determination,” it added. within the framework of our Constitution,” said had acceded to India under in 1947. “So Pakistan strategic location; one-off case is a precedence in
which are currently under consideration of the Analysts have said India will have to look at former foreign secretary Lalit Mansingh. Given crying foul over the revocation of Article 370 is a (iv) economic place. Decentrali-
Parliament of India are internal to India. These Pakistan raising the Kashmir issue at all possible that India says the entire state of Jammu and bit like pot calling kettle black,” Mansingh said. backwardness; zation would now
are aimed at providing good governance, pro- fora, including at the forthcoming session of the Kashmir is part of the country, revoking Article Former army chief Ved Prakash Malik wel- and (v) non-viable nature of come under attack specifically
moting social justice and ensuring eco- 370 in no way interferes with India’s comed the move by the Indian government say- state finances. in zones of conflict,” said a
nomic development in Jammu and Kash- It’s time for us all to embrace stance that Pakistan is in illegal occupa- ing that the revocation of Article 370 was in the “This is a good decision and New Delhi-based academic
mir,” the person added. Kashmir as an indistinguishable tion of a part of Kashmir, he said. long-term interest of the country. “Within I support it. This will promote requesting anonymity, whose
In the coming days, India could brief Referring to India’s claim over Paki- Jammu and Kashmir I have felt that there is a dis- unity and integrity in the focus area of research has been
envoys of some other countries too, a sec- and inseparable part of our stan-occupied Kashmir, Gilgit and Balti- tance between the people of Jammu, Kashmir country; but then what will Kashmir’s conflict zone.
ond person said. national community. stan, Mansingh said this would not be and Ladakh.” happen to states like Sikkim?,” Nagaland, which has had an
Reacting to the Indian move, Pakistan ANAND MAHINDRA diluted by the central government’s When asked about apprehensions that the said Hishey Lachungpa, mem- uneasy relationship with the
on Monday said it “strongly condemns MAHINDRA GROUP CHAIRMAN move. “We claim the whole of Kashmir as government move could fan separatist senti- ber of Parliament from the Sik- mainland since the days of the
and rejects the announcements made part of our territory and that includes ments and boost the position of Pakistan-backed kim Democratic Front (SDF) late pro-independence leader
today by the Indian government.” The part of the UN General Assembly in September. In 2016, Pakistan-occupied Kashmir and Gilgit-Balti- terrorists in Kashmir, Malik was of the view that party. Angami Zapu Phizo, is wary of
state in Indian control “is an internationally Pakistan had despatched envoys to prominent stan,” he said. Moreover, India’s claims over “in the short term, we may see some law and However, others believe National Democratic Alliance
recognized disputed territory,” it said. world capitals in its bid to highlight alleged Kashmir date back to 1947 and Article 370 came order problem.” that Kashmir is a one-off case. (NDA) promises because of the
“No unilateral step by the government of India human rights violations by India in Kashmir. into existence in 1954, he said. “Pakistan as a country is not a position to wage “This is specific to Jammu Naga Peace Accord, 2015, held
can change this disputed status, as enshrined in Prime Minister Narendra Modi is to travel to the “Pakistan will make a noise and ask the UN and a war against India,” he said adding that in the and Kashmir to deal with the up by slow progress of talks
the UNSC resolutions. Nor will this ever be US for the UN General Assembly session and is others to intervene. But the Simla Accord of 1972 short run, Pakistan could step up infiltration of peculiar situation arisen over and the controversial Citizen-
acceptable to the people of Jammu and Kashmir expected to address the gathering on 28 Septem- takes precedence over all previous positions on terrorists into Kashmir. “That is the kind of chal- the last 70 years. Despite sev- ship (Amendment) Bill, 2016.
and Pakistan,” the statement said. ber. the matter. Under the Simla pact, we said India lenge we can face,” Malik said. eral attempts to find a solution, utpal.b@livemint.com

DECISION CHANGES THE DYNAMICS OF THE INDIA-PAKISTAN DIALOGUE ON KASHMIR

EXPERT
VIEW
K A N WA L S I BA L
Respond to this column at
feedback@livemint.com
A
bold and historic decision has been taken by the govern-
ment to scrap Article 370/Article 35A, separating Ladakh
from Jammu and Kashmir, to make both Union territo-
ries. No one really expected this decision so rapidly after the
Bharatiya Janata Party’s (BJP’s) electoral victory, and especially
such a far-reaching one. The government has obviously calcu-
lated all the consequences of this epochal decision, both internal
and external. Even if there are difficulties down the road, essen-
tially internal, these will be overcome in due course and a histori-
cal mistake in keeping Kashmir separate and entrenching separa-
tism in the polity at the nation’s cost will have been corrected.
Pakistan must be stunned by the Narendra Modi government’s
decision. It changes completely the dynamics of the India-Paki-
stan dialogue on Kashmir. For too long India has adopted a defen-
sive approach on Kashmir, accepting talks on the “outstanding
issue” of Jammu and Kashmir, tolerating terrorism in order to
keep the bilateral dialogue alive. Now that Kashmir’s internal sta-
tus in India has been radically changed and it has become a Union
territory, and Ladakh has been separated from it, the basis of a
bilateral dialogue with Pakistan on the issue has disappeared. For
India, there is now no “outstanding” issue of Kashmir except
India’s claim on Pakistan-occupied Kashmir (PoK), which
includes Gilgit-Baltistan. The need for a back-channel to find a
solution to the Kashmir issue has disappeared. The so-called four
point formula, which has supporters in Indian circles, has lost all
meaning. All talk of a resumed dialogue with Pakistan with a
structured agenda, which has Kashmir on it, has become point-
less. The Modi government’s decision will also have effect on the
Indus Waters Treaty and Pakistan’s strategy of creating obstacles
for Indian power projects in Jammu and Kashmir permitted by
the treaty.
All in all, the prospects of any early “normalization” of ties with
Pakistan have receded. The ball will lie in Pakistan’s court as it has
been principally responsible over the years for the state of our
bilateral relations. It is unlikely that after having been outflanked
by the Modi government on Kashmir it will change its policies
towards India. Its political frustration and domestic pressures will
compel it to seek an internationalizing of India’s decision.
Imran Khan has, according to the
The need for a Pakistan government, already “invited
back-channel to attention of world leaders and interna-
tional bodies towards irresponsible,
find a solution unilateral and irrational behaviour of
to the Kashmir the Indian leadership”. Pakistan has
issue has
warned that it will exercise all possible
disappeared options against India’s “illegal” steps.
Pakistan has propagandist options,
but no substantial ones. It can try to
foment resistance within the valley to India’s decision and step
up terrorism in J&K. This will be risky as support to jihadi activi-
ties in J&K will allow India to increase pressure on Pakistan in the
Financial Action Task Force (FATF), besides the danger of retalia-
tion from India, which Pakistan can ill afford in view of its dis-
tressed economic situation. Pakistan will, of course, raise the
matter with the United Nations (UN) Secretary General, who
might be persuaded to issue some statement advocating reduc-
tion of tensions and peaceful settlement of differences, etc., but
a change in India’s domestic law on J&K’s status within the Indian
Union is not an international matter as it does not endanger inter-
national peace and security. More importantly, Article 370 does
not figure in any UN resolution on Kashmir. It was inserted in the
Indian Constitution in 1954 unilaterally by India, many years
after the UN resolutions on J&K and, so, it can be unilaterally
removed.
The UN Security Council will not take cognizance of any Paki-
stani complaint. All major powers have adopted the position that
the Kashmir issue should be settled bilaterally between India and
Pakistan. The Simla Agreement supports that position. No major
country would want to risk its ties with a rising India for Paki-
stan’s sake. They are habituated to India-Pakistan differences on
Kashmir and would avoid getting involved. Pakistan will argue
that the tensions India is creating in Kashmir will distract Paki-
stan from its support to the US on Afghanistan. The US and the
UK in particular may raise the subject in private, more to under-
stand the likely scenario in the future, than injecting themselves
into the situation.
Kanwal Sibal is a former foreign secretary.

V OICES OF D EMOCR ACY

We support the govt on its decisions on Today’s decision violates all the principles This is the time to stand with the people of BJP wants to polarize Jammu and Kashmir
J&K. We hope this will bring peace and invoked by Vajpayee: insaniyat, jamhuriat, J&K and mobilize them to resist this into a simple binary of terrorists and
development in the state. kashmiriyat. onslaught on the Constitution. anti- terrorists.
ARVIND KEJRIWAL YOGENDRA YADAV SITARAM YECHURY THOMAS ISSAC
DELHI CM AND AAP NATIONAL CONVENER SWARAJ INDIA PRESIDENT CPM GENERAL SECRETARY KERALA FM AND SENIOR CPM LEADER
 EXCLUSIVE FROM

12 TUESDAY, 6 AUGUST 2019

MUMBAI

Sovereign bonds may hold us hostage to the wild

swings of global sentiment about India: Subbarao
ABHIJIT BHATLEKAR/ MINT
Latha Venkatesh In fact last half year, the second half We already have a full capital account
CNBC-TV18 of FY19, 80% of government bor- convertibility, we have a fuller capital
If the govt treats rowing was... account convertibility, which is mangled

S
overeign dollar bonds can dis- (RBI reserves) as a So you have got to reckon with that English, we can say even more fuller capi-
play India’s confidence to the when you estimate the adequacy of the tal account convertibility and build in this
world but can also be addictive, resource, there is a reserves. dollar into that.
former Reserve Bank of India risk that they will jack Assuming the committee recog- But one thing I want to reiterate that no
governor Duvvuri Subbarao up expenditure. They nises ₹2 trillion or ₹3 trillion or matter what you say, what milestones you
said. In an interview, Subbarao also said some number as excess, how do you keep, very important that you reckon with
RBI’s excess capital, if any, should be should instead treat think it should be passed on to the the fact that the market will be unable to
transferred to the government and treated it as a financing item. government, should be in tranches, discipline you and that the government
as a financing item to reduce fiscal deficit, is there any thought on that? has to have self-imposed responsibility
not as a resource that will keep govern- D. SUBBARAO Assuming that they are determined, and prudence; otherwise, we will go down
Former RBI governor
ment expenditure high. Edited excerpts that there is an excess reserve, certainly it the way other countries have but if it is just
from an interview: should be—as you suggest—in tranches. one-time measure, if it is a small measure,
The big issue is the dollar bond. The Giving it one time is not good for the gov- it is a government just testing the waters to
government of India wants to bor- ernment, not good for RBI, not good for be used in the future whenever the econ-
row some proportion outside as a the larger economy but even when you do omy is ready, I think it is an okay thing to
sovereign bond; what is your sense it in tranches, more important question is do.
—Good idea? Bad idea? what the government does with it. Let me come to the other issue. We
It is very difficult to give a binary answer Does the government treat that as a are meeting in the 50th year of
to that good or bad idea. There are advan- resource and thereby show a lot of fiscal bank nationalization. We had
tages, benefits, there are costs. Among the deficit or does the government treat that about a week back a lot of discus-
benefits, I think by far the biggest benefit as a financing item for financing the fiscal sions on it. Former governors were
would be that it has signalled India’s confi- deficit? I think that is very important. there, former finance ministers
dence about opening up its external sec- The government should treat that as a Yashwant Sinha and P. Chidam-
tor. financing item, financing the fiscal deficit. baram were also there on the chan-
We have an unsavoury reputation It can do it either by reducing the borrow- nel regretting that we have carried
about too much caution, about capital sec- ing in the current year or buying back the on bank nationalisation too long,
tor liberalisation; so it will have significant bonds from RBI. Otherwise, it will amount what are your thoughts? Is it time
positive externalities and bring in the to as many people have said monetizing to relook that 70% are government
long-term not just more foreign portfolio the deficit. banks?
investment (FPI), more debt flow, more One more thing about this because I First of all, I want to say that bank
dollar flow but even more foreign direct was in public finance, I was in budgeting. nationalization served the purpose. With
investments (FDI). But there are costs as An important thing is if the government the benefit of —with hindsight 50 years to
well. pline Argentina. cal deficit is not what is seen on ized? Did you ponder over it? treats this as a resource, there is a risk that this macro situation, you might think that
There is of course the swapping and Several emerging markets had gone paper. Comptroller and Auditor Of course I pondered over it, during my they will jack up expenditure and this is we have gone too far but back in the 70s,
hedging cost, but from a political into problems because markets did not General (CAG) himself has called time certainly because it was part of my not a permanent resource; after two-three back in 80s it did serve a purpose.
economy perspective, Raghuram discipline them in good time. out and said that in prior years job mandate but also after this contro- years when the excess is exhausted, we However, it is fair to say that perhaps it
Rajan points out that it may become If they should have, even the local when we claimed it was 3.4 or 3.7, it versy blew up in the open about the will be back to square one. However, the has gone on for so long but the 70% num-
addictive. Is that a big worry? markets, the FPIs are in domestic actually was 5.7. So, do you think Reserve Bank has excess reserves or what- expenditure stays where it was. So it is ber you have mentioned will automati-
Yes, certainly. One big concern is that it markets, they should have but that that we should also ever. very important that the government does cally go down as much as you don’t license
will make India hostage to the wild swings is a hope that foreigners will be big- worry about the cam- INTERVIEW I am unable to comment not treat this as a resource but as a financ- any further private sector banks.
of global sentiment about the country. ger task masters. You don’t think ouflaging of fiscal defi- in this interview whether ing item. In fact, some of the public sector banks
Foreign investors we know are fickle, they that has worked in other countries? cit? there are excess reserves because you got Just to come back to the dollar might disappear and private sector banks
come in when the going is good; they quit I don’t think that to believe that foreign- Absolutely, not just for the purpose of to go into the numbers from the account- bond argument, one of will take that space. So that
or exit at the slightest hint of ers will, they might be dollar bonds, we should worry about cam- ing practices. the things that Y.V. 70% number will come
trouble whereby we become tougher task masters but per- ouflaging fiscal deficit—to use your But what I do want to say on that issue is Reddy wrote in one of ‘We should worry down.
vulnerable through ‘The idea that haps not tough enough to word—for a lot of other purposes because that straightforward comparisons of the newspapers is that about camouflag- Bank nationalization of
exchange rate volatility and markets will disci- discipline government. today not just the government borrowing, reserves from one country to another maybe we should have a ing fiscal defi- public sector banks is not as
market turmoil. pline govt is a Another thing about the which is on budget 3.3% or expected to be internationally is misleading and inappro- Tarapore-like commit- cit...it gobbles up imperative today as they
What Raghuram Rajan has stretch. Several financial sector as we learned 3.3% but if you combine on- and off-bud- priate because the reserves have to be cali- tee, which says that you not only the were so certainly there is a
said is absolutely right. from the crisis is that the get public sector borrowing, it gobbles up brated or tailored to what the risks are. reach this milestone in household finan- need to look at the whole
EMs have run into cial savings but
Countries, which have com- financial sector can with- not only the household financial savings The risks the Reserve Bank of India has current account, this issue from today’s perspec-
mitted the original sin trouble because stand pressure for longer but also eats into corporate savings. I think to manage are much higher than the risks milestone in fiscal defi- also eats into tive, today’s India’s low mid-
believing that they will keep markets did not than people expect; so pres- the market senses it; we should stop this of other central banks. So, I think our cit then you go to the corporate dle income status, what the
the door ajar, do it one time, discipline them in sure builds up and when practice, earlier the better. reserves have to be calibrated to that. dollar bond, is that one savings.’ large majority of poor people
be responsible, be prudent good time.’ implosion takes place, it is I wanted to ask something which Also we got to see what the reserves are way of tackling the dol- in this country need.
have come to grief. Argentina catastrophic. perhaps you would have encoun- in a careful sense. Because the Reserve lar bond? Don’t look at it just from
and Turkey are prime exam- Just a word more, the tered when you were the governor Bank also lends a substantial amount to Not one way but the only way. Who can the perspective of the investors in large
ples. worry about this becoming addic- as well—RBI reserves. Of course, it the government so if you let that out both disagree with Dr Y.V. Reddy? You should cities but also look at it from the perspec-
I think the idea that markets will disci- tive, that if you had one sovereign is a Jalan committee issue now and from assets and liabilities, the reserve ratio have a calibrated roadmap but I don’t tive of the millions of poor people in the
pline government is a stretch. They have bond and you would want to do recommendations are still awaited of RBI may not be as strong as is apparent think we should have another committee, country.
not disciplined Turkey, they didn’t disci- more of it is the worry because fis- but do you think RBI is overcapital- from the big numbers. another roadmap. feedback@livemint.com

Revenue and margins are going ‘Under current geopolitical climate, rupee may suffer further’
up: Bata’s chief financial officer Latha Venkatesh
& Sonia Shenoy
sort of opposing currents.
On the one hand we are
obviously looking at a situa-
Does this Kashmir issue
worry you at all and if the
yuan were not to go to 7.4
Latha Venkatesh & the outlook like for the CNBC-TV18 tion where central banks glo- but say to 7.2 or 7.25
Sonia Shenoy full year? bally are effectively racing to where do you see support
During this quarter we have he global geopolitical the bottom in terms of rates.

CNBC-TV18 added 33 new stores and at the
same time have closed 8-10
ame-store sales growth stores where either the loca-
T
coming for the rupee?
backdrop remains tricky This is particularly true in the Does it go to 71 per dol-
and we should expect case of the US. lar? Does it go further?
more weakness in the rupee, However, with central It is early to say. I would

S in the first quarter of

FY20 was 6.5% and we
expect that trend to continue,
tion was not good or we were
not getting as much profits as
we had expected. We have also
says Sameer Goel, head-Asia
macro strategy, Deutsche
Bank. Edited excerpts of an
banks of other major devel- again say as far as the relation-
oped countries, central banks ship with the renminbi is con-
of a lot of the other EM econo- cerned the India-China cross
says R.K. Gupta, chief financial opened around 20 franchise interview: mies, and the Reserve Bank of and a level of 10 becomes very
officer, Bata India. Edited stores. Is the yuan move a one India this week as well cutting significant to watch for in
excerpts of an interview: What would your target off? Does it go back rates and potentially now what terms of the metric of where
What was the same store be for the full year? Have below 7 or do you think is the sum total in one should peg
sales growth in Bata in Q1 you scaled down the tar- we are going to see it terms of whether ‘The move takes the rupee mov-
and what is the outlook Bata added 33 new stores get because there is a bit worsen? it sort of keeps the dollar-yuan into ing.
for FY20? during the current quarter, of a slowdown in the I don’t think this is a one off. pressure on the unchartered terri- Again it is not a
In first quarter our same- CFO R.K. Gupta said. demand environment, or We have seen this situation dollar lower, I tories, and puts single dynamic,
store-sales growth was 6.5% does it stay the same? evolve for the last few months. think that is one the focus back on but at least till the
and we expect the trend to What was the growth in We are hearing about a In response to the initial angle to consider. how much the time the noise
continue. Therefore, with new the premium slowdown in the breakdown in conversations The other is currency needs to settles down on
stores and product innovation sector com- retail segment, between the US and China in Sameer Goel, head-Asia macro strategy, Deutsche Bank. the very direct move to offset this trade issue,
initiatives we do not see any pared to the ‘In Q1 same-store- consumer prod- early May, the Chinese author- relationship ver- tariff imposed on the global geopo-
negative impact. year a g o sales growth was ucts. ities very clearly opted to hold of the tariffs that have been seen, but almost certainly the sus the China Chinese export’ litical backdrop
What is the kind of con- quarter? 6.5%. We expect However, with the line on 7 on Dollar-China. imposed on Chinese exports to economics of the currency cross. remains fairly
sumption? Has your Growth in this the trend to con- marketing and However, after this latest the US and that certainly sug- move would suggest that there In the case of tricky at this
higher value footwear quarter was 3-4% tinue. Hence, with product innova- escalation they have clearly gests a level of Dollar-China is more of this to happen. India, the China-India cross point in time both in terms of
found more new stores and tion we have not allowed that big figure level to that is higher and above where Are you expecting more has been very importantly these trade issues but also sev-
b u y e r s INTERVIEW product innova- noticed that in Q1 break. we are right now. pressure on the rupee? insignificantly seen around eral other aspects overhanging
because your tion initiatives, we and we are ready This, to my Potentially, if As we speak it has that 10 level and if you believe Brexit for example and other
margins have inched up. better than our don’t see any to mitigate all mind, obviously INTERVIEW we have to offset crossed 70 per dollar. I that the Chinese currency will things that are impinging on
Yes, margins are going up. regular product. negative impact.’ these kind of it takes Dollar- the entire impact think it is the lowest have more depreciation to go risk sentiments for global
In fact, the contribution from How many things and we are China into unchartered terri- of the 10% new tariffs on $300 since May 2017. Do you then I think we see a support assets. So I think under that
the premium segment is stores did you hopeful that tories, but also very impor- billion of goods we could be get a sense that we could here than in dollar-rupee environment I would argue
almost 50% now. The custom- add in this quarter? How there will be reasonable tantly puts the focus back in thinking about Dollar-China be headed lower? terms at these kind of levels at that a currency such as the
ers are upgrading themselves many of those stores are growth in the remaining terms of the math about how closer to 7.40. For the rupee, as indeed for least till we see the dust set- rupee could still sort of trade
and our revenue and margins owned? How many are months of the year. much the currency needs to Whether we actually make a lot of other emerging market tling down on this renminbi more to the softer side.
are going up. franchises and what is feedback@livemint.com move to offset at least the part that move or not remains to be (EM) currencies, there are two move. feedback@livemint.com

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MUMBAI 13

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OFFICE OF THE EXECUTIVE ENGINEER (NE) II
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14 TUESDAY, 6 AUGUST 2019
MUMBAI PERSONAL FINANCE

Why pay a fee when there

are zero-fee credit cards
Most credit cards that charge a fee come with extra benefits, but do you need them?
Bindisha Sarang
HOW TO CHOOSE A CARD
mintmoney@livemint.com
An annual fee card may provide extra benefits, but a no-fee card may be enough for new and irregular users Mutual fund costs matter
I
f you are in the market looking GO FOR A NO-FEE CARD WHEN:
for a credit card, you are proba-
bly prepared to shell out an
 You want a low-cost credit card
 You are not looking for specific benefits
E very mutual fund house incurs expenses. Rules allow mutual fund schemes to deduct some
portion from your investments to pay for these expenses. But there is a limit to which fund
houses can charge investors. Equity funds are allowed to charge up to 2.5% of the assets that
annual fee for the same. But
why should you pay a fee when a scheme manages; debt funds’ expenses are capped at 2.25%. Ideally, the lower the expense,
 You are using the card to build a good credit
the market has zero-fee credit score and keep card usage low the better it is as expenses reduce fund returns. But a low expense ratio is just one of the many
cards too? While paying a fee may parameters that investors should look at. Check out these expense ratios, which are the lowest
 You are a new credit card user in the industry for this category, against your funds’ costs.
entitle you to extra benefits, a zero-
fee credit card may suffice if you do Mint tip: Always pay the total amount due every
month and look for free benefits at zero cost Fund Expense Fund Expense
not use it a lot or are a new user. We
ratio (%) ratio (%)
explain why but first let’s start with GO FOR AN ANNUAL-FEE CARD WHEN:
the basics. Edelweiss Large Cap 1.66 HDFC Top 100 1.87
 You are earning enough rewards to offset the
annual fee SBI Bluechip 1.70 Tata Equity PE 1.88
TYPES OF CREDIT CARDS Reliance Tax Saver (ELSS) 1.71 ICICI Prudential Value Discovery 1.89
 You make use of added benefits such as
Credit cards give you free credit for discounts and lounge access regularly Kotak Standard Multicap 1.75 UTI Mastershare 1.90
45-55 days after which it charges a
 You spend enough to accumulate rewards Mirae Asset Large Cap 1.76 DSP Tax Saver 1.90
monthly interest. Apart from this,
there is an annual fee to pay, points Reliance Large Cap 1.77 Franklin India Taxshield 1.91
regardless of your usage pattern. Mint tip: Check if your card offers free services Aditya Birla SL Frontline Equity 1.78 Canara Robeco Emerging Equities 1.91
Zero-fee credit cards, on the other which you would have paid for anyway HDFC Equity 1.78 Aditya Birla Sun Life Equity 1.93
hand, don’t levy any annual fee. Quantum Long Term Equity Value 1.78 Reliance Focused Equity 1.93
SANTOSH SHARMA/MINT
Then there are credit cards that
Quantum Tax Saving 1.78 HDFC Small Cap 1.94
are sandwiched between an annual whether they are actually using the with better reward features. membership and complimentary
fee and no-fee cards. These cards rewards and benefits.” However, that will be suitable lounge access to a number of air- Franklin India Equity 1.79 Sundaram Mid Cap 1.95
charge an annual fee initially but Go for zero-fee cards if you are only if you have the financial disci- ports across the world, miles Axis Long Term Equity 1.81 HDFC Taxsaver 1.96
waive it off eventually after the user using a credit card for the first time pline to not let your credit spiral redemption in the form of free SBI Magnum Multicap 1.82 DSP Equity Opportunities 1.96
crosses a certain threshold of and figuring out how it works, how into a debt trap. “The benefits of flights, upgrades, hotel accommo- Reliance Multi Cap 1.83 IDFC Core Equity 1.97
spends. For instance, State Bank of often you need to use it and the like. annual fee cards are endless as dations, car rentals, 24X7 concierge Picking a
credit card ICICI Prudential Bluechip 1.83 UTI Value Opportunities 1.97
India’s (SBI) SimplyClick card char- “This can be the stepping stone to compared to zero-fee cards, espe- services and the like. You even get that suits
ges an annual fee of ₹499, which is building your credit score and his- cially for those who can afford them insurance covers for baggage delay, Franklin India Smaller Companies 1.84 DSP Midcap 1.97
your wallet,
reversed if you spend ₹1 lakh tory, and your pathway to more or are eligible for premium cards. checked-in baggage loss and per- caters to HDFC Mid-Cap Opportunities 1.84 UTI Mid Cap 1.99
through the card in a year. HDFC premium and specialized cards. It The typical individual seeks travel, sonal accident cover, to name a few. your needs
Franklin India Focused Equity 1.84 Reliance Value 1.99
Freedom Credit Card charges would also be an entertainment, Clearly, you can’t expect no-fee bit.ly/33dro3i
UTI Equity 1.85 Principal Emerging Bluechip 1.99
₹500 as annual fee but waives it off inexpensive way dining, retail, and cards to compete with annual fee
Reliance Growth 1.86 Mirae Asset Emerging Bluechip 1.99
after you cross the ₹60,000 spend- to increase your curated experien- cards in terms of reward points, but
ing threshold in a year. credit limit,” said ces. Premium you need to evaluate if you really L&T India Value 1.86 ICICI Prudential Large & Mid Cap 2.00
“Even in case of premium credit Navin Chandani, cards may help need these benefits. “A number of Motilal Oswal Multicap 35 1.86 Aditya BS Life Equity Advantage 2.01
cards that involve a relatively chief business them access these additional benefits, rewards and SBI Magnum Taxgain 1.87 L&T Midcap 2.01
higher annual fee, card issuers usu- development offi- in a rewarding offers are directly linked to the Franklin India Prima 1.87 L&T Emerging Businesses 2.01
ally offer annual fee waiver if you cer, BankBazaar, a manner,” said annual fee. If a credit card provider
Franklin India Bluechip 1.87 IDFC Multi Cap 2.02
spend beyond the minimum loan aggregator. Chandani. While is not charging any annual fee, then
threshold amount in the previous Also, if you use the annual fee may the number of benefits a user can Data as on 30 June 2019. List contains all equity- in this space once a week, such as turnover ratio,

year,” said Naveen Kukreja, chief
executive officer and co-founder,
Paisabazaar.com, an online mar-
ketplace for financial products.
Some banks also waive the
annual fee against a security
deposit. For instance, Axis Insta
Easy Credit Card is issued against a
minimum fixed deposit of
₹20,000, and SBI Card Unnati
against a minimum FD of ₹25,000.
I LIKE PLAIN VANILLA
Mrin Agarwal, financial educator,
founder director of Finsafe India
Pvt. Ltd and co-founder of
Womantra, said, “A cashback,
no-fee credit card which offers
decent benefits is a good choice.
Many fail to even redeem rewards
and benefits of credit cards, so it
makes sense to go for no-fee cards
and get a cashback that reduces
your amount due. Those who want
to go for an annual fee card must
see if the rewards they get in return
are worth a high annual fee and
It’s important to know your risk profile before making an investment
Sunita Abraham
sunita.a@livemint.com
‘
your credit card This (no-fee card) range from ₹1,000 avail on such a card will be way less oriented funds except sector and thematic funds. cash holding levels of funds, concentration ratio, and
Passively-managed funds and closed-end funds are expense ratio.
sparingly, you can help build to ₹10,000, the when compared to a credit card excluded. Look out for value-added mutual fund data SL: Sun Life
should pick a your credit score and customer usually that charges an annual fee,” said SANTOSH SHARMA/MINT Source: Value Research
plain-vanilla, gets benefits in the Chopra.
zero-fee credit history, and your path- form of vouchers,
card. “No-fee way to more premium discounts and so MINT MONEY TAKE
credit cards are and specialized cards on, added Chan- While standard no-fee cards too
best for users who dani. “People offer a wide range of benefits,
seldom use credit Navin Chandani
cards for making Chief business development
big-ticket expend- officer, BankBazaar
looking for spe-
cific benefits may
seek these cards.”
annual fee cards work well for
heavy spenders and those who
want high-value rewards in return.
Under DTAA, Australian employer
itures,” said Gau-
rav Chopra, founder and chief COMPARING FLAVOURS
executive officer, IndiaLends, a We compared two credit cards
“Most of the top-rewards credit
cards waive off the annual fee in the
first year. In this period, one can
shouldn’t withhold tax from salary
financial technology startup. from the same bank, one that char- identify one’s consumption pattern ISTOCK
If you have a bad credit score and ges no annual fee and another that and dependency on credit cards. If Sonu Iyer
are trying to repair it, go for a charges a fee of ₹3,500. The zero- consumption is less, one can opt for
no-fee card and use the card for fee credit card gives regular bene- no-annual fee credit cards and if I have been offered a job
nominal expenditures. fits such as rewards points, cash- the consumption is higher one by an Australia-based
back offers, discount offers, fuel should opt for a credit card with an company but I will be
I AM READY FOR MORE surcharge waiver, complementary annual fee, as one can enjoy addi- working in India. As it
If you are a savvy credit card user, lounge access at select airports, and tional rewards associated with it,” doesn’t have any office in
who knows how to use the rewards so on. The other card, however, has said Chopra. India, my contract will be
and benefits that cards offer, you several other features besides the A plain-vanilla credit card works from Australia. If the
could look beyond zero-fee cards. regular ones, including a chance to for most, but if you want to company provides me a
Cards that charge an annual fee, earn unlimited miles which never upgrade, be ready to spend some salary slip, will it be valid
initially or otherwise, usually come expire, award miles, priority pass time analyzing the trade-off. for filing taxes in India?
If yes, what should be the
structure of the salary? ASK MINT income tax law on certain sal-
—Kunal Chandra m N R I TA X AT I O N ary components, such as
Salary for services rendered house rent allowance, leave
in India is taxable in India, irre- travel concession and so on.
spective of the place of receipt. the advance tax schedule—15% Eligibility of such tax benefits
As you would be rendering
services in India, salary earned
of total tax by 15 June, 45% of
total tax by 15 September, 75%
on the salary expected to be
received from the Australian
from an Australian company of total tax by 15 December, employer may be analyzed
The ability to take risk investor’s ability to take risk tors with less experience and will be taxable in India, irre- 100% of total tax by 15 March. separately. Ideally, the Austra-
takes into account things for a near-term goal will be understanding of markets spective of where you receive You may also make the lian employer should not with-
such as the age of the inves- lower and, accordingly, the and investments may be it. Under the income tax law, deposit under self-assessment hold tax before paying salary

A
n investor’s risk pro-
file is an essential ele-
ment in determining
the suitability of an invest-
ment product. There are two
facets to this—the ability and
the willingness to take risk.
tor, level of income of the
household, income security,
investment horizon and so
on. Typically, a young inves-
tor who has a secure income
is able to take more risk for a
long-term goal. The same
investment choice will be
different. It’s also important
to consider the willingness to
take risk. An investor may be
uncomfortable with higher
levels of risk even if they are
able to take risk. Older inves-
unwilling to take greater risk
even for better returns.
Risk profiling question-
naires are typically used to
determine an investor’s atti-
tude to risk before an invest-
ment product is suggested.
the employer is required to
withhold applicable tax on the
salary income. However, in
your case, if no India income
tax is withheld by your Austra-
lia-based employer, you may
calculate your taxable salary
income and deposit it under
tax before filing the India
income tax return. However,
in this case, interest for delay
in deposit or non-deposit of
advance tax will be applicable.
Note that there are exemp-
tions available (subject to con-
ditions) under the India
into your India bank account
in view of the relief available
under India-Australia Double
Tax Avoidance Agreement.
Sonu Iyer is tax partner and
people advisory services leader,
EY India. Queries at mint-
money@livemint.com

IF YOU DON’T HAVE THE EXPERTISE, STAY AWAY FROM SECTORAL OR THEMATIC FUNDS
POWER
POINT
V I V E K AG A RWA L
Respond to this column at
mintmoney@livemint.com
T
hematic or sectoral funds are mutual funds that invest in a
particular industry or sector or around a theme. Some of
these funds are investing in sectors such as technology,
banking and financial services, utilities, auto and auto ancillaries,
real estate, and so on. They could also be following a particular
theme like consumption and investing in consumer goods,
healthcare, and financial services companies, among others.
According to the latest Securities and Exchange Board of India
(Sebi) directives, a fund can be deemed as thematic or sectoral if
it invests at least 80% of its assets in that sector or theme. These
funds are considered high-risk investments as a majority of their
investments are linked to a particular sector. Any adverse impact
on the sector due to change in the macro or micro economy,
changed business regulations or change in consumer behaviour
or technology can in hit investments. In other generic funds,
since the investments are diversified, any adverse impact to a par-
ticular sector can be nullified by positive news on other sector
allocations. This diversification is not possible in sectoral or the-
matic funds.
That’s why, timing one’s entry and exit in these funds becomes
quite important. The annualized returns for five-year periods for
Franklin India Technology Fund that was launched in 1998 (at
the peak of the tech boom), show a wide difference depending on
the entry and exit timing. For instance, in the five-year period
between 1998 and 2003, the fund gave 26% annualized returns,
but between 2003 and 2008, another five-year period, it gave
only 10%. However, timing the market is very difficult, especially
for retail investors.
But there are advantages of investing in such funds. The two
biggest advantages of a sectoral fund are that they allow investors
to invest primarily in a sector that they are upbeat about or which
they feel is at the bottom of its business cycle. These investments,
if timed correctly, can lead to higher returns than diversified
funds where the higher returns of investments in a specific sector
can be offset by the lower or negative returns of the other sector
allocations. Many investors use sectoral funds to invest in cyclical
sectors which are at the bottom of their business cycles. For
example auto sector is considered a cyclical sector. An astute and
patient investor could invest in this sector through an auto sector
fund to generate above-average
Retail investors returns and book profits at the peak of
should seek the cycle.
The same fund mentioned above
professional has given an annual return of more
advice at the
than 18% since its inception. ₹1 lakh
time of entry as invested in this fund is now worth
well as exit more than ₹33 lakh, which is a 33-time
appreciation in 21 years. At the same
time, this fund from its peak in March
2000 gave close to 10% annualized returns.
Since sectoral or thematic funds come with higher risks,
investments in these must be done only on the advice of experts
or if the investors are experts themselves in understanding stocks
and stock markets. Some of the sectors are cyclical and hence
understanding these cycles becomes important as well. These
business cycles can be short or long, depending on the specific
sector. As timing of these investments and redemption plays a
very important role in the returns being generated by such funds,
a lot more careful analysis and planning is required before invest-
ing. One can also adopt different strategies with these funds,
some for long-term growth (sunrise sectors/themes), some for
medium-term tactical gains (cyclical/beaten down sectors) and
some for defensive strategies.
However, I would not recommend more than 15% allocation
of your investments to these funds. This 15% could be divided
among two-three sectors or themes. You must remember that
your other mutual fund holdings may also have some allocation
to these sectors. Making large allocations to these funds can be
risky and should be avoided by retail investors.
Also, there are some sectors or themes that are coming in
vogue or their business cycles are on their way up. These cycles
can fully play out and reach their peaks in the medium term
(three to five years) or can take even longer. Hence, not just
knowledge of these cycles but also patience in allowing the cycles
to fully play out is important. Retail investors should seek profes-
sional advice both at the time of entry and exit from these funds.
Vivek Agarwal is co-founder at Upwardly.in
 PERSONAL FINANCE TUESDAY, 6 AUGUST 2019
MUMBAI 15

Long-term debt funds gain, but should you buy?

Investors need to understand that high returns from long-term debt funds seen in the past one year are unusual and may not be replicated every year
Neil Borate In comparison, short-duration funds fared RBI stance has only ever happened on two If you have a financial adviser, speak to
neil.borate@livemint.com Growing strong poorly giving 5.18% and credit risk funds other occasions. Even if rates go below 6%, her before investing. “Investors who are
Returns from gilt and long-duration funds over the past year have been unusually gave just 0.69% average one-year annual they don’t sustain there for a long time,” investing directly, without the right
high compared to their long-term average

L
ong-term debt funds, including Returns (%) returns (see graph). said Arvind Chari, head of fixed income advice, are likely to be drawn towards
gilt funds, long-duration funds 1 year 3 years The responsiveness of debt funds to and alternatives at Quan- long-duration or gilt
and in some cases dynamic bond Gilt
5 years 10 years interest rates is given by a measure called tum Advisors Pvt. Ltd. funds due to their returns
funds, have had a good run in the “modified duration”. A modified duration Second, interest rates over the past year. They
last one year, drawing interest of two means that a 1% cut in interest rate can reverse themselves if should understand that
from a large swathe of investors. Speaking will cause a roughly 2% gain in the fund. inflation moves up. such returns are unusual
at the sixth edition of Mint Mutual Fund Long-duration Long-duration funds typically have modi- “Long-term average CPI and not likely to be repli-
Conclave, held recently in Mumbai, chief fied durations of 6-12, meaning that they is 5%, so repo rate can’t go cated every year,” said
executive officers of several asset manage- are hypersensitive to interest rate move- too south of 6%. The rule Roopa Venkatkrishnan, a
ment companies noted that there had ments—you can pocket huge gains or of thumb, especially for mutual fund distributor
been a sudden surge in long-term debt Short-duration losses based on interest rate changes. retail investors, is to be based in Mumbai.

funds. The buying has been particularly
high on mutual fund apps, which allow
investors to directly invest in schemes
(without distributors or advisers). Paytm
Money, one of the largest mutual fund
apps in India, said in a blog post recently
that in the debt funds category, “gilt funds
were the most bought on the platform” in
June 2019. Gilt funds have posted average
returns of 14% over the past year.
However, those entering this fund cate-
gory at such a late stage may be walking
into a highly risky gamble, said experts.
Here’s why.
WHERE’S THE RETURN SOURCE?
Long-duration debt, gilt and other funds
which buy high-maturity papers take a
Liquid
Credit risk
0 5
Data as on 26 July 2019
high level of interest rate risk. When inter-
est rates rise, their returns fall sharply and
vice-versa.
Over the past year, interest rates in
India have fallen on multiple rate cuts
from the Reserve Bank of India (RBI). This
10 15
Source: Value Research
SANTOSH SHARMA/MINT
caused long-duration funds to post stellar
returns even as their credit risk cousins
struggled with an ongoing crisis in the
credit markets. The average one-year
return for long-duration funds (as of 26
July) was 19.04% and for gilt funds 14.17%.
‘
Why does the fund make these gains? cautious if you observe Most of the rally “If you were lucky
Typically, such funds have locked in gov- double-digit returns in (from long-term enough to be invested in
ernment debt at high rates of interest. debt funds,” said Chari. funds) is behind us. these funds over the past
When interest rates fall, this older debt year or so, now would be
becomes more valuable. The opposite WHAT YOU CAN DO People should look at a good time to exit. The
effect happens when interest rates rise. When it comes to invest- short- to medium-term rally may extend a little
ing in long-term debt funds to benefit from bit more but you would
WHERE DO THE RISKS LIE? funds, experts advise cau- be walking off with sub-
20 Though the returns from long-term debt tion. “The last three the interest rate cycle stantial gains even post
funds in the past year have been good, months have seen around Devang Shah tax,” said Kalpesh Ashar,
investors need to be mindful of two factors. 1% drop in the bench- Deputy head, fixed income, proprietor, Full Circle
First, the gains these funds make from mark 10-year bond yield Axis Asset Management Financial Advisors and
interest rate cuts are a one-off. Unless which had caused returns Planners, a financial advi-
rates continue to drop in the same dra- to surge. But most of the rally is behind us. sory firm. “If, however, such funds are part
matic fashion over the next three to five People should look at short- to medium- of a long-term debt portfolio, then you can
years, such gains are not likely to repeat term funds to benefit from the rate cycle,” stay invested,” he said.
themselves. “In the last 20 years, a repo said Devang Shah, deputy head, fixed Investors should be cautious while
rate cut below 6% with an accommodative income, Axis Asset Management Co. Ltd. investing in these funds.

‘We want to make Airbnb the default Do a financial assessment before you
option for Indian millennials’ Our housing
solution for
transfer home loan to another bank
ISTOCK
millennials Surya Bhatia
is beyond
lock-ins,
deposits: I am 46 years old and I have a
Rohit
Kapoor
home loan at a floating interest
Airbnb, a US-based online accommodation marketplace, forayed into India rate of 9.50%. The loan is
bit.ly/2GLiwZ8
in 2016 and has been growing at about 70% since its official launch. worth ₹41.50 lakh, which was
Currently, it has over 50,000 listings in India, and more and more Indians taken in December 2010. The
outstanding principal amount
seem to be opting for it not just within India but also abroad. Amanpreet is about ₹33 lakh. The rate of
Bajaj, country manager – India, Airbnb, talks about the India story, how the home loan has dropped to
platform’s cost-effective model works, and more 8.5-8.6%. Would it make sense
to switch to another bank or
financier now? Or should I stay
MONEYGURU put with the current one since
most part of the interest has
AMANPREET BAJAJ already been paid for?
Country manager – India, Airbnb —Jones
The loan taken is prima facie for 20
years and you have already paid for a
little less than nine years and the out-
standing tenure is another 11 years. ASK MINT save ₹20,000 per month and post
How has Airbnb been tings of the highest quality OFF TRACK more than 4,000 companies And for the balance principal amount m FINANCIAL PLANNING 2021, once your education loan is
doing in India compared homes and exceptional hosts). are using Airbnb for work and payable of ₹33 lakh, the interest pay- paid off, you can increase your sav-
to other countries? These are homes that are veri- Your favourite we launched it only six months out has come down on a monthly ings by equivalent of the education
Overall, we have seen 70% fied for quality, amenities as book ago. Corporate travellers are basis but will still be close to ₹20.4 sion, which in financial terms could loan EMI of ₹30, 000, thereby result-
year-on-year business growth well as an up-levelled design. Good to Great: Why incorporating work and lei- lakh for the remainder of the tenure. be the best option for you. ing in savings of ₹50,000 per month.
since we launched. Our lis- There are hosts that provide Some Companies sure. Also, the number of peo- Now consider the other scenario Your expenses may increase by that
tings in India have grown exceptional hospitality and Make the ple in a reservation is not one. where you switch the loan to another I want to retire 10 years before time nut so would your income. The
almost 200% and it’s only have unique traits. We have a Leap... and It is two to four people who housing loan bank or financial insti- the retirement age of 60. I’m rationale of how to increase the sav-
Others Don’t
growing. Almost 2 million few homes in Goa now and we by Jim C. Collins travel together for work. So tute where the interest rate comes 29 years old right now, unmar- ings remains the same.
Indians used us last year alone. will be doing a phased launch there are teams travelling down by 1%, i.e., to 8.5%, and the loan ried and I earn ₹60,000 a Your investments can be made
And all three segments of our in other Indian cities. together, brainstorming and starts again. Assuming the same ten- month. I live with my parents based on your risk profile. Long-
business—Indians travelling bonding together. ure of 11 years as in the above case for and have expenses of ₹40,000 term investments should preferably
abroad, Indians hosting Indian You also have a product Your money Relocation is also growing. comparative purposes, the interest a month, including an educa- be invested in equity asset class as it
mantra
travellers within India and for- called Airbnb Luxe. How So if you are moving to a differ- payment on this will be close to ₹20 tion loan equated monthly has the potential to deliver inflation-
Understand the
eigners coming to India—have is that different from fundamentals ent city, and you want to first lakh, i.e., ₹19.7 lakh, which is better instalment (EMI) of ₹30,000, adjusted returns but they do carry
seen robust growth. From a Airbnb Plus and what all of savings at get a feel of the neighbour- than the earlier workings but quite to be paid off by 2021. I want to inherent volatility and, hence, are
global perspective, India is one does it entail? Are there a young age hood, it’s best to book a house close to the earlier interest payment start a non-government orga- recommended for the long term.
of the fastest growing emerg- any India plans? on Airbnb and stay in the of ₹20.4 lakh. So what should you do? nization (NGO) at the age of 50, Subject to the above, you can plan
ing markets for Airbnb, and is It will come to India at some neighbourhood before doing The best case for you would be to with a cost of ₹35 lakh. How for retirement post 50 years of age
among the top five growing point of time. Airbnb Luxe are it for a longer term. speak with the existing housing loan should I plan for my goals? and have a retirement corpus as well
markets, globally. We aim to luxurious homes that are provider and ask them to bring it —Palak Adarsh as a corpus of ₹35 lakh for starting an
reach about a billion Airbnb hand-picked for their unique Your fitness How is the pricing deter- down at par with the rates they are Your expenses currently are on NGO.
users by 2027. Airbnb globally space and come with various mantra mined on the platform? giving to a new customer. They may the lower side as you are staying with Surya Bhatia is managing partner
has seen more than 500 mil- trip designers. So somebody Having a routine We are an open platform, so charge you a conversion fees which your parents. So try and maximize of Asset Managers. Queries and views
lion guests. We are in almost will sit with you and under- every morning— the pricing is decided by hosts could be a flat fees, for the conver- your savings. At present, you can at mintmoney@livemint.com
100,000 cities, across 191 stand your travel needs and whether it’s themselves. We have built-in
walking, gym
countries with provide an expe- or yoga tools to help the hosts choose
more than 6 mil- India is one of the rience. Today we the right pricing. The pricing
lion listings fastest growing have more than is dynamic but the final choice
across the world. emerging markets 2 , 0 0 0 luxe rests with the host. We take a
India is going to for Airbnb, and is homes across the
play a critical role
in reaching the
among the top world. We have a
100-point check-
If you were
21 again
revenue fee out of it, which is
3%. A lot of hosts on Airbnb
don’t do it for money. I met a
Returns on my investments
goal of 1 billion five growing list to decide Travel
host who were empty nesters
Building a portfolio is a complex exercise, and it has to be maintained too. A person’s portfolio holds different
more types of assets based on her financial goals, and each asset class gives different types of returns, which is why a
Airbnb travellers. markets, globally whether a prop- and they priced their lavish portfolio must have an ideal mix of financial products. One must also keep in mind the volatility risk of the asset
erty qualifies for bungalow at $20 a night with class, liquidity, lock-in rules and taxation. Here's a look at how four commonly used asset types—equity, cash, gold
Airbnb is being luxe or not. meals. So when we told them and fixed income—have done in different periods.
seen as a premium option you can charge two times the
for travellers. So how are In India, what kind of current price, they said they Returns (in %)
you positioning your- properties are more in did this not for money but to Equity (Sensex) Cash (money market mutual fund)
selves in India, especially demand? Favourite thing meet new people.
18.re9turn8th%
Gold Fixed income (fixed deposit)
with Oyo offering cheap Adoption of bigger houses is on your desk
options as well as pre- on the rise on the platform. Small miniature What percentage of the at
mium options under its The other trend is during models of traveller’s pie are you The 18.98
iven
Townhouse offering? weekends, people are not trav-
airplanes I
have flown in targeting? gold has g ar
The beauty of our platform elling to a different city all the Our target right now is the over a e
1- y
is that there is something on time. Staycation is becoming a millennial population in India period
offer for everyone. We have big play in India. People are because we believe they are 9.78
options for very economical booking something 10km out- more likely to value experien- 7.59 7.81 7.64
7.10 6.70
stays, say, under ₹1,000 in a side their city and then travel- listed. As awareness increases, tial travel. Also, they are trend 6.25 6.60
city as well as ₹25,000-a-night ling in large groups. So a lot of more unique places will come setters. What they do and how 5.00
penthouses, or a ₹1 lakh-a- farm houses or villas get on the platform. they travel becomes a trend for 2.07 2.12
night villa in Goa. We want to booked on Airbnb. We are also other segments to follow. So 1.29
0.21
ensure that there is an Airbnb seeing heritage listings being Airbnb has also been our entire focus right now is to
-0.13
across all price points. What booked. So in Goa, people are catering to business trav- ensure that the Indian millen-
we have seen is that the looking for 100-year-old villas ellers. What are you nial population across top -2.02
accommodation need varies or Portuguese villas. We have doing to target them? urban areas as well as tier II 1 WEEK* 1 YEAR 3 YEARS 5 YEARS
based on the type of the trip a villa which is 400 years old It is something very recent towns understand the benefits Data as on 2 August 2019; Look out for returns on various asset classes in this space. Rate of return for fixed deposits is for the
the person is on—whether he and the family still lives there but we have seen rapid of this network. We want to future. For other asset classes, returns indicate past performance.
is travelling with family, and hosts people and share the growth. Almost 700,000 com- ensure than we are the default Equity is the benchmark index return; Cash refers to the average return for liquid funds category as defined by
friends or for work. great stories that they have. In panies (globally) use Airbnb. pick for their travelling. Valueresearchonline; Gold refers to returns from domestic MCX gold prices; and fixed income is SBI fixed
Very recently, we also Rajasthan, we are seeing old, So 15% of all Airbnb stays are Sabari Saran deposit rate. *Other than fixed deposits all returns are absolute. Returns above one year are annualised.
launched Airbnb Plus (with lis- refurbished havelis getting now for work. Even in India, sabari.s@livemint.com SANTOSH SHARMA/MINT Source: SBI, Bloomberg, Value Research
16 TUESDAY, 6 AUGUST 2019
MUMBAI VIEWS

OUR VIEW MY VIEW | BARE TALK

ISTOCKPHOTO

The capital adequacy norms for

banks could do with revision
RBI could use the mechanism of countercyclical capital buffers to ease credit conditions in India

actively adjusted risk weights to dis-
suade banks from lending excessively to
certain sectors and businesses. Is there a
case for doing so in reverse now? I think
so, and that would be less risky than
opening up external commercial bor-
rowings to purely domestic players.
That would be the first step.
In the post-2008 phase, regulators
V. ANANTHA NAGESWARAN around the world have embraced
is the dean of IFMR Graduate counter-cyclical capital buffers and
School of Business, Krea University macroprudential norms to better regu-
late credit creation while interest rates
plumbed new lows. RBI could use the
relating to Basel III norms in the web-
site of BIS states rather clearly: “Like all
Basel Committee standards, Basel III
standards are minimum requirements
which apply to internationally active
banks.” A substantial number of banks
in India, especially government-owned
banks, are not internationally active
banks. Their predominant shareholder
is the government and the deposits are
protected by the government in more
ways than one, both formally and
through an implicit understanding that
the government would not allow the

The full integration of

mechanism of countercyclical capital failure of banks owned by it, let alone
buffers to ease credit conditions. Coun- cause depositors to lose money.

O
n Wednesday, 7 August, the ter-cyclical capital buffers mean exactly The bigger question, therefore, is
monetary policy committee of that. They have to counter the cycle and whether the capital adequacy norms
the Reserve Bank of India (RBI) not exacerbate it. It is possible to do this prescribed under Basel III should be

Jammu and Kashmir will announce its monetary policy deci-

sion. RBI is widely expected to cut rates.
It does not matter what the magnitude
is. The question of transmission is a big
with clear expiration dates. Extraordi-
nary measures must be withdrawn
when times become ordinary. There
should be other safeguards lest the
made uniformly applicable to all banks
in India or only to internationally active
banks. A lower capital ratio for other
banks will not only reduce the capitali-
one. Interest rate cuts take much longer bond market react badly to such a move. zation burden on the government but
to be passed on, if at all they are passed The central bank must apply the will also free up lending capacity.
Now that the government is set to withdraw the ‘special status’ of the state, New Delhi on. Moreover, it is not even clear if many regulatory lessons that it must The problem is that the discourse has
interest rates matter in the current have learnt from the recent and become so puritanical that such a move
should consider an economic package that would assure better lives for its people uncertain environment. There is much ongoing episode of bad debts. Second, it would be seen as a dilution of prudence
that the government needs to do to dis- must act in concert with owners of banks and credit discipline and interpreted as
pel the uncertainty for it has had quite a in enforcing lending discipline. Third, I another sign of the central bank caving
substantial role in its creation. That is had also written earlier on the incongru- into pressure from North Block or

O
n Monday, the Indian govern-
ment moved to withdraw the
“special status” conferred on
the state of Jammu and Kash-
mir by Article 370. Home min-
ister Amit Shah moved a reso-
lution in Parliament to abrogate this provision
that allowed the state to draft its own constitu-
tion and limited the Union of India’s legislative
powers to three areas: foreign affairs, defence
and communications. The Centre also revoked
Article 35A, which gave the state legislature
the power to define “permanent residents” of
the state and grant them such benefits as the
exclusive right to buy land. Shah also intro-
duced the Jammu and Kashmir Reorganisa-
tion Bill, which seeks to split the state into two
Union territories. This involves carving out
Ladakh as a Union territory without a legisla-
ture, while Jammu and Kashmir would have a
legislative assembly. Soon after Shah’s
announcement in Parliament, President Ram
Nath Kovind promulgated the Constitution
(Application to Jammu and Kashmir) Order,
party’s pitch of “one nation, one Constitution”. the subject of another column, how- ity of the central bank prescribing the South Block or both. Therefore, the
Since Article 370 was included in the Consti- ever. Here, we shall focus on what the marginal cost of funds-based lending government and the central bank must
central bank should do. rate as the floor in a so-called liberalized approach this in a calibrated manner
tution’s Part XXI, which deals with “Tempo- According to data published by the interest rate environment. Fourth, the and communicate clearly so that it is
rary, Transitional and Special provisions”, the Bank for International Settlements government, on its part, must use the not painted as another attack on
party believes there is no reason for it to exist (BIS), India’s credit-to-gross domestic crisis to legally enshrine non-interfer- institutions by the government.
seven decades after its adoption. The shift has product (GDP) gap has been negative ence in the operational decisions of To begin the process, the govern-
no bearing on the state’s accession, Shah since 2013 and is now running well banks. Fifth, the government must ment and the central bank could
below trend. That is not a surprise. incentivize banks to augment their consider appointing a committee to
asserted in Parliament. “It is not true that Banks are unwilling to lend and busi- assessment of credit worthiness and risk re-examine the relevance of capital
Jammu and Kashmir joined India because of nesses are not keen to borrow either. assessment of loans on a continuous adequacy norms prescribed for
Article 370,” said the home minister. It’s worth There is not much confidence that basis. More specifically, capitalization internationally active banks in the
recalling that Maharaja Hari Singh, the then non-performing assets will not see support and operational autonomy must Indian context. The terms of reference
ruler of Jammu and Kashmir, signed an Instru- further accretion. The understandable be made contingent on skill upgradation for such a committee should be formu-
caution of banks should not starve and other quantifiable performance lated in a manner that strikes a balance
ment Of Accession to India on 27 October creditworthy borrowers of credit. Both measures. Finally, both the government between India’s economic growth and
1947, two years before the Article’s inclusion the government and the central bank and the central bank must be clear that employment imperatives and maintain-
and within days of the state seeking New must do all that is within their powers to as economic conditions normalize, ing a sound banking system. India
Delhi’s aid to repulse an invasion by Pakistan- ease the situation. countercyclical capital buffers must and should not prioritize one at the cost
backed militia. The country’s central bank, in the will move in the opposite direction. of the other.
credit boom years up to 2007, had pro- It is not widely known that the page These are the author’s personal views
The immediate impact of New Delhi’s move
could be on investment in real estate in the
state, since the revocation of Article 35A would
allow residents of any part of India to acquire
immovable property there. If this results in
greater commercial activity, then the local
economy could pick up. That’s no small “if”,
I’ve never seen anywhere in
New Delhi, Mumbai, Bangalore, Kolkata, Chennai, Chandigarh*, Pune* Thursday, August 6, 2009 Vol.3 No.186 Rs. 3.00 24 PAGES
www.livemint.com + 4 PAGES MARKETS WATCH

2019, stating that the Indian Constitution will though. Prosperity needs to be preceded by Infosys looking
CORPORATE:
at non-US acquisitions >7

now fully be applicable to the state. The presi- peace, and the outlook on this could yet turn EXCLUSIVE PARTNER
WSJ: Quick! Tell us, what does
KUTGW mean? >19
COMMODITIES: India caught
short as sugar prices soar >21
the world as beautiful as
dential order comes into force “at once” and grim if the people of the state do not see their Kashmir. It has something to
SENSEX 15,903.83 Æ 72.85 NIFTY 4,694.15 Æ 13.65 DOLLAR Rs47.53 æ Re0.22 EURO Rs68.15 æ Re0.28 GOLD Rs14,810 ® OIL $74.54 Æ $0.67

SHAILENDRA BHOJAK/PTI

RNRL keeps Direct fertilizer

What’s inside up pressure; subsidy plan
in trouble
shall “supersede the Constitution (Application lives improve within a reasonable time frame. RIL remains
Larsen and Toubro (L&T) has sought permission from the

do with the fact that the

Securities and Exchange Board of India to sell its stake in
software services firm Mahindra Satyam, formed after
fraud-hit Satyam Computer Services was acquired by
Tech Mahindra in April. L&T’s stake in the company is
silent B Y S ANJIV S HANKARAN
A NUP R OY
&

now 6.9%, according to Thomson Reuters data. >P4 B Y B HUMA S HRIVASTAVA ·························
NEW DELHI/MUMBAI
bhuma.s@livemint.com
LEADING THE NEWS MONEY MATTERS
The positive turn in con-
·························
MUMBAI I nitial attempts by the Union
government to use banks to

to Jammu and Kashmir) Order, 1954”. Recent security measures have caused anxiety
Trai has asked
that 2G licences
not be issued
till it decides if
sumer sentiment in recent
months seems to be the
main factor driving growth
T he fight between Mukesh
Ambani, the chairman of
Reliance Industries Ltd (RIL),
provide subsidies directly to
farmers to purchase fertilizers
have run into problems and

valley is very small and the

there is a need in auto sales, says Mobis and his estranged younger also triggered differences be-
for more players Philipose. >P14 brother Anil Ambani, the tween its different arms.
in the crowded market. >P2 *** chairman of Reliance Natural Security cover: CISF personnel at the Infosys campus in Bangalore. The In meetings held over the
*** Malaysia’s Maxis Communi- Resources Ltd (RNRL), contin- IT firm will pay Rs3.65 crore a year to the paramilitary force. past fortnight, different arms
Sebi norms mandate firms cations, which ued along expected lines on of the government discussed
SAFE HOUSE using banks as a possible de-

The abrogation of Article 370, which was and local suspicions have been rife. To
divulge price-sensitive in- owns a 74% Wednesday.
formation, such as the val- stake in Aircel, An executive from the Reli- livery mechanism to give the

uations involved in acquisi-
tions, to shareholders, but
some companies aren’t
forthcoming on this. >P4
76 firms line
plans to raise $2 ance-Anil Dhirubhai Ambani subsidy directly to farmers.
billion in a pub- Group (R-Adag) launched a Finance minister Pranab
lic offering later media offensive and sought to Mukherjee had declared in his
this year. >P14 highlight alleged irregularities speech while presenting the

mountains are very big, so

in RIL’s production of gas Union Budget on 6 July that In-
BUSINESS OF LIFE from the D6 block in the dia would eventually move to-
Back to the stone age Krishna- Godavari basin off

up for CISF wards directly handing out the

incorporated in the Indian Constitution in forestall cynicism, or worse, the Centre must
India’s east coast. fertilizer subsidy to farmers in-
Limestone, travertine, sandstone, And Mukesh Ambani and his stead of the current practice of
granite and slate—a measure of team responded, like they usu-
the best architectural uses you ally have, by keeping silent. TURN TO PAGE 3®
can put these to.

CORPORATE NEWS
>P12-13

ECONOMY & POLITICS

The fight between the two
brothers over gas that RNRL
wants so badly for its Dadri
power plant in Uttar Pradesh, protection Vishal Retail

you have this miniature

however, continues to cause
open to offering

October 1949, has been a long-held political take special care of relations with the state’s
The 25-year-old Maruti 800
and the Splendor bike still
sell alongside newer prod-
Encouraged by last week’s
US gross domestic product
(GDP) report, and as con-
sumer spending picks up
and manufacturers ramp up
production, economists are
revising upwards US GDP
growth forecasts for the
third, fourth quarters. >P17
significant collateral damage.
Already, RNRL has targeted pe- Paramilitary processing and get cover from the govern-
troleum and natural gas minis-
ter Murli Deora—he was sub-
10 requests, including ment paramilitary.
CISF has received requests
shares to vendors
sequently forced to defend those from Mumbai’s from 76 more private sector
himself in Parliament on Mon- Taj Mahal hotel, Wipro, firms for protection and is pro- B Y J HARNA M AZUMDAR
day—and the head of the Di- cessing 10 of these, including jharna.m@livemint.com
rectorate General of Hydrocar- RIL’s Jamnagar refinery ones from Reliance Industries ·························
bons (DGH), a government Ltd’s (RIL) refinery in Jamna- MUMBAI

promise of the Bharatiya Janata Party, which population. To that end, the government V
ucts, as diverse consumer *** body that regulates the produc- B Y K . R AGHU gar, Indian Hotel Co. Ltd’s Taj ishal Retail Ltd, the cash-

needs make it possible for
variants to coexist. >P6
***
Novartis officials say they
believe animal rights groups
are behind a series of at-
tacks on the firm. >P19
State-run trading firm
MMTC has joined hands
with Bharat Heavy Electri-
cals to help itself secure di-
amond, cobalt and iron ore
mines in the Democratic
Republic of Congo. >P5
tion of oil and gas, V.K. Sibal.
On Wednesday, Reliance Pow-
er Ltd’s chief executive J.P.
Chalasani alleged that two of
the three technical experts who
had validated RIL’s capital ex-
penditure for the D6 block had
a “conflict of interest” and
raghu.k@livemint.com
·························
BANGALORE
I ndian companies are wak-
ing up to the real threat
that terror attacks pose and
scrambling to get paramilitary
protection—for a price—to
Mahal Palace and Tower in
Mumbai and Wipro Ltd, ac-
cording to Rohit Katiyar,
spokesperson for CISF.
Although India has several
private security agencies, cur-
rent laws prohibit these firms
from arming their guards with
countryside surrounded by
strapped retail store
chain, is offering shares to
some of its big manufacturers
and suppliers instead of cash,
and is struggling to raise mon-
ey for daily operations, said a
person familiar with the situa-
tion, who didn’t want to be

has argued that its provisions for autonomy on could consider developmental initiatives and
VIEWS were “not independent”. strengthen or replace the secu- automatic weapons. Apart identified.
States keen to Reliance Power is part of R- rity cover they are provided by from automatic weapons, Chairman and managing di-
eliminate preju- Adag and Chalasani is also a private firms. CISF guards have wireless rector of the company Ram
spokesperson for RNRL. Earlier this month, the coun- equipment that operates on a Chandra Agarwal denied this

the Himalayas... The people

dice may want to
intervene in cases On Tuesday, DGH had said try’s best-known software secure channel, and explosives and said “nothing of this sort
of discrimination that RIL’s capital expendi- services firm Infosys Technol- detection units. is happening”, but added that
among private ture—it holds the key to how ogies Ltd retained the services Infosys sought protection he is open to offering equity
individuals, the profits from the block are of the Central Industrial Secu- from CISF in 2006, a year when shares instead of cash to ven-
says Salil to be shared between the com- rity Force (CISF) to protect its Bangalore was abuzz with ru- dors.

internal matters have privileged the state’s an economic package that would help busi-
Tripathi. >P22 Bangalore headquarters—the
TURN TO BACK PAGE ® first private sector firm to seek TURN TO PAGE 2® TURN TO PAGE 3®

QUICK EDIT RS1,200 CRORE

political elites, harmed the region’s develop- nesses flourish and generate jobs. For full inte-
Managing swine flu fears
A teenage girl in Pune was
the first casualty of swine
flu in India. Her death can
also be the tipping point at
which vague concern becomes
full-blown panic. There are
already reports of a rush at
cascades, a process in which
people look at what others are
doing and then unthinkingly
choose the same path: Thus
irrational behaviour seems to
be rational behaviour.
Behavioural economists say
Cricket ad revenues to hit a six this year
B Y A NUSHREE C HANDRAN
anushree.m@livemint.com
·························
MUMBAI

H ere’s a pop quiz: Which

business will generate in
are expected to attract in the
same period.
In the entire year, according
to Shashi Sinha, chief execu-
tive (CEO) of media buying
agency Lodestar Universal Pvt.
KIRSTY WIGGLESWORTH/AP

are very beautiful too.

Pune’s public hospitals that that information cascades are 2009 a little over double the Ltd, cricket telecasts will at-

ment and prevented the full integration of gration to be widely hailed as a win-win bar-
conduct swine flu tests.
Hard though it is to believe,
there are striking similarities
between such episodes of
panic and the panic buying
that grips investors during a
stock market bubble. And thus
the lessons of the latter could
be used to manage the former.
fragile and can be reversed
with new types of credible
information. At times, even
one unit of fresh information
can do the trick.
Public health agencies,
citizen groups and the media
can play a calming role,
to ensure that hospitals are
revenue it did in 2008?
The answer, as evident from
the picture accompanying this
story: Cricket telecasts.
Thus, while a packed calen-
dar from September means
good news for cricket junkies
currently getting high on the
Ashes, broadcasters are licking
tract ad revenue of around
Rs1,200 crore. The number has
never crossed Rs500 crore in
previous years, said Sinha.
Some broadcasters are look-
ing to sign lucrative sponsor-
ship deals for telecasts. Neo
Sports Broadcast Pvt. Ltd could
announce a sponsorship deal

India’s northern-most state with the rest of the gain, its benefits need to be palpable to all. The SA L MA N RUSHD I E
Both are cases of what are not overwhelmed by their lips at the prospect of get- with Tata Docomo, the new
known as information panic-stricken citizens. ting a juicy slice of the between GSM (a cellular technology
Rs400 crore and Rs650 crore of Netting advertisers: The third cricket Test match of the Ashes series.
Mint is also available for Rs5.50 with Hindustan Times under a combo offer advertising cricket telecasts TURN TO BACK PAGE ® Cricket channels’ gain could be general entertainment channels’ loss.

country. Monday’s action is in line with the eventual economic outcome may hold the key.

MY VIEW | THE IMPARTIAL SPECTATOR

The trouble with legislation that’s difficult to enforce

severe punishment can be used to deter
SHRUTI RAJAGOPALAN individuals from breaking rules. As India
develops more state capacity in the future,
these laws will be primed for better enforce-
ment. Unfortunately, this view does not take
into account the kind of incentives created
ing the rule. In other words, it is not only the reduces the probability of being punished. simply overload the system and cannot be
severity of punishment, but also the proba- Therefore, when enforcement resources enforced.
bility of facing the severe punishment that are constrained, the expected value of the The second is to pass laws that actually
deters rule violations. penalty facing potential violators falls as the increase state capacity by increasing the per-
The more counter-intuitive problem is frequency of violation rises. The late Mark sonnel that enforce the laws. India has only
that stronger penalties that are under-en- Kleiman dubbed this “enforcement swamp- 12-15 judges per million compared to 110 per

L
ast week, Parliament hastily passed
three bills. The Protection of Children
from Sexual Offences (Amendment)
Bill, 2019, aims to increase the severity of
punishment for sexual offences against chil-
dren. The Code on Wages Bill, 2019, repla-
ces four existing laws regulating wages, cov-
ers 500 million workers, and establishes
by under-enforcement and its unintended
consequences.
There are three problems with passing
laws without the capacity to enforce them.
The first is that low capacity to enforce leads
to arbitrary enforcement. So, some individu-
als will get away while others will be pun-
ished. This tends not to be random. Typi-
forced may actually incentivize more rule ing”. Consequently, the third effect is that million in the US. Similarly, India has about
violation. When the even sensibly crafted pre- 129 police personnel per 100,000 citizens.
enforcement infrastruc- existing laws that were Only Uganda fares worse. Worse still,
ture is overloaded, this also Well intentioned enforced to some degree 20-25% of allotted police positions are
affects pre-existing laws will now be enforced to a vacant. To meet the UN recommended ratio,
and not just newly passed laws without the less degree because of India is short of half-a-million policemen.
legislation. overloading of the enforce- The overburdening of judges and the police
The probability of being
capacity to ment infrastructure. More also holds true for traffic police, inspectors

is assistant professor of
floors for wages and overtime as well as pen-
alties and criminal punishments for violat-
economics, Purchase College,
State University of New York
ing these rules. The Companies (Amend-
ment) Bill, 2019, criminalizes violations of
the spending provisions of money meant for
corporate social responsibility activities. On
the face of it, these are all well-meaning laws.
However, aside from specific problems in
each of them, they suffer from the common
malady that they are likely to be extremely
under-enforced because of weak state
capacity. This raises the question—should
Parliament pass laws that the government
cannot enforce?
One view is that it is better to have these
strong laws on the books, as the prospect of
cally, rich and politically well-connected
individuals get away. Selective enforcement
can also be pernicious, where the govern-
ment uses these laws to punish its Opposition
or target particular groups and individuals.
Second, a rule violator weighs the
expected costs and benefits of breaking a
rule. The expected cost is the cost of break-
ing the rule, i.e. the punishment/fine, multi-
plied by the probability of getting caught,
which is determined by how universally and
well the law is enforced. If the punishment
or the probability of getting caught is too low
because the law is under-enforced, then
expected costs might be relatively low, com-
pared to the expected benefits from break-
punished is a function of
the total amount of crime
enforce them individuals will be incen-
tivized to break those laws,
and bureaucrats. In addition to personnel,
India requires the accompanying infrastruc-
that occurs in any given
society. As the total
may result in resulting in more criminal
behaviour in society.
ture to reduce processing times and thus
congestion in its criminal justice system.
amount of crime increases, even more In sum, passing well The third step is to free up existing state
criminal justice enforce- intentioned laws with capacity by reducing or repealing onerous
ment resources are rule violation severe punishments with- regulations in almost every area of social and
strained, the police are out accounting for state economic conduct. Streamlining and
overworked, courts con- capacity can create very shrinking the ambit of the regulatory state to
gested and prisons overcrowded. As a result, harmful effects in society that are not easy to a size that can actually be effectively
proportionately fewer criminals are appre- reverse. Increasing the amount of crime in enforced will free up precious capacity that
hended, convicted and imprisoned. One society by criminalizing much more, with- will help increase enforcement in all other
simple way by which more crime occurs in out the state capacity to enforce penalties, areas.
society is criminalizing more activities. To can actually incentivize more rule violators. The severity of punishment is not a substi-
deter certain actions by criminalizing them What is the way out? tute for state capacity. Parliament would do
increases the amount of crime in society and The first step is to stop passing laws that well to recognize this while framing laws.
 VIEWS TUESDAY, 6 AUGUST 2019
MUMBAI 17

MY VIEW | A VISIBLE HAND G LO B A L VO I C E S

India’s competition policy must El Paso shooting confirms an ugly truth: racism

A s usual, facts and truth are elusive in the hours after a mass shooting. Early

keep up with emerging threats reports on the murderous rampage at an El Paso shopping mall put the death
toll at at least 20, with more people hospitalized with grave injuries. Chillingly, but
not surprisingly, police were investigating whether anti-immigrant statements
posted online were written by the alleged gunman, and whether such details pro-
vide a path to understanding this latest mass atrocity. It wouldn’t be a sucker’s bet
to wager that it was a semiautomatic combat-style firearm, which seems to be the
The Competition Act of 2002 is inadequate to deal with abuses of monopoly power in a changing business environment weapon style of choice.
They are designed to kill as many people as possible in a short period of time, and
once again that truism has proved itself out in the bloody slaughter of people doing
RAMEGOWDA BOPAIAH/MINT their Saturday shopping. Is there any outrage left in the depleted well to draw on
here? Or do we just wait for the gun enthusiasts to shake their heads, offer thoughts
and prayers, and mumble as the political system continues its stasis on the vital
issue of gun violence and the threat to the lives of everyday Americans — every day?
But moving on. All too often these attacks are perpetrated by assailants who are
either directly motivated by racial hatred or informed by it... According to the Gun
Violence Archive, there have been 250 mass shootings... Yet this passes for normal.
Because as a nation, we accept it.
Los Angeles Times

NARAYAN RAMACHANDRAN
is chairman, InKlude Labs. Read Narayan’s Mint
columns at www.livemint.com/avisiblehand Time to stop coddling state-owned banks

I t is good to see the finance minister finally instruct the new management of Basic
Bank to shut down -- for good -- all the branches that had been incurring losses
for three consecutive years. This directive is long overdue, no doubt. Time and
again, the government has coddled and bailed out loss-making state-owned banks
[SoBs], hoping things will change; but they never do, and the bad loans just pile up.

T
he combined market capitalization of
just four companies—Facebook, Apple,
Alphabet (Google) and Amazon—is
greater than the gross domestic prod-
uct (GDP) of India. In the US, in China
and, of late, in India, corporations
which have a disproportionately large share of
their consumer markets are rising. The current
regulatory architecture is woefully inadequate to
comprehend and determine whether this corpo-
rate concentration gives rise to monopoly power.
The dictionary definition of monopoly is “a
market situation where one firm, or a group of
firms acting in concert, controls the supply of a
good or a service”. Historically, the economic
implication of this has been synonymous with high
prices and the restriction of output. The intent and
structure of regulation around the world has there-
fore attempted to mitigate or break up monopolies
in an attempt to negate this abusive pricing power.
Even though competition laws have been
around for 2,000 years, the design and intellectual
roots of the current framework for competition
policy and anti-monopoly regulation, called anti-
trust in the US, can be traced to justice Louis
Brandeis of the US supreme court (1916-1939).
Brandeis, using Madisonian principles, argued that
there should be a democratic distribution of power
and opportunity in the political economy and that
“industrial liberty” must go hand-in-hand with
political and religious liberty. With significant
inputs from the Chicago school, this “Brandeis
philosophy” has morphed into one of consumer
welfare, measured principally by the price paid by
consumers as the test of policy effectiveness. The
laws codified in the US before World War II were
transferred to Germany and Japan after the war
and became the basis upon which competition
policy was documented in the European Union
(EU) and beyond.
In the US and Europe, the increase in corporate
concentration has led to a lot of discussion about
the limitations of current law. The EU, and its com-
petition tsarina, Margrethe Vestager, have used
existing competition regulation to examine the
“abuse of market concentration” with some zeal.
Most recent rulings on disrupting competition and
the abuse of market power in the international
arena have come about in the EU. Landmark
rulings came in 2004 against the “lack of interop-
erability” of the Microsoft operating system and in
2017 against Google’s Android operating system.
In the US, discussion among a group of thinkers
called “the New-Brandeisians” is pushing lawmak-
ers to jettison short-term price effects as the sole
determinant of abuse. Lina Khan, a leading compe-
tition attorney, in a Yale Law Journal article titled
Amazon’s Antitrust Paradox, wrote that “it doesn’t
matter if companies like Amazon are making
things cheaper in dollars if they are using preda-
tory pricing strategies to dominate multiple indus-
tries and choke off competition and choice”.
Competition policy in India is governed by the
Competition Act of 2002. This Act establishes the
Competition Commission as the arbiter of any
activities that may have an “adverse effect on com-
petition in India”. The Act is now inadequate to
deal with the changing business environment in
telecommunications, technology and e-com-
merce, and the government’s own role in distort-
ing competition. The same deficiency that plagues
the rest of the world, namely a requirement of
“dominance” and a test of price “increases”
restricts the commission from challenging abuse.
Today, consumer data and behaviour is the
“asset” around which a monopoly or an oligopoly
can exist. Private corporations or the government
can abuse this asset by monopolizing it to deliver a
range of goods and services. A government may
abuse its power to regulate by preferring large
domestic corporations over foreign ones, or by
interfering in pricing. In India, you are beginning
to see emerging corporate concentrations in con-
sumer industries related to data and e-commerce
and payments. The government’s role has been
schizophrenic; for instance, on one hand, creating
the only truly interoperable backbone in the world
I t appeared to be a well-intentioned plan by technology giant Huawei to tie its pro-
for payments (the Unified Payments Interface), but
on the other interfering directly in the payments
industry by abolishing the merchant discount rate,
and promoting a government-created consumer
app called Bhim. The long-standing Indian inter-
ference tradition has led to landmark interventions
that include the nationalization of banks (1969),
abolishment of front-end loads for mutual fund
sales (2009) and the wide-spread subsidy for LPG
sales (until it was changed recently).
The government has put out a draft e-commerce
P ain and pride are never far apart in Poland’s long history of suffering at the hand
policy for discussion that brings up some of these
issues—such as predatory pricing and consumer
data abuse. This limited update of competition
policy is wholly inadequate. An updated competi-
tion policy in India must simultaneously focus on
the objectives of free and fair competition, con-
sumer welfare and the abuse of monopoly power
wielded by government and companies. The Com-
petition Commission must have the authority (and
the will) to investigate and charge the government
with “distortion of competition” if it interferes
micro-economically with pricing or arbitrarily
favours private companies with regulation.
PS: “The greatest dangers to liberty lurk in the
insidious encroachment by men of zeal, well
meaning but without understanding,” said
Louis Brandeis.
The ailing Basic Bank had received thousands of crores from the government in
an ill-advised recapitalization program, but their poor performance continues.
Why must SoBs be protected like this, when the private sector has to perform or
perish? Indeed, private banks have outperformed SoBs in every aspect: Not only
do they consistently demonstrate greater efficiency, but they tend to be free from
political influence and the corruption that tends to plague state-owned banks.
Bangladesh is at a crucial juncture in its economic history, as we stand on the verge
of finally becoming a middle-income country, and a formidable player in global
business... Enough money has been drained on white elephants like loss-making
state-owned banks; it is time for a systemic change, and it is time to shut some of
them down.
The Dhaka Tribune
When discounts prove to be costly
motional offer of a smartphone for just $54 to Singapore’s 54th National Day cele-
brations this year. Indeed, the discount was a substantial one for the Huawei Y6 Pro
2019, which costs $198. The three-day promotional offer by the company was tar-
geted specifically at Singaporeans and permanent residents above the age of 50 as
this demographic reinforces the idea of Singapore’s longevity and success since the
country’s sudden independence in 1965. What could have been a feather in Hua-
wei’s Singapore’s cap turned ugly, when thousands of people, responding to the
generous discount, turned up at stores only to be told that the phones were out of
stock.
The episode will be remembered as an example of planning and management
having gone wrong that it has now also raised questions about whether Huawei
breached consumer protection laws and advertising guidelines in its promotion...
The cynical might wonder whether the promotion did succeed , since it does not
make financial sense to sell a product at a reduced price. However, the company
disappointed many people whose feelings amplified in the media, hurt its corpo-
rate image. Huawei has apologised and decided to give $100 vouchers to those who
registered at its stores to purchase the phone between July 26 and July 28.
The Straits Times, Singapore
Anti-LGBTQ+ sentiment spinning out of control
of its neighbours. Last week the country came to a standstill to remember one
of its most proud and painful moments: the Warsaw Uprising in 1944 against the
Nazi occupation. Beginning on August 1st the Polish home army, tired of waiting
for Allied assistance, rose up against occupying Nazi forces in the Polish capital.
After 63 desperate days, outnumbered and outarmed, the Poles capitulated on
October 2nd... The Uprising is a terrible reminder of the tyranny of a war instigated
by Nazi political poison, that Slavs, Jews or other peoples were somehow “inferior”
—or even a threat—to Aryan Germans. When the anniversary passes, however,
Poland’s ruling Law and Justice (PiS) party will switch from victim to perpetrator,
spreading poison of their own.
With an autumn election to win, PiS has realised that anti-Semitic and anti-immi-
grant incitement are no longer as effective as they once were. So PiS leader Jaroslaw
Kaczynski has found a new scapegoat. The LGBTI community are now a seminal
threat, he argues, to Polish identity, families and traditional values... PiS officials
alternate between condemning LGBTI “ideology” and condemning the resulting
violence against the LGBTI community. Polish society is more polarised than ever
and not even history is safe.
The Irish Times

MY VIEW | IT MATTERS

The making of cyborgs and the challenges ahead

of research and development is “cognitive
SIDDHARTH PAI neuroprosthetics”: devices that directly
interface with the brain to improve memory,
attention, emotion and much more. Ming
labels herself a “mad scientist”. After she
learned that her son was autistic, she put her
tery life. Batteries impact an intervention’s
cost and lifetime, a device’s size and weight,
the need for repeat surgeries and problems
of tissue-heating and performance compro-
mises. This is due to the relatively high
power consumption of the electronics for a
setts Institute of Technology (MIT). He and
his collaborator, Dr. Mohan Kumar, a scien-
tist with interests in ultra-low-power weara-
ble systems for medical devices, have
formed a firm called Neubionix to further
develop Sarpeshkar’s patents from the time
semiconductor patent portfolio developed
at MIT. Most of these patents have already
been fabricated to generate chipsets that
have been validated in lab and animal trials.
Some of these chipsets and systems, espe-
cially related to cochlear (ear) implants, have

O
n 13 July, The Guardian reported on
an extraordinary medical trial. The
trial restored partial sight to six
blind people via an implant that transmits
video images directly to the brain. The trial
was made possible by experts from Baylor
College of Medicine in Texas and from the
University of California at Los Angeles. The
research to work to build a face- and expres-
sion-recognition system for Google Glass
designed to interpret others’ facial expres-
sions in real time. Ming wrote in a blog post
(bit.ly/2Y7OU25): “I’ve chosen to turn my son
into a cyborg and change the definition of
what it means to be human. But do my son’s
engineered superpowers make him more
given performance requirement. The he was at MIT. One of the most fascinating of been tested on human subjects in a lab.
National Institutes of these is a flexible chip-type According to Kumar and Sarpeshkar, the
Health in the US opines implant that harnesses glu- global neuromodulation market is expected
that pacemaker batteries Attempts at cose present in the body to reach $11 billion by 2022, registering an
last between 5-15 years, but and converts it into electri- annual average growth pace of 13.1% from
their average lifespan is 6-7 melding man cal energy that can power a 2016 to 2022. Spinal cord stimulation and
years; a doctor has to oper- neurological implant. deep brain stimulation are major target
ate again after about 7 years
with machine The problem of battery applications. Neuromodulation is the most

is founder of Siana Capital, a

technology is not proven on those who are
born blind, but nonetheless, represents a
venture fund management
company focused on tech
phenomenal breakthrough in the area of
implants. The leader of the study, neurosur-
geon Dr Daniel Yoshor, said his team was
“still a long way from what we hope to
achieve”, but added that “this is an exciting
time in neuroscience and neurotechnology,
and I feel that within my lifetime we can
restore functional sight to the blind”. The
device used was called Orion, which feeds
images from a camera directly to the brain.
Meanwhile, theoretical neuroscientist
Vivienne Ming has been getting attention
after she announced that she was trying to
turn her autistic son into a “cyborg”. Her area
human, or less?” This is a philosophical ques-
tion, and one that must indeed be pondered
by anyone who attempts to tamper with the
human body with technology that is still
experimental. Nevertheless, it is break-
throughs like Orion’s and Ming’s system that
push the frontiers of science and medicine.
While these breakthroughs are exciting,
almost all attempts at melding man with
machine come with a common problem.
And, this is a problem that ranges from the
(lowly) cardiac pacemaker all the way
through to ultra-fine implants that stimulate
the central nervous system. Current neuro-
modulation systems need surgical implanta-
tion of bulky components with a limited bat-
to replace either the bat-
tery or the pacemaker
face a problem
itself. Imagine this process
for a fine ocular implant in
of bulky parts
a blind person’s eye! with limited
What is fascinating is
that science has begun to battery life
tackle this problem
head-on. One researcher in
particular has made much progress in the
field. He is Prof. Rahul Sarpeshkar, an old
schoolmate of mine whom I have known for
over 40 years. Sarpeshkar holds dozens of
patents in his name and has four concurrent
professorships at Dartmouth, where he has
moved after many years at the Massachu-
size can be tackled, to a
large extent, by reducing
the power consumption
and operating the elec-
tronics near fundamental
levels of physics. Achieving
a higher number of chan-
nels, better signal-to-noise
ratio and improved flexi-
bility and robustness while working at ultra-
low power can significantly lower implant
sizes without sacrificing performance. Neu-
bionix, which is now incubated at the Soci-
ety for Innovation and Development at the
Indian Institute of Science, intends to build
on about 15-plus years of an ultra-low power
lucrative sector in the European neurologi-
cal device market, accounting for over half
the revenue. In India, it is estimated that
about 30 million people suffer from various
forms of neurological diseases and the aver-
age prevalence rate is as high as 2,394
patients per 100,000 of the population. As
opposed to Western societies, we have a dif-
ferent problem here. Current neuromodula-
tion devices cost between $10,000 and
$40,000, putting them out of reach for
many Indians. Neubionix intends to create
a platform that developers of neuromodula-
tion devices can draw upon to power their
devices. I hope that such an approach will
also make them affordable.
18 TUESDAY, 6 AUGUST 2019
MUMBAI POLITICS

HT

FM meets bankers, assures help

in resolving industry’s concerns
Sitharaman will over the next few days meet representatives from various sectors to hear their concerns
Shreya Nandi man said she will not speculate on
shreya.n@livemint.com the number of tranches and the
NEW DELHI finance ministry has done nothing
in this regard, besides the

F
inance minister Nirmala announcement in the budget,
Sitharaman said on Mon- owing to commitments in the Delhi
airport to
day that the government ongoing Parliament session. have 4
Only Indian couples who have been married for at least five years
plans to take policy meas- During the March quarter, runways, a will be allowed to opt for surrogacy, as per provisions of the bill.
ures “fairly quickly” to India’s economy grew at 5.8%, the first in India
address the challenges plaguing
the industry. She said also that the
government is open to hearing out
slowest in five years. Growth in
2018-19 was 6.8%, down from 7.2%
a year ago. Besides the slowdown
bit.ly/2Ynlj5L
Lok Sabha gives nod
the grievances of foreign portfolio
investors (FPIs).
The minister was speaking to
in fresh private investments, sub-
dued demand and stress at non-
banking financial companies
to legislation that bans
reporters after meeting chief exec- (NBFCs) are affecting growth.
utives of private and state-run
banks as she kicked off a series of
In signs of a persistent slow-
down, India’s automobile makers
commercial surrogacy
meetings planned with various are finding it hard to sell vehicles,
industry heads. She met the heads and NBFCs and MSMEs are strug- Neetu Chandra Sharma act as a surrogate mother only
of State Bank of India (SBI), ICICI gling to access credit. neetu.s@livemint.com once, must be aged 25-35
Bank, Axis Bank, Punjab National Overall credit growth continues NEW DELHI years, and a close relative of
Bank and Kotak Mahindra Bank to be at 12%, which is marginally the couple, besides being a

T
among others. The meeting also Finance minister Nirmala Sitharaman with finance secretary Rajiv Kumar in New Delhi on Monday. PTI lower than 13.3% at the end of he Lok Sabha on Mon- married woman with a child of
discussed the credit requirements March, the finance ministry said in day passed the Surro- her own, according to the bill.
of non-bank lenders, automobile from several sectors —FPIs, auto- way acknowledging the ongoing Union budget announcement to a statement after the meeting. gacy (Regulation) Bill, It also ensures that there will
industry and micro, small and makers, industry associations, economic slowdown and the gov- impose higher surcharge on some “At the same time, with turn- 2019, which seeks to ban com- be no exchange of money
medium enterprises (MSMEs), financial markets, MSMEs, indus- ernment’s willingness to take of these investors. around in the NPA cycle, high pro- mercial surrogacy and allows between the relative who vol-
and the transmission of interest try associations and real estate to inputs from businesses. Bankers who attended the vision cover of over 75%, and only close relatives of infertile unteers for being a surrogate
rate cuts to the economy. listen to their challenges. This is Sitharaman said the economic meeting sought the government’s record recovery, banks’ balance couples to volunteer for “ethi- mother and the couple.
“Behind the series of intervention on tax noti- sheet are healthier than before. cal altruistic” reasons. Several political parties,
meetings is to hear them WILL HEAR FPI CONCERNS: FM ces asking lenders to pay Banks are now, therefore, in posi- “It is the ‘need of the hour’ to including the Congress, DMK,
out and fairly quickly service tax and Goods and tion to step up lending,” said a have such a bill and it is unfor- CPI(M), and the National Con-
after that come out with THIS is the first time THE minister said BANKERS sought the THE automakers are Services Tax (GST) on finance ministry statement. tunate that the country had ference opposed the bill. How-
something that will help in the second term
of the NDA that the
the govt is open to
hearing out what
govt’s intervention on finding it hard to sell
tax notices asking vehicles, and NBFCs
minimum balance MoS for finance Anurag Tha- emerged as a hub of commer- ever, B.V. Satyavathi from
those sectors...We are FM is meeting top representatives of lenders to pay service are struggling to accounts. Banks will soon kur, finance secretary Rajiv cial surrogacy in recent years,” YSRCP supported the bill, say-
getting inputs from vari- executives FPIs have to say tax and GST access credit respond to the notices, Kumar, economic affairs secretary Union health minister Harsh ing that the infertility rate in
ous sectors and trying to Sitharaman said, adding Atanu Chakraborty, expenditure Vardhan said during the dis- the country was on a rise.
respond so that the confi- Jan Dhan accounts and secretary G.C. Murmu, revenue cussion on the bill. The bill, which was passed
dence of those sectors is being the first time the finance minister affairs secretary will soon hold basic deposit and savings accounts secretary Ajay Bhushan Pandey, “According to rough esti- by a voice vote, also prohibits
restored,” Sitharaman said. is meeting top executives in the talks with FPIs on their problems. do not attract any charges. RBI deputy governor NS Vishawa- mates, there are 2,000-3000 the sale and purchase of
Over the next few days, the min- second term of the National Dem- There has been a massive outflow On the decision to borrow over- nathan, were among those who surrogacy clinics running ille- human embryos and gametes.
ister will meet representatives ocratic Alliance government, in a of overseas funds following the seas in foreign currency, Sithara- attended the meeting. gally in India and a few thou- The government has claimed
sand foreign couples resort to that it will also prevent exploi-
surrogacy practice within tation of surrogate mothers
India, and the whole issue is and children born through
thoroughly unregulated. surrogacy.
There have been reports con- In recent years, India

Centre eyes newer EV AAP backs move to revoke J&K special status cerning unethical practices, emerged as a commercial des-
abandonment of children tination for foreigners seeking
born out of surrogacy and surrogate mothers. There

battery technologies to Pretika Khanna

pretika.k@livemint.com
statehood. The government
held a special session of the
exploitation of surrogate have been reports on unethi-
mothers,” said Harsh Vardhan. cal practices, exploitation of
The minister cited the surrogate mothers, abandon-

retain energy security NEW DELHI assembly to pass a resolution

making the demand. Senior
228th report of
the Law Com- The bill, which
ment of children
born out of surro-

D
elhi’s ruling Aam AAP leaders on various occa- mission, which was passed by a gacy, and rackets
Aadmi Party (AAP) has sions have alleged that the recommended voice vote, also involving inter-
Utpal Bhaskar backed the move to lieutenant governor (L-G) was that the govern- prohibits the sale mediaries import-
revoke special status for preventing the government ment enact a leg-
and purchase of i n g human
utpal.b@livemint.com
NEW DELHI Jammu and Kashmir, in a key from working. The AAP-led islation to ensure embryos and
shift of stand for the party Delhi government has been that commercial human embryos gametes.
and gametes

T
he Union government is seeking full statehood for the trying to get the support of surrogacy is Women’s rights
exploring advanced bat- national capital. Opposition parties on the banned in this activists have sup-
tery technologies, such Delhi is a Union territory issue. country and ported the pas-
as polymer-based solid state where matters of land, and In the run-up to the general there is only restrictive surro- sage of the bill. “We welcome
cells, as part of a strategy to law and order come under the elections this year, Telugu gacy. the passage of the Surrogacy
avoid over-reliance on lithium purview of the Central gov- Desam Party (TDP) also held a The bill also aims to consti- (Regulation) Bill in the Lok
or cobalt imports, to retain ernment. This has been the Delhi chief minister Arvind Kejriwal. PTI day-long protest in the tute surrogacy boards at the Sabha today. It is based on the
India’s energy security. main point of contention national capital to demand national and state levels. findings and policy recom-
This strategic initiative between the state and Central pared as they have different pare Delhi and Jammu and special status for Andhra Pra- Only Indian couples who mendations of two research
comes in the backdrop of Chi- governments since the AAP issues, and security remains a Kashmir. The overall situa- desh. have been married for at least studies and one national-level,
nese state-owned firms secur- Almost all EVs in India have came to power in 2015. key concern in tion in Kashmir is However, the AAP failed to five years will be allowed to opt multi-stakeholder consulta-
ing concessions in lithium imported batteries, mostly “We support the govern- the border state Senior AAP way different win any of the seven Lok for surrogacy, according to the tion conducted by CSR against
mines in Bolivia, Argentina and from China. PRADEEP GAUR/MINT ment on its decisions on J & K. of Jammu and leaders said Delhi, from Delhi’s,” Sabha seats in Delhi while the provisions of the bill. Couples commercial surrogacy and for
Chile, which form the so-called We hope this will bring peace Kashmir. and Jammu and Saurabh Bhar- TDP managed to win only who intend to opt for surro- formulation of a National Reg-
lithium triangle. an escalation of tensions in the and development in the “We support Kashmir cannot adwaj, the party’s three Lok Sabha constituen- gacy should not abandon such ulatory Board,” said Manasi
The Centre’s aim is to avoid a Persian Gulf and the Organiza- state,” AAP national convener decisions that chief spokesper- cies out of 25. children under any condition. Mishra, head of the research
be compared
supply squeeze as is the case tion of the Petroleum Export- and Delhi chief minister Arv- are taken by the son told report- Article 370 of the Constitu- The bill aims to allow ethical division, Centre for Social
with crude oil, considering that ing Countries-plus arrange- ind Kejriwal tweeted soon Centre in the as both have ers. tion is a temporary provision altruistic surrogacy for infer- Research (CSR).
India is now the world’s third- ment agreeing to extend output after the bill was taken up for country’s inter- different issues In the run-up which promises to grant tile Indian married couples, The Union Cabinet had
largest oil importer. cuts on crude oil. India is partic- discussion in the Upper est and we to the general autonomous status to Jammu within the age group of 23-50 introduced the bill in July.
Almost all electric vehicles ularly vulnerable as it imports House. oppose if deci- election, the and Kashmir and limits Par- and 26-55 years for females This was passed by the 16th
(EVs) in India have imported over 80% of its oil needs and Senior AAP leaders said the sions are not in the country’s AAP’s campaign was centred liament’s powers to make and males, respectively. A Lok Sabha, but lapsed after the
batteries, mostly from China, about 18% of its natural gas. two regions cannot be com- interest. It is not right to com- around the demand for full laws for the state. woman should be allowed to dissolution of the House.
and lithium-ion batteries make “The technology is evolving
up about 40% of the total cost of every day. Some of the
an EV. Lithium is also used in advanced chemistry cells that
mobile phone batteries and offer an alternative to lithium
solar panels. storage batteries are metal

one
“Why should we substitute hydride, zinc air, sodium air
energy
import source
with another and
The aim is to
prevent India
and nickel zinc
among others,”
said the official
Government scraps special status for Jammu & Kashmir
become hostage from falling into quoted above. FROM PAGE 1 The die was cast after Parlia- political instincts. Speaking in the Rajya Sabha
to external condi- a vulnerable Given the ment was informed that Shah Among the parties that during the debate, members of
tions. That’s the changing global of Jammu and Kashmir, Parlia- would be making a statement played a crucial role in getting YSRCP termed the govern-
position with any
reason why this energy landscape, ment needs the state govern- in the Rajya Sabha. the bill passed were the Biju ment’s move as historic. “The
approach is being threat of a supply India has set up a ment’s ratification for all other Interestingly, the step taken Janata Dal (BJD), Bahujan government will be remem-
explored. Once squeeze National Mission laws. by the BJP leadership comes Samaj Party (BSP), Aam Aadmi bered for this for all time to
enough invest- on Transforma- The move, part of a long- just two months after it Party and Telugu Desam Party come and Jammu and Kash-
ments happen in a tive Mobility and standing poll promise of BJP, returned to power with a (TDP). mir will see a new change,”
particular technology, we Battery Storage. An inter- min- was passed after nearly eight majority, winning 303 seats on “In a real sense today, said Vijay Sai Reddy of YSRCP.
won’t be able to do much,” said isterial steering committee has hours of debate, in which the its own and 353 as part of the Jammu and Kashmir has However, NDA was divided
a senior government official also been set up, chaired by opposition, particularly the National Democratic Alliance become a part of India. My on the issue as Bihar chief min-
associated with India’s EV pro- NITI Aayog CEO Amitabh Congress, found itself in a cor- (NDA). A resurgent BJP-NDA party supports this resolution. ister Nitish Kumar’s Janata Dal
gramme, on condition of ano- Kant. The panel comprises sec- ner—several opposition par- has since managed to push its We are a regional party but for (United) opposed the move in
nymity. retaries from the ministries of ties including the Bahujan legislative agenda. Senior Congress leader P. Chidambaram, leader of Opposition in us nation is first,” said Pra- the Upper House and said that
Mint reported on 25 July that road transport and highways, Samaj Party and Aam Aadmi The decision is significant Rajya Sabha Ghulam Nabi Azad and other Opposition leaders. PTI sanna Acharya, BJD’s Rajya Article 370 should not be
the EV programme aims to be power, new and renewable Party voted for the amend- because it is part of the three Sabha member. revoked.
technology-agnostic, meaning energy, and the departments of ments. core items on BJP’s agenda— only way out to resolve the cri- are people of different reli- Among other parties that “Our chief Nitish Kumar is
it will be left to the market to science and technology, heavy The move to change J&K’s revocation of Article 370 is an sis and deadlock in Kashmir. It gions in the valley and we are have supported NDA are YSR carrying forward the tradition
determine which technology is industries, industrial policy status came against the back- electoral promise since the will take some time, but this is not politicizing on the basis of Congress Party (YSRCP) and of J.P. Narayan, Ram Manohar
best suited, based on demand and promotion. drop of a steady build-up. The formation of the Bhartiya Jana the only way.” religion. The people of J&K All India Anna Dravida Mun- Lohia and George Fernandes.
and price. The panel also has director buzz had grown in recent Sangh, the earlier version of Shah said the changes were want democracy and if you see netra Kazhagam (AIADMK). So, our party is not supporting
As India prepares to switch to general of the Bureau of Indian weeks, especially after 30,000 BJP. The two other promises above legal scrutiny and were clearly, you will know how “Our party gives complete the bill moved in the Rajya
EVs to curb pollution and cut its Standards as a member, with additional security personnel are construction of Ram tem- needed to eradicate terrorism much Article 370 has harmed support. We want that the bill Sabha today. We have a differ-
dependence on foreign crude some committee meetings also were despatched to the state. ple at the disputed site in Ayo- from the region. J&K,” he added. be passed. Our party is not ent thinking. We want that
oil, policy planners are con- attended by the secretaries of The scheduling of a Union dhya and implementation of “Because of Article 370, Although the ruling NDA expressing any opposition to Article 370 should not be
scious of the dependence on the ministries of mines, elec- cabinet meeting in the first the uniform civil code. democracy has never perco- does not have a majority in the Article 370 bill and the other revoked,” said K. C. Tyagi, sen-
energy imports, specifically tronics and information tech- half of Monday reinforced the Addressing members of the lated, corruption was at its Upper House, the government bill,” said Satish Chandra ior leader of JD(U).
from West Asia. This has put nology and environment, for- perception that the govern- Rajya Sabha, Shah said: peak and poverty was once again demonstrated its Mishra, BSP’s Rajya Sabha PTI contributed to this story.
India in a vulnerable spot amid est and climate change. ment was poised to go ahead. “Repealing Article 370 is the entrenched in the area. There deft floor management and member. gyan.v@livemint.com
 POLITICS TUESDAY, 6 AUGUST 2019
MUMBAI 19

Will NMC bring transparency in EXPERT

VIEW
the medical education system? G AU TA M BA M BAWA L E

Respond to this column at

feedback@livemint.com

Bill attempts to set up a regulatory body with a clean image in place of the MCI marred by corruption
GLOBAL FALLOUT
Neetu Chandra Sharma ical register is being opposed, but
OF GOVT’S MOVE TO
neetu.s@livemint .com
NEW DELHI
it is one of the major reforms in
medical education with NMC.
There will be single National Eligi-
SCRAP ARTICLE 370

T
he medical education bility cum Entrance Test (NEET)
system in India is set to to admit students to all medical Hundreds
stuck in
witness significant colleges including AIIMS and JIP- Mumbai as
changes as the National MER along with a common coun- heavy rain
Medical Commission selling. The final-year exam of the disrupts rail
Bill, 2019 heads for implementa- MBBS course will now be called as service
tion. NEXT, it will also be treated as bit.ly/2YI5xBB
Last week, the Rajya Sabha entrance exam for PG courses,”
passed the bill with two amend- said Singhal.
ments—increased representation “We have included the skill-
from state medical council and based training during the intern- A file photo of Pakistan PM Imran Khan and US President
vice-chancellor of medical univer- ship period and MBBS course has Donald Trump. Islamabad will accelerate its efforts to further
sities—and referred it to the Lok been made competency-based. internationalize the Kashmir issue. REUTERS
Sabha, which too passed the This is one of the ways to measure

T
amendments on Monday. The bill the outcome of medical education he decision of the Modi government to scrap Article 370 is
will now go to the President for his which wasn’t there earlier. Now, mainly a domestic, internal decision of India, with several
assent. students can focus on internship implications for how Jammu and Kashmir is governed and
Seeking sweeping reforms to instead of preparing for PG administered. The question that pops into many people’s minds
medical education, largely exams,” he said. The NMC will is does this decision have any external, international or foreign
opposed by the medical fraternity, frame guidelines for determina- policy related dimensions?
the bill attempts to set up a regula- tion of fees and all other charges in First, we should fully expect Pakistan to protest this move. It
tory body called the National Med- The National Medical Commission Bill 2019 will now go to the President for his assent. MINT respect of 50% of seats in private is indeed strange that, where Kashmir is concerned, Pakistan is
ical Commission in place of the medical institutions and deemed a non-status quo nation which has ceaselessly attempted to
tainted Medical Council of India family welfare told Mint. and high quality medical profes- lation of course fees in private col- to be universities which are gov- change the ground situation in Kashmir, but when India makes
(MCI). According to the government, sionals in all parts of the country. leges. Section 15 (1) of the bill erned under the provisions of this its own domestic moves as it did yesterday, Pakistan is the loudest
“Marred by corruption, the MCI the NMC bill will provide for a The NMC will bring in changes in proposes a common final-year Act. “Before this, we never had the to voice its opinion against change. It will, doubtlessly, accelerate
underwent major judicial MBBS exam, the National power to regulate course fee. With its efforts to further internationalize the issue, arguing, as it has
interventions for last 20 SWEEPING REFORMS Exit Test (NEXT), before NMC, we will have some control done recently, that there is great danger to regional peace and
years. The government an individual starts prac- over fee in private colleges with stability due to India-Pakistan differences on this subject.
after major deliberations NMC will bring a BILL aims to provide IT will ensure EXIT exams and tising medicine and for 50% seats, that too will vary from Will Pakistan receive any support from the international com-
realized that the idea of a transparent era in
medical education,
improved access to
quality and
availability of
adequate and high
regulation of course
fees in private
seeking admission to state to state. More so, the state munity? Even as some people in India label the scrapping of Arti-
self-regulatory body said health affordable medical quality medical colleges are new post-graduate medical governments will have more cle 370 as the murder of democracy, we can be sure that there will
wasn’t fruitful. The NMC additional secretary education professionals provisions courses and for enrol- power and freedom to take their be a pushback from select members of the comity of nations on
will bring a very transpar- ment in the state register own decisions regarding fee,” said the subject of human rights in Jammu and Kashmir. There will
ent era in medical educa- or the national register. Singhal. “The bill is an outline. be criticism of curfew in Kashmir as
tion with eminent personalities medical education system that the way medical colleges are There will also be a screening test The rules, details of final frame- India needs to well as the preventive detention of cer-
running it for a single term of four improves access to quality and assessed, MBBS entrance are con- for foreign medical graduates. work, standard operating proce- be careful of tain individuals. Actors such as the
years,” Arun Singhal, additional affordable medical education, and ducted and bring in new provi- “The NEXT for getting a licence dures and modalities are yet to be Organization of Islamic Conference
secretary, ministry of health and ensures availability of adequate sions such as exit exams and regu- to practise and enrol into the med- developed by the government.” global players (OIC) and the United Nations High
itching to Commissioner for Human Rights may
mediate in the become active again.
Kashmir issue The rest of the world cannot say
much on the subject of doing away
with Article 370 itself, as that is

TDP to review election defeat on Plea seeks recording of Ayodhya trial entirely a domestic matter and decision for India and its govern-
ment to take. What can be highlighted is that there are elements
in India which do not agree with the move. However, the massive
recent mandate that was given by the people of India to the Nar-
14 August at Vijayawada meeting Japnam Kaur Bindra
japnam.b@livemint.com
NEW DELHI
INDIA TODAY GROUP
endra Modi-led National Democratic Alliance (NDA) govern-
ment will bolster the legitimacy of the decision.
What we will need to be careful about is that there are any
number of international players who have been itching to medi-
Yunus Y. Lasania

TDP leader, who did not want
yunus.l@livemint.com to be identified.
HYDERABAD The TDP is also expected to
take a decision on its future
T
he Supreme Court on ate. US President Donald Trump is only the latest in a longish list.
Monday agreed to con- China has in recent times been attempting to play mediator
sider—“on the adminis- between India and Pakistan, also indicating that they are the big
trative side”—a plea for live boys in this region. Readers may be unaware that the current Sec-

T
he Telugu Desam Party
(TDP) is set to hold a
major meeting with its
leaders, including those who
contested the 2019 Lok Sabha
and assembly elections, and
lost, on 14 August at Vijaya-
wada.
The party’s 160-member
general body, led by TDP chief
N. Chandrababu Naidu, will
also meet and review the rea-
sons for the loss in the elec-
tions to the ruling YSR Con-
gress Party (YSRCP). Naidu,
who was in the US for a health
check-up, will also address the
gathering.
In the 2019 Lok Sabha and
assembly elections, the
YSRCP won a staggering 151
out of the 175 assembly seats,
and 22 out of the 25 parlia-
mentary constituencies. The
TDP won just 23 assembly and
three Lok Sabha seats. The loss
had taken many senior leaders
by surprise.
TDP chief N. Chandrababu
Naidu MINT
“All our MLAs (members of
legislative assembly), MPs
(members of Parliament) and
members who contested the
elections and lost will be there
for a review. Other than that,
the party’s general body,
which has not met in a very
long time, will also be con-
vened for a meeting. There are
many issues to be discussed as
the workers at the lowest rung
are not really happy with some
senior leaders,” said a senior
course of action after losing
some of its members to the
Bharatiya Janata Party (BJP).
In June, four Rajya Sabha MPs
and some local leaders
switched sides to the BJP
when Naidu and his son Nara
Lokesh, the TDP general sec-
retary, were holidaying in
Europe.
This is likely to be one of the
TDP’s biggest review meetings
after the party’s loss to the
YSRCP in the 2019 elections.
So far, no major change has
been announced.
However, the TDP leader
mentioned above said that
Nara Lokesh may take over,
but could not say when that
would happen.
The TDP has to make some
radical changes in view of its
defeat in the 2019 elections,
said political analyst Palwai
Raghavendra Reddy. “Unless
they change the leadership, it
will not make any difference.”
streaming or recording of
hearings in the Ram Mandir-
Babri Masjid land dispute case.
The matter was mentioned
by senior advocate Vikas Singh
before Justice S.A. Bobde in
the Supreme Court.
The petition filed by K.N.
Govindacharya seeks live
streaming of the hearings
since, as according to the peti-
tion, the case “has created
large-scale interest across
India”.
Bobde said the court doesn’t
have the equipment and facili-
ties for live streaming. Singh
then submitted that, at the
very least, recordings of the
proceedings should be
allowed. Bobde rejected the
request, saying that such an
order cannot be passed in a
judicial court. He, however,
agreed to consider the request
on the administrative side.
Day-to-day hearings in the
Ayodhya land dispute will
retary General of the United Nations António Guterres has also,
on numerous occasions in private, offered to help out on this mat-
ter, despite being told on all these occasions that the subject will
be handled bilaterally. Pakistan will definitely step up its efforts
to get any or all of these personalities to play a role and we shall
Day-to-day hearings in the Ayodhya case will begin on Tuesday. have to very clearly convey our abhorrence to this as was done
recently by external affairs minister S. Jaishankar. India can with-
begin on Tuesday, the equally divided among the stand such pressure and our people need to understand this very
Supreme Court had ordered Sunni Waqf Board, Nirmohi clearly.
on Friday, noting Akhara, and Ram Conversely, we need to step up our game and push Pakistan on
that more than Live-streaming is Lalla. the back foot on the terrorism front. Whether at the UN or in bod-
four months of not possible, at The Supreme ies such as the Financial Action Task Force (FATF) we shall have
efforts at media- least recording of Court bench was to tighten the screws on Pakistan. The recent successes of the
tion between rival the proceedings earlier told by Indian Army in foiling infiltration attempts will have to be played
Hindu and Mus- Hindu bodies, up internationally.
should be
lim claimants had barring the Nir- One aspect of the changes being made in J&K, particularly in
failed. allowed, mohi Akhara, and making it a Union territory, is that both law and order within the
The mediation submitted lawyer the Uttar Pradesh territory as well as the defence of India will be in Delhi’s hands,
panel was formed government, that thereby making this a seamless activity and perhaps more effec-
in March and had they were not in tive. Hopefully, the level of cross-border infiltration and terror-
given its first status report last favour of mediation. ism will come down as a result.
month. Muslim bodies had sup- Therefore, while the scrapping of Article 370 is mainly a
Fourteen appeals have been ported the proposal. domestic issue for India, we should expect some fallout in the
filed before the Supreme On 6 December 1992, the international sphere for which there can be little doubt that our
Court against a 2010 Allaha- 16th century Babri Masjid was government has already prepared itself, including its diplomacy.
bad High Court judgement, demolished by pro-Hindutva Gautam Bambawale is a former Indian ambassador to Bhutan,
which said the disputed 22.7 groups who want a Ram tem- Pakistan and China. He is currently distinguished professor, Sym-
acres in Ayodhya should be ple built there. biosis International University, Pune.

by the Vidhan Sabha by a voice vote amid vociferous protest by

m SHORT TAKES the opposition Bharatiya Janata Party (BJP), which wanted the
Jalan panel to give report on RBI UK PM Johnson’s spokesman: We
Bill to be referred to a select committee. surplus reserves this month leave European Union on 31 Oct
“It is proposed to nip the evil in the bud and to prevent spread-
‘Parliament building of the largest ing of hatred or incitement to mob lynching by creating special
PRIYANKA PARASHAR/MINT
London: Britain will be leaving
AP

democracy should be magnificent’
New Delhi: Lok Sabha speaker Om Birla on Monday urged
Prime Minister Narendra Modi to include the modernization of
PTI Parliament building in his reso-
lution for the “New India” on
the completion of 75 years of
independence.
Presiding over the proceed-
ings of the Lok Sabha, he said it
is the aspiration of the members
of the House that Parliament
building of the world’s largest
democracy should be the most
magnificent and attractive. PTI
Rajasthan assembly passes
anti-mob lynching bill
Jaipur: The Rajasthan legislative assembly on Monday passed
a bill providing for life imprisonment and a fine up to ₹5 lakh to
convicts in cases of mob lynching involving the victim’s death.
The Rajasthan Protection from Lynching Bill, 2019 was passed
offences against such offences,” the statement of object and rea-
son of the bill said. Chief minister Ashok Gehlot had announced
to bring in the Bill while replying to the debate on state budget
on 16 July. PTI
Delhi airport plans expansion to
raise passenger capacity to 100 mn
New Delhi: The Delhi International Airport Ltd is planning a
major infrastructure expansion to increase its annual passenger
handling capacity from around
HT 66 million to 100 million by
2022, according to an official
statement on Monday.
The expansion plan, which
includes construction of a
fourth runway, would be com-
pleted by June 2022. ₹9,800
crore would be the capex for the
expansion plan, said I. Prabhak-
ara Rao, deputy managing
director, GMR Group. PTI
the European Union (EU) on 31
October no matter what, Prime
Minister Boris Johnson’s
spokesman said on Monday.
The spokesman also said that
Britain would keep reaching
out to counterparts in the EU in
search of an exit deal, and that
the government hoped the bloc
changed its position on the
so-called Irish backstop—a sticking point in negotiations.REUTERS
New Delhi: The Bimal Jalan committee, which was set up
to review the economic capital framework of the Reserve 72% polling recorded in Vellore
Bank of India (RBI), has initiated a consultation with the
new economic affairs secretary, Atanu Chakraborty, before
parliamentary constituency
finalizing its recommendations to the central bank, a per-
son privy to the discussions said after the panel’s meeting Chennai: Vellore parliamentary constituency recorded nearly
on Monday. 72% polling on Monday, officials said. There were no untoward
It will submit the report later this month after one more incidents, police said, even as there were reports of glitches in
meeting. “It is, however, yet to take a call on whether to electronic voting machines and voter-verified paper audit trails.
carry a dissent note by former economic affairs secretary Tamil Nadu chief electoral officer Satyabrata Sahoo said “about
S.C. Garg, who was recently shifted to the power ministry,” 72%” of the total 1.43 million voters cast their votes on Monday
he added. GIREESH CHANDRA PRASAD in the six Assembly constituencies covered under the Vellore Lok
Sabha segment. “The final figures are still awaited,” he said. PTI
 MUMBAI, NEW DELHI, BENGALURU, KOLKATA, CHENNAI, AHMEDABAD, HYDERABAD, CHANDIGARH*, PUNE*
DON’T MISS
Will NMC bring
transparency?
The medical education
system is set to witness
changes after NMC Bill
2019 is implemented.
See Page 19
Lok Sabha passes
surrogacy bill
Lok Sabha on Monday
passed surrogacy bill
that seeks to ban
commercial surrogacy in
India. See Page 18
TDP to hold review
meeting on 14 Aug
TDP is set to hold a
review meeting with its
leaders on 14 August at
Vijayawada.
See Page 19
Govt eyes new EV
battery tech
Govt is exploring newer
battery technologies to
avoid dependence on
lithium or cobalt
imports. See Page 18
TUESDAY, AUGUST 6, 2019
LIVEMINT.COM
Mufti, Omar detained after bill to
scrap Article 370 gets RS approval
Central govt steps up vigil to counter any law and order situation, state in complete security lockdown
Shaswati Das
shaswati.d@livemint.com
NEW DELHI
J
ammu and Kashmir’s former
Facebook, chief ministers Mehbooba
Instagram
restored
Mufti and Omar Abdullah
after global were arrested on Monday
outage evening, soon after a pro-
bit.ly/2M0hm0 posed law to revoke the spe-
7 cial status granted to the Himala-
yan state was cleared by the Rajya
Sabha, a government official said,
requesting anonymity.
Mufti and Abdullah were earlier
placed under house arrest on Sun-
day night, following the imposition
of Section 144 in the state. Both
have vociferously opposed the
scrapping of Article 370.
Meanwhile, a complete security
lockdown has been put in place in
Jammu and Kashmir following the
Union government’s decision on
Monday to scrap Article 370,
revoking the special status to the
state.
The Centre has also stepped up
vigil across the region to counter
any law and order situation.
The decision could lead to insta-
bility in the volatile state, contested
by both India and Pakistan. There
could be far-reaching consequen-
ces as the political leadership in
J&K, as well as the local population,
VOL. 2 NO. 187 Rs 6.00
‘RBI’S EXCESS CAPITAL MUST BE SITHARAMAN ON ARRESTING
TRANSFERRED TO GOVT ‘ uP12 SLOWDOWN IN ECONOMY uP18
TWITTERVERSE
Rajyavardhan Rathore
@Ra_THORe
Thank you @narendra-
modiji @AmitShahji.
This is the best homage
to all soldiers martyred
experts said that the move would
in Kashmir. #Article370
help the Centre establish perma-
going going .... (gone)
nent control over the region, while
diminishing the control exercised
by the separatists and militants in
the Valley.
“With this move, the Centre has
neutralized people who were
responsible for the security threat
in the valley. What it will do is Rahul Gandhi
throw up new leadership in the @RahulGandhi
area and that will reshape the dom- FM said in her budget
inance the Centre has over the speech that an elephant
region. The separatists fuelled radi- should take 2 pounds of
calization, and this is a ruthless rice & not trample the
entire paddy field.
response to that,” said D.P.K. Pillay,
Meanwhile, the IT dept
a former National Security Council
member, and research fellow at the elephant is running
Institute of Defence Studies and amok in a bid to meet
Analyses. India’s revenue short-
In a notification, the home min- fall.
Army personnel stand guard during restrictions, in Jammu on Monday. NITIN KANOTRA /HT istry said: “In the overall interest
and to strengthen national secu-
is vehemently troops, with an rity…it is essential that the occasion
opposed to the Cen-
LID ON BACKLASH additional is not allowed to be misused by
tre’s decision. RESTRICTIONS ALL communication CENTRE rushed 30,000 security inimical and anti-social elements to
The announce- have been imposed lines—landlines, 8,000 paramilitary personnel put cause breach of security, peace and
ment has also pushed in J&K under Section mobile phones and troops, with an on standby. public harmony in any part of the N Chandrababu Naidu
144 of the CrPC since data service— have additional 30,000 @ncbn
security forces on late Sunday been snapped personnel on standby Troops were country.” Home secretary Rajiv
overdrive to clamp airlifted from Gauba signed off on the order, Telugu Desam Party
down on possible Uttar Pradesh, instructing security forces and law supports Union Govt as
political and civilian backlash fol- alert. Odisha and Assam. enforcement agencies to be on the it seeks to repeal Article
lowing the decision to bifurcate While all tourists and Amarnath While the Centre asserted in the highest alert to thwart any security 370. I pray for the peace
Jammu and Kashmir and Ladakh Yatra pilgrims were asked to leave Rajya Sabha that the decision breach, and “...special attention and prosperity of the
into two Union territories. India’s the Valley by Monday night, the would transform governance in the may be paid to communally sensi- people of J&K.
military has also been put on red Centre rushed 8,000 paramilitary region after 70 years, defence tive and other fragile areas”.