1

2018
 PRINCIPAL’S
note
Shri Ram College of Commerce is renowned
for its pursuit of academic excellence. The seeds
of intellectual curiosity and conceptual rigor are
sown in classrooms but there is also a signifi-
cant emphasis on learning beyond textbooks.
Artha has only been made possible by this
environment provided by the college. It is a col-
lection of articles by students on contemporary
economic issues, with topics ranging from data
privacy to gender lens investing.

I believe that the values of teamwork, commit-

ment and above all, the passion to learn that
the students have displayed in bringing out
this edition of Artha will help them in all their
future endeavours. I wish them all the best and
hope for the success of the magazine.
SIMRIT KAUR

FACULTYnote
ADVISOR’S
The Economics Society has created a niche
for itself in the college, and deservedly so,
with their tradition for fostering economic
curiosity and their insistence on moving past
the confines of theoretical knowledge. With
each passing year, the society reaches for new
heights: be it through their annual fest, the
Shri Ram Economics Summit or through
their publications: Ceteris Paribus and Artha.

It is indeed a matter of pride for the college

that the annual magazine of the society is
being released. On behalf of the entire faculty
of SRCC, I wish them all the very best.

AVINASH JHA

3
At this time in the world, there is a growing disconnect between the mainstream narrative presented to
us and people’s lived experiences. Our conventional and antiquated understanding of our society is in
the need of inspection and investigation. We have attempted to do just this. Our highlights look at the
ever evolving nature of the oft-touted ‘empire’.

The Cambridge Analytica scandal has sounded the death knell for digital firms-calling for a departure
from the established pattern of negligence towards privacy. Users everywhere are logging off and the
backlash has plunged internet firms into a reputational crisis. Our article, ‘Modern East India Compa-
nies’, written a few weeks prior, foretold this erosion and further comments on the nuances of digital
privacy. Elsewhere, as Xi re-establishes stronghold over China, the Dragon continues on its rampage
to amass geopolitical influence through overseas investments, forging- you could say- an empire of its
own. In ‘Debunking China’s Economic Growth’, we have attempted to comprehend the not-so-subtle
alchemy of China’s growth, which has fuelled this remarkable rise to the status of a superpower.

In India Unbound, we have taken a closer look at the issues that persist in our country. One of the
major talking points this year was the PNB scam which rattled the Indian banking sector, exposing the
dire need for reform. Its nuances have been elucidated in our piece ‘The Misery of the Indian Banking
System’.

This year, we have re-introduced Jargon Minimised which seeks to deconstruct complex economic
ideas, which are often misunderstood. Further, we have introduced a new section, The Firing Line,
where we look at contemporary issues through the lens of different political perspectives. Finally, we
have also included a special report on our annual fest, the Shri Ram Economics Summit.

We are indebted to a lot of people for helping us bring the magazine to a higher standard. In particu-
lar, we would like to extend our sincerest gratitude to our juniors, for their commitment and diligence;
our team, for their unwavering support and enthusiasm throughout; Vishal, for keeping us inspired;
Shireen, for her patience; Abhinav Prakash sir and Avinash Jha sir, for their invaluable guidance and
Rohit, for making this magazine possible.
-Varsha & Rahul

4
 world unfurled
the firing line

india unbound
magnum opus

02
03
04
01

09 15 19 29
My Hero, Trump’s Economics of How to Get Rich
China Economics: Elections in India in America
Sounds Good,
12 Doesn’t Work? 21 31
Modern East Code Blue Debunking
India Companies 16 China’s
NHPS: 23 Economic
Ayushman Scams: Growth
Bharat? The Misery of the
Indian Banking 33
17 System High Time for
Farm Loans: Change:
Waiving or 26 Drug
Drowning The Telecom Decriminalisation
Shakeup
36
The Economics
of Immigration

5
 interviews

maximised
economics

minimised
jargon

SRES
05
06

08
07
39
Karan Thapar
53
Ivy, Not Rosy
63
Gender Lens
75
Theme
Investing
42 55 76
Rohit Azad Going the E-way
65 Speaker Sessions
Decrypting
45 57 Cryptocurrencies 79
In Pursuit of
Prabhat Patnaik
Happiness 68 Events

47 The Cost of
81
Isher Ahluwalia 60 Financial Stability
Summit Exhibition
Environmental
49 Dumping 70
Microfinance:
Sanjeev Sanyal Revolutionary or
Not? 83
Annual Report

6
 Friedrich Hayek

7
 MAGNUM OPUS

8
MAGNUM OPUS
My Hero,
China
BY ARNAB DUTTA AND TUSHAR SINGH
state capitalism
noun
a political system in which the
state has control of production and
the use of capital.
What could possibly be the underlying similarity
between Portugal’s electricity grid, Greece’s largest
port- Piraeus and Apartment blocks in Sydney? All
of them have been surreptitiously acquired by state-
backed Chinese companies or Chinese policy banks.
China’s state-led capitalism has created a nexus of
Chinese influence around the world, fervently pushing
forward the agenda of the Belt and Road Initiative,
which seeks to cover about 65 percent of the world’s
population, about one-third of the world’s GDP, and
about a quarter of all the goods and services the world
moves. China, the world’s largest saver, has been dol-
ing out large sums of money to struggling third world
and developing nations in Asia, Africa, and Latin
America. These transactions have primarily taken the
form of infrastructure investments, wherein China
offers to fill the dearth of public infrastructure in these
nations in return for establishing new export markets.
This alleviates its domestic overcapacity and helps its
companies globalize their operations by gaining cheap
assets, market share, and key marketing, distribution,
and engineering capabilities. However, China gains
something of larger significance than commercial
consolidation through its provision of such capital:
geopolitical influence.
China’s ambitious journey towards global supremacy
has left a large number of western liberal democra-
cies perturbed. The Global North’s influence around
the globe, traditionally uncontested by an outsider, is
today challenged by a rising China. Countries per-
turbed by China’s growing influence include a cohort
of European countries reeling under the burden of
9
large amounts of debt, Australia which is struggling to
finance public infrastructure projects and the ever-in-
secure USA.
Donald Trump issued an executive order barring
Singapore-based chipmaker Broadcom from acquiring
Qualcomm, in fear of China overtaking the USA in 5G
Technology.
Huawei’s undersea cable project raised a red flag in
Australia.
European Commission President Jean-Claude Juncker,
in an apparent reference to China, said: “If a foreign,
state-owned, company wants to purchase a European
harbour, part of our energy infrastructure or a defence
technology firm, this should only happen in transpar-
ency, with scrutiny and debate. It is a political respon-
sibility to know what is going on in our own backyard
so that we can protect our collective security if need-
ed.”
All of the above represent the growing concern among
the leaders of several countries over China’s bour-
geoning economic and geopolitical prowess. They
argue that China seeks to exploit the target nations by
coercing them to trade short-term gains for long-term
dependency. China’s rising prominence in Latin Amer-
ica has irked several world leaders, most notably the
President of the United States of America. Rex Tiller-
son, the erstwhile United States Secretary of State, has
echoed the President’s disdain and paranoia on nu-
merous occasions while cautioning the world against
the predatory nature of China’s investments and the
casualties arising out of poor governance of these
funds in the target countries. Primary examples of
misgovernance include Venezuela, which is embroiled
in the quagmire of a political and economic crisis and
Sri Lanka’s Hambantota Port, which has been leased to
China on account of Sri Lanka’s inability to repay the

loans borrowed from it to build the port.
However, instead of partaking in the vilification of
China, what this piece intends to highlight is that in
the wake of western liberal countries increasingly
growing protectionist, China is acting in the spirit of
multilateralism, free trade, and globalization. As the
USA continues to build trade barriers by imposing
tariffs and quitting trade agreements, it is China which
is coming to the rescue to of a globalized world order.
China’s Belt and Road Initiative (BRI) brings together
countries spread across different continents on a single
platform to facilitate infrastructural investment. BRI is
China’s response to growing protectionism and uni-
lateralism. This became clear last year when Xi Jin-
ping spoke vehemently in favor of globalization at the
World Economic Forum right after the USA had quit
the Paris Climate Agreement to retreat into its shell.
We recognize that China is inflicted with a certain
degree of unwarranted ‘villainization’ by the western
media. It resonates the inability of western liberal na-
tions to reconcile to the fact that China is a burgeon-
ing power seeking to expand its political and economic
presence in struggling third world nations. Institutions
like the World Bank and the IMF have exploited such
vulnerable nations since time immemorial by impos-
ing severe conditions like fiscal austerity and sanctions
while doling out aid packages. Amidst such historical
exploitation, China is a messiah for these nations.
Interestingly, China’s BRI dwarfs the Marshall Plan,
for which the USA received glorification for ‘reviving’
war-torn Europe. Marshall Plan gave away $100 billion
(in today’s worth) of aid, while China is spending
roughly $150bn a year in the
“China’s am- 68 countries that have signed
bitious jour- up to the BRI. If anything,
ney towards BRI will make the poor and
infrastructure hungry Eurasia
global su- one of the most well-connected
premacy has regions, rivalling the transat-
left a large lantic, dominated by America.
number of USA used the Marshall Plan
to export its currency (the US
western lib- dollar) to increase its interna-
eral democ- tional acceptability by provid-
racies per- ing subsidies in the US dollar.
turbed.” China is doing the same with
BRI, by increasing the accept-
ability of the renminbi (RMB),
10
MAGNUM OPUS
which threatens the dollar’s position as an internation-
al currency. No wonder The Eagle is insecure about
The Dragon.
The criticism leveled against China’s growing influ-
ence in Africa is unfounded. Some western intellectual
circles have even labelled it ‘neo-colonialism’ (Pretty
ironic, isn’t it?). The myth that western aid has ‘saved’
Africa needs to be busted. If anything, the West and
the institutions it controls, like the IMF and World
Bank impose conditions on African countries in re-
turn for monetary benefits. Many of these conditions
require democratization of the political system and
adoption of neo-liberal principles by the country. If
this is not an imposition of ideology and an attack on a
country’s sovereignty, then what is? Unconditional aid
is good, aid with conditions is a bribe. China, mean-
while, does not impose any political conditions while
loaning to African countries. As these countries are
increasingly looking in the direction of China for aid,
the World Bank is taking corrective actions: it imposes
15% fewer conditions on Africa in return for aid for
every 1% increase in Chinese aid to the continent. Talk
about paranoia and standing by ‘one’s own principles’.
Africans, traditionally exploited by the US and Europe
for centuries, are increasingly growing a favorable
opinion of China (63% according to one survey, more
than any other country). In just 10 years, Africa’s trade
with China has grown 20 fold, from $10 billion to $200
billion, making China its largest trading partner. How
can the West not be wary? The land it ‘owned’ every
inch of until a few decades ago is now sleeping in bed
with a rival superpower.
The BRI is not just limited to Africa, Asia, and Europe.
It expands well into Latin America as well. China is the
top trade partner of Brazil, Chile, and Peru. China is
following what many call the ‘patient capital’ approach:
providing state-to-state packages to incentivize exports
and following a policy of non-intervention in political
affairs. China believes by negotiating favorable trade
agreements today, it will benefit in the future when
these Latin American countries realize their economic
potential and boost their exports and imports simul-
taneously. Compare this professional trading relation-
ship which China maintains with Latin America to the
USA, which is infamous for staging coups and setting
up puppet governments in the region throughout the
cold war. America has lost the moral high ground to
speak on Latin America decades ago.
MAGNUM OPUS

China often turns out to be generous. It has loosened the constitution to remove limits on his term. Howev-
the terms on Venezuela’s outstanding loans, by ex- er, it is time we stop letting the skewed opinions of the
tending deadlines and allowing it to only pay interest west towards China dissuade us. To put it succinctly, in
until stable conditions prevail. Had it not done so, and a world where countries are closing their borders for
instead put sanctions on Venezuela (like the USA), it trade, “China is not the hero we deserve, but the hero
would have been the Venezuelan people who would’ve we need.”
suffered the most because of worsening economic
conditions, and not the government. Australia is real-
izing the same. Its Foreign Investment Review Board
(FIRB) has stated that Australia needs to be more
relaxed about Chinese cash flowing into the country.
This comes after Australia had blocked Chinese bids
for its electricity grid at the last moment on grounds of
‘national security’.

China is increasingly using market-based instruments

like private equity funds (e.g., China-Latin America
Infrastructure Fund) and also entering public-private
partnerships (especially in Africa) to invest in coun-
ties. It is also using multilateral institutions like the
Inter-American Development Bank and local develop-
ment banks, along with Chinese commercial banks to
fund BRI projects. Turn back time by fifty years, and
who would’ve imagined that the world will be looking
up to a Communist-run country to stand for the free
market and liberal economic order. USA’s insecurity
was highlighted in its national security strategy which
claims that China is “challenging American power” by
seeking “to pull the region into its orbit through state-
led investment and loans.”

Sure, China is lacking on several fronts. It has con-

stantly challenged its neighbors’ sovereignty. It has an
abominable human rights record and lacks freedom of
speech. Its president, Xi Jinping only recently amended

11

Modern East
India Companies
BY ADITYA JAIN AND KARAN MEHROTRA
Beep, beep, beep.
It’s 7 AM. You roll over to the oth-
er side of the bed, reach out, and
switch off the alarm on your flashy
new iPhone. Then follows the daily
ritual of checking your WhatsApp
messages, listening to your favourite playlist (on Apple
Music, of course) while you shower and checking your
friends’ snaps and stories as you polish off your break-
fast. You then proceed to book an Uber, and surf the
internet. The cab ride allows you to check the prices of
shoes that you need for next week’s party, on Amazon
and check out trending events on Facebook.
It’s 9 a.m., and you finally reach your destination.
While this might seem to be the morning routine of an
average Joe, you have unwittingly shared everything
you did over the past two hours, with some of the
world’s most powerful corporations: Apple, Google,
Uber, Amazon, and Facebook- the modern day East
India Companies.
Despite these MNCs’ diverse product offerings and
unique value propositions, they all have one thing in
common- they failed in the world’s biggest market-
China. Uber was left red-faced and sold off its Chinese
subsidiary to Didi Chuxing. Facebook was forced to
shut down its operations, after posts publicizing the
Xinjiang Independence movement were shared on the
platform. Google was coerced into leaving the coun-
try, as it couldn’t navigate around the Government’s
infamous internet censorship. Amazon couldn’t put
its finger on the pulse of the market as well as the
indigenous giant, Alibaba could. In order to counter
the problem of saturating demand back home, these
conglomerates had to pursue growth strategies outside
of Western countries. Thus, they turned to India, a free
market with speedy economic growth, internet expan-
sion and a colonial hangover that made it much more
appreciative and trusting of all things Western. If data
is new the oil, then these companies could become the
12
MAGNUM OPUS
next OPEC (which will be equivalent to an apocalyptic
end to privacy and free speech).
Companies can monetize data: Facebook can track
the activity of its users in a region and sells this to an
FMCG. Besides this, the social-media giant can use
past data to improve its key revenue stream-adver-
tising, by allowing companies to have personalized
advertising services, thus enabling very effective
market segmentation. Apple can collect your medical
status from your morning jogs, and sell it to phar-
maceutical majors, under the illusory notion of per-
sonalizing your exercise experience. Uber knows the
most frequented restaurants and bars in town, which
it can then sell to food chains, in order to let them get
a sense of the competition. Amazon has a goldmine
of data on consumer spending habits, and business
revenue which it can sell to practically anyone. With
advancements in the field of Internet of Things and
Artificial Intelligence, data will become much easier to
collect and process. The most dangerous aspect is not
that a considerable portion of our country’s big data is
in the hands of a foreign entity, but rather the fact that
they have much more advanced systems to make bet-
ter use of this than indigenous startups. Moreover, we
can’t predict whether they will use this for good, or for
possible iniquitous motives. Thus, akin to The East In-
dia Company, these tech giants will soon have control
over citizens’ lives. The fact that they know how Indian
consumers think and make decisions, draws frighten-
ing parallels with an Orwellian future.
The next aspect deals with how tech giants are stifling
Startup India. Vast experience in the industry, econo-
mies-of-scale, much more efficient internal operations,
and access to unlimited capital, give these foreign
giants a significant edge. For the past decade or so, In-
dian startups (such as Ola, Flipkart, Paytm) benefited
from ideas arbitrage (using Western product ideas and
platform models, and making it profitable in an Indian
space). However, they failed to reckon with the fact
MAGNUM OPUS
that their duplicate models will struggle, when their
Goliath versions come knocking on the door. Smaller
competitors with similar models have either closed
down or were sold off to these tech giants. Junglee was
sold off to Amazon, Guruji.com couldn’t face the Goo-
gle onslaught, just to name a few. The only way small
startups can exist is by forming a distinctive ‘blue
ocean strategy’, and targeting a particular segment.
Moreover, lack of funding and
“If data is customer coverage has closed
new the oil, down many desi startups. It has
then these now come down to a duopolistic
situation in most tech spaces,
compa- pitting an indigenous entity with
nies could a foreign behemoth (Amazon
become vs Flipkart, Ola vs Uber, Paytm
vs Google Tez), with seeming
the next monopolies when it comes to
OPEC.” search engines (Google has a
mind-blowing 98% market share)
and social media sites (Facebook has 250 million In-
dian users). Besides this, recent examples of Amazon
venturing into the foods and private label business,
Uber into logistics, and Facebook into the mobile
payments business, showcase a big threat to other B2C
firms. It’s only a matter of time before the former turns
into the latter, and darkness falls over Startup India.
Similar to the British Raj, were the handlooms indus-
try was destroyed, our startup space is being broken
down, under the guise of ‘free markets’, while our weak
government watches with its ‘hands tied behind its
back’, and oblivious Indian consumers continue to pre-
fer foreign products (over false better quality notions).
The most frightening aspect of this is the ‘network
effect’, and what makes this story different from a
generic piece on the threat of dominance by ‘brick-
and-mortar’ MNCs. Data being the holy grail of
modern-day businesses, fuels the network effect. This
nomenclature essentially means that as more and more
consumers use the services of a platform model/tech
business, it serves as an engine for internal product
innovation and personalized services. This implies that
once a firm becomes the market leader, it becomes
harder to displace their dominance. This is because a
higher market share means more customer data and
hence better innovation. This cycle continues till a
monopoly is achieved. This is why the advent of tech
companies is much more harrowing than the domi-
nance of a foreign manufacturing firm.
13
MAGNUM OPUS
The fact that we are allowing foreign enterprises to
exploit such a precious national resource (data), with-
out any regulation or privacy laws in place, and also
destroy our entrepreneurship fabric is egregious.
China’s transformation from being a part of every
‘copycat’ reference, to a becoming a global hub for
technological innovation and application, can largely
be attributed to the BAT (Baidu, Alibaba, Tencent)
trio. These companies have a combined market capital-
ization of $900 billion, and after vanquishing Google,
Amazon, and Facebook (respectively) domestically;
they are now giving them a run for their money in
global markets. The BAT trio had blossomed due to
favorable government policies and patronage, which
gave them an impetus to become what they are today.
This included a 10% lower corporate tax rate, R&D
expenses rebate, and staff training expenditure rebate,
to name a few. Though of course banning foreign tech-
nology companies (similar to China) will be a gross
violation of our free-market and democratic setup, the
Indian government can at least revamp its data privacy
laws, on the lines of EU’s GDPR. However, we have a
lot to learn from China, on how it made this giant leap
to get this ‘technological trendsetter tag’. The fledgling
Indian startup world needs to be provided incentives
such as the ones provided to Chinese companies, and
the Indian government needs to turnaround its cur-
rently archaic and impractical policies, to something
that can truly be useful to this promising entrepre-
neurship ecosystem. Besides this, Indian companies
need to focus on increasing R&D capital expenditure,
and improving the overall customer experience, to
become much more competitive.
The role of foreign technology companies should be
that of an incubator on a larger level. All of these big
enterprises need to be mandated to hold quarterly
startup accelerator programs, for local firms. More-
over, regulatory bodies need to keep a closer watch
on them, and antitrust laws should be placed to pre-
vent them from acquiring competitors and creating a
monopoly setup. Besides this, these companies should
adopt the ‘blockchain’ method of storing data, which
will not only allow customers to know where their
data is being used but also lower the chances of a data
breach.
As the clichéd ‘kings’ in this marketplace, be careful
where you spend your next rupee, it might be fueling
your own colonization.
 THE FIRING LINE

14
THE FIRING LINE
Trump’s Economics: Sounds
Good, Doesn’t Work?
While the world was busy crying
‘apocalypse’ over an impending
nuclear war, the American economy
was booming under Trump. Domes-
tically, his policies were impecca-
ble. Unemployment is at one of the
lowest while economic growth is at
one of the highest levels in recent
years. His $1.5 trillion infrastructure
spending plan will bring even more
jobs to construction and manu-
facturing sectors. Trump has put
national interests first and limited
his government’s size: he increased
military spending by 10% while
weakening Obamacare. Trump is
also working increasingly towards
cutting red tape. He has issued 29
deregulatory executive actions and
reversed 14 Obama era regulations.
He plans to revise the Dodd-Frank
Act and allow banks to invest depos-
itors’ funds in derivatives, which if
done, will boost economic growth.
By repealing Obama-era limits on
carbon emission at power plants,
Trump has revived the US coal in-
dustry. Quitting Paris Climate Deal
helps the government save money
which would’ve otherwise gone
to India and China. Trump’s trade
policies, however , are questionable.
Quitting TPP and putting NAFTA
on the line only hurts international
economic growth. Tariffs on steel,
aluminum and other Chinese goods
are a step away from free markets.
An otherwise progressive economic
policy is marred by this, and it would
behoove him to correct course on
the international front. Also, tax cuts
are love.
Prior to election, Donald Trump
proposed sizeable income tax cuts
alongside deregulation, consistent
with Republican ideas. Also among
his promises were significant infra-
structure investment and status-quo
protection for entitlements for the
elderly (typically considered Dem-
ocratic). His anti-globalization
policies of trade protectionism and
immigration reduction cross party
lines. This combination of poli-
cy positions could be considered
“populist” and has played a role in
convincing some of the 2012 Obama
voters to vote for Trump. President
Trump’s 2018 United States federal
budget was a statement of his ad-
ministration’s economic priorities for
the following decade. It indicated a
rightward shift relative to the
2017 current law baseline but also
contained a few left of centre el-
ements. Here is an overview: Re-
publican agenda elements: Nearly
$2 trillion reduction in healthcare
spending (mostly from Medicaid, a
program for lower-income persons),
about $1.5 trillion in non-defense
discretionary spending cuts, and
about $1 trillion in corporate and
income tax cuts (mainly benefiting
the upper class), representing a net
deficit reduction of $2.5 trillion.
Democratic agenda elements: A net
reduction in defence spending of
$300 billion, and approximately $200
billion more for infrastructure.
15
RIGHT
If there is anything ‘fake’ in Amer-
ica right now, it’s not the CNN, but
Donald Trump’s claims to solving
the US economy’s problems. The
US’s economic growth and drop in
unemployment have come because
of a global recovery and not because
of Trump’s policies, but his tweets
claim otherwise. Unfortunately, at
a time when international trade
should pick up pace after the 2008
crash to the benefit of all coun-
tries, Trump’s trade war might play
spoilsport. His tariffs on steel and
aluminum will also destroy more
jobs in metal-based industries than
they will create in metal-making
industries. In a country where real
wages of the bottom quartile have
been stagnant for decades, Trump’s
tax cuts do not provide any relief to
the lowest income bracket. Instead,
rates have been cut for big corpora-
tions and rich individuals (most of
whom are his friends). The estate tax
exemption has been doubled which
only helps the top 1 percent of the
population, who pay it anyway. And
his spending? While military sees a
10% increase, welfare has taken a hit.
Obamacare has been weakened by
choking essential funds for volunteer
groups and advertising. Trump said
he quit the Paris Climate Agreement
because of the unnecessary expendi-
ture USA had to incur. If spending
money to fight global warming is
‘unnecessary’, then what will you call
the expenditure on a border wall?

NHPS:
Ayushman Bharat?
RIGHT
The National Health Protection
Scheme (NHPS) is an investment
towards a healthier future; a fu-
ture which promises universal
health coverage, efficient primary
healthcare, reduced out-of-pocket
expenditure and improved access
to healthcare services. Most devel-
oped nations provide some form of
universal healthcare to their citi-
zens. By announcing this scheme,
the government has taken a step
towards a developed India. The
NHPS aims to build a healthier
India. Providing insurance coverage
on such a huge scale will not only
allow poverty-stricken people to
access the healthcare system but will
also make it cost-effective. General-
ly, insurance premiums are high as
only sick people tend to get insured.
But mass insurance will reduce the
cost by reducing the probability of a
claim. India severely under-invests
in healthcare and this consequent-
ly affects the health and economic
well-being of its citizens. Around 7%
of our population is nearly impov-
erished due to the healthcare costs.
By providing insurance coverage for
secondary and tertiary treatment,
NHPS will give everyone the oppor-
tunity to seek medical treatment.
One of the best features of NHPS is
that it aims to improve the primary
healthcare system as well. One of its
objectives is to build over 150,000
wellness centers which form the
first and most crucial link between
the public and the public healthcare
system.
RIGHT
Every solution has it own set of
problems. This should not stop us
from finding solutions but
should us encourage us to improve
those solutions and strive for per-
fection. Similarly, the NHPS might
be flawed but it has a huge room for
improvement. We should endeavor
to to formulate and finalise a scheme
where quality medical services are
assured to a majority of the popu-
lation. Access to healthcare is the
universal right of every citizen and
the NHPS is a step to ensure that.
The quality of healthcare offered to
a country’s citizens shows its stage
of development and India has been
lagging behind on this front for a
long time. It spent a dismal 1.4% of
its GDP on public healthcare and has
one of the highest child mortality
and malnutrition rate in the world.
Any step to improve the health of the
people should be welcomed, critical-
ly analysed and honed after serious
deliberations. The public should not
consider it god’s gift to humanity
nor should it be dismissed as use-
less. Everyone should accept that
although it is a forward-looking
scheme, it is a work in progress.
16
THE FIRING LINE
RIGHT
NHPS is the perfect combination of
grandiose and populist, announced
to garner maximum support to
the government. Touted as one of
the largest healthcare scheme in
the world, NHPS is a scheme that
seems to lack substance. There are
all sorts of unanswered questions
regarding the NHPS, ranging from
the lack of information regarding
its method of implementation,
premature assumption of states’
support and the disproportionate
allocation of resources. In the last
budget, the government allocated
Rs 2,000 crores for the scheme. But
the estimated cost of implement-
ing it varies from person to person.
One official put it at 30,000 crores
while other projected it to be around
11,000 crores and a economic think
tank in Delhi pegged it at 1 lakh
crores. No matter what the cost, the
question that stands is: How will the
government finance this ambitious
scheme as it already struggles with
fiscal consolidation? Another ma-
jor problem is that the government
has still not explained the working
of this scheme. It has not clarified
whether the government will pay
for premiums or pay for the cost of
treatment. Both these models come
with their own set of problems and
these problems cannot be tackled
until the government can come up
with a viable model to first restrict
the input prices.
THE FIRING LINE
Farm Loans:
Waiving or Drowning?
The neo-liberal structure has been
established on the premise of ben-
efiting industrialists at the cost of
farmers. Modern agriculture requires
investment in advanced machinery
and purchase of seeds, fertilisers,
chemicals and diesel. Savings are
generally insufficient to meet such
requirements, as a result of which
marginalised farmers have to resort
to informal sources of loans, where
money lenders charge interest rates
as high as 70%. Due to insufficient
rainfall or lack of market demand,
farmers get trapped in debt, which
increases farmer suicides. Many
farmers have quit farming to find
better jobs. This may lead to a food
scarcity in the future and drive infla-
tion up. In fact, waivers can encour-
age more farmers to borrow from
formal sources, thereby bringing
them into the banking system. The
Centre has clearly overlooked this
issue and argued that agricultural
problems are essentially a state prob-
lem. It contends that it cannot take
up NPAs of the agricultural sector
because waivers will destabilise the
financial system. Why then, did the
Centre write off Rs. 2.46 lakh crore
of corporate NPAs during the 2012-
17 period? It is a shame that the
government can go miles to protect
corporates but cannot even take one
step towards addressing the plight of
the nation’s farmers.
Firstly, we should not view ‘populist’
moves like loan waivers and ‘criti-
cal’ expenditure like infrastructure
development in absolutes. Undertak-
ing one does not necessarily mean
un-doing the other. A good policy
maker has to balance these two
aspects of the same coin. The truth is
that both the Indian farmer and In-
dian agriculture are struggling. You
need loan waivers to save the farmer
who will otherwise commit suicide
if the burden of his loan becomes
too heavy for him; you also need
infrastructural reforms to improve
agriculture. The farmer is in distress
because agriculture is in distress, not
the other way round. Saving agricul-
ture may not save the farmer. This
is why farm loan waivers cannot be
ignored. They are a relief, however
temporary. Loan waivers also come
in handy during elections. But how
do we stop politicians from just giv-
ing waivers without solving the real
problem? This is where the FRBM
which curbs excessive spending,
comes into play. We can only hope
that politicians realize that unless
irrigation, supply chain and land
reforms are undertaken, a new group
of farmers will hold their re-election
ransom on the demand of another
loan waiver.
17
Farm Loan Waivers as a scheme is
not an economic policy but a popu-
list trend. The scheme helps you win
elections but it is neither econom-
ically viable nor socially desirable.
Here, the borrowing cycle alters
from borrower-lender to that of
taxpayer-lender. This leads to higher
expenditure by the government. To
keep fiscal slippage under check,
only has two options remain: either
to decrease expenditure (mostly
capital) or to increase borrowing.
Neither of these are desirable in
a growing economy. Waivers also
reduce the chances of fixing a broken
loan recollection system in rural
areas. Studies showed that honest
taxpayers became defaulters and that
it led to a threefold increase in NPAs
between 2009 and 2013. The farm
loan waivers are based on the the-
oretical argument that high level of
outstanding debt reduces the debt-
or’s extra efforts to repay the loan.
But it does not take into account the
general behavior of debtors about
committing to future debt repay-
ments. Frequent farm loan waivers
create an expectation of government
intervention amongst the farmers
and they are likely to use the bor-
rowed amount for consumption
rather than productive investment
purposes. Thus, farm loan waivers
are only a source of temporary relief
to a small section of farmers while
causing a distress to larger sections
of the society in the long run.
 INDIA unbound
india UNBOUND

18
INDIA UNBOUND
The Economics of
Elections in India
BY SUHANI SINGHAL
From friends to foes and from
rivals to allies; every election story
witnesses radical changes in the
ideologies of the so-called “peo-
ple’s representatives”. Good politics
takes an upper hand over good
economics. The winning party’s
high-headedness and inability to fulfill the promised
reforms come into the limelight while the opposi-
tion starts demanding changes in the foundational
system. Hurling accusations and throwing of shoes
aren’t uncommon either. What integrates every facet
of elections is the underlying politics and what disinte-
grates them is the overlying economics. Every election
is followed by a criticism of the “First Past The Post”
System, mostly in the form of protests by the oppo-
sition which claims the unfair nature of the elections
in which just 31% of the voters ended up deciding the
Prime Minister of the country in 2014. An alterna-
tive called “Proportional Representation” is suggested
which has its own pros and cons. Very recently, an-
other aspect of making the elections more simplified
(read: complicated) is the concept electoral bonds.
This article aims to examine the aforementioned ideas
and their economic implications, along with an overall
impact of elections on the economic working of the
country.
India and UK follow a system called the Westminster
electoral model in which the procedure of voting,
as well as the candidates’ elections, depends on the
FPTP system. Under this, the deciding factor of the
composition of the Lok Sabha is the number of seats,
instead of the count of votes. BJP’s victory of 2014
was a historic one as it was the first time that a single
party won a majority since Rajiv Gandhi’s monstrous
win in 1984. However, the opposition tried to delegit-
imize the victory by questioning how only 31% of the
votes channelized into a humongous but unjustified
triumph. However, if other countries’ elections are
analyzed, who follow the same system of voting, it is
19
seen that in the previous four elections in Canada and
the UK, where politics is less fragmented. the vote
share of the winning party was somewhere around
40%, which is greater than that of BJP’s. In a country
like India where the competition is not only fierce but
also cut-throat, winning one in every three votes was
no less than a feat for Narendra Modi. Donald Horow-
itz, a legal scholar, mentioned in one of his essays on
electoral systems, “The best electoral system is the one
that straightforwardly and most accurately reflects the
preferences of voters.” Therefore, it is indispensable
to analyze the working of an alternative system called
Proportional Representation and whether this sys-
tem upholds the values of democracy and equality or
poses a threat to our culture of unity in diversity. The
underlying fundamental of PR is that the number of
seats won by a party is in proportion to the number
of votes the party receives. The foremost argument to
support such a system is that it reduces the digression
between the votes won and the seats obtained. But
such a system is bound to make the election process
more party-oriented rather than people-oriented and
coalitions will become inevitable as no single party will
be able to secure a majority. Also, the parties are likely
to nominate more influential members to occupy the
won seats. Under FPTP, all parties and independent
candidates except the winning party get a higher num-
ber of seats as compared to their vote shares. Thus vote
bank politics becomes rampant. Conclusively, FPTP
ensures clarity, transparency, and simplicity. It comes
with its downsides but the choice is between the two
evils: FPTP (status quo) and PR (whose disadvantages
outweigh those of the former). A clear choice would
be to support good politics and good economics and
FPTP seems to justify both.
Electoral bonds are instruments of certain denomina-
tions issued by banks to the general public, who can
donate these bonds anonymously to the party they
wish to support. The party can convert these bonds
into money through their bank accounts. Seen as an
 INDIA UNBOUND

attempt to cleanse the country’s electoral system, the A country’s politicians play “For progres-
bonds were recently launched in denominations rang- a major role in the econom-
ing from INR 1000 to INR 1,00,00,000, with a validity ics of the nation. For pro- sive growth,
of 15 days to prevent these bonds from becoming gressive growth, the need the need of
parallel currency. The Finance Minister defends the of the hour is to focus on the hour is
move saying that anonymity prevents harassment and good politics which converts to focus on
promotes transparency as under the current system, itself into better economics.
“unclean money comes from unidentifiable sources.” Electoral reforms which can good politics
However, a major criticism is that corporate sharks bring about more account- which con-
will rely on funding the parties by black money so ability among other factors verts itself
as to prevent anonymity. This is because they would like transparency and equal- into better
want the parties to know their identity and if electoral ity need to be introduced but
bonds come into the picture, the purpose of getting the demographic structure of economics.”
political favors in the corporate sphere won’t be served. India and the mindset of the
Since an introduction of electoral bonds wouldn’t typical Indian voter and of the typical Indian politician
allow any alternative way, this portion of the funding needs to be considered carefully before introducing
would be carried out by under the table transactions reforms in the machinery of elections. These reforms
which could only be facilitated by the use of black can be in any form, ranging from a change in the sys-
money. Also, another aspect is that the Government, tem of elections to an introduction of instruments like
through the RBI will eventually discover who has do- electoral bonds, but the underlying motive should be
nated to whom because of the KYC norms that need to to ameliorate and not “deform” the structure of the de-
be fulfilled with SBI before buying these bonds. How- mocracy. This can only be analyzed after due consider-
ever, the voting public will not know which party has ation of multidimensional factors and the comparison
been funded by whom, and if not anything else, this of the pros and cons. As James Freeman Clarke says,
system is likely to increase the opaqueness rather than “A politician thinks of the next election; a statesman
promoting transparency. Also, this system of electoral thinks of the next generation”. Thus the focus should
bonds only allows donations to the parties which se- be to improve the status of upcoming generations by
cured at least 1% of the votes in the preceding election, using the election as a means to this end.
and this regulation may pose an entry barrier to new
candidates. If the rollout of these bonds is supposedly
affecting democracy, it won’t serve its inherent pur-
pose.

It is a well-known fact that the political parties turn

opportunistic near the elections and the focus on eco-
nomic growth takes a backseat. A study highlighting
the relationship between the economic growth of India
and general elections for the past 30 years shows how
the economy slows down during these times. Busi-
nessmen and industrialists defer their projects to judge
the impact of the formation of a new government and
its ideologies. The consumption of steel and cement
goes down drastically as the real estate sectors funds
are diverted to illicitly support political campaigns.
Government spending and fiscal deficit increases
and the number of farm loans given also increase
by a considerable proportion. Considering the fact
that public expenditure is done for more conciliatory
causes instead of developmental, the rise in spending
channelizes itself by the increase in inflation rates and
not an increase in economic growth.

20
INDIA UNBOUND
Code Blue
BY AYUSHI SRIVASTAVA AND SHIVANUPRAV
The Global Burden of Disease
Study (GBD) ranked India 154th
among 195 nations on its health
index. Countries like Sri Lanka,
Bangladesh, Bhutan and Nepal,
whose GDP is significantly lower
than India’s were all ranked above
it. India was among the biggest underachievers in Asia.
Seeing this ranking and numerous others, we should
ask ourselves what the fundamental causes of this dis-
tressing situation are. What have we been doing
wrong for the past seventy years that we are still not
able to ensure quality healthcare? The people have
repeatedly blamed the government for being ineffec-
tive and in response, it is trying to revamp its image by
overhauling the health sector.
One major action taken by the government to fix the
ailing healthcare system of the country is the plan to
implement the National Health Protection Scheme.
It will be the world’s largest healthcare scheme and
would assure secondary and tertiary healthcare to over
10 crore families, covering around 50 crore people,
for 5 lakh rupees a year. Even though the scheme may
seem like the solution to our problems, we should
analyse the situation at hand more critically.
Through this scheme, the government is trying to
focus on improving the demand side of the problem
and is trying to increase the number of the patients
that visit the hospital for treatment but the supply side
plays an equally important role: what can the patients
do with the Rs. 5 lakhs if they do not have access to
doctors in their area?
There is an 81% shortage of specialists in the rural
area. According to a KPMG Report, 74% of the doc-
tors in India work for 1/3rd of the urban population.
This clearly shows that the rural community health
centres in our country are understaffed and under-fi-
nanced. They do not have the facilities that are re-
21
quired to treat the patients properly. The availability of
funds will not benefit the patients if the efficiency and
access to hospitals is not increased and malpractices
are not curbed. Patients will not be able to recover if
the hospitals fail to provide them the proper care. A
striking example is the Gorakhpur tragedy where 290
children died in a month from encephalitis due to lack
of oxygen tanks. This clearly shows that the willingness
to go to hospitals and getting treated alone does not
solve the problem.
There is another problem that the scheme fails to
recognise. The most common ailments in the poorest
states are heart and respiratory diseases like asthma,
bronchitis and tuberculosis, which require regular
outpatient consultations. 80% of the out-of-the-pocket
expenses made by the people belonging to the low-in-
come group are on these consultations. Many patients
are impoverished due to the burden of the indirect ex-
penses that are a part of the hospitalisations. Given the
paucity of hospitals with good facilities in rural areas,
people often have to move to bigger cities to avail of
private services.
The control of the private sector in the healthcare
scenario is worrying. It is one of the biggest hurdles in
this scheme’s path to success. According to the Na-
tional Sample Survey Office, majority of India relies
on the private sector for their treatment. Over 72%
of the rural and 79% of the urban population go to
private hospitals for treatment. This forces us to ask if
these profit-making institutions are ethical enough to
not exploit the 5 lakh cap. The private hospitals, which
are statistically more ‘scalpel-heavy’, may subject the
patients to unnecessary tests and procedures to earn
quick bucks. These profiteering hospitals could be the
probable cause of the C-section rates in India going
from 10% to 30% within 20 years.
Along with the government’s ambitious plan to pro-
vide healthcare coverage by providing insurance to all,
 INDIA UNBOUND

the government needs to take serious steps in order

to improve the basic healthcare structure and try to
reform the primary healthcare sector. Substantial steps
have to be taken in order to improve social determi-
nants like water, food hygiene and environmental san-
itation. Such efforts will be instrumental in bringing
a grass-root level change. As seen in countries like Bra-
zil, Japan, China and Sri Lanka, investments in such
areas increases life expectancy and reduces disease
burden by reducing hospitalisation and emergencies
due to avoidable diseases.

Any policy that the government

“In order introduces to reform the country
to revolu- has to be accompanied by edu-
cation and proper dissemination
tionise our of information. It is the general
healthcare tendency of the poor to ignore a
system, we problem until it completely pre-
need to vents them from working. They
consider hospitals as a last resort.
attack it on The policy of providing coverage
all fronts.” for secondary and tertiary care
will only accentuate this mental-
ity as people would prefer cure over prevention. The
effect of going to the hospitals at such a stage does not
give a fair chance to the doctors to actually help the
patients. This further aggravates the existing distrust
among the uneducated people.

The National Health Protection Scheme is necessary

and should be implemented but this article is just a re-
minder that this scheme alone is not the answer to all
our questions. In order to revolutionise our healthcare
system, we need to attack it on all fronts. Also, a good
step to begin would be to ensure that the requirement
of getting hospitalised itself is reduced by providing
better primary health care and improving education
regarding health. We not only need to ensure that
the sick go to the hospitals by providing them with
the necessary funds but we also need to assure that
after visiting the hospitals they get quality healthcare
and are not thrown into the trap of profit-mongering
pariahs.

22
INDIA UNBOUND
Scams: The Misery of the
Indian Banking System
BY YASH MALPANI
Sixty-one thousand, two hundred
and sixty crores rupees.
This is the amount of losses pub-
lic-sector banks have incurred
from the loan frauds in the bank-
ing system in the last five years.
India, in fact, has historically been known for banking
frauds. Even the renowned economist John Maynard
Keynes wrote about the impending threats to the
Indian banking system in his book ‘Indian Currency
and Finance’ after surveying the banking system of the
country
The recent banking fraud involving rich diamond
merchant, Nirav Modi and India’s second largest
public-sector bank, Punjab National Bank has proved
Keynes’ apprehension correct. Only a few days ago,
Bank of Baroda was in the news because of its fraudu-
lent dealings in South Africa with the Gupta brothers,
who were accused of ‘state capture’ when Jacob Zuma
was President. Such activities in the banking system of
the country makes one doubt the administration and
functioning of Indian banks both inside and outside
the country.
While the frequency of number of bank frauds has
decreased post liberalisation, the amount involved has
been increasing at an alarming rate, especially in case
of public sector banks. This negatively affects the econ-
omy and is also a headache for the Reserve Bank of
India. According to RBI data, 83% of the total amount
of bank fraud involves public sector banks. Why is the
percentage of frauds higher in the public sector? The
reason behind this is the kind of people they lend to.
A majority of the industrialists and high-profile busi-
nessmen in our country are involved in these scams
and frauds. These people are the ones who take loans
from banks for their large business, buy property
abroad and fly away as fugitives after committing the
23
breach. Private sector banks do not fall prey to this,
thanks to their superior governance. Hence, these
defrauders target the public-sector banks and because
of the mismanagement in the structure of the banks,
fraud happens: Nirav Modi and Mehul Choksi with
the Punjab National bank (Rs12,600 crore), Vijay
Mallya with the State Bank of India (Rs 9000 crore),
Jatin Mehta, the owner of Winston diamonds with
15 banks (Rs 7000 crores). The list does not end with
these high-profile businessmen but also includes many
others. Lalit Modi, Sanjay Bhandari, Deepak Talwar,
Vikram Kothari are just a few more of them.
In spite of all this, public sector banks continue to
issues letters of credit to businessmen. These business-
men continue to swindle the banks. Therefore, why
would public sector banks continue to issue LoCs?
This can, in part, be attributed to the tough competi-
tion they face from private sector banks. In order to
sustain, they take decisions in haste, compromise with
the procedures and as a result, fraud happens.
The internal working environment of a bank and its
corporate culture largely determine its performance.
A survey by Harvard Business Review states that there
is a positive correlation between the HR of a company
and its performance. The employees of the bank play
a vital role in determining the efficiency of its perfor-
mance. Poor HR results in poor selection. In order to
overcome the lags in the system, each branch should
ideally have a personalised recruitment procedure
(specific to the branch) and the employees should be
selected on the basis of certain qualities and traits.
Further, the employees should be made to undergo
training. Due to a lack of proper training, the workers
are ill-equipped to prevent scams of this magnitude.
Moreover, the incentive structure requires overhaul-
ing. The current low-pay structure does little to incen-
tivise employees. As per the RBI, compound annual

growth rate of wages and salary per employee which
was 13.7% from 2004-05 to 2010-11, decelerated to
6.4% from 2010-11 to 2016-17. The lack of incentives
coupled with low pays leaves the employees dissatis-
fied. As a result, he becomes dishonest and indulges
in illegal activities. In fact, it was this very dishonesty
on part of the branch managers which led to the PNB
fraud case.
The use of redundant technology in PSBs could be an-
other contributing factor to the increase in the quan-
tum of default as it fails to detect potential defaults.
Frauds can also arise because of the misuse of the
technology- not entering the data in the core banking
system and transferring money via SWIFT technology
are, in fact, some of the reasons which led to the loss of
around Rs12,600 crore to Punjab National Bank. The
list of reasons seem endless.
But has the government taken any steps to prevent
this?
To exercise a right on the fugitives flying abroad after
defaulting, the government came
“Private up with Fugitive Economic Of-
sector fender Bill, 2018. Currently, the
banks do government lacks the authority
to exercise legal rights over the
not fall fugitives running abroad, which is
prey to this, a major loophole defaulters often
thanks to take advantage of. The provisions
their supe- of the new Bill allow the legal
department of the country to take
rior gover- charge of all the people commit-
nance.” ting a breach of more than Rs. 100
crores and trying to evade Indian
legal services by flying abroad.
After the PNB fraud, the government has discontin-
24
INDIA UNBOUND
ued the practice of issuing ‘letters of undertaking’ for
trade credits for import. The banks were also required
to check and monitor all the records and data of loans
given by them of value exceeding Rs 50 crore.
Privatisation of the PSBs is often talked about as a
measure to save banks from frauds. But will privatisa-
tion help the banks to reduce the amount of loans? Is it
the ownership of the banks which leads them to a mis-
erable state or the inefficiency in the internal working
environment?
Even private banks do face losses by frauds and have
to face defaults. The communal reasons shared by the
banks is their improper managerial structure. Involve-
ment of too many third parties in the procedure and
flawed managerial structures are problems universal
to all banks, public or private. These are major chal-
lenges that have to be tackled. Chartered accoun-
tants, auditors (at all levels) play an important role in
the lending procedure of a bank. There should be a
two-level auditing process. Both banks’ and the bor-
rowers’ accounts should be thoroughly scrutinized and
audited before the procedure. This will definitely help
in minimising the frauds as the approval and credibil-
ity of both the parties will be required before a loan is
passed.
Banks’ recruitment and selection policies can also be
improved. Proper background checks should be con-
ducted before selection. All the employees should be
selected on the basis of specialisation required by each
branch. Remuneration should be of such an amount
that the employees are motivated to work for the or-
ganisation.
With the changing dynamics and growing complexity
in the industrial world, it is important for bankers to
have financial literacy. This can be done only if proper
and regular training is provided to the employees to
keep them updated thus enabling them to supervise in
an efficient manner and minimize risks.
Banks should have a strong internal rating team which
will help them analyse the risk involved while lending
a loan to a particular person. The borrower’s credit
status has to be properly verified. Taking the mac-
roeconomic environment of the particular industry,
evaluating the valuation of the work for which the loan
has been granted, etc. will be the primary duties of this
department.
INDIA UNBOUND

Ultimately, it is the concerted effort of the RBI, PSBs

and government which is needed to solve the prob-
lem. PSBs should try to increase the efficiency of their
working.The RBI should come up with stricter laws
relating to the negligence on part of banks The govern-
ment should take prompt legal action against default-
ers. For all we know, a fresh new banking fraud could
have been taking place while you were reading this
article.

25

The Telecom
Shakeup
BY SHIVANUPRAV
The telecommunications sector,
you could say, has launched India
into the 21st century. In fact, if it
weren’t for the liberalisation of this
industry and the consequent entry
of private telecom service provid-
ers, we wouldn’t have had more
than a billion mobile phone subscribers today,
40 percent of which access the internet via their
phones. This number is only expected to rise.
The sector contributed a massive 6.25 percent to the
GDP. Telecommunications matters economically for
two reasons. First, it plays a vital role to power the
functioning and the rapidly expanding productivity of
the modern “information-based” economy. Second,
the evolution of telecommunications from a natural
monopoly to a more competitive industry has raised
many challenging economic issues such as a top-
sy-turvy downhill battle, bruised by cut-throat com-
petition, policy paralysis, CBI probes, high spectrum
prices and the stick of the Supreme Court.
With Jio’s launch in September 2016, the industry has
been strife with legal wars over non-payment of dues,
insolvency cases, mergers, predatory pricing, and alle-
gations of the regulator being biased.
Legal battles in the telecom industry have reached
unprecedented levels in the past year or so. One such
legal issue is the tariff order given by TRAI on Feb-
ruary 16 which mandated a new formula to identify
predatory pricing. It changed the definition of signif-
icant market player (SMP), giving pricing flexibility
only to operators with less than 30% of the market’s
subscribers or revenue. Earlier, the SMP parameters
included volume of traffic, including data and switch-
ing capacity, which have been dropped in the amended
regulation. India’s first and third-ranked telcos argued
that the order was unconstitutional as it prevented
them from retaining customers and conducting busi-
26
INDIA UNBOUND
ness. The incumbent telcos contended that the rules
favoured new entrant Reliance Jio at their expense. Jio
has 13-14% share of revenue and users, while Airtel
and the Vodafone-Idea Cellular combined would each
have over 30% revenue market share.
Jio, with more than 160 million subscribers, has been
blamed for low tariffs that forced others to follow suit
amid growing debt and shrinking revenue. In the short
term, mobile data revenue growth is likely to be af-
fected due to the lower tariff. A further decline in data
tariffs and erosion of domestic voice revenue would
impact operators’ profitability and sustainability.
As compared to other developed and emerging tele-
coms market, India boasts of one of the lowest data
tariffs. However, in the long term, lower tariffs are not
sustainable because of high spectrum fees and ongoing
capex requirements. This tariff war model is not viable
and the average revenue per user is much lower than
the global average.
The thought is that these changes in the industry are
part of the normal transition from voice to a data
play market. All these assumptions of the long run
do not answer the question at hand: What effect does
the present dip in tariff have on the margins of these
companies?
Considering that wireless voice revenues accounted for
approximately 65% of the total circle revenues in India,
offering free voice is likely to have the biggest impact
on operator revenue. Going forward, data revenues are
likely to cannibalize voice revenues as well. This will
adversely impact the margins of operators. Customer
acquisition cost would increase for operators owing
to increased competition. In addition, operators are
likely to face increased pressures to retain customers,
and will have to resort to offering freebies and larger
allowances, further lowering margins.
INDIA UNBOUND

With pricing concerns due to discounts and lower
tariffs, operators are likely to witness stagnant EBITDA
growth. It is going to be impacted by the short-term
decline in wireless data revenue growth. In addition,
voice and data realization are also expected to drop
significantly over the next few quarters. Overall, mar-
gins are expected to decline by 250 to 300 basis points
and remain under pressure for the coming few years.
panel has suggested deferring the spectrum auction to
the next fiscal, providing more time for payment for
the auctioned spectrum, and recommended a cut in
interest rates.
However, this may still not be enough. The fact is
these recommendations address only debt issues of the
sector, not fundamental concerns. There is an immedi-
ate need for relief on licence fees and spectrum usage
charges as recommended by the telecom regulator.
Unless these issues are resolved, the industry will con-
tinue to struggle financially.

Narendra Modi in his address to the World Congress

on Information Technology said, “Technology, if used
well for public good, can deliver lasting prosperity to
mankind and a sustainable future for our planet.” But
the present situation of telecommunication industry is
far from where it needs to be and it is going to worsen
in the coming years. The transition from a developing
to a developed country requires our economy to go
through a lot of ups and downs.

The principle of survival of the fittest applies even to

With lower incremental revenue and stagnating EBIT-
DA, the profitability of operators is expected to remain
subdued. A lot would depend on the data volume
growth of all operators, once the sector EBITDA is sta-
bilized. Thus it’s prominent that the sector is currently
facing its worst phase ever and needs the government
to step in. The sector is currently finding it increasing-
ly difficult to manage its cumulative debt of almost ₹5
lakh crore, with revenues of less than ₹ 1.8 lakh crore,
and steadily falling.
the telecom sector, where companies like Aircel, Tata
and Telenor perished, leaving behind four giants-
Bharti Airtel, Idea, Vodafone and Reliance Jio. Among
these four, Idea and Vodafone are in talks for a merger
which will have an adverse impact on the economy.
Even though this merger is going to be one of the larg-
est in the telecom industry in India (yielding a revenue
of 42%, slightly higher than that of Bharti Airtel), here
is a possibility that it could lead to unemployment
within this sector.

“With lower We can relate the present

condition of telecom compa-
incremental
nies with our government’s
revenue and ambitious plans. For instance,
stagnating Make In India’s efficient
EBITDA, the execution is largely depen-
dent on the telecom sector
profitability
but is contingent on its sound
of operators financial health. This is per-
is expected haps why the government
to remain formed the Inter Ministerial
Group (IMG) to look into the
subdued.”
deteriorating health of the
telecom sector. The IMG has
made some bold recommendations. Reportedly, the

27
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28
WORLD UNFURLED
How to Get Rich
in America
BY MANASI MERTIA
Taking into consideration the pro-
longed challenges one experiences
in today’s modern economy and
the socio-cultural shifts that have
been brought about by the inces-
sant developments in all sectors,
Americans have taken a closer
view of their personal situations and their priorities,
creating new personalized perspectives of success.
According to a survey conducted in 2014, by the Busi-
ness Insider, a whopping 90% considered success to be
less important than happiness, prestige, and satisfac-
tion. Americans are also surprisingly (and admirably)
optimistic about shaping their own future. One survey
found that nearly 75% of Americans thought hard
work was a “very important” component of success,
while 62% put it down to a good education and just
20% to coming from wealth. “How to Get Rich in
America” might sound like the title of an article in a
lifestyle magazine or a clickbait link on the internet.
But the essence of it is seen when we look at the trends
in income distribution in America, which ranks poorly
when it comes to social mobility and income equality.
So what does the average American have to do to get
rich in America?
In America, the wealthiest 1% of the population owns
about 40% of the wealth available. It is, in fact, one of
the highest ever seen since 1962, according to the U.S.
Survey of Consumer Finances. The top 10% owning
more than the bottom 90% combined, goes to show
the widening of the prevalent gap between the ul-
tra-wealthy and the poor. Quoting Greek philosopher,
Plutarch, an imbalance between the rich and the poor
is the oldest and most fatal ailment of all republics.
This ‘ailment’ has now begun to take its toll on Amer-
ica. If you were designing a tax schedule to reduce the
magnanimous inequality in the United States, one
would probably try to find ways to redistribute some of
the wealth from the richest households to the poorest
ones. But the Senate GOP tax plan does precisely the
29
opposite of that. According to the Congressional Bud-
get Office (CBO), in the short-term, the richest house-
holds get the biggest tax cuts, while in the longer term
the taxes of the poorest households actually increase.
An easily forged path to the top 1% exists, of course,
for everyone who has an Ivy League degree. But, some-
times, the discipline matters more than the institution.
On average, graduates of lesser-known engineering
colleges such as Kettering University and the Stevens
Institute of Technology do just as well as those from
the Ivy League. However, as was also witnessed in
most of the cases, 10 years after starting college, the
typical Ivy League grad earns more than twice as much
as the typical graduate of other colleges. In fact, the
median Ivy graduate is making more money than the
top 10 percent of graduates at other schools.
So is an Ivy League degree the way to get rich in
America?
To reach the Ivy League after having grown up poor
seems like hitting the jackpot. The online confession
pages allow students at elite colleges to confess about
their food insecurity and the habit of skipping meals
due to financial constraints. A Harvard student had
confessed to living off peanut butter and jelly for a
week due to the closure of the University’s food ser-
vices during the break. Looking at this from the poor
man’s perspective, we see that getting into an Ivy
League will leave the poor with a cultural shock. Ivies
play a huge role in this by having a multiplier effect on
the income of those households who could previously
afford a good standard of living nevertheless. Only
52 percent of Yale students receive financial aid from
the university. Meanwhile, according to a Yale report,
100 percent of families making under $100,000, and
99 percent of families making between $100,000 and
$200,000, qualified for aid. In other words, you need
to make a ridiculously large amount of money to not
qualify for aid. You have to be in the 1 percent or very
close. And approximately half of Yale students are just
that rich. About 4 in 10 students from the top 0.1%

attend an Ivy League or elite university, roughly equiv-
alent to the share of students from poor families who
attend any two- or four-year college. At elite colleges,
the share of students from the bottom 40 percent has
remained mostly flat for a decade. Access to top col-
leges has not changed much, at least when measured in
quintiles (The poor have gotten poorer over that time,
and the very rich have gotten richer).
Most students who grow up
“About 4 in stricken by poverty remain poor
10 students as adults, and most students
who grow up affluent remain the
from the same, with more endowments.
top 0.1% The data provided by a New
attend an York Times Report shows that
Ivy League children born between 1980
or elite uni- and 1982, who are around 36
years old today. Most Ameri-
versity.” cans remain in a similar place
on the income distribution
statistical graph from their late 30s through the end
of their careers, previous studies have found, so the
highest-earning 36-year-olds are likely to become the
highest-earning 60-year-olds, at least on average. Even
though most lower-income students fare well at elite
and prestigious Ivy League colleges, there are relatively
few of them there, so less elite colleges may be more
important engines of social mobility. Researchers
developed a new statistic they call a college’s ‘mobility
rate’, which combines a college’s share of students from
lower-income families with its success at propelling
them into the upper part of the distribution. In this
data, not even one of the Ivy Leagues featured, show-
ing that social mobility is the last priority for an Ivy
League which stands to maintain standard and pres-
tige.
Economic diversity in Ivy League colleges seems to be
a far-fetched thought. The American Dream, they say
is still alive. In recent times, due to the need for a di-
versity within the Universities and a heightened need
for the inclusion, they made appropriate strategies and
introduced programmes to enable social mobility.
Preferential treatment at Ivy Leagues for alumni and
donors shows that the more affluent you are, the more
likely is it for your future children to be richer. Legacy
admissions are particularly an issue at dozens of selec-
tive colleges and universities, which have become ever
more difficult to gain admittance to in recent years.
Every spring, the most prestigious colleges and uni-
30
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versities announce their acceptance rates for next fall’s
freshman class, and every year it seems the number
gets smaller and smaller (now somewhere south of 10
percent for Harvard, Stanford, and Princeton). That
suggests that the simplest way to become extremely
rich is by being born to the right parents.
Or you could think about starting an innovative busi-
ness, a new brilliant startup which shines through the
thousands out there to emerge successful.
Despite Silicon Valley providing a safe space for
booming startups, starting a company for the ordi-
nary American remains the riskiest move. Further, we
see that Silicon Valley and certain other financially
better-off metropolitan cities remain the cradles for
startups. The wealthy, thus make more wealth.
It is a sane choice for several startups since they need
employees, engineers and these kinds of facilities are
inhibited in only a few particular zip codes. America
needs to think of ways to empower the startup found-
ers across the income spectrum, despite its inherent
love for elitism. One of the world’s biggest startups was
founded by a college dropout lacking in wealth, and
by allowing the concentration in economically well-off
hands, how can America be sure that it is not leaving
the next biggest thing behind? The correlation even
fits well in San Francisco, where the richest neighbour-
hoods have quickly become hotbeds for startups, while
the poorest ones remain far removed from that poten-
tial for economic growth. While causation is difficult
to prove here, it seems clear that companies leading us
to the future are concentrating themselves as far away
from those who most need the future to arrive.
With the relative likelihood of divorce in America
being 39% less likely for couples with income greater
than $ 125k as compared to an income of $25k, we see
that marrying rich is also a way to stay rich in Ameri-
ca. So if the startup or the expensive elite college does
not work out, marry rich, if your definition of success
includes money and not happiness.
WORLD UNFURLED
Debunking China’s
Economic Growth
BY SALONI CHHABRA
For over three decades now, the
world has witnessed the spectac-
ular growth of the Chinese Econ-
omy, and the People’s Republic of
China has successfully managed
to surprise the world with its high
GDP numbers. The world has
been as suspicious of China’s growth as it has been
surprised. Since 1978 the Chinese economy has main-
tained economic growth at an average of nearly 8%
which is remarkable as per the western standards.
China’s initial stellar growth was undoubtedly fuelled
by huge government expenditure and investments. The
government made constant attempts to stimulate eco-
nomic growth in the country and hence, continuously
kept increasing its spending to boost the economy.
Today, State-owned companies make up 25 percent of
total industrial output, down from 75 percent in 1970.
The Chinese government has overstepped its role
when it comes to the economy and their economy is
clearly “overbuilt”.
In a bid to increase investment and give a boost to the
economy, the government has often indulged itself in
wasteful expenditure. It has more often than not built
and rebuilt airports and skyscrapers, only to flush
money into the economy.
However, the truth is, China now has a huge set of un-
used apartments, highways, and airports. All this at the
expense of its middle class and low-income families.
The role of infrastructure comes into play when it is
used and it is not merely a tool of economic expansion.
So, a highway to nowhere can boost GDP temporarily,
but it will have no long-run positive effect.
Over-investment is not the only problem facing the
Chinese economy, China’s growth is still unsustain-
able and unbalanced, to say the least. Reckless lend-
ing by public-sector banks in China is another major
31
problem. The banks pay less interest on deposits, in
order to be able to lend out to companies at a cheap
rate. However, the banks end up lending to some
not-so-profitable businesses and are risky to lend out.
In a supposedly communist setup, the officials heading
the companies are judged for their ability to be able to
generate more business by expanding their companies,
rather than by their ability to generate profits. At the
same time, bank officials are put under a continuous
pressure by the government to lend out to businesses.
It is not problematic to have an economy fuelled by
investment, but when a lot of investment (with ques-
tionable profitability) is backed by bank loans, it leads
to mounting of bad loans in the economy. Thus, the
kind of risky lending that China’s economy is basing
itself on is immense and it’s some risky waters that the
economy is wading into.
The Chinese are in a trap. If they continue aggressive
lending to failing businesses, they have to face infla-
tion. That increases costs and makes the Chinese less
competitive in exports. Allowing businesses to fail
brings unemployment, a massive social and political
problem.
The issue of unemployment is at large connected with
the broader issue of standard of living. If econom-
ic growth is not accompanied by an increase in the
standard of living for the residents of the country and
helps only the elite few, growth serves little purpose.
Hence, in order to assess the viability of a country’s
economic growth, it is important to check certain
growth parameters and how they are reflected in the
standard of living of the residents.
Pollution in China is at an all-time high with China
indulging in unsustainable ways of growth. According
to the Chinese Ministry of Health, industrial pollution
has made cancer China’s leading cause of death. At the
 WORLD UNFURLED

same time, unemployment in China is a major prob-

lem and the economy is facing a constant trade-off be-
tween unemployment and inflation which needs to be
addressed. From 1990 to 2001, the income of the rich-
est 20 percent in China increased by nearly 20 percent,
while the income of the top poorest 20 percent fell by
one-fourth. The income gap in cities is even starker.

The government of the PRC has often been accused of

manipulating the employment
“China’s rates and it has been safely con-
economic cluded by sources like The Econ-
omist that the unemployment
growth is rates could be as high as double
of course the rates reported by the govern-
not entire- ment in their official figures.
ly a sham
A widening rich-poor gap is also
but it is being caused because of this and
structurally government’s lack of involvement
flawed.” in the lives of the poor. The gov-
ernment in China has been fo-
cussing on macro-level growth rather than harnessing
growth at micro-levels and hence, adversely affecting
the poor.

China’s economic growth is, of course, not entirely

a sham but it is structurally flawed and needs to be
corrected at the earliest. China’s continuous manipula-
tion of GDP numbers, exchange rates, and artificially
induced investment will not help it top the charts for
a long time. The Chinese government has started to
recognise this and is increasingly trying to push for a
consumption-driven economy. But it is a far cry, given
the fact that it would require major structural changes
in the domestic markets to induce consumption by
households, especially at a time when China’s export
growth rate is already negative. The government can,
of course, invest strategically in the Chinese stock
market in order to make corporates less reliant on debt
and in order to enable them to receive appropriate
funding for their ventures. A market-based economy
can be created only by deviating more market power
in the hands of competitive private players.

32
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High Time for Change:
Drug Decriminalisation
BY PIYUSH BATHWAL
The subject of growing substance
usage and its tribulations has been
a conventional topic for debate
over the past few decades, with no
conclusive solution. While some
countries like the US have resorted
to stringent laws on drug usage,
others like Uruguay and Portugal have enacted more
clement laws. This article explores the impact of policy
making on drug usage and trade, on its various stake-
holders, namely the government, victims and perpe-
trators, and finally goes on to explain how decrimi-
nalisation of such substances can work wonders for a
nation’s economy and its populace.
In this competitive world, one might often find himself
lost, and seeks sanctuary in a world where there’s no
pain, the future is non-existent and high is the new
normal. This world of ‘ecstasy’, according to conserva-
tives, ensnares a person to such an extent that the real
world seems oblivious to him. To prevent this from
happening, an external agent in the form of govern-
ment steps in. It imposes upon its subjects certain laws
which prevent them from acting upon their will.
These laws compel people into finding alternative
sources of drug supply and have in fact paved the way
for an estimated $300 billion black market for drugs,
which continues to grow at a rampant rate and affect
more lives than ever before. Marijuana, heroin, co-
caine, crystal meth, you name it – they are available
right across the street where you live. Mind you, they
are illicit, well at least according to the government
laws. But why would an addict care as long as it makes
him high? Several countries today have imposed se-
vere regulations on drug usage and trafficking. But the
question remains – is it actually reducing the num-
bers?
The scale of production of such substances is indefi-
nite. They are sold on the ‘Dark Web’ or simply put,
33
the Internet’s secret black market through platforms
like Silk Road, or through other devious channels. It
is almost impossible for addicts to rid themselves of
addiction because drug use directly affects their brain’s
reward system controlled by the hormone dopamine.
Over time, their body adapts to these drugs, and drug
intake simply makes them feel “normal”. This effect
is known as “tolerance”, and once people develop
this, not using drugs leads to withdrawal symptoms.
Avoiding these symptoms acts as a strong motivator
for them to continue consumption of such substanc-
es. Therefore, it is not feasible to curb this menace
through demand and supply channels. When Peru
decided to drive away its coca farmers, they migrated
to Colombia, and when they were later kicked out of
Colombia, they returned to Peru. The sealing of the
Caribbean trafficking route saw the advent of a new
bloodier one in Mexico and Central America. In fact,
the video of young ‘Kamlesh’ and his ‘Solution’, which
went viral on the internet recently, highlights exactly
this.
The government’s answer to the ‘drug menace’ has
been drug interdiction, which basically refers to the
interception of illegal drugs being smuggled by air, wa-
ter or land. Let us, for once, assume that interdiction
on drugs is successful and the authorities are able to
prevent drugs from entering the country, and succeed
in arresting smugglers. Supply will, therefore fall. As a
result, equilibrium price will rise, and quantity will fall.
But given that only few addicts are likely to break their
habits, and demand for drugs is fairly inelastic, addicts
will have a greater urgency for cash to purchase the
expensive drugs.They will run down their savings and
might as well take to crime, as is often the case. Let’s
take an example of the world’s greatest super power –
the United States. It spends approximately $40 billion
interdicting drugs every year, but has made little prog-
ress in eradicating them.
In a nutshell, prohibition is actually a recipe for disas-

ter. Supply should be managed and not suppressed.
Case in point - Portugal. Portugal formerly had a
rather hard-line approach to the fight against drugs.
But in 2001, it decriminalised drugs and possession
of small amounts of drugs became permissible. Being
caught with small quantities would now mean referral
to a treatment programme, or a nominal fine. Addicts
could now openly come out to discuss their problems
and seek help. Drug offences would now be dealt in
special courts, where the jury
“In a nut- comprised psychologists, legal ex-
shell, pro- perts and social workers. Portugal
invested 90% of its budget alloca-
hibition is tion on drugs towards treatment
actually a and prevention programmes and
recipe for a mere 10% towards policing.
disaster.” At the same time, it rolled out
massive job programmes and
micro-loan schemes for these “junkies”. As a result,
drug induced deaths have reduced by 75% during the
2001-2012 period and the number of heroin addicts
has halved. Similar versions of Portugal’s policy are
now present in various countries across Europe today.
The rich world is progressively treating addiction as an
illness rather than a crime.
It is important here to draw a line between decriminal-
isation and legalisation. Decriminalisation means that
any person found in possession of drugs for personal
use will not be deemed guilty. The person will have to
depend on illicit markets, however, for these drugs.
The criminal law will be applied only if a person is
caught selling, importing, smuggling or trafficking
drugs. Legalisation, on the other hand, means that
buying, selling and importing drugs are absolute-
ly legal under law and any free citizen is allowed to
practice such acts. It is argued that decriminalisation
will increase drug usage, but this is not true. In fact, it
is legalisation that can increase the number of drug ad-
dicts, but not decriminalisation, because it only works
towards remedies.
Decriminalisation has many benefits, as has been
evident from its enactment in several countries. Firstly,
it will reduce the criminal justice cost, and will allow
money to be redirect to preventing the crime. Second-
ly, it will save the government tremendous amount
of money on costs of imprisonment, for it will direct
addicts into treatment programmes, rather than plac-
ing them in the criminal system. Most importantly,
there will be reductions in transmission of HIV, and
34
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the number of drug-related deaths will reduce signifi-
cantly. Today, people use a new method of getting high
– ‘flashblood’, where some users inject blood extract-
ed from another drug users. If decriminalisation is
brought to the fore, such activities can be prevented
and volunteers bring clean needles to drug users and
spread awareness as in the case of Portugal.
Proponents of criminalisation argue that it controls
addiction and prevents people from committing rape,
assault, murder and property damage. From a social
perspective, they believe criminalisation keeps crime
under control, and prevents people from experiment-
ing with recreational substances. The UNDP, however,
has stated that drug control efforts are responsible for
“creating a criminal black market; fuelling corruption,
voice and instability; threatening public health and
safety; and generating high scale human rights abuses.”
Though it is inhumane to have stringent laws on drug
usage, many countries across the world have taken
harsh steps to curb this drug menace - not knowing
its repercussions. Take Philippines, where, allegedly,
people accused of drug usage or trafficking are killed
without the opportunity of a trial. Around 9,000 Fili-
pinos have been killed by agents on the suspicion that
they were drug users. This shortcoming in the sys-
tem allows the corrupt in the agency to kill innocent
enemies and later allege them of being a drug user by
fabricating false evidence.
Since drugs have to be sold in black markets because
of criminalisation, these drug cartels have a huge
advantage due to their financial backing and econo-
mies of scale. Their business will never run dry, since
drugs will always be in demand and since they are
being sold through black markets, they can charge
exorbitant prices. Such prohibitions on drug trade are
actually helping these cartels and have turned these
dealers into well-financed killers. Colombian drug
dealers in Guinea Bissau are alleged to have funded the
re-election campaign of President Vieira, which goes
on to show the network that these cartels have gone
on to establish with the authorities. For all we know,
the political class could even be promoting criminal-
isation, so that illicit drug trade through cartels can
continue to expand, as a result of which they may get
cuts as a source of funding for elections. It is alleged
that even in India, elections of some states like Punjab
may be influenced by drug lords who smuggle drugs
from Pakistan. These drug cartels are also a big source
WORLD UNFURLED

of funding for terrorist organisations and pose a more

direct national security threat as a result.

John Stuart Mill, the celebrated British philosopher

and political economist wrote that what happens
inside a person’s body or mind is the person’s private
business, not the business of society and certainly not
the business of the government. According to him,
a person’s choice of pleasures is his “own concern
and must rest with his own judgement.” Along these
lines, decriminalisation appears to be the most liberal
approach to drug usage because it allows substance
usage, while at the same time criminalising drug sale
and trafficking. Several countries across Europe and
other parts of the world have understood that the issue
of drugs is more of a health issue than a criminal issue.
Although conservatives advocate that prohibiting such
usage will be the only resort, decriminalisation proves
to be a more constructive way forward.

35

The Economics of
Immigration
BY RAHUL GERA
Human migration is the move-
ment of people from one place to
another, permanently or tempo-
rarily, with an aim to live a better
life and earn a livelihood there.
There have been countless ac of
large-scale migration between
countries. In the early 19th century, unskilled and
cheap workforce immigrated from developing coun-
tries to developed countries. With the recent tech-
nological advancements, there has been a shift in the
type of immigrants to developed countries. Now, more
people from the technical and skilled labour force
migrate to developed countries, where they are able to
find jobs that pay them better.
Immigration from India also follows this same pattern.
Before independence, international migration from
India mainly comprised of unskilled workers from
poorer socio-economic groups who went to other col-
onized countries. Following independence, migrants
from India majorly belonged to the richer socio-eco-
nomic groups who either left for a better job with a
higher pay, educational opportunities or for a better
quality of life in general.
Migration, a worldwide phenomenon, has often
been seen as beneficial for both sender and recipient
countries, it now has become more of a double-edged
sword. Even though immigration brings with it diver-
sity to the receiving country, which can render it soft
power, it has many downsides which often outweigh
the positives.
According to a survey by The Independent, the immi-
gration policy of the European Union has been cited as
a major concern for voting in favor of Brexit. The fall
in real wages, inadequate housing, pressure on public
expenditure- predominantly for education and health
services- are some reasons why immigration is seen
as a problem in Britain. The immigration policy can
36
WORLD UNFURLED
be listed as one of the leading causes of the rising
euro-scepticism in Britain. In South East Asia, India’s
geographical location, its relatively sound economic
position in comparison to its neighbours and its politi-
cal environment and opportunities make it an
immigration hub for citizens of peripheral countries
who are looking for a better life.
Refugees/immigrants from Pakistan, Bangladesh, Ti-
bet, Sri Lanka, Myanmar, and Nepal have found shelter
in India. As of 2015, about 5.2 million immigrants live
in India, making it the 12th largest immigrant popula-
tion in the world. A majority of these immigrants have
been from neighbouring countries, with Bangladesh,
Pakistan, and Nepal being the major contributors
(4.85 million). While India has been able to keep a
check on refugees from regions like Pakistan and Sri
Lanka, there has been no record whatsoever of the
refugees/immigrants from Bangladesh.
India has been regularly facing the problem of illegal
immigration from Bangladesh. The fact that Bangla-
desh is surrounded by India on three sides coupled
with the fact that there have been continuous border
disputes between the two gives a window to Bangla-
deshis to cross borders illegally and find respite in
India. The census carried out in 2001 by the Indian
government estimated, based on place of birth and
place of last residence, that there were 3.1 million Ban-
gladeshis residing in India. The largescale migration is
mainly because of the porous India-Bangladesh border
of 4,096 kilometers which has not been properly
fenced so far. Moreover, frequent floods and cyclones
make it difficult for people in Bangladesh to stay back
and earn a livelihood there. With the availability of
better economic opportunities across the border, they
are tempted to move away from their homeland.
It doesn’t end there. These immigrants have to earn
a livelihood to sustain and feed their families. They
need shelter, they need space and they need resources.
WORLD UNFURLED
India is already overpopulated (especially in the West
Bengal and Assam regions which are subject to immi-
grants from Bangladesh) and the influx of migrants
further pressurizes it to cater to their needs as well.
This also adds to the demand for consumer goods in a
country where there already exists a problem of excess
demand. Moreover, illegal immigration also alters the
population dynamics and demographics of places.
Increases in the supply of workforce in a region lead
to fall in wage rates and unemployment and creates
a divide between the new and
“A problem existing communities.
which is
The government has miserably
so deeply failed to address this situation
entrenched and this has led to drastic conse-
in histo- quences. In Assam, for example,
the agitation by the Assamese
ry cannot
under the leadership of the All
be solved Assam Gana Sangram Parishad
overnight.” (AAGSP) and the All Assam
Students Union (AASU). This
resulted in political instability which turned into a
violent protest by the people. The Assam Accord was
the result of this agitation. Further, due to rampant
corruption and ease of forging documents in India,
most of the Bangladeshi immigrants have got their
names enlisted in the voting list illegally. They claim
themselves to be a citizen of the state and this makes
it difficult to identify the immigrants. The immigrant
population acts as a vote bank for the political parties
in Assam. This might be the only instance in the world
where illegal immigrants who are being used as a vote
bank have considerable impact on the elections. In
several districts of Assam and Bengal, the immigrant
population has outnumbered the native population,
thus making the native population a minority.
These immigrants need space to live. They encroach
forests to build their settlements and undertake ag-
riculture which disturbs the ecological balance and
further damages the depleting biodiversity. The state
governments have to provide facilities for these im-
migrants and also have to incur expenditure on their
healthcare and education. There is this constant fear
that the immigrants will take up the jobs that would
have been taken up by the locals in their absence and
this problem is aggravated during a recession. This
creates competition and conflict between them.
This free cross-border movement also facilitates illegal
37
smuggling to-and-fro India. A large number of smug-
glers, enter India through the West Bengal and smug-
gle away livestock and goods to Bangladesh to avoid
high tariffs imposed by the Bangladeshi government.
Bangladeshi women and girls are also trafficked into
India and further to the Middle East for forced labor
and sexual exploitation. The Centre for Women and
Children Studies estimated that 27,000 Bangladeshis
have been forced into prostitution in India. Accord-
ing to a CEDAW report, 1% of foreign sex workers in
India and 2.7% of all sex workers in Kolkata are from
Bangladesh.
An even greater threat posed by illegal immigration
is that of national security especially for a country
like India which does not have cordial relations with
its neighbours. The largely lenient political class has
been prompted to take a close look at the issue as an
increasing number of Bangladeshis have, of late, been
found to be involved in terror activities. Pakistan’s
ISI is believed to be active in Bangladesh, support-
ing militant movements in Assam. There have also
been many cases where there are militants among the
illegal immigrants who cross the border to carry out
terror-related activities. Allegedly, many of our neigh-
bouring countries use our vulnerability on the border
to sponsor terrorism in the country. The similarity in
appearance, culture and language of the immigrants
and the natives makes it difficult to deport the illegal
immigrants back to Bangladesh. Further, the absence
of national refugee laws has made it nearly impossible
to differentiate the illegal immigrants from the eco-
nomic immigrants.
A problem which is so deeply entrenched in history
cannot be solved overnight. The dangerous conse-
quences of large-scale illegal migration from Bangla-
desh need to be emphatically stressed. Illegal migra-
tion from Bangladesh is no longer confined to the
North Eastern regions of the country. The immigrants
have spread all over the country to find a better life.
The problem of immigration is threatening the very
existence of India. Further delay in addressing
the problem will only make matters worse.
 INTERVIEWS

38
INTERVIEWS
Karan Thapar
Eminent Indian Journalist
Karan Thapar is an Indian journalist and
news commentator who was associated with
esteemed press organisations such as The
Times, CNN-IBN, India Today and The In-
dian Express. He graduated with a degree
in Economics and Political Philosophy from
Pembroke College, Cambridge and holds a
doctorate in International Relations. He is also
a recepient of the International Press Insti-
tute-India Award for excellence in journalism
COMPILED BY ARNAB DUTTA AND SHEREEIN SARAF
Sir, do you think journalism today has become all about
shouting and heckling? Have we lost quality content
over attempts to win TRP?
No, of course not. Let us not exaggerate but there
is an awful lot of mindless, thoughtless shouting on
television encouraged often by anchors who them-
selves have not researched the subject and find it easier
to conduct the program by getting people to quarrel
rather than by asking sensible, probing questions. I
don’t think it is journalism, I think it is a tamasha or
a spectacle being staged to win TRP but sadly a large
number of our countrymen fall for it. The truth of the
matter is that if large audiences didn’t watch these TRP
hogging shows on television, they wouldn’t be there.
So, you could argue the opposite that if a few channels
were to stick their necks out and make their programs
thoughtful, probing, intelligent, interpretive, balanced,
well-researched, you could find that the audiences like
them and begin to watch and listen because they are
reliable programs, after all at the end of the day the In-
dian people are no different to the British, the French,
the American, the German and they all enjoy sensible
television discussions that are well-researched, well-ar-
gued, balanced, objective, informative and credible.
Sunday Sentiments, written by you imparts information
in a creative manner. Do you feel creativity hides the
true sense of information and makes it difficult to inter-
pret the text at times or does it help enhance it?
Creativity is not a barrier to communication, it facil-
itates communication. The objective of creativity is
to make what you have to say more interesting to the
39
other person to read, so you find artful, clever, witty,
thoughtful and exotic ways of saying things that previ-
ously you have said in rather pedestrian ways. Creativ-
ity is therefore the handmaiden of communication, not
the obstacle to it.
Independent news outlets like The Wire have sought to
mould the news business into a joint venture between
journalists, readers and a concerned citizenry in the
public sphere-one that is starkly different from the
traditional models of family-owned, corporate-funded
and advertising-driven media outlets. Could you explain
the fundamental differences between the functioning of
a conventional media outlet and an independent news
outlet like The Wire? Also, why is it that independent
news outlets have a greater propensity to unearth and
report news on political wrongdoings than most of
the established media houses? Also, do you think that
independent outlets like The Wire, Newslaundry etc. are
going to define the future of news in our country?
I can’t for the simple reason that I don’t work for the
Wire. My knowledge of their internal functioning is no
better than yours. However, what I can quarrel with is
your initial statement regarding how outlets like The
Wire are remodeling the news industry. Instead what
they are doing is that they provide an essential but
separate ingredient. Organizations such as the Wire,
The Quint, etc. exist because their proprietors believe
that existing news channels are not providing suffi-
cient good quality, objective and balanced news. They
believe that it tends to be one-sided, hindutva-oriented
and supporting government influence and therefore,

the opposition or the alternate view point is not being
heard. And these organizations exist to make up for
that lapse. They believe that because such develop-
ments and exposés are not adequately covered by the
traditional news outlets, they have an opportunity to
do so by themselves and major in it. Also, the future
of news depends not on what Quint and The Wire or
the Print are seeking to do, although that would be an
influencing element in it, but I think the future of news
depends on the nature of the technology by which it is
communicated.
Referring to your interview with Mr. Shashi Tharoor on
the subject of the Padmavaat Controversy, what is your
personal take on the subject – do you think we should
pursue artistic freedom vociferously, even if it leads to
unrest in the state given that we as a country haven’t
matured enough to accept diverse and contrasting opin-
ions?
He was torn between the argument he was making as a
politician and the position an author or an intellectual
ought to take. I don’t think he was fully committed to
either, which is why I feel he was swaying between the
two. It is very interesting, because the second part of
the question reflects the position that Shashi was tak-
ing. However you put it more bluntly, which being that
we haven’t matured to the point that we can be fully
democrat. We haven’t learnt to tolerate opinions that
we dislike, and so our response is to be either violent
towards them or to censor them. Whereas in a mean-
ingful democracy, people have matured to the point
where they can live side by side even if they find cer-
tain views completely offensive. They may even peace-
fully protest against it but they do not seek to censor
them. We haven’t reached that point here in India. But
we should strive towards it. Secondly, I do believe that
every time politicians come down on the wrong side in
instances like Padmavati, they embolden the intolerant
viewpoint and strengthen it, and make organizations
like Karni Sena able to stand
“The more out and demand a movie to
you stand up be banned else they threaten
to burn down the cinema hall
to these intol- or kill the director. If from the
erant bullies, very beginning politicians and
the less likely chief ministers had unequivo-
they are to cally said that such behaviour
is unacceptable then they
stand up and would’ve quietened down
respond.” much sooner. I am not say-
ing that Karni Sena would’ve
tucked its tail between its legs
40
INTERVIEWS
and disappeared, but the more you stand up to these
intolerant bullies, the less likely they are to stand up
and respond.
Considering your illustrious academic journey, what is
your take on the significance of a liberal arts education
and how does it mould a student’s value system?
I think a liberal education system is one where you are
encouraged to think for yourself, to explore. There is
nothing wrong in getting it wrong, as long as you’re
reflective of it. One is in contact with people from dif-
ferent walks of life, cultures, nationalities and classes.
And in contact with them you broaden your horizon
and you start thinking differently and that opens your
mind, it opens your eyes and one of the disadvantag-
es of being in a more homogeneous setup is that you
learn nothing of other disciplines.
In one of your pieces for the Hindustan Times you
spoke of how constructive criticism levied against the
state should be gracefully accepted. Amidst the slew of
reports that the political machinery vehemently stifles
critical voices, what according to you is the way forward
for our country?
God that’s a difficult one! I suppose as a country, we
need to be more accepting of other people with differ-
ent viewpoints. And, the word tolerant is an extremely
patronizing term. It suggests that you’re wrong but
nonetheless I will put up with you. Instead our attitude
should be that I disagree, but you may well be right.
Let’s just agree to differ. Let’s agree to live side by side
with different viewpoints. There is no earthly reason
why that shouldn’t be the case.
How mature do you think the Indian populace is in
distinguishing between structural reforms and populist
propagandas? This is in relation to the post-truth era
that we are living where people prefer to wear patrio-
tism on their sleeves.
I don’t think wearing patriotism on your sleeve affects
your ability to distinguish between populism and
jingoism on the one hand and structural reforms on
the other. So let’s leave patriotism aside for now and
let’s look at the binary that you’re drawing of whether
Indian people can distinguish between populism and
structural reforms. And I think they can. Speaking
more instinctively than analytically, but most people
do know in their hearts and often in their conversa-
tions as well, that things aren’t right in our country. We
know there are people who are hungry and sometime
even starving, there are people who are woefully un-
educated and illiterate and there are people who don’t
INTERVIEWS

have clothes to put on at night. And we know that

these are not easy things to put right. We know that we
are an ambitious and deserving country. However, we
do realise that we don’t get the fruits of our hard work.
There are people who slog all their lives and their
status or position does not change. And instinctively
that means they know that major changes are needed
and that these changes will be difficult. All people are
accepting of that. They may not be able to intellectual-
ize it, they may not be able to use terms like structural
reforms, but instinctively they know that there are no
shortcuts and the road ahead will be difficult, and it’ll
need sacrifices and pain and suffering. And they are
prepared for it, provided two things happen, 1. The
people administering and governing them are honest
about it, and 2. Everyone puts in their equal com-
mitment to it. Therefore, I would say instinctively all
people can instinctively distinguish between populism
and structural reform.

What do you think about China stream-rolling its way

in East Asia through its initiatives like the OBOR and
its increasing its presence in the subcontinent, and the
implications these hold for India?
I can see why India wouldn’t be pleased about these
developments, because we see ourselves as rivals of
China. It makes sense for China to use its political and
economic advantages. Secondly, OBOR is only going
to be acceptable to the Bangladeshis, Burmese, the
Nepalis to the extent that it brings them benefits that
they won’t have access to. As far as the claim that we
see ourselves as rivals of China and we ought to be on
the same table as them. The fact of the matter is that
their economy is five times bigger than ours and the
economic and political influence they exercise is far
greater than India. We have to accept that they are in
a different league. We may not like it because we have
bitter memories from 1962 and deep down somewhere
we want to get our revenge, but the truth is that China
is in a different league from us.

41

Rohit Azad
Assistant Professor, JNU
Rohit Azad is Assistant Professor at the Centre
for Economic Studies and Planning, JNU. His
interest lies in macroeconomics, growth theory,
monetary theory and policy with special refer-
ence to developing countries. He also held the
position of Fulbright Scholar at the University
of Masschusetts, Amherst. Author of the book
“It’s Not Over: Structural Drivers of the Glob-
al Economic Crisis”, he is known for his great
insight into financial crises
COMPILED BY TUSHAR SINGH AND VANSHIKA YADAV
How do you think the government should approach the
fiscal condition in the country?
My first advice to the government will be to not adhere
by the FRBM, which has affected the Indian economy.
The next question which comes here is where should
that extra expenditure go? According to me, the most
important expenditure the government should look
into is agriculture which it well knows needs priority
especially, after the Gujarat elections.
So, where should that added expenditure on agriculture
be directed towards - building long-lasting infrastruc-
ture or populist measures like loan waivers?
Let me correct you there. There is no such thing as
populism as long as you are doing something for the
people of the country. Any expenditure should be
judged on how it affects the livelihoods of the poor.
Furthermore, corporate loan waivers given to few rich
businessmen are never termed as populist, but the
same is not the situation when a loan waiver is given
to the poor. Farmers who need these waivers are those
who cannot service their debt and a loan waiver is
sure to help them gain more out of their livelihood,
income from which would’ve otherwise gone as loan
repayment. With the FRBM gone, you can have both
types of expenditure since both aren’t exclusive of each
other.
India, despite its good GDP numbers especially for the
last 15 years, has seen a rise in inequality. Relatively
high unemployment persists. What are other indices
which we should look at to measure India’s success story
42
INTERVIEWS
apart from GDP?
For that, you will have to go to the Human Develop-
ment Index and its different indices like health, educa-
tion, mortality, etc. After having a look at that, it could
be easily comprehended that the last 15 years haven’t
been as exceptional as misleading by the growth
rate. Inequality being just one aspect, there are many
metrics such as open defecation where India hasn’t
performed well. For India to become a superpower, we
drastically need to improve on these indices by looking
beyond the GDP and increasing expenditure on health
and education. This essentially brings us back to why
we should not adhere to the FRBM.
Were the reforms of 1991 the only way to achieve these
impressive growth rates? Has the pace at which we have
liberalized since 1991 been adequate?
As mentioned above the growth numbers have surged
only in the last 15 years, that is 2003, so 1991 should
not be credited with the impressive increase in our
growth. Had liberalization been responsible for it, then
we would have seen similar growth rates in the 90s
as well. It was during the 2003-07 period when our
exports surged due to global demand which benefitted
the ‘emerging economies’ like Brazil and China as well.
Moreover, the financial crisis had a say in our growth
numbers as well. Thus, it’s not purely the internal poli-
cy which affects growth.
Now, coming to the question of liberalization as a pol-
icy. I agree that there were problems with the license
raj, but the adopted reforms were far from perfect.
INTERVIEWS INTERVIEWS
They were supposed to make the economy a plat-
form free of government intervention and corruption
because of ‘efficiency’ which is contrary to the present
scenario where an entire
“There’s no government was toppled on
such thing as the issue of corruption in
2014. Therefore, I would say
populism as liberalization has not re-
long as you formed either our economic
are doing or political situation but has
something for led to private sector-led cro-
ny capitalism, as compared
the people of to state-led crony capitalism
the country.” before 1991.
Talking about China, can we learn from the Chinese
example of how they fought-off NPAs or are our systems
too different?
The Chinese system is very different from ours. Firstly,
their political systems are different, but majorly their
debt is of the public sector itself. A large part of their
manufacturing still comes from state-owned enterpris-
es. For China to write-off a debt is like the left hand
giving money to the right hand which is not the case
with India. The Indian case would involve bailing out
the private sector which has political implications.
Why should the Indian public bail out corporate giants
like Vijay Mallya?
Today, the news which comes from the economic circles
inside the government is that the country needs to solve
its structural problems. What exactly are these ‘struc-
tural problems’ which almost every government policy
targets?
NPAs, as discussed above, is one, but the most import-
ant structural problems which requires an immediate
response is employment. The employment elasticity of
the Indian growth story was very low which gave rise
to inequality and jobless growth. To tackle this, we re-
quire higher government intervention for giving prior-
ity to employment generating sectors, which can never
be done by the markets which prioritise profits. To
give you a concrete example on which I am currently
working on, the green sector generates a lot more em-
ployment than fossil fuels, but expenditure is not di-
rected there as it is less profitable. Adequate attention
must be directed here, and this requires more than just
slogans like “Make in India”. The private sector should
be allowed to do whatever it is doing in profit inten-
sive sectors, however, there should be a genuine level
playing field and not crony capitalism which we see
right now. Moreover, the government should focus on
43
creating adequate infrastructure for attracting invest-
ment in employment generating sectors.
Sir, in one of the articles you mentioned about the
missing ‘third pole’ or the ‘missing left’ in India. Who do
you think can be the Bernie Sanders or Jeremy Corbyn
of India?
I think at the moment you don’t have the third pole
but that doesn’t mean you will never have a third pole.
Instances like Una and people like Jignesh Mevani
clearly show a possibility of that happening. There is
no doubt that there is anger amongst the youth which
may result in young people like you providing for
that missing space. The country doesn’t need oldies
like Bernie Sanders and Jeremy Corbyn for filling that
open space.
BR Ambedkar did not want the word Socialist to be
included in the preamble as he believed the constitution
should not dictate government policy in the future.
However, Indira Gandhi eventually did include the
word. Do you think the constitution should dictate gov-
ernment policy so overtly?
I have come to believe that Ambedkar was a socialist
at heart. At least, he was more socialist than Indi-
ra Gandhi who brought the emergency after all. He
proposed two things to annihilate the caste system:
land reforms and inter-caste marriages. The first is so
radical that no government has been able to do that.
I still believe the vision that Ambedkar had is the one
India should have.
As JNUSU president, you started a protest against
George Bush’s War on Terror. 15 years down the line,
what do you think would have been a better alternative
than US interventionism?
First of all, there was not a conflict it was all self-cre-
ated arising out of the want to access oil. The fact is
well established now. Even if there was a conflict who
are you to intervene in it? You wouldn’t want the USA
to intervene if there is a conflict between India and
Pakistan. War is never a solution; the only way out is
through dialogue. The United Nations should in no
way allow the war against sovereign countries.
Sir, today we see an ideological war between Russia and
the West through semi-controlled media outlets like
RT and CNN. For example, Russian media will compare
Trump’s authoritarianism to Stalin while western media
will accuse Russia of interfering in US elections. Is this
the new form of conflict where ideas, and not military
will be at war against one another?
 INTERVIEWS

With Trump, I cannot guarantee anything! He can

press any button at any point in time. Unfortunately,
US polity is moving in a clueless direction because of
its leadership. Trump as an individual is not import-
ant. What’s important is what he stands for. Whether
the next president of that country will be any differ-
ent is no guarantee. Therefore, I cannot foreclose the
possibility of a military conflict. It is not in the interest
of the US to go to war against Russia if you look at oil
and other resources. Also, Russia is not USSR any-
more. China is one country they are trying to create an
enemy of, but they have deep economic relationships
to break into war. A large part of US wealth is owned
by the Chinese primarily because of the trade deficits.
But with an extremist madman with the button, you
never know.

44
INTERVIEWS
Prabhat Patnaik
Renowned Marxist Economist
Prabhat Patnaik is a distinguished academi-
cian and political commentator. An alumnus
of St. Stephen’s College and Oxford Universi-
ty, he has taught at the Centre for Economic
Studies and Planning in the School of Social
Sciences at the Jawaharlal Nehru University in
Delhi for more than 35 year and has also been
a part of the Faculty of Economics and Politics,
University of Cambridge. He also served as the
vice-chairman of the Planning Board of Kerala
COMPILED BY PIYUSH BATHWAL AND SNEHA CHOUDHARY
In 2017, we witnessed the Bengal elections where the
CPI(M) considerably lost its hold. The PM’s “anti-Con-
gress” propaganda has worked wonders, and he has
successfully uprooted Congress from the Centre and in
many states. With the BJP gaining influence and the Left
losing its hold in India, where does the future of Marx-
ism in the country stand? Moreover, do you think India
is pushing itself towards dead-end imperialism?
Let’s just take the Modi question that you asked. This is
not specific to India. There is Trump in the USA, Ma-
rine Le Pen in France etc. The forces of this kind are
coming up all over the world and the fact that they’re
coming up reflects the economic crisis which exists.
The problem is that the liberal bourgeoisie leadership
which was pioneering this globalisation has not been
able to recognise this economic crisis. Hillary Clinton
even denied the fact that there was an economic crisis.
So, to the extent that they deny this, it becomes an op-
portunity for all kinds of other forces to strike a chord
with people who are victims of the crisis even though
these other forces do not have a solution to the crisis,
not even Trump. He only says the Chinese and Mex-
icans are responsible for this, but that does not solve
the problem. Even if you prevent Chinese or Mexican
immigration, the point is that capital is global, which
he cannot change.
Similarly, Modi has no idea of how to tackle the crisis.
In the last three years, the unemployment situation has
worsened. As far as the agriculture-dependent popula-
tion is concerned, their real incomes have marginally
declined over the three-year period. And this was
before demonetisation and GST. Large segments of the
45
population are actually witnessing a worsening, or, at
best, a stagnation in their living condition. Modi has
no solution to this because the only thing he’s saying is
“invite investment from outside”, but the point is that
this is a world where not much investment is being
undertaken anyway, whether in India or the US or
anywhere, so there’s no reason why an investor should
come and invest in India. This plays a political role-it
prevents the emergence of a concerted working class
of peasant struggles because if you divide people along
the lines of Hindu-Muslim, white and black, you’re
preventing the emergence of a concerted movement as
far as the workers and peasants are concerned. Such a
role becomes important in a period of crisis and they
get the support of the upper classes. Modi enjoys the
support of monopoly capital in India. Similarly, Trump
is very popular because of his tax measures in the
United States.
The second question is about the decline of the Left. I
think Marxism is the only view which sees the capi-
talist system as a spontaneous system. Individuals in
capitalism behave in ways which are thrust upon them.
Therefore, even though the system appears to act on
the basis of individual decisions, it is like a self-driven
system, which means the only way you can get out of
the ills of this system is by getting out of this system
altogether. That is why Marxism is different from every
other reformist kind of position and that perception of
capitalism, to my mind, rings true. The abiding rele-
vance of Marxism consists in the fact that it has a view
of capitalism which can get transcended only when
capitalism is transcended. Now, there is a weakening of

existing Leftists not just in India but the whole world.
The Left had come up in a particular historic conjec-
ture which Lenin had written about. The world today
is different and I don’t think the Left has managed to
cope with this new world. In particular, it has not been
able to cope with globalisation.
What, according to you is the most important metric for
judging how developed a country is?
Every group’s position has to be looked at before you
can say that social welfare has increased. It is not
enough to say potential welfare is large, and it is not
enough to just look at the GDP. You also have to
look at the living conditions and the access to goods
and services. I’m not raising deeper questions about
whether increased access to goods and services in-
creases welfare. But even if we assume that it does,
you have to look at the access to goods and services of
every single group. Even that is not enough, because
access to goods and services to some groups may in-
crease a little bit and to others
“I believe there a lot more in which case the
should be a set distribution is skewed. If every
of economic group is better off and if we
can ascertain that the distri-
rights, like we bution is better, then we can
have political say we have made progress. I
rights.” believe there should be a set of
economic rights, like we have
political rights, which everybody is entitled to. Those
mean right to employment, right to food, right to free
and quality healthcare, right to universal, publicly
funded, free and quality education (at least up to a cer-
tain level), right to old age pensions, right to disability
benefits, and so on. I believe these are economic rights
essential for building up citizenship which transcends
castes and communal differences.
We’ve seen many suicides among farmers. They are in-
centivised to move to urban areas where they might find
employment but even there the job markets are saturat-
ed. So the farmers are stuck in a helpless situation. So do
you think capitalism actually helps in the generation of
employment?
Capitalism is actually what has brought us to this
situation. I think there is a view that capitalism, even
though it destroys small production, ultimately ab-
sorbs everybody into the workforce, which is a wrong
view. In European capitalism, even though small
production was destroyed, the fact that a certain
tightness emerged in the labour market was because of
the massive emigration which took place from Europe
46
INTERVIEWS
to countries like US, Australia, New Zealand and so
on. Those possibilities are not there, so what hap-
pened historically (because possibilities then existed)
was wrongly attributed to the internal working of
the capitalist system which is wrong. If capitalism is
replicated elsewhere, it is assumed that the same thing
would play itself out which is not the case. Peasants
who move into cities don’t find jobs because no jobs
are being created. Consequently, they swell the army of
reserve labour. You have casualisation of employment,
intermittent employment, etc. Employment rationing
does not take the form that 20% are unemployed and
80% are employed and 20% keeps increasing and 80%
keeps decreasing. Everybody is unemployed for 20%
of the time which keeps increasing over time, that is
what is happening. So, this weakens the working-class
movement which is one of the factors for the weaken-
ing of the Left. Capitalism is incapable of solving the
problems of societies like ours because it only works to
destroy the petty peasantry and agriculture, and not to
revive. As a result, it increases poverty.
Do you think Nehruvian socialism worked out well for
India? If we draw a parallel between countries like Sin-
gapore, they have developed at a much faster rate than
ours.
Firstly, Singapore and India are non-comparable. Sin-
gapore has no peasantry. Countries like India, China,
Bangladesh and Indonesia are very different because
there is a substantial peasant population and work-
ing-class population. In the pre-liberalisation period,
the state protected the peasantry in many ways. It pre-
vented them from competition from the world market,
price fluctuations, it gave institutional credit through
bank nationalisation, and it gave procurement prices.
You did not have an agrarian crisis at that time. Conse-
quently, when people say that Nehruvian socialism did
not work, their point is that the rate of growth was low.
But the point is, as I was arguing, the rate of growth
means nothing. So, if an acceleration of the rate of
growth is associated with primitive accumulation of
capital where peasants are being crushed, that is not
social progress. You’ll find that the rate of employment
growth in the period of high GDP growth under neo-
liberalism is lower than in the earlier period. Similarly,
take standard indices like food grain absorption. Food
grain absorption, which had gone down greatly by the
time of independence, actually came up and it is much
lower now than it was prior to the beginning of liber-
alisation. So, by any such criteria, you cannot say that
the current period marks an improvement over the
Nehruvian period.
INTERVIEWS
Isher Ahluwalia
Renowned Indian Economist
Isher Ahluwalia is currently Chairperson on
the Board of Governors for the Indian Council
for Research in International Economic Rela-
tions. She was awarded the Padma Bhushan in
2009 by the President of India for her services
in the field of literature and education. An
alumnus of the Delhi School of Economics and
MIT, Dr. Ahluwalia has also written a number
of books, the latest being “Transforming Our
Cities: Postcards of Change”.
COMPILED BY AYUSHI SRIVASTAVA AND DEVANSHI BHATI
In your book, Transforming Cities, you talk about
how small cities were able to transform themselves. In
old cities, the infrastructure, although poor, has been
already built and it will be very difficult to bring about a
change in it as it will require a lot of overhauling. Given
this, how can we transform our old cities?
Transforming old cities is a difficult task. After com-
pleting my report on urban cities, I was invited by
fourteen Chief Ministers to discuss the relevance of my
report in their state. When I was talking to the Bihar
Chief Minister, Mr. Nitish Kumar, he told me that Bi-
har had extremely narrow roads with tall building on
both sides. He asked me exactly the same thing you are
asking me. To this, I would say that out of the multi-
ple challenges, try to pick the one that is relatively less
challenging and show that you can turn things around.
Once people see that you have been able to change
one thing, their aspirations will grow, then they come
forward and say, “Okay, let us widen this road.” In In-
dore, people actually gave up their own land that they
had encroached for pavements. Change cannot come
without community engagement. The people have to
understand that the benefit bounces back to them.
The government recently launched the Smart City
Mission which aims at developing 100 smart cities. Do
you think the government was smart enough about this
mission regarding the finances and planning?
The Smart City Mission is not really about cities but
a specific area. The government is thinking of using
advanced technology and developing infrastructure so
as to transform an area and hold this out as a pilot. The
47
cities that have been selected are mapping a particu-
lar area where they are promising to provide wifi or
improve the water supply. According to me, a city can
be called smart only if its citizen is smart enough to
demand good governance from the government and
the government, along with high technology, brings
about governance reforms in order to improve ser-
vices in a transparent and accountable manner. To me,
that is a complete definition of Smart City. The cities,
just like a human being, cannot be smart unless they
are healthy. Hence, health and sanitation become a
priority. Infrastructure and technology are important
but they are not sufficient. Good governance and the
capacity to manage enable a better Smart City. Our
cities need to be equipped with the funds to manage
themselves. In the current scenario, the municipali-
ties are accountable but they do not have the funds to
manage the cities. The cities should be allowed to raise
funds through bonds or through public-private part-
nership. For this, they need to have a revenue model
and the autonomy to decide the prices to be charged. If
not, the state government should ensure that they are
compensated for the reduced prices.
Ma’am, the standard of living in the cities is decreasing
due to pollution and overpopulation. This overpopu-
lation can be attributed to the continued migration of
people from villages to cities. So, don’t you think that
India needs ‘Smart Villages’ and not ‘Smart Cities’?
If you want 6-8% percent growth, you have to move
towards urbanization. Villages can give you 4-4.5%
growth. At a 4.5% growth rate, if your population

growth is 1.5%, you are growing at 3% per annum and
at 7.5% growth, you are growing at 6% per annum. If
a doubling of income at 4.5% growth rate were to take
‘x’ number of years, it will take half the time at 7.5%
growth rate. The only time poverty actually declined
in the country was when the growth was rapid. One
might think that rapid growth leads to inequality but
that just means that you have to work harder to ensure
that the growth is sustainable and inclusive. Without
growth, poverty cannot decline. No one would make
a case to ignore your villages. You have to ensure that
there is regional development, where villages are con-
nected to the cities but the focus has to be on the ur-
ban areas for development. It’s not about rural versus
urban but the development of both rural and urban
areas in a synergistic manner.
Ma’am we read one of your articles about the Bellandur
lake fire. In January 2018, the lake caught fire again.
Even then, the officials claimed that they did not know
the reason for this fire. What can ordinary citizens like
us do, when the authorities are completely clueless and
refuse to act?
The officials are not clueless. They are ignorant enough
to not know that it is the effluents from the industries
that are polluting the rivers and causing this damage.
But if you acknowledge the cause, the next question
that arises is what steps have been taken to stop the
damage. Also, there is a lot of corruption. I am ex-
tremely relieved to see that you all are asking these
questions at such a young age. I only learned about
these things in the last ten years. When I finished my
book on industrial growth and productivity in 1982, I
would go to seminars, talks, and sessions and if any-
one asked me if India would open up or if industrial
controls would be removed, I would say, “Not in my
lifetime” and then liberalization took place in 1991. So
now when someone asks me if we will be able to han-
dle urban challenges, I say yes because I have faith in
the young generation. You have never seen the country
grow at 3.5% and I know that you will not take the
inaction of the government lying down. You will be
more forthright and active and demanding. It is only
when governance is demanded that it is delivered. So I
have a strong belief that you will not tolerate incidents
like Bellandur lake and the Bawana incident.
With the rising levels of pollution and the high levels of
smog we witness every year, do you feel that in the quest
for development, we have neglected the issue of envi-
ronment? And is pursuing development without paying
much attention to the environment worth it??
48
INTERVIEWS
I absolutely agree with you, but we need growth.
However, there’s a need for sustainable growth; growth
which is inclusive. We cannot have growth which is
not sustainable. Environment is not something that
will be put in there by the government as an adjunct,
there’s a need to educate people. People who have
moved to the cities are unable to recognize their con-
tribution toward this issue, hence, this is something
that people should understand and thereby take small
yet significant steps in the direction to conserve the
environment. For instance, more colleges and insti-
tutions should have solid waste management units.
The more it is advertised,
the better it will be. Hence, “Our salvation
there’s no question about
whether we should give lies in fixing
environment space on the cities like My-
same stage. I would not say sore, Surat,
environment versus growth Indore, Bho-
but would rather advocate
sustainable growth. pal and all the
areas situated
An article in the World next to our
Economic Forum talks about villages.”
how urban cities in the rest
of the world are losing their
charm because of increasing pollution and traffic. With
improved accessibility to goods and services and the
advent of the work-from-home facility, living in urban
cities is not as attractive as it used to be. Is India close
to that stage and if not, then how can we achieve a stage
where rural areas are able to manage the urban area
growth?
Our salvation lies in fixing cities like Mysore, Surat,
Indore, Bhopal and all the areas situated next to our
villages, we should start getting in touch with them
and start focussing more on these cities and create
a development plan for them. We must begin at the
other end and treat them as investment goals and
work towards creating mobility. We would have terrific
results. Developing these cities will help in preventing
the concentration of the population in a few cities and
will lead to a more inclusive growth.
INTERVIEWS
Sanjeev Sanyal
Principal Economic Advisor,
Ministry of Finance
Sanjeev Sanyal is an internationally acclaimed
economist and bestselling author. He spent two
decades in the financial sector and was Global
Strategist & Managing Director at Deutsche
Bank till 2015. He is widely regarded as one
of Asia’s leading economists and was named
“Young Global Leader 2010” by the World
Economic Forum in Davos. He is also a well-
known environmentalist and urban theorist.
COMPILED BY RAHUL GABBITA, SALONI CHHABRA AND SHRUTHI RAMESH
Sir, your current role in the Ministry of Finance as the
Principal Economic Advisor has been a remarkable shift
in career path from your previous role as Managing
Director at Deutsche Bank, an organization where you
had spent over twenty years. What inspired you to take
up this job and what do you find different?
Being an economist, I have all sorts of ideas and
suggestions with respect to policy making and it’s an
opportunity to have those ideas implemented. That’s
probably why I decided to switch to this job. There’s
an effort by the government to bring in people from
outside and I’m grateful for the opportunity of getting
to work here and contribute to policy making. I spent
a lot of time in the banking sector and I was not a
mainstream banker. I was an economist in a financial
environment. That world was exciting in its own sense.
So, I can’t say I didn’t enjoy that. This is a different
environment and it’s an exciting time to be a part of
policymaking in India.
India, being a growing economy, needs to make in-
creasing budgetary allocations to both welfare and core
sectors. Given that, what needs to be done to increase
our tax base and generate more revenue?
This is one thing we spent a lot of time thinking about,
and one of the major issues was, of course, GST, which
is something that has been debated in India for years.
Despite being a united country; from a market per-
spective, we were all divided. Introducing GST was
not easy and many taxes that had to be synchronized
were state taxes. This made the job a little too chal-
lenging. We needed to give some structure to the tax
49
system. We recognize that GST may not be perfect at
this point, but over a period of time, we’ll make cer-
tain modifications by taking into consideration the
feedback that we get. Talking about the tax structure
in general, a good tax system is ultimately a simple
tax system. We will smoothen the tax structure over
a period of time. We have recently lowered the cor-
porate taxes for small companies to 25%. The reason
why it wasn’t done for the big companies was that they
already enjoy a lot of exemptions and privileges. Over
a period of time, as we take away those exemptions,
we will simplify the tax structure and charge a flat rate
of 25% as corporate tax. So, a simple tax structure is
needed and we need to sequence the change well.
The RBI recently overhauled and simplified the way we
deal with stressed assets and NPAs. The new system is
centred around the Insolvency and Bankruptcy Code
(IBC). Why is the IBC so important?
Well, the IBC is important because any financial
system must have a provision for an exit. In an en-
trepreneurship based economy, huge risks are taken
and when that happens, some go wrong and that can
be for all kinds of reasons and not necessarily fraud.
In India, we moved from ‘Socialism without entry’ to
‘Capitalism without exit’. IBC is a critical part of how
you run a market-based economy. Talking about its
relevance in the banking system, the way BIFR dealt
with stressed assets was really an unviable way as it
perpetuated the same mistake and never rectified it.
IBC is a very simple framework- if risks fail, banks
have a way and they can auction the resources off and

thus the system goes on continuously cleansing itself.
IBC was used to cleanse the banks. The initial idea was
to create a bad bank but it wasn’t a very good idea. IBC
is basically about resolution and not retribution. There
needs to be retribution if there’s been a fraud but when
risks go wrong, we need to resolve the issue and not
seek retribution. If you create a system where every
small misdemeanor, say someone’s cheque not coming
in for three days, is punished, the whole system will go
bankrupt.
Sir, the Economic Survey (2017-18) talks about an
investment dip by companies due to stressed balance
sheets. In this context, how far do you think the recent
reforms by the government, such as tax cuts, would go
in assisting the creation of new jobs?
The investment dip is attributed to a lot of reasons. In
order to ensure investments, it is important to cleanse
the system, which is being done by reforms like IBC.
If the kind of auctions being done right now work effi-
ciently and the resources are acquired by the right kind
of investors, and the banks are cleaned up, there will
be a generally positive outlook towards investment.
There needs to be greater accountability in the system.
Sir, you often talk about a ‘strong but limited state’.
Considering this, where do you think the state should
allocate its resources, and what areas need immediate
attention in this economy?
I often say that the problem with the Indian state
has been that it’s an all-pervasive but weak state. We
should rather aim for a state that does a few things
but does it well enough. I’m a proponent of the
‘Chanakyan’ view of the state which elaborates that the
state’s role is limited to defense, providing law and or-
der, justice and maybe some social services for which
there is a market failure like public health and disaster
management. It is not the job of the state to optimize
things for everyone. It is not the business of the state to
make everyone happy. The state should rather provide
a framework for people to lead their lives and what
people do with their lives is then their private matter
and not that of the state.
We observe that there are high rates of educated un-
employment among the youth. Will you attribute this
to low standards of education or is there a structural
problem in the employment sector, which needs to be
corrected?
There are several issues here. One major issue is that
the education sector is producing degrees but not
people with adequate skills. Another failure can be that
50
INTERVIEWS
it is creating a lot of degrees in sectors where there is
little or no demand. If you look at the debates in Indi-
an academia, academicians have enormous resistance
to having job-oriented courses and I fail to understand
why. This is something that
”We moved the students should demand,
from ‘Socialism courses that would give jobs.
That is one major part. An-
without entry’ other issue here is the rapid
to ‘Capitalism changes in artificial intelli-
without exit’.” gence. The job market will
change drastically because
of artificial intelligence, but I don’t think that we have
readied ourselves for the change. It has become quite
clear that the kind of jobs that will get wiped out will
be those of the educated people. It does certain jobs
more efficiently than the humans. Every innovation
creates new jobs and AI also will, but, at this juncture,
it is unclear what those jobs will be.
In the context of urbanization, we have myriads of
slums that are not even recognized by their respective
municipalities. How should we be moving towards erad-
ication of slums?
One of the key things to understand here is that slums
should not be thought of as deterrents to develop-
ment. They are rather routers to the development
process. Try and understand that a migrant to a new
city in search of employment will find his home in a
slum and not a prime location. In any society that has
developed, be it the European cities in the early 20th
century or the early years of American development,
people used to migrate to cities and settle in slums in
large numbers. To get rid of slums is, therefore, a bad
idea. I do not mean to say that we should let housing
spring up in any corner of the city but rather, cities
should be planned in a way that they allow enough
space for where this kind of churn can take place.
Whenever you create a city, you anticipate a space
where such kind of residences will come up. If it is not
done, gradually, unorganized versions of slums will
come up. Also, in a rapidly urbanizing system, renting
is extremely important. A migrant to a city wouldn’t
want to buy a cheap house, what he rather wants is a
place with low rentals and that is essentially the role
that slums play in rapidly urbanizing cities. So, slums
should rather be anticipated and spaces for their devel-
opment be created or else, they will gradually come up.
You speak extensively about ‘Real Indian History’, and
have also highlighted in your books that we never read
about India winning wars, or how small empires centred
INTERVIEWS

in Delhi overshadow the large kingdoms (like the Cho-

las) in our history textbooks. How can we institutional-
ize changes in the history that we read?
I always use the African quote “Until the lions tell the
story of the hunt, the story of the hunt will always glo-
rify the hunter” to bring home the idea that until we
write our own history, someone else will write it for us.
This has been a major issue in Indian history, first, the
British wrote it for us in a certain way that created an
impression that Indians never won their wars, it was
always a slave nation and that was their way of telling
the Indians that they’ve never ruled themselves and
hence, they shouldn’t mind being ruled by the British
empire. They systematically wiped out incidents in
History that didn’t suit their interests. They created
the ‘Aryan Invasion Theory’ but something that people
don’t realize is that they created such theories wher-
ever they planned to rule. For instance, they creat-
ed ‘Hamitic Theory’ in Africa along the same lines.
Secondly, they diminished all Indian military heroes,
they wiped some out and when they couldn’t wipe out
the others, they diminished their stature. For instance,
they called Samudra Gupta the ‘Napoleon of India’.
Since the British had beaten Napoleon in a war, they
wanted to drive home the idea that the greatest Indian
warrior could’ve been defeated by the British.
Even after 70 years of independence, we continue
to read the same story. Similarly, they wiped out the
importance of various Indian victories. One gets the
impression that the British conquered India from the
Mughals but in fact, the British conquered India from
Marathas who were ruling India all the way from Pun-
jab to Travancore. To give you an idea of its extent, the
Maratha empire at its height was bigger than Akbar’s
empire and it lasted for 75 odd years at its peak, which
is not a trivial length of time. Yet, the Maratha peri-
od has been systematically wiped out of our History
books and we hardly read about it. They show as
minimal a version possible of the areas ruled by Indian
rulers on a map in order to establish the supremacy of
the British. Figures like Marthanda Varma who defeat-
ed the Dutch have been wiped out of our history.
We can understand why the British did it, but it is
surprising that these events have not been re-insert-
ed into our history 70 years after independence. The
narrative has been deliberately tuned in a certain way
that the very existence of this country is due to a very
small group of people who are convenient to a certain
dispensation. It’s unfortunate that we haven’t restored
the real history and such important figures. This is why
I began writing my own history.

51
 ECONOMICS MAXIMISED

52
ECONOMICS MAXIMISED
Ivy, Not Rosy
BY KARAN MEHROTRA
AND YASHASWI SHARMA
The image that usually comes to mind
when the word ‘Ivy League’ comes up
is that of a picturesque setting with
a combination of rustic and contem-
porary buildings, pristine lakes, and
expansive gardens; world-class aca-
demic reputation, and a path to a better life. But these
universities’ questionable admission practices, the
scale at which their enormous endowment funds are
being deployed in equity and fixed-income markets,
and their attempts to further reach across different
countries (through college branches and online plat-
forms) completely elude us.
In order to consider the revenue of an Ivy League Uni-
versity, we will have to look into their two principal
sources of fresh revenue- tuition fees and donations/
grants. The cost of going to an Ivy League University
is five times the average cost of attending an American
state university, a considerable difference in tuition
fees. In fact, on an average, one-fourth of the graduat-
ing class of an Ivy League College ends up knee-deep
in student debt. In addition to this, the other reason
why the selected candidate pool of an Ivy League has a
high number of wealthy students is that richer can-
didates have access to professional college counselors
and tuition teachers, to ‘crack’ the admission process.
Moreover, students whose family members have at-
tended the college, in question, have a higher chance
of being selected for admission. Stories of rich parents
donating millions to the University in order to secure a
seat for their ‘precious’ ward are not uncommon.
Ivies often try to justify this flawed admission practice
by a certain theory called ‘The Happy Bottom Quarter’,
which posits that having a quarter of the student body
which is not academically-inclined, makes the intellec-
tual portion of the student body less competitive, and
campus life much more vibrant. However, this is often
a glib excuse for letting in wealthy students, mostly
53
because the wealthier student population tends to be
better performing at standardised tests (again by virtue
of their access to tutors and resources) which helps
these universities achieve higher ‘rankings.’
Now, while it might not be the most suitable channel,
donations are in fact the primary reason for Harvard
having the largest academic endowment fund in the
world (around $37 billion), while Yale comes up at a
respectable second place with $27 billion, and Brown
finishes last with $4 billion. To put things into perspec-
tive, if Harvard stopped outsourcing its fund manage-
ment and turned its endowment into a hedge fund,
it would become the sixth-largest hedge fund in the
world.
These funds are primarily financed by the colleges’ ul-
tra-high net worth alumni who are well-placed in the
echelons of power, be it in the government, interna-
tional organisations, corporates, or even in the creative
industry. In fact, the Ivy Leagues have produced more
than 130 billionaires. And again, the millions that rich
parents pay definitely add up.
With such huge funds at their disposal, Ivy Leagues
often have such elaborate investment mechanisms that
even full-time wealth and fund managers take cues
from what a university such as Yale or Harvard choos-
es to do with its endowment. And these universities
often end up achieving much better returns than indi-
vidual investors. In fact, for the two decades preceding
the recession in 2008, Yale’s endowment fund grew at
an annual rate of 16.6%, exceeding the returns on the
S&P 500 index by at least 500 basis points.
Interestingly, this isn’t only about having the best
brains, it is also about long time horizons (some Ivies
are over three centuries old) allowing these universi-
ties to make riskier investments, because the volatility
smooths out over longer periods of time. Exclusive ac-

cess to private equity partnerships and a large number
of employees handling endowment funds are believed
to be other major factors leading to universities real-
ising better yields than their individual counterparts.
Tax exemptions on returns, however, is by far the big-
gest reason these investments played out better than
the market. In fact, this is why it became such a signifi-
cant political issue that the Republican Senate tax plan
decided to ask universities with endowments exceed-
ing $250,000 to pay up 1.4% excise on the returns real-
ised, and a 20% excise on remuneration to investment
executives (if it sums up to more than $1 million). An
intriguing pattern that has been observed very recently
is how universities such as Dartmouth and Columbia
have been outperforming the likes of Harvard and Yale
in terms of returns, with UPenn, Columbia and Brown
all reaping returns higher than 12.6%, while Harvard
lagged behind by at least four percentage points.
Parallely, the Ivies are now trying to cash in on their
brand recall by setting up branches overseas and pro-
viding MOOCs (massive open online courses). While
the Wharton School of Business has established a
campus in Dubai, Harvard has executive programmes
running in both Mumbai and Shanghai. Not only do
they help the Ivies tap into a larger (and possibly bet-
ter) pool of talent, but they translate into significantly
higher earnings for them. This is because more people
who have the willingness to pay are now able to avail
an Ivy education while also avoiding problems such as
dislocation of the executives and difficulties in getting
a visa to the US. On the internet, MOOC provider
edX.org (which is Harvard’s lovechild with MIT and
has many Ivies on board) is witnessing lifetime highs
in terms of the number of visitors and registrations.
While one is allowed to be “auditing” the courses free
of cost, verified certificates usually cost anywhere be-
tween $50-200 for the more popular courses. Although
the edX platform is a non-profit
“Interest one, participating universities
income on and institutions are usually able
to secure a sizeable part of the
investments certificate fee, again leading to
makes up revenue generation.
more than
22% of the If you think that all of this money
is being used to primarily fund
total rev- research and enable scholarships
enues for for financially weak students, you
Harvard.” are sadly mistaken. In 2015, Yale
dished out $480 million as com-
54
ECONOMICS MAXIMISED
mission to fund managers for generating above-aver-
age returns on investments in equity markets, private
equity, and fixed-income instruments. In the same
time-period, the renowned ‘cradle of leadership and
promoter of liberal values’ only spent a paltry $170
million on tuition assistance.
With revenue growth slowing down due to stagnation
in the tuition income and number of students, these
universities are becoming increasingly dependent on
income from investments, and interest income on the
same now makes up more than 22% of the total reve-
nues for Harvard.
Both federal and non-federal grants have been fall-
ing at Ivies even as universities try to contain costs
to ensure profitability and continue to be favorites of
international rating agencies. While these universities
claim to be doing as much as they can to provide equal
access to research finances, things aren’t nearly as rosy
in the real world. Since their investments have lately
been yielding some of the lowest interest rates among
competitors, the Ivies have been looking at containing
costs by limiting real expense on education and re-
search, while continuing to use conventional methods
of debt restructuring, portfolio repositioning, among
other things. All of this explains, to quite an extent, as
to why commission payouts and other forms of remu-
neration to people managing the Ivies’ finances are
now touching record highs.
This brings us to the question- if academic endowment
funds are not being used for their fundamental pur-
pose- the betterment of the institution’s facilities and
aid programme, then what is the point of just sitting
there and watching the money grow? This certainly
doesn’t feel like something that the ‘flag-bearers of
the Great American Dream’ should be up to. It seems
imperative that the Ivies need to set their priorities
right and look at maintaining their prestige as centres
of academic excellence in real terms instead of de-
pending on rankings or other such overly simplified
quantitative instruments of comparison for validation.
Investments needed in research and education cannot
suitably be replaced by spending of any other kind.
And by no means should they continue to ignore their
social responsibility of providing inclusive education,
if these universities were to think of shedding their
image of being “bastions of coastal elitism.”
ECONOMICS MAXIMISED
Going the
E-Way
BY SANKET JAIN
The advent of e-commerce has had
a profound impact on the market
as a whole. The way markets func-
tion. The dynamics of consumer
choices. The mechanics of supply
chain. All these have been dis-
rupted by the world of e-commerce. E-commerce has
heralded a new technology era which is driven by fast
payment methods, burgeoning growth of electronic
money and increasing personalization and customi-
zation. This article aims to offer a deeper insight into
how the world of e-commerce has impacted the con-
sumers, the sellers, and the way in which organizations
as a whole function and of course how economics is all
closely attached to it.
Let us first look at how the consumers have been
affected by the advent of e-commerce. Firstly, let us
delve deeper into the way consumers shop online
versus the way they shop conventionally. Conventional
shopping involves a lot of time spent, which means the
opportunity cost associated with conventional shop-
ping is quite high. We hop from one shop to another,
see a lot of shopping catalogues, compare the prices of
the same products in different shops, and finally if we
feel the product is giving us utility worth its price, we
decide to strike a deal with the seller.
What happens in online shopping is completely differ-
ent. Consumers’ search costs are minimized to a great
extent. They no longer have to move from one store
to another to find which vendor is selling at the low-
est price and having the best quality product. Speedy
comparisons with the help of shopping search engines
help consumers find what they want, and this low-
ers their opportunity associated with shopping from
online platforms. Moreover, personalization is a key
feature of e-commerce which helps in utility maximi-
zation. E-commerce websites like Amazon personalize
the entire shopping experience by suggesting other
55
good purchases for a customer who is buying a spe-
cific product which helps the consumer to tailor the
existing purchase to his own liking. This is done by
providing real-time reviews, recommendations and
showcasing all the possible prices at which the product
is available from different vendors.
This ensures that the consumer is able to decide which
product to buy on the basis of all the possible param-
eters and hence he can decide what point is the opti-
mum point of his marginal utility curve i.e. the point
where he can maximize his satisfaction. The main
idea here is that to come to the equilibrium, the time
involved in conventional shopping is a lot more and
the opportunity cost is higher whereas in e-commerce
both the time and opportunity cost of time are lower.
Another advantage of e-commerce is that it blurs all
the boundaries across markets. A customer sitting
anywhere can order anything and his geographical
location no longer acts as a constraint for him to buy
a specific product, which otherwise, in conventional
shopping would have been a roadblock.
If we assume accessibility to be one of the determi-
nants of demand we can very easily postulate that in-
creased accessibility to a wide basket of products leads
to increased demand for those products.
Having looked at how e-commerce has made the shop-
ping experience for a consumer economically viable in
terms of utility maximization, lower opportunity cost
of time etc. let’s move on to look at how this has helped
in establishing efficient and economically productive
markets for the sellers.
First, let us analyse the reasons for the costs to sellers
coming down. Firstly, to set up an e-commerce com-
pany one doesn’t require a sales force, a massive brick
and mortar building, excessive inventories or volumi-
nous physical facilities. In other words, the barriers to

entry in the e-commerce market are substantially low
and so are the costs. The e-commerce world also helps
in skimming down the interaction costs between the
buyer and seller in terms of the time and money spent
on sales presentation, phone calls etc.
This is mostly true for B2B e-commerce platforms. In
case of B2C e-commerce markets, the barriers to entry
are present but are less tangible. Building better sup-
plier relationships/ supply chain networks to reduce
the time taken to deliver, or a recognizable and trusted
brand name to dispel consumer’s apprehensions and
safety or quality concerns require a lot of resources al-
though it is not as apparently noticeable as the money
required to buy land or machinery. All these costs are
hence spread over time and don’t pose a monumental
problem for the e-commerce giant as over time his
profits will also increase if he is operating with opti-
mum efficiency and if the brand name is flourishing.
E-commerce also offers efficient markets. When con-
sumers are being rendered with the facility of differ-
entiation and personalization they are ready to pay a
higher price for the product being offered. This further
helps the e-commerce company to mint good money
as the costs of operation are comparatively lower than
the price they get for the products being sold. The
huge non-operating costs to cater to a wider consumer
base – advertising, incentives, discounts, offers etc. do
eat into profit. But these costs stabilize and become
substantially less once the e-commerce giant is able to
muster a good clientele in the market.
The efficiency of e-commerce markets is further
strengthened because the barriers for a seller to be-
come a part of the e-commerce network in terms of
size, language or location are negligible. Any company,
of any size, located anywhere and using any language
for transacting can be a part of this circuit. Hence the
competition between companies is of how well they
are advertising, how extensive is their network with
Web companies which help them to increase their
reach, and how well they are able to communicate
with their potential audience. So, all these qualitative
factors are important for an e-commerce company.
E-Commerce has also allowed for direct advertising
of products which is more profitable than mass adver-
tising and has hence made the communications with
consumers more rich and interactive. The cost of dis-
seminating information over the Internet is very low
and results in substantial savings for the companies.
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ECONOMICS MAXIMISED
Market operations and ordering systems are further
very economically viable in e-commerce markets.
Taking online orders helps in ensuring that the orders
are routed to the requisite retailers and the sales team
which otherwise would have been busy fulfilling these
orders can now be employed to better use.
A significant change because of e-commerce has been
in that of supply chain management. In a supply chain
if activities are shifted say from producers to consum-
ers a lot of money and time
is saved. E-commerce pro- “Personaliza-
motes self-configuration of tion is a key
products whereby consum- feature of
ers can track their orders
online and this significantly
e-commerce
reduces the burden on the which helps in
employee force team making utility maximi-
the supply chain efficient. zation. ”
Otherwise to answer the or-
der related queries from customers a separate and hu-
mongous workforce of call center employees is needed,
but in the presence of e-commerce platforms, online
tracking has scrapped the need for the same. These
small but significant changes in supply chain make the
platform all the more economical.
E-commerce has also changed a lot of things about
finance and accounting. The e-commerce giants have
to ensure that electronic orders (or in other words
back-office transactions) are executed with utmost
swiftness or otherwise they may hamper the overall
efficiency of the companies.
With all the positives being talked about, now let us
talk about a potential threat which the e-commerce
market is fostering. The threat being talked about here
is that of the creation of gig economies. Gig economies
are those which are primarily characterized by tempo-
rary job positions for short-term engagements. E-com-
merce which is characterized by such high degree of
digitization and automation is prone to short-term
jobs. Only a few people have permanent jobs, while
the rest have to experience turbulent work conditions,
subjected to a lot of changes. Thus, this can be a disin-
centive for many to enter this industry.
All in all, with its own set of eccentricities and char-
acteristics, e-commerce is surely an alluring prospect
but only for those who can crack the all the more
mind-boggling economics behind it!
ECONOMICS MAXIMISED
In Pursuit
of Happiness
BY DEVANSHI BHATI
If pleasure and pain could be ex-
pressed as quantities, then plea-
sure minus pain is the measure of
happiness. Add the happiness across
all men, deduct the unhappiness,
and the government that produces
the greatest net happiness for the
greatest number has de facto applied the best policy.
When David Cameron was elected as the British prime
minister, he proposed the ‘happiness formula’ and
argued that it’s more important to think about putting
joy in people’s hearts than just about putting money
in their pockets. But aren’t these one and the same?
Doesn’t happiness come with money? If it does, does
that mean the richer you are, the happier you will be?
Every year, the Sustainable Development Solutions
Network for the United Nation releases the World
Happiness Report. The report ranks countries on six
key variables that support well-being: income, free-
dom, trust, life expectancy, social support, and gen-
erosity. This year, Finland secured the first position,
followed by Norway and Denmark.
Finland has always been considered one of the most
secure and socially-advanced countries in the world.
Its banks are healthy; police, reliable; government,
least corrupt. There’s no doubt that Finland’s pro-wel-
fare policies have played a substantial role in making it
the happiest country in the world.
The government largely funds the education and
healthcare systems. No or nominal fees are charged
for any level of education-be it kindergarten or uni-
versity- and the expenditure on each student is more
than $13,865 per annum. Education, in fact, consti-
tutes about 5.7 percent of its GDP. Further, the Labour
Administration (which is entrusted with the respon-
sibility of the labor market) sponsors various training
programmes, to enhance the medium for seeking job
57
opportunities, where unemployed are given training
for 6 months.
The Finnish healthcare system is also top-notch. The
“Kela Card”, issued to all those covered under the Na-
tional Health Insurance Scheme of Finland, guarantees
medicines at a subsidized rate and provides on-the-
spot reimbursements at pharmacies and clinics for all
costs. Maternity and child health care is also free. The
expense on health per capita is more than $3701 and
about 9.7 % of GDP is assigned for health. It is no
wonder that the Finnish have a very high life expec-
tancy rate: 78 years for males and 84 for females.
Countries like Finland, Norway, and Denmark, which
have been on the top of the World Happiness Report
for a while now, all have one thing in common: they
follow the Nordic model of policy-making which aims
at “embracing globalization and sharing risks” vis-a-
vis ensuring quality healthcare systems, strengthening
property rights and enabling market freedom. The
density of labor unions in Nordic countries is quite
high: 86% in Iceland, 69% in Finland, 68% in Sweden,
67% in Denmark and 52% in Norway. Unemployment
benefits and early retirement programmes are allocat-
ed a handsome amount.
Burundi came at the very bottom of the Happiness
Report. Having experienced a civil war, a series of
fragile governments, political conflicts and mass
killings, the unhappiness is justified. The second-last
ranker was the Central African Republic (CAR). Its
score on labor market flexibility and taxation has been
so far abysmal and its development is constrained by
an unskilled workforce, an indisposed transportation
system, and unhealthy policies. Rural areas are home
to a significant proportion of the population which
hangs on subsistence agriculture as a source of liveli-
hood. Though the constitution claims to provide an
independent judiciary, however, the courts are in a bad
condition, with very few resources and citizens have

narrow access to justice and
“People who corruption is ubiquitous.
spend their
The United States, surpris-
income on ex-
ingly ranked 18th rank, de-
periences and spite having a very high per
charities are capita income. This could be
usually happi- because its performance on
social measures has been be-
er than those
low the par. Life expectancy
who spend on has deteriorated, inequality
material prod- has intensified and confi-
ucts.” dence in the government has
tumbled. One of the other
reasons behind this fall is also the rise in diseases such
as obesity, substance abuse (opioid addiction) and
depression.
Latin America, on the other hand, synonymous with
corruption, high crime rates and violence, and dispar-
ities in income accompanied by widespread poverty
has scored relatively higher. Researchers believe that
social support is to be credited for this upswing.
Recently, there has been a worldwide movement
which aims at measuring happiness and well-being.
There have been studies about what makes a country
“happy”. National measures, such as gross domestic
product (GDP) and gross national product (GNP)
have been used to gauge happiness. Research suggests
that there is an intrinsic relationship between GDP
and happiness. People living in countries with a high
growth tend to be happier than those living in poorer
countries. It is claimed that this relationship stretches
only to an average GDP per capita of about $15,000.
A renowned economist Richard Easterlin, in 1971 ar-
gued that an upsurge in GDP was not always accompa-
nied by the increase in happiness levels as the marginal
gain in happiness to decrease after a point. This came
to known as the Easterlin Paradox. Earlier, econo-
mists considered well-being to be a simple function of
income, however, once wealth reached a certain level,
its efficacy in delivering and raising levels of well-being
depreciated. In 2010, Daniel Kahneman and Angus
Deaton discovered that higher income reported better
life satisfaction, but the rise in emotional stability rose
with earnings until an annual income of $75,000. How
you spend your income is also an important element.
It is claimed that people who spend their income on
experiences and charities are usually happier than
58
ECONOMICS MAXIMISED
those who spend on material products.
Other significant determinants of happiness com-
prise of employment, social security, taxes. Employed
people are believed to be more content with their lives
than unemployed people. Employment gives a sense
of independence and freedom and also provides with
sources of income which add to satisfaction.
However, there are divergent views regarding the
social security payments. On one hand, It is believed
that social security does not contribute to happiness as
it’s not earned income and people who think that they
control their lives are better off. Whereas a counterin-
tuitive approach focuses on how the quality of life is
ameliorated and how these benefits provide an incen-
tive to employees as their other needs are also met and
all of this boosts productivity. Similarly, the relation-
ship between taxes and happiness is also paradoxi-
cal. Though it might seem that taxes have a negative
impact on happiness, however, instances suggest this
generalization might not always be true, as happiness
depends more likely on what is taxed and how. For
instance, taxes on cigarettes are always a subject of
various conflicts.
Gary Becker, a renowned American Economist, pro-
posed a rational addiction model which suggests that
smokers are worse off after a rise in taxes. And the
other model, an alternative time-inconsistent model
proposes that higher taxes would make smokers better
off as it would act as a self-control mechanism. After
scrutinizing and prioritizing the subject of well-being
factor, it was realized that smokers were happier with
higher taxes. Similarly, in Nordic countries, the tax
rate is relatively higher, however, there’s a widespread
public support as people perceive them as investments
in the quality of life. Free healthcare and subsidized
education are considered to be one of the biggest con-
tributors to satisfaction.
ECONOMICS MAXIMISED

The rationale behind the growing popularity of mea-

suring happiness is that happiness contributes signifi-
cantly towards increasing labor productivity and en-
hancing labor market performance. Lately, companies
have started taking initiatives to make workers feel at
ease and to create a work-friendly environment. Gyms
and crèches have been set up, paid leaves are being
granted. Countries all over the world are taking ini-
tiatives to increase their levels of happiness and be on
the top of the table. Since the 1970s, Bhutan has been
using an index of Gross National Happiness instead of
GDP to measure success. Many other countries have
made attempts to reproduce the Bhutan model of hap-
piness maximization. For instance, in the US, the state
of Maryland recorded a measure called Genuine Prog-
ress Indicator which assesses inequality, environmental
degradation, health, and leisure. In 2014, The United
Kingdom released its own well-being and happiness
statistics. In 2007, Thailand launched the Green and
Happiness indices.

The growing efforts to measure happiness and the

metrics used to define it are laudable but the question
of whether or not money can actually “buy” us happi-
ness remains a controversy. Nevertheless, the pursuit
of happiness will continue, inviting new claims as time
passes and taking us an inch closer to resolving the
tantalizing enigma that happiness is.

59

Environmental
Dumping
BY PRABHMAAN THAPAR
In this world of ours, everyone
agrees on the survival of the fittest,
however, there even exists a sce-
nario where resources, greed, and
the urge to surge take over and
there comes the action of the cat-
alyst; known as foreign relations.
This article studies the harmful and obnoxious effects
of one’s doing on another’s country/continent.
The African western horn is often regarded as the most
vulnerable area when we refer to pollution, especially
water pollution. Most of the waste dumped here by
the third parties, including nations and organisations,
is generally radioactive. What this waste includes is a
question of paramount importance. It is of the follow-
ing 3 types: building/construction waste, radioactive
waste, and hazardous waste including e-waste and
industrial waste.
The effects of this dumping include, but are not limited
to harmful cosmic radiations which initiate a chain
of actions and reactions which ultimately affect the
topography; including the soil and biodiversity of that
area and human lifestyle and demographics.
The topography of the region takes precedence in this
case. This is because a nation can only possess a work-
force which is healthy and efficient due to a diverse
and environmentally-enriched area. This is a prereq-
uisite for every developing country so that the growth
and development of that region can be spurred at a
faster rate. This leads to a positive shift in the overall
demographic trends, in terms of the birth rate and
death rate, which are important parameters in decid-
ing how healthy a nation can be.
We need to understand, what exactly gives the leverage
to the organised syndicate criminal groups and west-
ern companies to indulge in such activities. Firstly, we
need to understand, that most of the western African
60
ECONOMICS MAXIMISED
nations have a weak political structure, which accounts
for a huge amount of instability in the region. The
history of West Africa is replete with a series of consis-
tent conflicts. Most of the Western African states have
seen civil wars like in Sierra Leone, Liberia, Guin-
ea-Bissau, Ivory Coast, coups in states like Gambia,
Niger, Guinea as well as ethnic and religious clashes
in the nations of Benin, Nigeria, Mali; since gaining
independence. As a consequence it is valid to state that
poverty, political despotism, corruption and foreign
interference have turned the dreams of a common Af-
rican citizen into a distant reality, and has now become
a nightmare. Moreover, during the era after the Cold
War, most of the countries experienced destructive
civil wars on their soil. This led to the irrevocable and
irreversible instability in the region. Thus, the quest
for power of different social groups in these nations,
especially Somalia, continues.
With the urge to come to power, comes a need for re-
sources. They are required in order to become popular
and win the majority. When resources come to play, no
one on such a large scale bothers about the trade-off.
And in this case, the trade-off being so large, especially
the quality of life and development of their own nation
has led to the negative consequences that are high-
lighted here. This sends out the narrative that econom-
ic prosperity of a few is more important than the life of
people in that region. Hence, it leads to concentration
of economic wealth in the hands of few influential and
diplomatic people. This causes many problems because
of the involvement of certain external elements in this
scenario, i.e. the organisations and nations involving
themselves in such acts.
We need to understand the problem through a time-
line. The concentration of waste grew in the Western
African region post the Industrial Revolution and the
second world war. This is also a time when the capital-
ist world was involved in growing its base for Weap-
ons of Mass Destruction. The number of experiments
ECONOMICS MAXIMISED

increased, which served as a spective of a body monitoring the working of waste

“With the catalyst for more waste, hence disposal in this region and strict law formation by an
urge to more dumping. international organisation is the need of the hour so
that substantial measures can be taken up.
come to All this dumping is centered
power, around the coast, which is ex-
comes a tremely rich in nutrients. This
need for re- leads to soil degradation and
pollution of the underground
sources.” water and the shallow seas. The
consequences of this devastating
act are not only causing harm and substantial loss of
life quality to humans but also the surrounding biodi-
versity.

Topography plays an important role for a simple rea-

son: this aspect increases the propensity of the western
countries using this area as a favourable location for
dumping. Also, the western nations want to increase
the amount of faith and trust that the world organisa-
tions have in them. This is affected if the dumping on
their part is in their own country. Thus, these nations
wish to use their money to buy weaker nations’ po-
litical system. This is done to display a better image
of themselves to world organisations such as UNEP,
because of which the overall credibility of their nation
increases. They are also perceived in a brighter light by
the nations to whom they pay a price for dumping by
clearly making a vicious cycle of fake promises.

The Basel Convention on the Control of Movement

of Hazardous Wastes Across Boundaries and Their
Disposal as well has been very well laid out. These can
be found in the Basel Convention, which is one of the
most important steps taken in recent times towards
the international regulation of hazardous waste. But
we need to understand the efficacy of the Basel Con-
vention’s plan to achieve environmental justice for
developing countries by eliminating hazardous waste
exports from industrialised developed countries to
developing countries. We also need to examine the
relationship between waste disposal and environmen-
tal justice and the motivation for exports of hazardous
waste to developing countries.

Thus, due to these reasons and impacts, this issue of

dumping needs to be approached in a collaborative
and comprehensive manner. The objective is to engi-
neer a decline in the overall wastage and drainage of
environmentally growing regions, which shall accrue
long-term benefits to earth. Hence, the overall per-

61
 JARGON MINIMISED

62
JARGON MINIMISED
Gender Lens
Investing
BY TUSHAR SINGH
Merriam-Webster has declared ‘Fem-
inism’ as the word of the year. You
will have to be totally cut off from
the outside world if you do not know
why. From the dethroning of Har-
vey Weinstein which sparked off the
#MeToo movement to a South Korean governor, once
considered a potential president of the country, resign-
ing because of sexual assault allegations, the feminist
movement influenced entertainment to politics from
East to West. Be it Wonder Woman’s march at the box
office or the women’s march against Trump, the word
feminism was never out of trend.
More groups of people are coming together for wom-
en’s causes. Is this true for the financial world as well?
Why are we discussing this in an Economics Jour-
nal?  Can there be a ‘coming together’ of investors for
a social cause? In the selfish world of finance where
earning profits is a matter of life and death, this may
seem impossible. Turns out it isn’t.
Today, more people are investing with a gender lens.
‘Gender lens investing’ is simply considering the
impact of your investment on women. You view your
investments with a lens of gender. It falls under the
growing ambit of impact investing.  Impact investing
is investing which aims to generate a societal benefit,
apart from financial gain. Take the example of ‘green
lens investors’ who only invest in projects that are ben-
eficial to the environment.
There are several kinds of gender lens investors.
Moderate ones invest in firms that have a good female
representation in senior management or in wealth
funds managed by women. They also seek businesses
started by women. The radicals invest in firms making
products that directly benefit women and consider the
role of women throughout the value chain.
“It may sound good on paper but is it a good oppor-
63
tunity to make money?”, you might (very selfishly)
ask.  To give you an idea, women launching and
expanding ventures around the world face a credit gap
of $320 billion (Credit gap is the difference between
the capital women entrepreneurs are seeking and the
credit to which they have access). Therefore, if you are
not driven by feminist ideals, the Benjamin Graham in
you should be able to identify the huge potential of in-
vesting in business ventures which are ready to expand
but are starving for capital.  Some of these businesses,
especially in the global south, have been traditionally
deprived of capital due to no access to formal sources
of finance, and some others simply due to gender bias.
To add an Indian perspective, Amartya Sen’s concept
of “Missing Women” also talks about how we have
faced a notional loss of 4% of GDP growth per year be-
cause of lack of women in the working force. We have
a $158 billion financing gap for women-owned micro,
small and medium enterprises in India. Gender lens
investing fills this vacuum between the demand and
supply of capital (and in no way ‘distorts’ the capital
market.)
“Not every prodigy turns out to be a star performer.
Why will gender lens investing be one?”, your scepti-
cal self will ask. To draw a comparative, gender lens
investing is today where green lens investing was 20
years ago. At that time, investing taking into consid-
eration its effect on environment was unthinkable
and considered impractical. Yet, as people’s attitude
changed with growing awareness around climate
change, so did the green lens investment market.
Today, there is an entire market infrastructure and
ecosystem that considers ESG (environmental, social,
governance) and climate-related investment analytics.
With corporate gender equity becoming more import-
ant day by day (or year by year), there is every reason
to believe gender lens investing will take centre stage
soon. Gender lens investing (GLI) is outperforming

all other aspects of impact
“Gender lens investing. GLI assets grew 41%
last year. There are over a 100
investing is funds that specifically cater to
today where gender lens investors in the
green lens US (We need more in India).
investing More funds were launched
was 20 years in 2017 than any other year
tracked. GLI is generating
ago.” so much heat that Goldman
Sachs has announced a $600
million fund for investing in women entrepreneurs
globally.
Investment in women is increasing and the women
are not disappointing. It is no secret that companies
with women in senior positions outperform those with
don’t. Several researchers have also found a causal link
between higher female representation and a company’s
profits. Here are a few: Aa 2015 MSCI World Index
study showed that companies with strong female lead-
ership generated a return on equity of 10.1% per an-
num versus 7.4% for those without; Fortune 500 com-
panies with the highest percentages of women board
directors outperformed those with the least by 53
percent return on investment. Although this is correla-
tion and not causation, to an investor that distinction
should not matter as long as the investment has better
prospective returns.  Surveys have also shown how
women wealth fund managers are inherently more risk
aware than men and have more targeted investments.
Academics Brad Barber and Terrance Odean, through
their research have shown that women have outper-
formed men in the market by one percentage point a
year. They believe it’s primarily because men are tradi-
tionally more overconfident than women, and hence
tend to carry out riskier and unprofitable trade.
More importantly, GLI benefits society more than
anyone else. GLI It also has the potential to trans-
form traditional forms of aid like philanthropy. While
philanthropy is still desirable, it is largely indirect and
restricted. Only the super-rich give their money to
charitable organizations. How effectively these charita-
ble organizations use this money is very debatable. On
the other hand, GLI, and other forms of impact in-
vesting directly go as capital to firms promoting social
causes. What’s even better is that the middle class (and
not just the rich) can contribute. The stock market is
open to all, unlike philanthropy which only some can
afford.
64
JARGON MINIMISED
This can unlock the true potential of private capital.
If GLI takes off, capital-hungry firms will be forced to
bring gender reforms. After RobecoSAM, an impact
investment specialist, introduced a gender equality
fund in 2015, the share of companies reporting the
gender make-up of senior management to RobecoS-
AM rose from 35% in 2012 to 54% in 2016 and the
number reporting gender pay gaps rose from 21% to
31%. This might seem like a small step but imagine a
thousand more RobecoSAMs and you are on the verge
of a corporate gender reformation revolution.
GLI will help capitalism regain the human face it is
so desperately searching for. It will create a “gender
dividend”: women reinvest their increased earnings in
health, education and nutrition at a higher rate than
men- 80% vs. 40%. With more GLI funds coming up,
we will see more impactful goods and services, and of
course more gender equity.
However, it is easier said than done. There are two
major obstacles. Firstly, there is a lack of data which
will tell us which companies promote women and how
much. This is only a short-term problem as more and
more institutions are coming up with their gender eq-
uity indices and trackers.  The second problem is per-
ception. People generally are unaware of such forms
of impact investing existing. Even if they have heard
of it, they misinterpret GLI as microfinance given to
women. To add onto these two problems, many scep-
tics have written off the profitability of GLI. They say if
GLI is providing above average returns today, it might
as well lead you into losses in the future.
Don’t worry.  The most positive aspect of GLI is that
men need not ‘lead’ this time. There are a growing
number of women investors- women today represent
significant capital in the Global North and will inherit
60 per cent or more of the wealth in the intergener-
ational wealth transfer over the next 20 years. They
are more than looking for social returns apart from
financial ones from their investment. People not mo-
tivated by the social impact may also join in if women
entrepreneurs continue to provide better returns. One
of the most exciting things that’s brewing is the Global
Gender Lens Investing Summit this November in the
U.K. To be a gender lens investor you need not ‘move’
money from one asset to another or from one invest-
ment to another.  It might mean keeping everything in
place and just asking yourself what social impact your
investments have. It’s is a dual benefit an icing on the
cake if you get solid profits and help the world.
JARGON MINIMISED
Decrypting
Cryptocurrencies
BY NEHA GOYAL
When you think about how to get rich
enough to fill bathtubs with dollar
bills, the first thought that may come
to your mind is investing in Bitcoin.
But could this cryptocurrency really
make that happen? The recent media
spotlight has paved the way for more people to take
note of it and to attempt delve a bit deeper into the
world of cryptocurrencies.
Invented by Satoshi Nakamoto (a fictional name,
believed by some to be a pseudonym for a group of
people) the Bitcoin domain was registered in 2008.
Bitcoin.org was up a year later. Bitcoin was intended
to be a peer-to-peer electronic cash system and not a
currency. To this day the identity of the inventor is not
known. But what we do know is that he has already left
an incredible legacy on the financial industry.
Cryptocurrencies are distributed digital currencies
(much like a form of digital cash) over which you have
full control. This means you don’t have to rely on a
central authority like RBI to validate your transactions
as the same is done by the cryptocurrency network
itself. These currencies, often referred to as coins, are
stored in digital ‘wallets’ and are protected by a private
key (which can be thought of as an extremely complex
password) that is only known to you. But anyone could
authorize payments on your behalf if they were to get
your key. So, it is of utmost importance to keep your
private key, well, private. Just like cash, the money in
this wallet can be spent wherever you want. The block-
chain technology is what has made cryptocurrencies
possible.
A blockchain is a complex mathematical problem
based on cryptographic technology (called a ‘hash’)
which computers aim to solve. People who solve these
mathematical problems are called miners. As an incen-
tive to mine, they receive new coins, transaction
65
fees or both. These miners ensure that the transactions
are valid.
Bitcoin (BTC) is the market leader, valued at $96 bil-
lion (i.e. having a market share of about 57%). While
it is the original cryptocurrency due to its established
reputation worldwide and its security, it is not the only
one. Ethereum (designed to help companies deploy ap-
plications on the distributed blockchain), Ripple (XRP,
a digital asset targeted to allow financial institutions to
make global payments more easily), Litecoin (LTC, the
‘lite’ version of Bitcoin) are some other leading crypto-
currencies.
There’s a reason why cryptocurrencies are gaining
popularity lately. In fact, there are many. One of them,
of course, is if you purchase a specific crypto and it
shoots up in price, you’re buying pennies on the dollar.
Other than that, though, cryptocurrency is readily
available to the public, decentralizes operations and
allows payments in a matter of seconds. It also offers
quick settlements due to the peer-to-peer nature of its
networking structure which cuts off the middlemen. It
has a miniscule transaction fees which only the buyer
incurs and doesn’t ask you to share any information
with the government and the bank regarding your
deals.
All your transactions are secured using NSA-created
cryptography. Moreover, information is exchanged on
a ‘push basis’ i.e. you decide the information to be sent
to the recipient unlike the traditional ‘pull basis’. The
chances of fraud are reduced by the fact that once the
payment is made, you can’t chargeback.
Psychology also plays an important role in increasing
the span of acceptance of cryptocurrencies. Those
individuals who advocate freedom and despise the role
of government and large corporations can find con-

solation and solace in cryptocurrency. Therefore, this
industry is gaining so much attention at the individual
level.
But no amount of these pros can make cryptocurren-
cies immune from the risks inherent to investments.
The least of them all being people losing their money
due to incomplete knowledge about this relatively new
concept. Not many websites and companies accept
digital currencies yet, and it will take time to take the
idea entirely out of the shadows. The possibility of los-
ing your wallet still exists, and you won’t be able
to retrieve it either, even with the help of legal assis-
tance. If you mistakenly pay someone by using crypto-
currency, all you can do is ask the person for a refund
or prepare for the loss. Some new cryptocurrencies are
still volatile. But for cryptocurrency, its unprecedented
rise has surely been due to its ability to initiate secure
and untraceable transactions.
Another aspect to be considered while talking about
cryptocurrencies is the legal one. There are countries
where the use of this currency is unregulated (little
or no restrictions) like UK and Singapore; countries
where its use is regulated (legal but specifically reg-
ulated) like France and Canada; countries where its
use is restricted like China; and countries where this
currency is outrightly banned like Russia and Bangla-
desh. This is due to reasons like chargeback ability, lack
of legal protection, hiding assets, taxation, large thefts,
loss of private keys and online drugs marketplace (due
to the one-way nature of cryptocurrency transactions).
If cryptocurrency’s popularity increases further, more
countries may regulate it, although it does not seem
like many are considering banning it. In India, howev-
er, their status is in curious limbo- they’re neither legal
nor illegal in India.
This inevitably brings us to the Bitcoin bubbleburst. A
dramatic, unexplained 1000% boom occurred in April
2013, when BTC peaked at a record $266 per BTC,
after surging 10-fold in the preceding 2 months. What
followed was a 50% collapse in weeks. This reinforces
the point that cryptocurrency remains a very risky
bet. What caused the burst? The market was one of
speculators looking to get wealthy and not of investors
analysing business models or cash flows. It is the fear
of missing out that drove the boom, and a rush to cash
out that drove the bust. Some believe that if history is
a guide, Bitcoin is set to fall further whenever its value
is substantially more than its worth in the real world.
66
JARGON MINIMISED
But the urge to gamble in the great cyber casino with
untraceable digital cash is hard to kill.
After a wild 2017, the cryptocurrency market looked
more stable at the beginning of this year. The first
major reason for this is that China’s social media and
search engines were cleansed of any mention of cryp-
tocurrencies when it banned all the cryptocurrency
trading services in the country. Second was Google’s
ban on its advertising following the lead of Facebook.
Then came South Korea (its currency was the second
most used to trade major cryptocurrencies) confirmed
crackdown on anonymous crypto trading which
brought the market down like a house of cards. Still,
new countries like Venezuela are venturing into crypto
trade for profits, so the situation isn’t all that bad.
This sparks a major debate about the future of cryp-
tocurrency in general, and Bitcoin, in particular. Will
these alternative currencies eventually supplement
conventional currencies? Will they become as ubiqui-
tous as dollars and euros someday? Or are they just a
passing fad that will flame out before long?
In countries like Zimbabwe and Venezuela, Bitcoin is
widely being used as a medium of exchange. This is
because government-issued currencies have fallen prey
to hyperinflation whereas Bitcoin transactions can
simply be performed on cell phones and are relatively
more stable. Other countries share a different view.
They believe that Bitcoin can’t be used on a nation-
al scale because of how few transactions per second
it supports. Moreover, its value (which is driven by
speculation about its worth)
fluctuates too much for it “But the urge
to be a stable, functional to gamble
currency. It could be worth a
candy bar one day, a car the in the great
other, and nothing the day cyber casino
after that. It’s very good as a with untrace-
medium of exchange but not able digital
that good as a store of value.
But saying that the future cash is hard
will not be based on bitcoins to kill.”
does not really mean it can’t
be based on cryptocurrencies.
One possibility is blockchain making its way into the
mainstream which is being tried by some institu-
tions. Estonia’s e-residency plan includes launching
the world’s first national cryptocurrency: estcoin. The
JARGON MINIMISED

Bank of England has created RScoin (an experimental

cryptocurrency framework) that would use a cen-
tralized system. To go crypto, it would create digital
money as if it were printing physical notes. National
cryptocurrencies would make conducting illegal activ-
ities more difficult.

Some of the limitations that cryptocurrencies cur-

rently face like the fact that one’s digital fortune can
be erased by a computer crash, or hacking of wallets,
may be overcome in due time through technological
advancements. But what will be harder to surmount
is the basic paradox that the more popular they be-
come, the more government scrutiny they are likely to
attract, and this erodes the fundamental principle of
their existence.

For cryptocurrencies to become more widely used,

they must first gain widespread acceptance among
consumers. Agreed, the number of merchants who ac-
cept cryptocurrencies have steadily increased. But they
are still very much in minority. And the relative
complexity of this currency is likely to deter most peo-
ple (except for the technologically adept).

A cryptocurrency that aspires to become a part of the

mainstream financial system may have to satisfy some
widely divergent criteria. It would need to be mathe-
matically complex but easy for consumers to under-
stand, decentralized but with adequate consumer
safeguards and protection, it would need to preserve
user anonymity without being a conduit for tax eva-
sion and so on.

To conclude, one can only hope for the cryptocurren-

cy of the future in few years’ time to have attributes
falling in between heavily regulated fiat currencies and
totally decentralized cryptocurrency of today because
solutions in life are often not white or black, but some
shade of grey. Yes, Bitcoin is having a moment and
whether you think it’s a bubble about to burst or hope
your investments will pay back big in the long run,
there is one clear takeaway: cryptocurrency is (chang-
ing, at least) the future of finance.

67

The Cost of
Global Financial Stability
BY SHEREEIN SARAF
It was July 1944.
The world was still recovering
from the Great Depression and
World War II was at its conclusion
when the United Nations Mon-
etary and Financial Conference
gathered at Bretton Woods, New Hampshire. With
the aim to financially rebuild the global economy and
to prevent any more prolonged economic downturns,
Bretton Woods institutions- the International Mone-
tary Fund (IMF) and the World Bank were established.
However, even with the concerted efforts of both these
institutions, no significant economic growth was seen
in countries which borrowed from these institutions
and recessions persisted.
Despite their intentions, the IMF and World Bank do
not contribute to global financial stability though they
were formed with this very object in mind. These insti-
tutions acted like banks which pooled money from the
developed countries and lent to the poor and develop-
ing countries. This concept of redistribution of wealth
was not one-sided. The institutions in turn imposed
certain conditionalities onto them after negotiations
(such as opening up the economy globally to trade,
removing tariffs etc.) However, it is quite obvious a fact
that crisis-hit economies which borrowed from the
IMF are not in a position to negotiate the terms and
end up acquiescing to the terms laid down. This raises
an important question on the sovereignty of the state.
The government lacks the power of financial control as
they bend their knees to these institutions. Although
they claim it to be good for the countries, the truth re-
mains that these institutions have all the power in their
hands. Their functioning, hence, seems to contradict
their purpose.
This imposition of conditionalities has had an adverse
effects on the recipient countries, which eventually
led to instability in the form of a crisis. The East Asian
68
JARGON MINIMISED
crisis was one such case which was caused by the
IMF promoting open-capital flow around the world.
This majorly affected East Asia and Latin America,
which were underdeveloped market economies having
weakly regulated financial markets. On the other hand,
closed capital markets such as China and developed
open-market economies such as Australia and New
Zealand were not at all affected.
The World Bank is also criticized for lending programs
being deceptive to the poor. Although loans are in-
tended to help a country develop, to fulfill the condi-
tions imposed on them, they need to take on debt on
which higher interest needs to be paid. This amounts
to a “perpetual debt” forcing countries to spend on
clearing their debt obligations rather than on social
and infrastructure development projects. Consider
the Indian scenario where the World Bank funded the
construction of a dam on the Narmada. This displaced
the people of the valley and the World Bank was
blamed for causing social turmoil as the territories that
had been inhabited since centuries were lost to man-
made reservoirs. With its primary focus being poverty
alleviation, the World Bank needs to have a keen eye
on GDP growth, unemployment, fiscal deficits and
debt sustainability of its member countries. Also, such
projects should be undertaken only if there is consen-
sus amongst all the stakeholders involved and not just
the officials.
Another major criticism of these institutions is their
dubious and intransparent forecasting mechanism.
The IMF and World Bank publish many forecasts of
economic data every year. But it has been noticed that
many a time these predictions are not just inaccurate,
they are misleading to the point of being fraudulent.
For example, the growth forecasts for India had an
error varying from 10.5 per cent to as much as 46.8 per
cent in a span of 7 years, that is, from 2006 to 2013.
JARGON MINIMISED

These forecasts, however inaccurate, mattered a lot as provide a global perspective to issues which can be
they influence investors’ expectations and decisions combated only when the all the states are in concur-
of credit rating agencies. Since the World Bank and rence with each other.
IMF do not disclose details of their forecasting model,
including what assumptions they make, it is hard to This, if it happens, would lead to global stability, not
critique them on their methodology. But the results do only financially but otherwise.
have drastic deviations, the reasons for which might
include improper assessment of factors operating
within national and global economies. This undoubt-
edly conveys the fact that the institutions should
appoint personages with strong analytical skills and
should be engaged in a more democratic system when
it comes to its forecasting model. Also, calculations
should be transparently shared on the official websites
and the any criticism should be taken into proper
consideration.

“Reform, and It has been argued that the

not elimina- IMF is biased towards Euro-
pean countries as it lends to
tion, of these
them more money relative to
institutions, is their economic power. The
the need of reason is the voting power of
the hour.” each country, which is de-
cided by the share of funds
pooled in by them. Thus, it isn’t surprising that the
USA and Europe have a much larger share of votes.
During the financial crisis of 2008-09, the IMF lent
large sums of money to the PIGS- Portugal, Ireland,
Greece and Spain. Coincidently, at that time, the pres-
ent Managing Director of IMF, Christine Lagarde was
the finance minister of France and she was accused of
negligence which was seen as a major reason which led
to the crisis. On the other hand, Greece which suffered
huge spending and tax evasion, found itself unable
to cope with debt repayment and ended up borrow-
ing from IMF even at a 12.7% deficit, which is about
four times higher than the European rules allow. The
institutions’ bias towards specific regions is surely not
in line with the goal of a stable global economy which
was the primary reason for their establishment.

Global stability is a distant dream for these institu-

tions. Presently, there is a dire need for reforms in
their working, and a departure from bias and corrup-
tion is imperative. Also, transparency in functioning,
loan and debt calculations, and forecasting methodol-
ogy is required. Reform, and not elimination of these
institutions, is the need of the hour.
Forums like the IMF and the World Bank would serve
as a medium to financially integrate the economy and

69

Microfinance:
Revolutionary or Not?
BY ARNAB DUTTA
Muhammad Yunus, the acclaimed
Nobel Peace Prize recipient, in
his autobiography, ‘Banker to the
Poor’, provides a heart wrenching
account of the poorest of poor and
makes a compelling and inspiring
case for Grameen, the revolution-
ary microfinance bank from Bangladesh. Income and
wealth inequality have become ubiquitous but what is
more alarming is the inequality in the distribution and
access to the agencies for income and wealth creation.
If a destitute woman is at the brink of starving to death
due to her inability to access any form of employment,
then the only means she is left with is self-employ-
ment. Yet, severe paucity of capital impedes her from
relying on this alternative and compels her to choose
the easier option of committing suicide. On the flip
side of the coin, the banking system is more comfort-
able in doling out a hefty loan (often running into
hundreds of millions) to an industrialist who may not
have the ability to repay even half the loan amount.
Yet, he is deemed to be safer, on account of his so-
cio-economic condition.
The United Network for Organ Sharing (UNOS)
manages the list of all the people across the US waiting
for an organ transplant. UNOS ensures that deceased
donor organs are distributed fairly using a transparent
system. For kidneys, this is a combination of blood-
type and antibody matching, time with kidney failure,
and a few other factors that give people priority on
the list (including being a child or being a past live
kidney donor). Hence, the most needy people re-
ceive an organ transplant first. The system, unlike the
banking system, does not discriminate or show bias
on the basis of an individual’s existing socio-economic
condition. Muhammud Yunus posits in his book that
the system we’ve built refuses to recognise people.
Only credit cards are recognised. Driver’s licenses are
recognised. People don’t have use for faces anymore,
it seems. They are busy looking at your credit card,
70
JARGON MINIMISED
driver’s license, your social security number. Yunus
goes on to argue that , it is not cash capital but human
capital that matters and that money is only a tool that
helps even the most unfortunate people on this planet
achieve dignity, respect and meaning in their lives.
Hence, there certainly exists a dire need for institu-
tions which tend to these financial ‘untouchables’. Mi-
crofinance institutions like Grameen and Sanasa have
done some splendid work over the years and serve as
an alternative source of capital to the poor at interest
rates which are starkly lower than those charged by
usurious money lenders. But the question is, do the
altruistic principles and motives of microfinance hold
in the long run? What are the casualties that emerge
upon relinquishing these altruistic principles?
Microfinance has been heralded by many as that one
noble concept which will eradicate poverty from the
face of the Earth. Hundreds of millions of dollars are
flowing into microfinance from international finan-
cial institutions, foundations, governments, and, most
importantly, private investors—-who increasingly
see microfinance as a potentially profitable business
venture. Yet, poverty still continues to haunt the Earth
the same way that it did a few decades back before
movements such as Grameen and Sanasa came about.
Microloans make poor borrowers better off. But, on
their own, they often don’t do much to make poor
countries richer. This isn’t because microloans don’t
work; it’s because of how they work.
It is often claimed that microcredit doesn’t involve col-
lateral, but that isn’t quite true, as pointed out by Tyler
Cowen and Karol Boudreaux in their paper titled, ‘The
Micromagic of Microcredit’. The borrowing is done
in small groups, and if one doesn’t pay their share the
neighbours come and take away, say, their TV set. In
reality, microcredit takes the collateral-seizing func-
tion away from the bank and puts it in the hands of
their neighbours, thereby increasing loan repayment
JARGON MINIMISED
rates. Cowen and Boudreaux further state that mi-
cro-loans are utilised for what they term as ‘smoothen-
ing consumption’, rather than for financing business
or for income-generating activities. They describe
micro-borrowing as an exercise entailing a kind of
‘bait and switch’. What they imply is that the borrower
claims that the money is for a business, but uses it for
other purposes.
The success of an MFI should be measured through its
ability to increase its operational, intermediation and
dynamic efficiencies (Some Critical Issues Relating to
the Commercialisation of Microfinance Institutions in
Sri Lanka, S.M.P Senanayake).
The operational efficiency is the minimisation of the
real resources used by the financial institutions in
the intermediation process. If competition increases,
operational efficiency will be enhanced. In a competi-
tive market, financial institutions should minimise the
costs to become profitable enterprises.
Intermediation efficiency is the efficiency of mobili-
sation of savings at a positive real interest rate and the
channelization of saved resources through a high pos-
itive lending rate. However, the interest rates should
not rise above the market-clearing rate.
Under dynamic efficiency, the desired outcome is in-
creased savings in the economy and a transfer of these
funds at a faster rate to growth-oriented, long-term
investment projects. According to the Central Bank of
Sri Lanka, most of the rural sector loans (63%) were
for consumption purposes, in the year 1999. Con-
sumption accounted for 63 % of the total rural sector
loans, agriculture accounted for 6.1%, trade and busi-
ness 6.6%, housing 9.5%, and settlement of debts 4.7%.
The share of total loans obtained for industry account-
ed only for 0.1%. Thus, it is apparent that loans going
into the real sector is very marginal, implying dynamic
inefficiency in the micro-finance system.
Muhammad Yunus in ‘Banker to the Poor’, debunks
the trickle down effect and the oft-used analogy of the
economy being the locomotive of a train and each so-
cio-economic unit representing a carriage. He says that
a train is drawn by a locomotive located at the front,
or pushed from behind or both. In the case of human
society, each economic entity or group has its own
engine, thus the combined power of all the engines
together pushes and pulls the economy forward. If
the society fails to ignite some engines, the combined
71
power of the economy will be much reduced. Al-
though the counter anecdote is compelling and inspir-
ing, it is flawed if one delves into the intricacies of how
microcredit is being consumed. As mentioned above,
microcredit doesn’t do wonders for an economy; it
probably makes poor people better off, but very few
climb into the middle class. Anecdotal evidence can’t
substitute for numerical and historical evidence. A
microloan can at best enable a person to earn $2.5 per
day, in comparison to his earlier $2 per day income.
What poor countries need most, are not more mi-
cro-businesses. They need more small-to-medium-
sized enterprises, ones that are bigger than a fruit
stand but smaller than a Fortune 1000 corporation. In
high-income countries, these companies create more
than sixty percent of all jobs, but in the developing
world they’re relatively rare, thanks to a lack of institu-
tions that provide them with the capital they need. It’s
easy for really big companies in poor countries to tap
the markets for funding, and now, because of micro-
finance, it’s possible for really small enterprises to get
money, too. But the companies in between find it hard.
It’s a phenomenon that has been dubbed the ‘missing
middle.’ This has given rise to the concept of ‘nanofi-
nance’ which shall be spoken of in detail later.
Having established the primary purpose of microcred-
it, there is a puzzling detail at the heart of the industry:
most microcredit banks charge interest rates of 30 to
40 percent on annualised basis (loans, typically, must
be paid off within weeks or months). That’s not as
scandalous as it sounds—local moneylenders demand
much higher rates. The puzzle is a
matter of basic economics: How can people in new
businesses (if at all) growing at perhaps 20 percent an-
nually afford to pay interest at rates as high as 40 to 50
percent? What is more pressing is that if borrowers are
using microcredit for consumption primarily and not
only to improve a small business, how do they repay?
Most borrowers are self-employed and work in the
informal sector of the economy. Their incomes are
often erratic; small, unexpected expenses can make
repayment impossible in any given week or month.
This, in fact, is exactly what fuelled the microcredit
collapse in Andhra Pradesh in 2010. Given the wide-
spread awe for microcredit, microfinance companies
quickly sprung up in the dozens. And soon enough a
person had these ‘micro-loans’ drawn from multiple
microfinance institutions. Thus it soon evolved into a
Ponzi scheme for the purpose of ‘smoothening con-

sumption’. The imminent collapse of the industry was
averted by virtue of stricter regulations by the Gov-
ernment through the creation of the Micro Finance
Institution Network (MFIN), which put a cap on the
highest interest rate that could be levied and super-
vised the industry. Most recently, the government has
institutionalised the industry further by creating Small
Finance Banks (SFBs), which have to abide by the
Banking Regulation Act and compulsorily utilise 75
percent of their Adjusted Net Bank Credit (ANBC) for
priority sector lending. This addresses the concern of
creating an institution for MSMEs.
Thus, for companies to operate in the informal sector,
controlling interest rates becomes extremely important
in ensuring the sustainability of operations. Howev-
er, this is in conflict with the profit motives of these
commercialised institutions. Microfinance institutions
are required to limit their costs and to cover them
from the income they generate to increase their oper-
ational efficiency. They have no choice but to take the
commercial side of their operations seriously in order
to ensure that they can survive economically and are
able to offer their small and very small loans on a long-
term and sustainable basis.
The banking industry largely propelled the commer-
cialisation of MFIs too. The Reserve Bank of India
(RBI) requires domestic and foreign banks to ensure
that 40% and 32% of their “net bank credit” is directed
to the “Priority Sectors”. Domestic banks are required
to lend 18% of their portfolio to agriculture, and
another 10% to the “weaker sections”, which includes
small-scale farmers, artisans, scheduled castes and
tribes and other vulnerable groups in Indian society.
While banks can usually find large-scale industrial
or contract agricultural borrowers to meet their 18%
target on a cost-effective basis, they struggle to lend
the required 10% to weaker sections, who are usually
only able to absorb small (for banks cost-ineffective)
amounts of credit. On the contrary, the core market
for MFIs is the very weaker sections as defined by the
priority sector lending requirements (PSLR) of the
RBI. As such, MFIs offer a tremendous opportunity
for the state, (which wants to see these vulnerable
groups “financially included” with access to a range of
financial services, particularly credit) and to the banks,
(which need to achieve their priority sector lending
requirements).
72
JARGON MINIMISED
Evangelists for commercialisation further argue that to
provide safe and secure savings services, commercial
banks must be involved. And even in countries where
the regulatory regime is more liberal, it is essential that
financial institutions accepting deposits from the poor
are professionally managed and profitable - and thus
financial sound - so that those precious savings are
protected and not lost. In recognition of this, the 1990s
and 2000s saw a growing emphasis on the “down-scal-
ing” of commercial banks to serve the poor, and the
“transformation” of NGOs to MFIs to NBFCs and
finally into commercial banks.
As soon as an MFI relinquishes the altruistic principle
which it had previously set out with it, it becomes an
exhibit of the Gresham’s law. Gresham’s law is the the-
ory that when two kinds of money of equal denomina-
tion but of unequal intrinsic value are in circulation,
the one of greater value will tend to be hoarded or
exported; in other words, bad money will drive good
money out of circulation.
Like the Gresham’s law, in the world of development, if
one mixes the poor and the non-poor within a pro-
gramme, the non-poor will always drive out the poor-
er, and this may continue ad infinitum. And what will
happen is that in the name of the poor, the non-poor
will reap the benefits. No sooner does an organisation
receive a statutory nod to operate as a commercial
bank it relinquishes the altruistic motive of alleviating
poverty and transforms into a profit-mongering entity.
Initially, some of these MFIs were capitalised by a
combination of social investors and (controversially)
their clients or “members”. However, soon private eq-
uity funds, attracted by the potential for rapid capital
returns based on the exponential growth of MFIs, took
increasingly large stakes, quickly crowding out the
social investors. It is an irony that the socially-focused
priority sector lending requirements should have
fuelled the commercialisation of microfinance in India
–and fundamentally changed the primary objectives of
the sector.
The vast majority of private equity investors involved
in microfinance have short-term goals. Typically, they
are looking for capital returns of around 25-30% per
annum within 3-4 years. To ensure that the small loans
were profitable for their shareholders, such banks were
compelled to raise interest rates and engage in aggres-
sive marketing and loan collection. The kind of empa-
JARGON MINIMISED
thy that had once been shown toward borrowers when
the lenders were nonprofits disappeared. The people
whom microcredit was supposed to help were being
harmed. In India, borrowers came to believe lenders
were taking advantage of them and stopped repaying
their loans.
One might wonder how Grameen and Sanasa have
been successful in spite of not morphing into prof-
it-hungry entities.
As reflected in the Profit and Loss Account for the last
twenty-five years, Grameen has churned out a profit
each year. However adhering to its founders’ ideals,
Grameen distributes the profit as dividend to its share-
holders, i.e., the borrowers of the bank. Sanasa has a
similar business model too. It is also interesting to note
that the valuation of MFIs are predicated above all on
the number of clients they serve, and this has resulted
in an unwavering focus on hori-
“Profit should zontal growth. MicroSave India,
always be a a pioneer think tank in this
field points out that this type of
by-product expansion has often taken MFIs
of the social out of their original states or
change that regions into new areas that they
the microfi- understand poorly, and where
cultural and language barriers
nance indus- can present very real challeng-
try seeks to es. For example, many of the
create.” southern MFIs have struggled
to maintain the quality of their
portfolio in the northern states. This raises several
concerns pertaining to the sustainability and the core
purpose of the industry. It would be impractical to
join the likes of Muhammad Yunus and criticise an
institution solely on the pretext that it works for profit.
However profit should always be a by-product of the
social change that the microfinance industry seeks to
create.
A microloan, if linked to a specific activity leading to
economic or social benefit in the medium to long run,
would be a sustainable model. But realising econom-
ic and social benefits requires continuous access to a
broad range of financial services and not a one-time
access to loans. Mere provision of financial services
has mixed or a limited short run positive impact.
Therefore, introducing the concept of ‘credit plus’ or
the development of a financial infrastructure and in-
termediaries committed towards growth and viability
is crucial for the true success of MFIs.
73
Smoothening consumption should certainly not be the
end goal of microfinance. Instead microfinance should
be focussed on providing capital to MSMEs who
lack the agencies for the same. As indicated before,
smoothening of consumption can be better addressed
through nano finance.
With technology such as the Internet of Things (IoT)
and greater financial inclusion through the Pradhan
Mantri Jan Dhan Yojana, we could hasten the intro-
duction of nano finance to address the inability to
fulfil certain necessities such as education and energy
due to inadequate liquidity in the hands of the poor.
One of the reasons behind the high interest rates is the
transaction costs, which can make issuing loans for
less than $50 prohibitively expensive. This forces larger
loans that many families don’t want and can’t handle,
and burdens them for months or even years. Larger
loans also limit the types of products and product
groups accessible with microfinance.
This has paved the way for the advent of nano finance
which will leverage technology and instruments like
mobile wallets to allow consumers to borrow smaller
sums of money. Envirofit is a company which is riding
and ushering in the nano finance wave at present. It
offers a new “SmartGas” service that lets users prepay
for gas with their phone as they cook and enables them
to eschew the rigid payment schedules. This product
is primarily targeted to those who utilise wood and
other archaic methods for cooking because they do not
have the capital to buy a LPG cylinder at once or get it
replaced.
With nano finance, enterprises which truly care for
the poor can reach more underserved markets to help
more people live well, while microfinance can ignite
the engines and lives of the needy.
 Shri Ram Economics Summit

74
Shri Ram Economics Summit

artham purusartham
Exploring the Ubiquity
of Economics
Economics is not just a discipline, it is a way of life.

People often believe that economics is based on human

observation, on the aberrations and the paradoxes. They
believe that economics enables us to be rational, to make
the best use of the resources at hand, to maximise utility
and to minimise cost. They believe that economics is a
facilitator, one that facilitates our desire for well-being.
They believe that economic principles help us make deci-
sions and influence our actions.

Instead, our actions and decisions are what formulate the

obscure and elusive subject of economics. Economics is
the way we behave and the rationality we possess.

Economics provides us Artha or meaning in life; it pro-

vides us with a purpose to achieve our goals. It shapes
up ones attitude and capability that enables one to make
a living, to remain alive, to thrive as a free person. The
ubiquity of economics cannot possibly be defined, quan-
tified or measured. It lies within us and around us. It lies
somewhere intrinsically buried in our decision to read
this piece or to be economical and move on.

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PRABHAT PATNAIK
The renowned Marxist economist, Mr. Prabhat Patnaik gave an enthralling speech on
welfare economics which sought to examine the interrelationship between welfare and
higher growth. He went on to establish that when we talk about having a higher GDP, we
are actually talking about increasing potential welfare. He also explained that whenever

speaker sessions
real income increases, nutritional deprivation also rises, and this why growth does not
necessarily eradicate poverty. The audience was very active in asking questions on neolib-
eralism, globalisation of capital and the several methods to approach economics.

ISHER AHLUWALIA
Dr Isher Judge Ahluwalia gave a compelling speech on the topic of urbanisation and smart
cities. She defined the term ‘Smart City’ from a fresh perspective. For her, it is a city which
optimises the use of technology and has people who are smart enough to demand good
governance. She pointed out the importance of ‘Healthy Cities’, where clean water and
sanitation is accessible to all. Through her eloquent speech, she threw light upon the need
of granting autonomy to public authorities and emphasised the importance of the synergy
between rural and urban areas for the development of the country.

ROHIT AZAD
A lot of dynamism was expected from the two-time JNUSU President and SRCC alumnus,
Rohit Azad. Saying he lived up to the expectations will only be an understatement. Speak-
ing on “NPAs and the Indian Growth Story”, Mr. Azad explained, using ‘8 stylized facts’,
how reckless lending and crony capitalism during the high growth years of the first decade
of 21st century have led to a huge pile of bad debts, especially in public sector banks. Both
professors and students alike were allowed to interrupt and ask him questions during his
speech and Mr. Azad even engaged in one-on-one debates with members of the audience.

DIKSHA DWIVEDI
Diksha Dwivedi is an alumna of SRCC and has a master’s degree in journalism from Car-
diff University, UK. She took us through an emotionally invigorating ride as she shared her
experience of penning the much-acclaimed book, ‘Letters from Kargil’. A martyr’s daugh-
ter, Diksha went on to describe how her sense of pride, determination and will power to-
gether lead to the successful completion of her book. Recounting her mother’s unwavering
support after her father’s martyrdom and her own relentless pursuit of her passion, she left
the atmosphere brimming with warmth and inspiration.

KARAN THAPAR
In a world where controversial statements spread like wild fire, it takes courage to speak
out against the tide of opinion. It takes even more courage to agree to an ‘AMA - Ask
Me Anything’ session with a group of politically-charged young students. Karan Thapar,
renowned Indian journalist, did more than just that. The audience asked questions rang-
ing from the intolerant mood brewing in the country to the inefficiencies inherent in the
judicial system. While his blunt and ‘to the point’ answers mesmerized the audience, the
biggest take away from the session was his libertarian interpretation of the ‘freedom of
speech’ and its limitations.

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Shri Ram Economics Summit
team that could meet portant social cause commercial world,
economie de
la ville
their resource require- through its theme: right from Sweden’s
ments emerged as the Domestic Violence. It Ikea to Japan’s Toyota.
Economie De La Ville, winners and tasted brought to everyone’s With every roll of the
which literally translat- success by freeing their attention how everyday die, participants strode
ed to economy of the sibling from the ene- events, which at the down a real-time mo-
city, presents the most my! outset look completely nopoly board in antic-
fundamental problem unrelated, affect do- ipation of expanding
of economics – that mestic violence against their empire of brands.
econovergence
of resource allocation women. The partici- Riddles, pictographs,
– in a new light. This Econovergence’18 wit- pants’ sole aim was to logo quizzes, dumb
year’s EDLV was a race nessed the participants’ minimize domestic charades, crosswords,
against time. While donning the hat of violence using three word puzzles and many
last year’s edition wealth fund managers variables: conserva- more sub-rounds add-
hurled into a dysto- tism, alchohol con-
pian future, this year sumption and number
the participants had of hours worked. They
to save their sibling, had 5 rounds to go
who was trapped in a about their task, which
video game. In order to included trading, quiz-
achieve this objective zing, clue solving, and
the participants had of course, election cam-

and investment bank- ed to the competitive-

ers, battling to maxi-
mize their returns. De-
ploying a perfect blend
of strategy and wit, the
investors and managers
tussled it out on the
negotiation table. From
to build an army with mastery in allocation,
limited resources, wage dexterity in approach
war against each other to uprightness in
and make their best negotiation, this event
moves to outshine each was a boiler room for
other. The first round our participants who
was an auction round juggled between taxes
wherein the particpants and returns with great
could auction off some elan!
of their resources in ex-
change for power cards. charlatan’s
This was followed by chutzpah
the checkpoint round
where they could either Charlatan’s Chutzpah
engage in war or trade (CC) tried to break the
with fellow participants monotonous nature
to meet their mini- of fests with a new
mum requirement for concept. This year, CC
resources. Finally, the highlighted an im-
ness of the event.
game theory
SRES’18 played host
to an event entirely
dedicated to one of the
paigning. It was one of most gripping theo-
the few, if not the only, ries in economics: the
all-in-one events at Game Theory. This
SRES. highly stimulating
event required the
brand slam participants to don
their thinking caps as
The most engaging they faced a multitude
“fun event” of SRES’18, of challenges. Their end
Brand Slam witnessed goal was to maximise
multiple rounds based their utility by making
on brands of today’s rational choices, all the

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 Shri Ram Economics Summit

while keeping in mind of resource manage- risk premium factoring

the trade-offs. These ment. The second and and a lot more. The

• ECONOMIE DE LA VILLE • ECONOVERGENCE • CHARLATAN’S CHUTZPAH •

BRAND SLAM • GAME THEORY •THE YOUNG ECONOMIST • SHARE DARE •
trade-offs got tougher final rounds involved event was divided into
with each successive taking on the roles of various trading rounds,
round and the teams firms and countries, calling for real-time
ultimately had to de- solving case studies and market trading coupled
cide whether to coop- negotiating with fellow with circuit trading.
erate with the other participants to arrive The teams, consisting
teams or go ahead and at a solution that was of traders from varied
take their own shot ar feasible to both parties. backgrounds had to ex-
it. This was followed by a ecute the biggest trades
quiz, which decided the just in time to reap the
the young winner. The events thus benefits. The biggest
economist gains came from the
biggest risks, trading
The Young Economist against the market.
was a one of a kind Comprehensive loan
initiative that exposed mechanisms taught
school students to nov- against investing when
el problems that could in debt and mergers
be solved only through between teams suggest-

tested the participants’

negotiation skills, prob-
lem solving ability and
ingenuity. It was a truly
unique simulation that
that induced students
to think.

the application of con- ed how synergies may

share dare
cepts they have learnt not always be reflected
in their textbooks. A simulation of mar- in trade.
The first round was kets, stocks, options,
an investment round mergers and antitrust exhibition
in which each team, laws, Share Dare not
allotted a civilization, only tested partici- This edition of the Shri
had to bid to invest in pants’ capability to Ram Economics Sum-
resources that would execute a trade, but mit introduced a one-
help them grow. This also laid considerable of-a-kind educative
round was designed to emphasis on analytics, exhibition at SRCC.
impart skills in the field signals of the economy,

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Shri Ram Economics Summit
This edition of SRES pioneered an edu-
cative exhibition at SRCC, which was in-
deed a feast to the eyes. It was a huge hit
among students, professors and guests, as
it was an amalgamation of creativity and
knowledge.
summit e
The next section put the guests’ gray cells
to task. Titled “what if ”, it turned around
the major incidents that shook the world
and invigorated a discussion on what if
they hadn’t occurred.
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Guests were welcomed with “the story
of economics”: an exhibit which took
them down memory lane and introduced
them to the worldly philosophers and
explained the evolution of the “dismal
science”.
In step with our penchant for decon-
structing economics through humour,
this exhibit used the famous You Have
Two Cows meme series to demonstrate
how various economic-political systems
work.

Our guest, Prof. Prabhat Patnaik, loved
the exhibition! He gave us encouraging
feedback and enjoyed participating in our
activities- a memory game and an eco-
nomics spinning wheel.
xhibition
Good literature ought to be celebrated.
This exhibit was a tribute to the authors
who changed the way we look at eco-
nomics. It potrayed books from Smith’s
Wealth of Nations to Levitt’s Freakonom-
ics.
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Shri Ram Economics Summit
The Wall of Memes, attracted a huge
crowd as it hit the humour note while
illuminating economic issues. Political
business cycles, rising income inequalities
and populist measures were a few topics
covered.
The web of economics brought forward
the intertwined nature of the discipline. It
contained iconic terms from A to Z that
characterise the discipline: B stood for
budget deficit, F for fiscal policy and so
on.
Shri Ram Economics Summit

The Economics Society of Shri Ram College of

annual report 17-18 Commerce, recognized as the proverbial melting
pot of intellectuals and innovators, stood by its leg-
acy of being considered as one of the most presti-
gious and sought-after student societies during the
academic year 2017-18. With the aim to go beyond
the confines of theory, the Society has done its bit in
setting up and nurturing for the curious who share
an economic bent.

The society kicked off the year by inculcating and

fostering the art of writing among its members through the medium of its blog,
Ceteris Paribus. Several articles were churned out throughout the year by our mem-
bers, thus nurturing an opinionated atmosphere in the society.

To supplement the atmosphere of thinking and writing, the Economics Society

sought to conduct several learning sessions, workshops and discussions. The high-
lights include an insightful discussion on “Brexit”, an interactive session on “The
State of the Indian Economy”, and one on the “Union Budget”. Mentor groups and
frequent sessions on research papers and current affairs ensured a steady stream of
intellectual engagement.

Along with the new year came the fervour and excitement of the Shri Ram Econom-
ics Summit. The Summit, considered to be the biggest economics fest in India, wit-
nessed stellar speakers ranging from erudite personalities like Mr. Prabhat Patnaik
and Dr. Isher Judge Ahluwalia to veteran journalists like Mr. Karan Thapar.

Several events were hosted, testing the strategic prowess, the financial acumen and
the economic rationale of the participants. These events included Economie De
La Ville- which was based on game theory, Share Dare- a stock market simulation,
Econovergence - the global sovereign wealth fund managers meet. The Young Econ-
omist catered exclusively to the school students who wished to explore the nuances
beyond what the curriculum prescribes.

Shri Ram Economic Summit was a sight to witness, literally too. The Summit organ-
ised an exhibition, the first of its kind, which showcased economics through the lens
of art. The campus was sprawling with magnificent artwork depicting various eco-
nomics terms and caricatures of great economists.

This year we sought to deconstruct complex economic phenomena as well as to ex-

plore the quirky side of the “dismal” science through an online series: Thirty Seconds
of Economics. Through our blog Ceteris Paribus (www.ecosocsrcc.com), we char-
tered further into the realm of economics.

The year 2017-18 was certainly a year of joy and learning.

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editorial board 17-18

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the cabinet 17-18

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The Economics Society
2017-18

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