LETTERS
Issn 0012-9976
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4 september 16, 2023
BRICS Expansion and
the Global South
B razil, Russia, India, China, and South
Africa (BRICS) have extended invita-
tions to additional members, expanding
their group from five to 11. The global
community is now actively discussing
the repercussions of this expanded
BRICS. In the recently concluded sum-
mit in Johannesburg, South Africa, the
BRICS group of emerging economies
has welcomed Iran, the United Arab
Emirates (UAE), Saudi Arabia, Argentina,
Egypt, and Ethiopia. With this enlarge-
ment, the combined BRICS countries will
account for over 50% of the world’s pop-
ulation. Many scholars and experts in
international relations suggest that this
enlargement will enhance the influence
of the global South.
The expansion of the BRICS and increase
in the influence of the global South come
with certain critical challenges as well.
The biggest challenge is to deal with the
potential escalation of dominance by
China and India on the global stage.
Originally initiated in 2009 with four
member countries, BRICS saw the subse-
quent inclusion of South Africa. This
further expansion is also seen as a mani-
festation of an anti-Western stance or
a concerted effort to counterbalance
Western power dynamics within the
context of the global South. The inclu-
sion of the world’s three largest oil
producers—Saudi Arabia, the UAE, and
Iran—will impart significant global sig-
nificance to the expanded BRICS group.
This development is poised to enhance
the stature of both the existing BRICS
members and the newly added ones.
The new BRICS will comprise states
with diverse and complex international
diplomatic issues. Russia is likely to
showcase its power globally to demon-
strate continued alliances after the Ukraine
conflict. The recently added states of Iran
and Saudi Arabia are regional rivals,
necessitating a delicate balance within
this new group considering their rivalry.
China’s anti-West stance and Iran’s
strained relations with the United
States (US) as well as Saudi Arabia, India,
Argentina, and Ethiopia’s traditional
alignment with the US further compli-
cate the dynamics.
Some of the important aspects that
will arise with the expansion of BRICS
include increased opportunities for the
development of infrastructure and gov-
ernance. BRICS also envisions establish-
ing the New Development Bank (NDB),
formerly known as the BRICS Develop-
ment Bank, headquartered at Shanghai
in China. This bank will extend loans
for infrastructure and other projects to
BRICS nations, reducing their depend-
ence on Bretton Woods organisations.
China, the world’s second largest economy
and an economic frontrunner within
the BRICS, is notably the most powerful
member. Making provision for the NDB
might open up new possibilities and
increase avenues for financial help for
many countries that need financial secu-
rity for their infrastructural development.
Another important aspect that the BRICS
is keen to bring up is the expansion and
usage of local currencies. BRICS states
advocate trading in local currencies,
aiming to reduce reliance on the US dollar
for market stability. Increasing the use
of local currencies will be helpful in
diversifying the economies of these
countries. This can also give rise to an
increase in local businesses. Brazil and
China engage in transactions using local
currency, as is similarly seen in China’s
dealings with Russia. India also seeks
to expand its use of local currency.
However, over here, the biggest challenge
lies in limiting the Western power dy-
namics and maintaining control over
currency regulations and exchange rates.
In the realm of global economics,
BRICS is projected to surpass the Group
of Seven this year. The addition of six
new countries elevates this group to the
world’s most economically potent con-
sortium. This expanded group holds a
strong potential for economic develop-
ment, which the West may perceive not
only as an economic threat but also as a
challenge to their global political domi-
nance. Managing and sustaining the
group’s interests amid intergroup and
West-related complexities will be chal-
lenging. In the past five years, India has
showcased its economic strength and
vol lViII no 37 EPW Economic & Political Weekly

improved business friendliness. While
enhancing its global standing, India
must closely monitor the potential tilt of
its fellow BRICS nations towards China
due to economic and political factors.
India’s task lies in maintaining an equi-
librium between economic development
and regional political autonomy while
guarding against undue Chinese influence.
The 2020 stand-off between India and
China has created a rift between these
two Asian giants. However, both nations
must collaborate to foster a more robust
international system. Thus, BRICS expan-
sion holds important ground with vari-
ous opportunities for the global South.
Niteesh Upadhyay
Noida
Atrayee Saha
New Delhi
A Pioneer in
Managerial Unionism
L V Subramaniam, the pioneer in
managerial unionism in India,
passed away on 8 April 2023 in Singa-
pore. He was 89.
Today, the managerial staff in the
banking industry is well-organised, with
a capacity to go on strike in pursuance of
its demands. But six decades ago, the
staff could never think of going on
strike. Managers and officers, who were
called supervisors, could not form a un-
ion. They were deemed “part of the
management” as they supervised the
clerks and peons called workmen under
the Industrial Disputes Act, 1947. In con-
trast, workpersons could unionise under
the Trade Unions Act, 1926.
It was Subramaniam who made pio-
neering efforts not only in unionising
the managerial staff in the banking in-
dustry but also demonstrated how mini-
mum rights could be wrested from the
employers through collective action.
LVS, as he was known among the fra-
ternity of bankers, was born in 1934 in
an illustrious and well-educated family
of Palghat Iyers in Kalpathy near Palakkad
in Kerala. However, immediately after
matriculation, instead of pursuing edu-
cation, he joined the then Imperial Bank
of India (IBI) at its Jabalpur branch as
a clerk in 1951. The IBI was the successor
Economic & Political Weekly EPW june 17, 2023
september
of three presidency banks founded by
Scottish bankers in Bengal, Bombay,
and Madras in the early 19th century. It
was nationalised in 1955 to become the
SBI. He was promoted as an officer in
1964 and posted at the SBI’s local head
office (LHO) in the then Bombay.
The supervisory staff was the victim
of the SBI’s colonial culture inherited
from the IBI. The bank mandated to
wear a tie every day to the office and to
supervise the work of their subordi-
nates who would draw higher compen-
sation than them. The working hours
were unlimited. They could not take a
leave without prior sanction. Unionis-
ing was the only way to break the
shackles of the past.
On his promotion as officer, Subrama-
niam took the lead in forming the SBI
Supervisory Staff Association in Janu-
ary 1965. It was a platform to seek hu-
mane treatment for the officers. He per-
suaded the officers to become members
of the association and campaigned not
only in Bombay but in different
geographical locations of the SBI. Simi-
lar associations were formed in other
cities like Madras, Calcutta, Delhi, and
Hyderabad. In a year, all of them were
federated into the All India SBI Supervis-
ing Staff Federation (SSF). Subramaniam
was elected as its general secretary.
It was a Herculean task to convince
the SBI management to recognise the
SSF. The right to collective bargaining
came after the historic indefinite strike
of June 1969. It was the first ever strike
by a managerial staff anywhere in the
world. SSF was recognised as the collec-
tive bargaining agent of the managerial
staff. It was a trendsetter.
With the success of the SBI strike,
Subramaniam persuaded the officers in
other banks to unionise. By that time,
14 major banks were nationalised.
Some of them had officers’ associations
with a loose national platform called
the National Confederation of Bank Of-
ficers’ Organisations (NCBOO) started in
1967. The success of the SBI strike was a
confidence builder. Officers in most
other banks decided to follow that
lead. By 1971, NCBOO was transformed
into the All India Confederation of
Bank Officers’ Organisations (AICOBOO).
16, 2023
vol lViii
volno
lViII
24 no 37
LETTERS
Subramaniam was elected its secretary
general.
The next decade saw the emergence
of a structured industrial relations machi-
nery in most banks. At the national level,
AICOBOO became a powerful platform of
bank officers. Periodic meetings with
Indian Banks’ Association and meetings
with the government would take place.
The scheme of participative manage-
ment in the public sector banks (PSB)
was operationalised. Under the scheme,
a nominee, each from the workmen and
supervisory staff, would be appointed
on the board of directors of every PSB.
Subramaniam was committed to high
standards of probity in banks. When
serious irregularities were noticed in-
volving the higher echelons, he would
document and bring them to the notice
of the Reserve Bank of India and the
Ministry of Finance. Two such cases are
worth recalling. In one, the chairperson
of a private bank had to make an uncer-
emonious exit, and in the other, the gov-
ernment had to terminate the services of
the chairperson of a PSB. These instanc-
es underlined the influence wielded by
collective movements.
It was an irony that when the AICOBOO
was emerging strong, by 1985, there
were internal dissensions among the lead-
ership resulting in a split and emergence
of the All India Bank Officers’ Confedera-
tion. Subramaniam stood marginalised
with no substantial role in the bank offic-
ers’ movement thereafter. He retired
from SBI as a junior officer in 1994.
What is his legacy? He conceptualised
a union for the managerial staff. It was
a landmark in the annals of the trade
union movement not only in India but
the world over. Subramaniam was rightly
called the father of the bank officers’
movement.
T R Bhat
Mangaluru
Corrigendum
In the article “To Poonguzhali” by
Divyanshi Sharda (EPW, 9 September 2023),
“Sharmila Paik” on p 65 should have read as
“Shailaja Paik.”
The error has been corrected on the EPW website.
5
LETTERS

6 september
june 16,
17, 2023 vol lViii
lViII no 24
37 EPW Economic & Political Weekly
HT PAREKH FINANCE COLUMN
Swapping Debt for Nature
Does Ecuador Show the Way?
C P Chandrasekhar
A financially significant deal
announced by the Government of
Ecuador and Credit Suisse (prior
to its merger with UBS) in May
2023, has raised the prospect of
debt-stressed countries writing
down distressed debt on favourable
terms in return for a commitment
to allocate part of the “savings”
for conservation or climate
projects. This “debt-for-nature”
swap is one in a recent series
which, unlike in the past, has been
structured and arranged by private
players, with “blue or green” bond
issues that raise the money to
finance the buyback of expensive
debt at heavily discounted prices.
The combination of debt reduction,
improved debt terms and locked-
in conservation spending is
presented as a “win-win” outcome
for all concerned. But as critics
have been quick to point out,
there is much to be wary of in
these complex transactions.
C P Chandrasekhar (cpchand@gmail.com) is
currently with the Political Economy Research
Institute, UMass, Amherst and was formerly
with Jawaharlal Nehru University.
10
O
n the fringes of the opaque world
of “innovative finance,” there is
much excitement over recent
efforts to swap the distressed foreign debt
of less developed governments in return
for a promise to protect biodiversity or
“green the economy.” The excitement
stems not the least from the fact that
though debt-for-nature swaps had been
experimented with as far back as the
1980s, only to lose momentum, there has
been a sudden spate in such deals in
recent times—Belize concluded a deal in
2021 (involving bonds valued originally at
$553 billion); Barbados struck a deal to
buy back a fraction, valued at $150 million,
of its outstanding bond debt due to
mature in 2029 and 2043; Ecuador com-
pleted in May 2023 what is, thus far, the
biggest debt-for-nature swap (involving
bonds with a face value of $1.6 billion);
and Gabon, most recently, clinched a
deal in August 2023 buying back $500
million worth of bond debt.
Though still a small share of total
external debt, the magnitudes involved
in Belize, Ecuador, and Gabon are much
higher than the deals struck in the past,
and large enough to attract interest as a
joint solution to debt stress and past and
future environmental damage. Moreover,
while the earlier deals involved, besides
the debtor sovereign, official bilateral
creditors and philanthropic institutions
and non-governmental organisations
(NGOs), the recent deals are led by private
players, who both structure the deal as
well as finance it. Historically, given the
fact that less developed countries were
hard put to service hard currency debt
and much of the debt up for restructur-
ing was in or on the verge of default, pri-
vate players had no interest. In those
circumstances, the effort was aimed at
getting creditor governments to write off
some of the debt or get NGOs backed by
September 16, 2023
philanthropies to buy up distressed debt
at a discount and write it off, and to get
the debtor to spend all or much of the
“savings” garnered through these means
on conservation projects in local cur-
rency. The debtor was offered some debt
relief but, more importantly, relieved of
the burden of finding or diverting scarce
foreign exchange to service the debt.
In the new wave of debt-for-nature
swaps, private players have a dominant
role to play. Debtor governments are
helped by financial majors and influential
“non-governmental” players (such as the
Nature Conservancy) to borrow sums at
much better terms than existing foreign
debt to buy back a part of their more
expensive debt at a discount. Interest
rates on the new loans are much lower
and maturity dates are postponed, giving
the debtor relief and breathing space.
Though the market here is the restructur-
ing medium, government-sponsored and
multilateral financial institutions from or
backed by the developed countries step in
to offer insurance or partial guarantees
that substantially improve the ratings of
the new bonds issued by the debt-stressed
sovereign. With the risk associated with
the instruments being taken over by these
entities, the bonds are acceptable to inves-
tors at terms far better for the debtor than
applicable on the debt being replaced or
on past debt outstanding.
This ability of private facilitators to
deliver debt relief, however limited, is
attributed to the willingness of the debtor
country to commit to use a part of the
“savings” garnered from the discounted
buyback of old debt and the low interest
rate on the new debt on conservation or
greening projects. As a result, the bonds
issued to mobilise the new loan are desig-
nated as “blue” (marine conservation) or
green bonds, even though not all of the
resources mobilised are spent on blue or
green projects. That designation helps
find investors in the bonds, including
insurance companies and pension funds,
looking to enhance or widen their envi-
ronment, social and governance (ESG)
investment portfolio. Combine the blue
bond designation with the reduced risk
deriving from guarantees and insurance
vol lViii no 37 EPW Economic & Political Weekly

coverage and the extremely favourable
terms at which the bonds can be placed is
easily explained. But what advocates of
these deals emphasise are the large sav-
ings for the distressed debtor and the
green benefits for the international com-
munity, making it a “win-win” proposition.
A case in point is the biggest of these,
recently announced by Ecuador in May
2023 and orchestrated by Credit Suisse,
which, before its merger with UBS, had
come to dominate the field. The deal has
been headlined as one in which, in the
process of restructuring distressed sov-
ereign debt, resources have been freed
up to support the newly established
Hermandad Marine Reserve and the
Galápagos Marine Reserve, as well as to
fund an endowment for marine conser-
vation. Overall, the Ecuadorian govern-
ment has committed to allocate around
$18 million a year for 20 years for con-
servation in the environmentally prized
Galápagos Islands through a non-profit
foreign endowment fund, the Galápagos
Life Fund.
The deal as “structured” has compo-
nents very similar to other deals arranged
in recent times, including in Belize.1 It
begins with leveraging bondholder fears
resulting from the economic situation in
Ecuador and the recent political uncer-
tainty in which the opposition in the
National Assembly was attempting to
impeach the incumbent president, Guill-
ermo Lasso, accusing him of embezzle-
ment. That allowed arriving at a deal in
which a combination of three sets of
bonds of different maturity dates with a
face value of $1.63 billion could be
bought for just $656 million or at a dis-
count of 60%.
To finance this buyback, the Ecuadorian
government received an equivalent loan
on much better terms (interest rate of
around 7%—as opposed to 16% on exist-
ing Ecuadorian debt—and a grace period
of seven years for capital repayments),
from a special purpose vehicle (SPV)
named GPS Blue Financing. GPS Blue, in
turn, raised the requisite funds by issuing
(in collaboration with Credit Suisse) “blue”
“Galápagos bonds” that were insured in
full by the US government-backed Inter-
national Development Finance Corpora-
tion (IDFC) and partly reinsured by private
Economic & Political Weekly EPW September 16, 2023
reinsurers as well as a partial guarantee
of $85 million from the Inter-American
Development Bank. This implied that not
only were investors protected, but the
bond issuer was covered as well, with
risk being transferred to these state-
backed agencies, who justify their action
as being aimed at de-risking environ-
mentally positive instruments to attract
private capital. A consequence of the
de-risking support is that Moody’s could
hand out an investment grade Aa2 rat-
ing for the bond, which was the agency’s
third highest rating and 16 levels above
the Caa3 junk rating that Ecuadorian
sovereign debt was subject to. Not sur-
prisingly, though the new bond offered
a yield of just 5.6%, it attracted much
interest, including from the likes of UK
asset management major Legal and
General, which snapped up $250 million
of the issue and sent out a signal that
bonds emanating from these kinds of
complex deals are a good bet.
This, and deals in other countries like
Belize, have been declared a “win-win”
for countries facing sovereign debt dis-
tress, for private investors and for the
international community concerned about
biodiversity loss and climate change. But
not so soon, argue the critiques.2 The
question arises as to what drives the
holders of bonds to sell them back to the
government at a discount, or accept an
“haircut,” which go as high as 60%.
Second, what is in it for the private
players such as Credit Suisse or Bank of
America that makes them invest time
and “expertise” to design and help com-
plete these swap arrangements? Third,
how come a debt-distressed country is
able to issue new debt in the form of blue
or green bonds that are placed at very
favourable rates and terms? Fourth, how
much is the debtor implicitly or explic-
itly paying out to utilise this swap? And,
finally, how much of a conservation divi-
dend does the operation provide?
The easiest of these questions to
answer is the first. The debt involved is a
small fraction of the stock that was built
when access to extremely cheap excess
liquidity in the international system led
to a supply-side push of capital into
sovereign debt in the less developed
countries, including the risky, so-called
vol lViii no 37
HT PAREKH FINANCE COLUMN
frontier markets.3 It soon became clear
that much of this foreign debt to be
serviced with hard currency was unsus-
tainable even in normal times, let alone
in a period marked by a pandemic, fol-
lowed by rising interest rates and infla-
tion led by speculation precipitated by
the war in Ukraine. In the event, coun-
tries were hard put to service external
debt, and the distressed debt was trad-
ing at a huge discount in markets. All it
took to persuade the bondholders to sell
that debt back to the debtor governments
was to offer them a modest “premium”
above these discounted prices. In fact,
even after part of the debt was bought
back, reducing supply in the market, the
price of these bonds in secondary mar-
kets did not rise to equal the buyback
price. Given the economic situation in
the debtor countries, holding on to the
bonds would have meant facing default
and restructuring in due course. Accept-
ing a haircut was much smarter.
For debtor governments, the buyback
at what was a significant discount, was a
way of winning some relief from stress.
However, the challenge they faced was
one of finding the resources to finance
the buyback given their fiscal and for-
eign exchange positions. It is here that
the private agents like Credit Suisse
(in Belize, Barbados, and Ecuador), and
(after the Credit Suisse merger with
UBS) Bank of America in Gabon, came
in with their restructuring packages.
They channelled to the debtor a loan
needed to cover the discounted total cost
of debt being bought back, at interest
rates that were extremely favourable
compared with that being paid on out-
standing debt of the debt-stressed bor-
rower, with grace periods and extended
maturities that eased the servicing bur-
den on the new debt.
Which brings up the second question
being raised above: What prompted the
likes of Credit Suisse that were offering
their services to structure the deal to
also advance a loan that was so favour-
able for an already stressed debtor? The
answer lies in how the operation is
structured. In both Belize and Ecuador,
the blue bonds were insured by the US
government-backed IDFC. This explained
the favourable terms of the loans, benefits
11
HT PAREKH FINANCE COLUMN

of which were partially passed on to
the government.
In fact, the yield on bonds sold to
investors were lower than that charged
in the bond sale, the proceeds of which
went to the government and the cost of
which had to be borne by it. The loan
to Ecuador carried a rate of 7%, while
the blue bond was issued at 5.4%. That
difference, even after accounting for
premiums for insurance paid to IDFC
and reinsurers and costs such as audit,
accounting and rating agency charges,
leaves a fat fee to be shared between the
likes of Credit Suisse and the host of other
private financial players and consultants
involved. In Belize, Daniel Munevar
estimates that a similar difference in
interest rates delivers up to $84 million
over the lifetime of the deal, which was
close to 45% of the $190 million the
country is estimated to have gained
from the debt relief implicit in the dis-
counted buyback of debt as well as the
lower interest outflows on the new loan
that financed that buyback.
Finally, while the blue bonds carry an
implicit ESG tag, the justification for this
on grounds of protection of nature are
not warranted as just a little of the money
conjured out of the exercise is allocated
to that cause, and there is no identified
means of verifying whether the promised
conservation benefits would actually be
delivered. On the other hand, multiple
layers of non-transparent transactions
make the deal a winner for finance with
some crumbs for the distressed debtor.
At first sight, it appears that everyone
has benefited: governments from the
discounted debt buyback financed with
a loan on attractive terms; investors who
get a reasonable return on an almost
riskless, ostensibly ESG-compatible instru-
ment, because of backing from IDFC and
others; Credit Suisse from the spread
and fee it receives by structuring the
deal and other intermediaries from fees;
and the rest of the world from the exter-
nalities associated with conservation of
biodiversity. But what stands out in all of
this is that the risks associated with loans
sitting with a distressed debtor have not
gone away—they have just been taken
over by the US government through the
IDFC. Leveraging that contribution of the
US government, private investors in the
blue bonds have got themselves a good
deal, and Credit Suisse and private “non-
profits” have fattened their bottom lines.
However, the debt relief gains are limited
and the conservation gains uncertain
and unverifiable.
notes
1 For a detailed analysis of the Ecuadorian
debt-for-nature swap, refer to Daniel Ortega-
Pacheco et al (2023).
2 Schweinberger (2022); Munevar (2021); “Financ-
ing the 30×30 Agenda for the Oceans: Debt for
Nature Swaps Should Be Rejected,” NGO state-
ment, https://www.cffacape.org/publications-
blog/joint-statement-financing-the-30x-30-
agenda-for-the-oceans-debt-for-nature-swaps-
should-be-rejected.
3 The bonds bought back by Ecuador amounted
to around 2.5% of the government’s sovereign
debt stock and 5.5% of external commercial
debt stock.
REFERENCES
Munevar, Daniel (2021): “Making Sense of Belize’s
Blue Bond Proposal,” Eurodad, https://www.
eurodad.org/making_sense_of_belizes_blue_
bond_proposal.
Ortega-Pacheco, Daniel, Iolando Fresnillo, Patricia
Miranda, Rodolfo Bejarano and Carola Mejia
(2023): “Galapagos Deal: An Ignominious
Legacy,” Latindadd, https://www.latindadd.org/
2023/05/25/galapagos-deal-an-ignominious-
legacy/.
Schweinberger, Maria C (2022): “The Belize Sover-
eign Debt Restructuring,” https://plumberina-
pantsuit.com/blog/the-belize-sovereign-debt-
restructuring.

Money, Banking & Finance

June 3, 2023

Some Contemporary and Classical Issues of Money and Finance —Partha Ray
Monetary Growth, Financial Structure, and Inflation: The Post-Pandemic New Normal — C Rangarajan, Dilip Nachane, Partha Ray
Taming Inflation by Anchoring Inflation Expectations — Sitikantha Pattanaik, G V Nadhanael, Silu Muduli
Monetary Policy in the Midst of Cost-push Inflation — Zico Dasgupta, Indranil Chowdhury
Credit Portfolio Assessment of Domestic Systemically Important Banks — Richa Verma Bajaj, Sagarika Rastogi,
Rhythm Kumar
Do Foreign Banks Affect Market Power, Efficiency, or Stability in India? — Pradyot Kumar Das
RBI’s ‘Financial Stability Reports’ and Stress Testing Methodologies: A Commentary — Amulya Neelam
Retail Investment in India: During and after the Pandemic — Tirthankar Patnaik
Understanding Sovereign Ratings and Their Implications for Emerging Economies — Rahul S Chauhan, Ilisa Goenka,
Kaushalendra Kishore, Nirupama Kulkarni,
Kavya Ravindranath, Gautham Udupa
For copies write to:
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email: circulation@epw.in

12 September 16, 2023 vol lViii no 37 EPW Economic & Political Weekly
 SEPTEMBER 16, 2023
Cobbled Consensus and Emerging Challenges
A more focused approach and timely delivery of assurances hold the key to the success of the G20.
T
he New Delhi summit of the Group of Twenty (G20) lead-
ers, which started off without any great expectations
with the Chinese and Russian heads of states staying
away, pulled off a major surprise on its very first day. It unani-
mously adopted the New Delhi leader’s declaration, accommo-
dating the groups’ diverse interests with minimum discord. This
was a major feat because many of the G20 ministerial group meet-
ings, in the run-up to the summit, had failed to build a consensus
for joint communiques. Moreover, the refusal of the Russian
and Chinese delegations to back down from their demand to
change the tenor of the G20 Bali summit declaration on the
Ukraine war further added to the uncertainties. Hence, the
quick adoption of the leader’s declaration was a major feat,
which reaffirmed the G20 status as the premier forum for inter-
national economic cooperation.
A landmark event at the meet was the entry of the African
Union, comprising 55 nations, as a permanent member of the G20,
as proposed by the United States (US)–Africa leaders’ summit
last year. This would certainly ensure greater representation to
the vast continent and add to its heft. On the economic front, a
major gain was the new partnership announced for setting up
an India–Middle East–Europe economic corridor. It will certain-
ly provide competition to China’s Belt and Road Initiative.
Other new initiatives like the emphasis on bigger and more
effective multilateral development banks are also welcome. The
nations also agreed to draw up a Crypto-Asset Reporting
Framework by 2027. The inclusion of non-financial assets in the
mutual information-sharing mechanism and the consensus for
a swift implementation of the two-pillar international tax pack-
age to ensure that the multinationals pay at least minimum
taxes in host economies are also positive steps. The G20 also
resolved to triple the global renewable energy capacity by 2030
and work towards phasing out fossil fuels. A consensus was also
reached on restoring the dispute settlement mechanism of the
World Trade Organization (WTO) by 2024.
Some of these decisions were made possible by the flexibility
shown by the Western powers, especially by the US, to ensure a
successful meet. This enabled the forum to dilute the earlier G20
stance on the war in Ukraine, to mollify Russian and Chinese
Economic & Political Weekly EPW SEPTEMBER 16, 2023 vol lViii no 37
sentiments. Similarly, the decision to restore the WTO dispute
resolution mechanism, which will restore its primacy in global
trade, also indicates a change in the US stance that had vexed it
since 2019. So, the New Delhi summit has certainly expanded
the space for multilateral cooperation in spite of the challenges
posed by the rising geopolitical tensions set off by the Ukraine
war and the escalating stand-offs between the US and China.
However, despite the remarkable consensus, the policy initia-
tives announced by the New Delhi summit left much to be de-
sired. Certainly, the incremental steps taken to tackle the global
problems like poverty, climate change, fiscal and monetary pol-
icy coordination, digital infrastructure and inclusive growth,
while no doubt significant, fell far below expectations and way
short of requirements. These incremental measures announced
stand out in sharp contrast to the G20 response to the global
financial crisis. At that time, the G20 not only agreed to spend
around $4 trillion in 2008 and 2009 to avert a financial collapse
but also implemented extensive global financial sector reforms.
Similarly, the Hangzhou summit in 2016 also had its very dra-
matic moments when both the US and China agreed to accept
the Paris Agreement on climate change.
However, the later years have seen a steady decline in the G20’s
ability to deliver anything very substantial on major issues like
coordination of fiscal and monetary policies, tax evasion and tax
reforms, growing global indebtedness, and controlling corrup-
tion. Most of these issues still remain a work in progress after so
many years. One reason for this slack is that the G20 agenda has
been broadened substantially to encompass multiple issues and
dozens of targets. By one count, the number of decisions made at
the leadership summits has gone up from 95 in Washington
(2008) to as many as 225 in Rome (2021). The New Delhi leader-
ship declaration now runs up to around three dozen pages.
Another reason for the lacklustre performance of the G20 forum
has been the diverging interests of the global North and the global
South, which have also weighed down both on decision-making
and delivery. Most ministerial meetings were entrapped in single-
subject silos that often failed to fully integrate with the overall
vision. Even at a critical juncture like the COVID-19 pandemic, the
forum failed to propose adequate solutions for a more equitable
7
EDITORIALS
distribution of vaccines and medical aid to the poorer nations.
A brief suspension of debt payments was all what most of the
smaller and poor economies probably gained. Similarly, the
promise for providing finance and technology to reduce fossil fuel
emissions in the developing world is yet to take off despite its
growing menace and the lofty emission-reducing targets.
Unfortunately, the New Delhi summit even failed to adequate-
ly address issues arising from the Ukraine war. The conflict had
8 SEPTEMBER 16, 2023
contributed to a steady rise in global food and energy prices,
causing rampant inflation and balance of payment issues,
which have destabilised governments in the global South. Un-
fortunately, such issues were either largely ignored or did not
get the attention they deserved. Similarly, though the Delhi
declaration has promised to increase the quantum of assis-
tance from multilateral development banks, it will probably be
a little more than just tokenism.
vol lViii no 37 EPW Economic & Political Weekly

From 25 Years Ago
Vol XXXIII, No 38 SEPTEMBER 19, 1998
Of Capital and Other
Punishments
K Balagopal
There are those like V R Krishna Iyer who
takes the consistent stand that all life is
precious and nobody - nobody at all - has
the right to take life. He bases his stand as
an abolitionist on this argument (among
others). The anti-abolitionist may argue
that notwithstanding the consistency of
this position, while the state may well
heed its reason and desist from hanging
murderers, citizens are unlikely to give up
killing, and Krishna Iyer’s pleas are not
going to stop them. So may not the state
hang a few of them to deter a few others
Economic & Political Weekly EPW SEPTEMBER 16, 2023
from killing, and thereby save some lives –
precious lives – in the aggregate?
Not that Krishna Iyer has no other argu-
ments left, but he would have to leave the
terrain of preciousness of life to continue
the debate. Preciousness (spiritual or secu-
lar) of life is a meaningful moral value, but
it is an inadequate ground for distinguish-
ing the two ends of the argument about
capital punishment. The efficacy of execu-
tion as a form of punishment then enters
the debate. And so we have arguments
about the purpose, effect or impact of capi-
tal punishment as an act of state. Here the
two poles of the argument are less sym-
metrical and hence the debate is more
fruitful. That it is still inconclusive is a re-
flection of the fact that we would rather not
punish anybody at all in the name of jus-
tice, for the cruelty that is inherent in pun-
ishment, any punishment and not just exe-
cution, is at odds with the lofty sense con-
veyed by the expression Justice, and yet we
vol lViii no 37
EDITORIALS
do realise that we cannot as yet (perhaps
for ever) do away with socially inflicted
punishment, even if we feel confident
enough about our civilisational strength to
rule out private revenge as a legitimate re-
sponse to crime, for then the weak (wheth-
er by virtue of social structure or contin-
gent factors) would be at the mercy of the
strong. Then, where exactly do we draw
the line between just and unjust punish-
ments? How do we ensure a criterion of
punishment that will simultaneously be
just to the one who has committed the
crime (for a signal difference between pri-
vate revenge and public justice as a re-
sponse to crime is that the latter must do
justice to both sides) and yet leave us with
the confidence that by its operation it will
ensure that the weak are safe from the
depradations (sic) of the strong (which is
the only rationale – and real one – for the
existence of a public justice system)? This
is not a very easy question to answer.
9

From 50 Years Ago
Vol VIII, No 37 SEPTEMBER 15, 1973
Supping with the Devil
As we go to press, stray snipers are still at
work in Santiago and its suburbs, protest-
ing against the army coup. But this is a
mere splutter, and unlikely to last beyond
a couple of days. Salvador Allende’s vio-
lent death marks the end of a major phase
in Chile. The democratic interlude is for
the present over; the country in which the
army has generally had a tradition of loy-
alty to the government will now join the
Latin American tradition of being ruled by
brass hats. Allende had been under con-
tinuous siege by the propertied classes for
the past several months.
Allende’s victory in the presidential
election three years ago had been a
paper-thin one. But even were it otherwise,
the denouement could hardly have been
Economic & Political Weekly EPW SEPTEMBER 16, 2023
different. Neither the multi-national cor-
porations nor the local landowning and
industrial interests were ready to accept
the possibility that the rules of parlia-
mentary democracy could militate against
their interests in ushering in change, or
that it could be the legitimate function of
government to adopt measures eroding
the privileges and prerogatives of the ru-
ral rich and the urban bourgeoisie. And,
since petty bourgeois prejudices can be
easily played upon when the working
class appears to be making advances, the
major vested interests in Chile were able,
over the last two years, to swing to their
side sizeable groups of the middle class too.
Inflation is endemic in Latin America
and the Allende government’s policies,
directed against the more exploitive
kinds of foreign investments and the
urban and rural rich, may have further
helped push up prices through their
impact on the flow of supplies in the short
run. The shor tages, which had appeared
by early 1972 appeared as though they
had been deliberately created. Chile
vol lViii no 37
EDITORIALS
further witnessed a most unusual phe-
nomenon: a strike by the rich and the
privileged against the government, and
by implication, against the working class.
The strike by employers was joined by
virtually all professions, bank employees,
a small proportion of government bu-
reaucrats, retailers and, in economic
terms far more importantly, shippers and
private truck owners. The working class
valiantly responded by continuing to go
to work. It was an effective struggle last-
ing 20 days to establish that the economy
could not be paralysed by the decision of
the business bosses. At the end of 20
days, as the strike began to lose strength,
Allende used the army as an intermedi-
ary to appeal to the strikers. He promised
that there would be no reprisals and
made minor concessions. In doing so, he
showed the timidity and paternalism of
which sections of the left had from the
beginning accused him, and for which
reasons they had maintained that no
socialist construction would be possible
under his regime.
9
EDITORIALS
Indian Democracy and Simultaneous Elections
Electoral reforms ought to uphold the democratic values of federalism and an active citizenry.
T
he idea of “one nation, one election” has once again
entered public discussion when it was revealed that the
union government has set up a committee led by former
President Ram Nath Kovind to study the feasibility of this idea
and suggest necessary electoral reforms. The committee’s man-
date is to “examine and make recommendations for holding
simultaneous elections to the Lok Sabha, state assemblies, munici-
palities, and panchayats, keeping in view the existing frame-
work under the Constitution of India and other statutory provi-
sions.” It would also propose stages and timelines for holding
simultaneous polls if they are not feasible in a single round.
It is notable that, in 2015, the Parliamentary Standing Commit-
tee on Personnel, Public Grievances, Law, and Justice submitted
its report on the “Feasibility of Holding Simultaneous Elections to
the House of People (Lok Sabha) and State Legislative Assem-
blies.” The report highlighted three main reasons against the cur-
rent practice of holding separate or non-simultaneous elections
in India. First, it entails a massive expenditure for the country.
Second, the enforcement of the model code of conduct during the
election period leads to a certain “policy paralysis,” implying ad-
verse consequences for the formulation and implementation of
crucial developmental activities. Third, it diverts valuable human
resources towards the mammoth task of election duty. The report
suggested a two-phase approach as a more realistic way to con-
duct simultaneous elections. The report advocated that some state
assemblies could have their polls in the middle of the Lok Sabha’s
tenure. The rest of the state assemblies could have their polls at
the end of the Lok Sabha’s tenure.
It is not as if simultaneous elections are altogether new in the
history of electoral politics in India. The first elections of India
as a sovereign nation took place from 1951 to 1952, spanning
more than three months. This was the beginning of India’s elec-
toral journey regarding simultaneous polls, with elections for
Parliament and state legislative assemblies being held at the
same time. However, this arrangement did not last long, as
states underwent reorganisation and assemblies were dissolved
before their terms ended. The first disruption of this synchro-
nised electoral cycle occurred in Kerala in 1959, when the union
government invoked Article 356 of the Constitution and dis-
missed the state government led by the Communist Party of
India within three years of its formation in 1957.
8 SEPTEMBER 16, 2023
To conduct simultaneous elections, it would not be enough to
merely secure the backing of various political parties and stake-
holders. It would also likely require at least five changes to the
Constitution and a huge number of extra electronic voting and
paper-trail machines. The five likely changes to the Constitu-
tion would involve modifying Article 83 on the duration of the
houses of Parliament, Article 85 on the President’s power to dis-
solve the Lok Sabha, Article 172 on the duration of the state leg-
islatures, Article 174 on the governor’s power to dissolve the
state legislatures, and Article 356 on the imposition of Presi-
dent’s rule in the states. In addition, specific amendments in the
Representation of the People Act, 1951 might also be required.
The committee is also tasked with exploring and proposing fea-
sible solutions for situations where simultaneous elections re-
sult in a hung Parliament or assembly, a vote of no confidence,
defections, and other similar events.
If India enacts the idea of “one nation, one election,” then it
will join three other countries in the world that hold simultane-
ous elections. Currently, Belgium, South Africa, and Sweden
hold simultaneous elections at the federal and provincial levels.
The 2015 report mentions the examples of South Africa and
Sweden as precedents for pursuing simultaneous elections in
India. For example, both national and provincial legislatures in
South Africa are elected for five-year terms at the same time.
Sweden also has a fixed date for electing its national, provin-
cial, and local representatives, who serve for four-year terms
simultaneously. However, South Africa and Sweden use varia-
tions of proportional representation in their elections, while
India uses the first-past-the-post system.
Two broad implications of this idea could be mentioned at
this stage. First, it is true that non-simultaneous elections
started as a result of the interference of the union government
in state legislatures in the past. However, with the emergence
of multiple regional parties, it has gradually become a factor
that supports federalism. Frequent and non-simultaneous
elections allow more space to regional parties as well as re-
gional issues to garner national limelight. This is because the
state-level issues and the regional forces that address them
have more opportunities to highlight their specificities when
the elections are focused on particular states. “One nation,
one election” risks to overshadow these regional specificities
vol lViii no 37 EPW Economic & Political Weekly

by privileging a more uniform narrative at the time of the
elections, thus giving a clear advantage to national parties,
especially parties that have disproportionate money and me-
dia influence. Moreover, elections held at different times can
potentially compel the union government to revise its policies
that are detrimental to the people.
Second, this idea looks at elections with a certain instrumental-
ist perspective, obscuring the normative content of parliamentary
Economic & Political Weekly EPW SEPTEMBER 16, 2023 vol lViii no 37
EDITORIALS
democracy. Periodic elections are not a mere technical or pro-
cedural instrument for electing our political representatives,
they are also constitutional channels for expressing popular
sovereignty, which lie at the core of our democracy. While de-
bates about how to channel the people’s mandate more effec-
tively and efficiently at all levels of government are welcome,
our starting point ought to be more, and not less, of people’s
involvement in the affairs of the government.
9
Green Capitalism and Growth
Anjal Prakash
C
apitalism, as it is currently prac-
tised, has contributed to the ex-
ploitation of natural resources
and the emission of greenhouse gases,
leading to the ongoing climate crisis. To
address this issue, many experts have
proposed reforms to capitalism that
would make it more sustainable and
environmentally friendly. This may in-
clude changes to measuring economic
progress beyond gross domestic prod-
uct (GDP) and shifting from a linear to a
circular economy, promoting renewa-
ble energy and energy efficiency, and
implementing carbon pricing, among
other solutions. Climate change is caus-
ing rising temperatures, more frequent
and intense natural disasters, melting
polar ice caps, sea level rise, and shifts
in weather patterns and ecosystems.
This is leading to severe impacts on hu-
man health, food security, infrastruc-
ture, and natural resources and exacer-
bating existing social and economic in-
equalities. The book under review deals
with this important issue the world is
facing today. The book is divided into
two parts. Part 1 deals with the issue of
economic growth and capitalism and
covers four chapters. Part 2 dwells on
the green plan to avoid climate-led dis-
asters and provides a blueprint for
green capitalism.
Limits of Economic Growth
The first two chapters deal with the
limit of economic growth as a concept
and focus on post-growth dystopia.
It talks about the idea of economic
growth that has inherent limits to
the ability of an economy to continue
growing indefinitely. This idea is
based on several factors, including
the planet’s finite resources, the
impact of economic growth on the
environment, and the limitations of
technology and innovation in driving
continued growth.
30
book reviewS
Growth for Good: Reshaping Capitalism to Save
Humanity from Climate Catastrophe by Alessio
Terzi, Harvard University Press, 2022; pp 368, $29.95.
The concept of the limits of economic
growth has been discussed in Chapter 1.
According to the author, the proponents
of the limits of economic growth argue
that continuing to focus solely on growth
as the primary goal of an economy is un-
sustainable and that we need to find new
ways of measuring and valuing economic
progress that take into account the well-
being of people and the health of the
planet. They also argue that we need to
transition to a more sustainable economic
model that prioritises the conservation
and protection of natural resources while
ensuring that economic progress is
achieved in a way that benefits everyone.
The author argues that the limits of
economic growth need to be better de-
fined and that technological progress
and human ingenuity will continue to
drive economic growth for the foreseea-
ble future. Further, he contends that the
limits to growth are not inherent but
result from poor policy choices and can
be addressed through innovation and
better resource management.
The subsequent chapters in part 1
carry the view that economic growth,
as it has been traditionally understood
and practised, has had a significant
impact on the planet and has contributed
to many of the environmental challenges
we face today, including climate change,
loss of biodiversity, and degradation
of natural resources. The pursuit of
economic growth has often involved
the exploitation of natural resources,
the emission of greenhouse gases, and the
degradation of ecosystems, which have
led to adverse environmental impacts.
In addition, many of the products and
services produced through economic
september 16, 2023
growth are often designed for short-
term use and are not built to last, con-
tributing to a culture of waste and
resource depletion.
However, it is important to note that
economic growth and environmental
sustainability do not have to be mutually
exclusive. There is growing recognition
that a more sustainable and environmen-
tally friendly approach to economic
growth is possible, one that considers the
planet’s limits and prioritises the well-
being of both people and the environ-
ment. In part 2, the author prepares the
argument for a green economy under
the premises of green capitalism.
Green Capitalism
According to the author, green capital-
ism refers to an economic system that
incorporates environmental concerns into
the workings of capitalism. The basic
idea behind green capitalism is that the
market can be harnessed to promote en-
vironmental sustainability and address
issues such as climate change, pollution,
and resource depletion.
In a green capitalist system, business-
es and governments would be incentiv-
ised to prioritise environmental sustain-
ability in their operations and decision-
making processes. This could be achieved
through various policies and practices,
such as carbon pricing, renewable ener-
gy mandates, and regulations on envi-
ronmental pollution. Green capitalism
aims to create a more sustainable and
environmentally friendly economic sys-
tem while maintaining the basic princi-
ples of capitalism, such as market com-
petition and private property rights.
The book carries the critique of green
capitalism that argue it to be inherently
flawed because it seeks to address envi-
ronmental issues within a system that
prioritises profit over all other values.
They argue that a truly sustainable eco-
nomic system would need to fundamen-
tally rethink the principles of capitalism
and prioritise the well-being of people
and the planet over economic growth.
According to the author, despite these
criticisms, green capitalism remains a
widely discussed concept and has been
vol lViii no 37 EPW Economic & Political Weekly

the subject of numerous books, articles,
and policy proposals. Whether green capi-
talism can be effectively implemented
and achieve its goals remains an open
question and is the subject of ongoing
debate and discussion.
This approach to economic growth,
called “green growth” or “sustainable
development,” seeks to balance eco-
nomic and environmental objectives
and promote environmentally responsi-
ble economic growth. Shifting to a more
sustainable economic model may reduce
the negative impact of economic growth
on the planet while promoting economic
progress and improving people’s lives.
Reshaping Capitalism to
Save Humanity
Reshaping capitalism to address the is-
sue of climate change is a concept that
has gained significant attention in re-
cent years as the impacts of climate
change have become increasingly appar-
ent. The basic idea behind reshaping
capitalism is that the current form of
capitalism prioritises economic growth
above all else and has contributed to the
ongoing climate crisis. We need to find a
way to align capitalism with the goal of
environmental sustainability.
To achieve this, the book argues for
reshaping capitalism to make signifi-
cant changes to how we think about
and practise capitalism, including re-
thinking how we measure economic
progress. Currently, GDP is often used
as the primary indicator of economic
progress. However, this metric does not
consider economic growth’s environ-
mental and social impacts. The book
argues for reshaping capitalism to find
new ways to measure economic prog-
ress that consider these impacts. Some
of them include shifting to a circular
economy, promoting renewable energy
and implementing carbon pricing. The
book gives examples of the changes
that could be made to reshape capital-
ism to address the issue of climate
change. However, implementing these
changes will require significant political
will, public support, and businesses’ and
governments’ willingness to prioritise
the planet’s well-being over short-term
economic interests.
Economic & Political Weekly EPW september 16, 2023
BOOK REVIEW
Is There a Future of Growth in growth in a green world may involve a
the Low-carbon Economy? rethinking of traditional measures of
The book’s fundamental question is economic progress, such as GDP, and a
about the future of growth in a green shift towards alternative measures that
world. It refers to balancing economic consider the environmental and social
growth with environmental sustaina- impacts of economic growth.
bility in the years to come. In recent The book posits that the future of
years, the urgency of addressing cli- growth in a green world will require a
mate change and other environmental concerted effort by governments, busi-
issues has increased interest in promot- nesses, and individuals to prioritise en-
ing environmentally responsible eco- vironmental sustainability in their eco-
nomic growth. nomic decision-making processes. By
The future of growth in a green world working together, it may be possible to
will likely involve a shift towards more create a more sustainable and environ-
sustainable forms of economic activity mentally responsible economic system
that prioritise environmental protec- that can support continued economic
tion, resource efficiency, and renewable growth while addressing the challeng-
energy. This shift could take many es of climate change and preserving
forms, such as the growth of the green the planet for future generations. Fur-
economy, the development of new tech- ther, it talks about decarbonised green
nologies that promote sustainability growth, which refers to economic
and implementation policies that incen- growth prioritising environmental sus-
tivise environmentally responsible be- tainability and reducing greenhouse
haviour. In addition, the future of gas emissions, focusing on achieving a
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vol lViii no 37 31
BOOK REVIEW
low-carbon economy. The idea behind
decarbonised green growth is to promote
economic development while reducing
the environmental impact of economic
activity, particularly in terms of green-
house gas emissions.
The book’s fundamental premise is
about rethinking how we measure
economic progress. Alternative mea-
sures of economic progress can help
drive decarbonised green growth.
32
Encouraging sustainable consumption
and production patterns, promoting
sustainable consumption and produc-
tion patterns, such as reducing waste
and increasing recycled materials,
can help reduce greenhouse gas emis-
sions and contribute to decarbonised
green growth.
This is an essential book for the stu-
dents, professionals, and people engaged
in the debate around green growth in
september 16, 2023
the context of rising climate-led extreme
events. It is a path-breaking book that is
well-researched and provides adequate
data to support the arguments. The
book does not deny the existence of
capitalism but embraces and enrols it in
the green path.
Anjal Prakash (anjal_ prakash@isb.edu) is with
the Bharti Institute of Public Policy, Indian
School of Business.
vol lViii no 37 EPW Economic & Political Weekly
BOOK REVIEW
Bangladesh’s Development
Trajectory
Mustafizur Rahman
T
he authors of one of the very first
books on Bangladesh, published
a few years after the country’s
independence in 1971, which was titled
Bangladesh: The Test Case for Development,
wrote in the preface: “If development
could be made successful in Bangladesh,
there can be little doubt that it could
be made to succeed anywhere else. It
is in this sense that Bangladesh is the test
case for development” (Just Faaland
and J R Parkinson, 1976). Five decades
of development experience of post-inde-
pendence Bangladesh has proved the
doubters wrong. Bangladesh has been
able to attain remarkable success in
terms of key socio-economic performance
indicators—the country stands out among
the developing world in areas of primary
education and gender parity in educa-
tion, women’s empowerment, health
and nutrition, population control and
life expectancy, among others. It was
only to be expected that at a time
when Bangladesh was celebrating 50
years of her independence, scholars will
venture to revisit Bangladesh’s devel-
opment narrative and try to demystify
what is often called the “Bangladesh
Paradox.” The Odds Revisited: Political
Economy of the Development of Bangladesh,
authored by one of the most eminent
economists of the country, K A S Murshid,
stands out among these works for
several reasons.
32
The Odds Revisited: Political Economy of the
Development of Bangladesh by K A S Murshid,
Cambridge University Press, 2022; pp 240, `1,195.
In revisiting the odds that informed
Bangladesh’s post-independence journey,
the author blends the panoramic view
with the granular underlying drivers
that allow the reader to get a good grip
on the broad development trends which
made Bangladesh the country it is today,
and at the same time offering an indepth
analysis of the meso- and micro-level
policies and actions which contributed
to this outcome. Drawing on his analy-
sis of the country’s development experi-
ence, the author questions, contests and
argues whether Bangladesh can rely on
the past drivers for its next lap of journey
and whether new policies, agents and
agencies will need to be innovated to take
the country forward.
At the launching ceremony of this
book held at the Bangladesh Institute of
Development Studies (BIDS), Wahiduddin
Mahmud, a leading intellectual of the
country, quoted American author Marshall
Cardsmith, quite appropriately, ‘‘what got
you here won’t get you there.’’ This is
also the core message that the author
convincingly argues in this book. Thus,
while the book instils confidence and
ignites hope, it also sounds a cautionary
note that the country’s future trajectory
will not be a mere linear progression of
september 16, 2023
its past and that present-day Bangladesh
truly stands at the crossroads.
Yet another distinctive departure of
the book is embedded in its subtitle,
Political Economy of the Development of
Bangladesh. Along with tracing and
explaining the growth variables, the
author makes an attempt to examine
and understand the Bangladesh narra-
tive with a political economy lens, div-
ing deep into the less trodden areas
which include the role of institutions,
the practice of accountability, the praxis
of governance and the correlation of
various forces and players in develop-
ment—state, private sector and entre-
preneurs, NGOs as also civil society and
the development partners. Thus, the
author focuses not only on policies and
policy outcomes but also puts under
scrutiny the process of policymaking,
the role of involved actors and their in-
terplay, the exercise of economic govern-
ance and the quality of macroeconomic
management. This line of enquiry is par-
ticularly important not only because that
is where many underlying elements of
the “Paradox” lie, but also because these
will define whether Bangladesh is ready
and be able to address the second gener-
ation of challenges that the country is
facing in the present context. From this
vantage point, the 10 chapters of the
book and the conclusions that the author
draws could be read at different levels:
the role of various drivers that informed
Bangladesh’s development; the adequacy
of these drivers to address the newly
emerging demands facing the country;
and the new drivers and correlation of
forces which will be necessary to sustain
Bangladesh’s development momentum
and take it forward in the 21st century.
vol lViii no 37 EPW Economic & Political Weekly

Accordingly, this book is an immensely
valuable reading, both from the perspec-
tive of learning from revisiting of the
odds which got Bangladesh here, as also
getting important insights into what
should be done to get the country there.
Getting a Grip on
the Development Narrative
In the introduction to the book, the
author writes: “This book provides an
analytical–descriptive narrative of the
Bangladesh journey by trying to forge
a comprehensive, integrated story that
is realistic but at the same time also to
track key development dynamics at the
sectoral, sub-sectoral and macro levels.”
The author does this by combining rich
empirical data and details with the theo-
retical underpinnings, backed by rigour
of analysis, remaining argumentative
but not losing lucidity and simplicity of
expression. However, some would per-
haps contest the author’s observation
that “this is a much-needed exercise to
dispel the notion that the Bangladesh
surprise can be reduced to certain singular
Module on Educational Statistics
The EPWRF ITS has 32 modules covering a range of macro-economic, financial and social sector indicators on the Indian economy
For more details visit www.epwrfits.in
Economic & Political Weekly EPW september 16, 2023
dimensions.” To be true, hardly anyone
would argue with the fact that the Bang-
ladesh story is multidimensional, that
many factors are involved and that the
story is a complex one. The author’s im-
portant contribution lies not in demon-
strating that the Bangladesh develop-
ment narrative should not be reduced to
“certain singular dimensions,” but that
there is a need to understand the various
dimensions: from the perspectives of
economics as also the political economy,
and the interplay of state and non-state
actors, by taking cognisance of the
emerging new tensions and foreseeing
the needs for change.
The author draws attention to some
of the key divers of the Bangladesh nar-
rative: the growth of food production
and commercialisation of agriculture,
the role of Bangladesh’s export-oriented
apparels sector and strengthened inte-
gration of the country with the global
economy, contribution of the non-gov-
ernment sectors and the participation in
the overseas job market that generated
significant remittance flows. In doing so,
EPWRF India Time Series
vol lViii no 37
BOOK REVIEW
however, the author goes deeper into
the underlying factors such as the im-
portant role played by rural non-farm
sector in broad-basing Bangladesh’s
development, the role of rice market as a
catalytic factor in rural development,
urbanisation’s role in spurring growth
and creating employment opportunities,
and the multiplier impacts of rural
roads and new technologies such as
mobile phones. Often these meso- and
micro-level factors tend to be underem-
phasised in Bangladesh’s development
discourse. The author draws attention
to the role of public policies and public
institutions in all these aspects that are
oftentimes either ignored or not appre-
ciated enough in relevant literature.
Indeed, as the author rightly notes, the
positive contribution of public investment
in infrastructure development, fiscal
incentives, subsidisation of agricultural
inputs, as also the government’s fiscal–
monetary–institutional policy support to
spur the emergence of the ready-made
garment (RMG) sector is not given the
credit that they deserve.
Features
Presents all-India
and state-wise
annual data from
1981 onwards.
Structured in three
sections :
• Literacy in India
• School Education
• Higher Education
Includes data on
SC/ST students and
school education in
rural areas.
33
BOOK REVIEW
The author questions the viewpoint
of many who insisted that “structural
constraints” would limit the growth
prospects of Bangladesh. The author
mentions in this connection the per-
ceived role of embedded power struc-
ture, religious belief system and the
pre-capitalist mode of production which
some thought would put a restraint on
Bangladesh’s development prospects.
The author observes:
these constraints were over-stated and over-
emphasised … and thus when peasants and
women embedded within these supposedly
severe structural constraints actually re-
sponded rather well to newly presented op-
portunities without too much persuasion, it
left observers surprised.
This is indeed an insightful and per-
ceptive line of argument and hopefully
future researchers will go deeper into
the underlying issues of societal atti-
tudes, social capital, beliefs, customs
and norms which could help to better
understand the Bangladesh journey and
could also provide important insights in
charting Bangladesh’s future develop-
ment path.
Emerging New Tensions
As was noted, this book’s value also lies
in offering pointers to the newly emerg-
ing challenges which Bangladesh will
need to tackle to sustain its current
growth momentum. The author identi-
fies some of the tensions that are emerg-
ing as old drivers of development having
reached their limits or exhausted their
potentials: the overexploitation of ground
water-based irrigation, the adverse envi-
ronmental consequences of current agri-
cultural practices, the retail markets
facing the threats posed by the emerging
supermarkets, the rise of the new elites,
distributive aspects of development and
the growing income inequality. Increas-
ing income and asset inequalities have
put issues of distributive justice not
merely as a moral agenda but as a con-
straining factor in going forward. The
author’s argument that public policies
are important not only from the point of
understanding the Bangladesh develop-
ment story but also from the perspec-
tive of future policymaking merits closer
consideration.
34
The growth of RMG industry has now
created demands for product and export
diversification. The expansion of social
safety net programmes has created de-
mands for transition to social security and
universal pension schemes. Horizontal
expansion of education and health ser-
vices has put issues of quality of these
services at the centre of development
discourse in Bangladesh. Efficacy of
public service delivery institutions has
come under closer scrutiny. The author
flags some of these, and offers sugges-
tions as regards what should be the next
steps in this connection. Both are impor-
tant from the vantage point of future
policymaking.
Out of Bangladesh’s economic success
has emerged a new middle class with its
own aspirations as regards voice, oppor-
tunities, justice and governance. The
author particularly mentions the new
and growing demands on institutional
efficacy, good governance and political
institutions as Bangladesh economy is
confronted with new headwinds. How-
ever, one would think that to take this
discourse forward more discussion is
needed to have a deeper understanding
about the relative roles of state and mar-
ket, the trade-offs, the correlation of
forces which will be required to reset
Bangladesh for its next lap of journey.
The author is well-placed and well-
equipped to undertake such an exercise
as part of this future work.
In Conclusion
In the times ahead, Bangladesh will have
to deal with the implications of dual
graduation—middle-income graduation
(from low income to lower middle income
status), with the transition having already
taken place in 2015, and the graduation
from the LDC status, to take place in
November 2026. The former will entail
greater dependence on non-concessional
external borrowings while the latter will
entail loss of LDC-specific preferences.
Bangladesh is also committed to attaining
the 17 goals of the SDGs by 2030. Thus,
going forward, Bangladesh will also need
to tackle the new challenges originating
from the dual graduation.
Against this backdrop, the author’s
last words are sobering:
september 16, 2023
Thus, looking to the future, the key chal-
lenge will be to avoid the (lower) middle-
income trap which will require reforms of
political markets and governance, reduction
of the democratic deficit, ability to ensure
market access, upgrade its human resource
base and promote independent capital.
The author rightly emphasises that
the best strategy for a country like
Bangladesh is to “enhance its human
capital,” and stresses the importance of
macro governance and political reforms
in this connection. The author notes
that “Bangladesh still remains a frac-
tious and divided country where basic
ideological issues are unresolved and
thus continue to pose a threat to politi-
cal stability” and observes that “While
the rise of Bangladesh’s business class has
been remarkable, there is the danger that
crony and criminal capital may become
ascendant, driving out independent
capital. That would be a huge blow to
our development aspirations and must
be thwarted.” The author concludes the
book with this final observation: “The
most important factor for the future
however will be the pace and direction
of political reforms and whether Bang-
ladesh can reposition itself as a respon-
sible democracy.” These are very power-
ful and wise words, transmitting a
cautionary note about the disquieting
emergent realities and the challenges
facing Bangladesh’s future journey.
In January 2023, Bangladesh had to
resort to $4.7 billion International Mone-
tary Fund support package as its balance
of payments position came under un-
precedented stress. This was a reversal
of fortunes which was unthinkable even
a few months back. If one reads this
book carefully, one will appreciate why,
while remaining confident and optimistic
about Bangladesh’s future, the author
ventures to pass on a subtle message
about the urgent need for corrective
steps, some of which have been flagged
in the book. In this sense, this book is
not only about the “Odds Revisited” but
also about the lessons to be learnt from
this exercise in revisiting, to reset and
redirect the journey ahead.
Mustafizur Rahman (mustafi z@cpd.org.bd)
is currently at the Centre for Policy Dialogue,
Dhaka, Bangladesh. He was formerly with the
University of Dhaka.
vol lViii no 37 EPW Economic & Political Weekly
COMMENTARY
Towards a Better Digital
Market Governance
Devising the Indian Approach
Himanshi Srivastava, Siddharth Chaturvedi
Looking into the efficacy of
the European Union’s Digital
Markets Act, a model for platform
regulation is suggested for India.
Ensuring a level playing field in
the Indian digital markets could
pose a challenge, where the
Competition Commission of India
needs to cater to the interests
of the consumers as well as the
industry and ensure economic
democracy for new players, big or
small, in the market.
Himanshi Srivastava (himanshi0908law@
gmail.com) and Siddharth Chaturvedi
(sid2002.rc@gmail.com) are pursuing BA LLB
(Hons) 4th year, from Dharmashastra National
Law University, Jabalpur.
Economic & Political Weekly EPW SEPTEMBER 16, 2023
F
or carrying out a comprehensive
analysis, the article points out the
diverse existing regulatory frame-
work in leading jurisdictions of competi-
tion law. Relevant details about the
current jurisprudence of competition
and antitrust laws in countries like the
United Kingdom (UK), the United States
(US), Germany, and India have been pro-
duced. The primary purpose of this
exercise is to highlight why the proposed
“gatekeeper model” should not be con-
sidered a benchmark for other jurisdic-
tions. The exercise is advisory and sug-
gestive in nature, outlying the possible
measures to promote competition and
innovation in the digital market. It
addresses various crucial questions like
the choice between ex ante and ex post
regulations, and also seeks to delve into
the rationale of the premise of the act,
which bears semblance to the provisions
for abuse of dominance in the digital
market and the very paradigm of a com-
petitive market. The article further
seeks to elaborate on the viability of the
model of the designation of big technol-
ogy giants as “gatekeepers” in India. The
article shall explore a plethora of options
to tackle the loopholes perpetrating the
current competition law regime. The
policy shall be exhaustive and inclusive
of the interests of all the stakeholders.
Existing Jurisprudence
India: When compared with other
mature jurisdictions, India is still at a
nascent stage, where a choice between
multisectoral reforms or the creation of
an exclusive statute, containing digital
market regulations, is being contem-
plated. In the Bharat Matrimony v Google
India and Others, it was held by the
vol lViii no 37
Competition Commission of India (CCI)
that Google had abused its dominance
in the search engine market and also
held it to be in contravention of Section
4(2)(c) of the act by denying websites
the opportunity to partner with other
websites.1 In the Google LLC case,2 the
CCI found that Google enjoyed a domi-
nant position in mobile operating sys-
tems in India. The CCI had also noted
that there was an abuse of its dominant
position after considering various fac-
tors such as the fragmentation of the
market by Google.3
In another precedent, the commission
had held that its Play Store was liable
for abusing its dominant position and
stated that the gatekeepers “had an
unassailable position” to require the app
developers to use “their core services.”4
The commission had also held that Play
Store abused its dominant position by
compulsorily requiring pre-installation
of it by Android manufacturers.5 One
also gets to see that the commission is
hinting towards ex ante regulation since
it states that “it is the duty of the Com-
mission to prevent practices which have
an adverse effect on the competition.”6
It is pertinent to mention here that a
Competition Law Review Committee
report had a full chapter on the implica-
tions of data.7 Though the committee
noted that there was a need to intro-
duce “size of transaction” or “deal value
threshold,” in merger controls, it felt
that the rest of the provisions were
adequate to deal with other issues in-
volving digital markets. Recently, the
Supreme Court rejected Facebook’s
petition to halt the investigation against
it by director general (Live Law 2022).
Thus, the story of India demonstrates
that the current regulatory regime is
faced with the tough question of recon-
ciling the cleavage between ex ante and
ex post regulation. Table 1 (p 14) com-
pares and contrasts the global gate-
keeper regimes with that of India.
The European Union: An intriguing
debate is trailing the recent draft Digi-
tal Markets Act (DMA) and the Digital
Services Act (DSA) which have been
13
COMMENTARY

proposed as a set of two complimentary files, etc. The European Commission encrypted messages are maintained,
regimes, aimed at encouraging trans- fined Qualcomm €99,74,39,000, for two messaging applications must use
parency, democracy, and innovation.8 alleged abuse of its market dominance, the same end-to-end protocol. In order
The European Commission has hailed by engaging in anti-competitive conduct, to secure interoperability, it will be
the DMA as a transforming document in when it entered into an exclusivity con- required that both applications use the
shaping the regulation of “big tech” dition with Apple related to the long- open API (Beley 2021). The concern
(Meaker 2022). The act, which will be term evolution (LTE) baseband chipset.12 around privacy was also highlighted in
operational in 2023, is an ex ante regu- While the General Court concurred an inquiry by the Australian Competi-
latory framework that has introduced a with the commission’s accusations of tion Commission. While analysing the
series of regulations and compliances, Google regarding abusing its dominant effects of interoperability in the banks
required to be adhered to, by the desig- position by imposing unlawful contrac- of the UK, the concern around negative
nated gatekeepers.9 The DMA is direct- tual restrictions on the manufacturers effects on innovation was emphasised
ed at regulating the conduct of large of android mobiles.13 (Brown 2022).
online platforms (LoPs) that may mis-
use their dominance and are likely to Critiquing the Existing Reducing algorithm secrecy: Twenty-
indulge in anti-competitive practices.10 Gatekeeper Approach of the DMA one of the DMA states that the commis-
The mandated data-sharing and the sion may, by appeal or decision, request
significant costs for building compli- Reconciling the provision of interop- the company to provide information
ance infrastructure could largely stifle erability: Through Article 7, the DMA which also includes information about
innovation and disincentivise the LoPs.11 makes it obligatory for messaging apps to its algorithm. The algorithm has been
One of the obligations of a gatekeeper achieve interoperability. The act envis- duly regarded as a “trade secret” of the
is to ensure adequate interoperability ages a procedure where messaging and company (Simsek 2021); and it cannot
to promote a competitive environment features such as videos and voice calls be expected that a company will reveal
in the relevant market (Brown 2020). will be soon available to all users. How- it every time it is asked for the same.
To facilitate interoperability, the gate- ever, questions arise about the applica- Many also regard it as the intellectual
keepers will have to ascertain that the bility of interoperability provisions. The property of the company (Foss-Solbrekk
users are provided with the facility to foremost issue deals with the nuances 2021); thus any revelation of it can be
message from their application to oth- of end-to-end encryption (Beley 2021), detrimental to the functioning of the
ers and have access to various other fea- which forms an essential feature in the company. Innovation and business in-
tures such as sharing of videos, images, privacy regime. To ensure that end-to-end centives may be hampered due to the
revelation of algorithms that are a huge
Table 1: Global Regimes and Their Relevant Provisions in Tackling the Gatekeeper factor in contributing to the quality of
Provisions European Union United States Germany United Kingdom India
services and the unique selling point of
Enforcement Director General, US Federal TradeSection 51 Competition Competition
authority Competition Commission authorises and Market Commission of the company (Akter and Wamba 2016).
(DG Comp), and Depart- the Bundes- Authority India
European ment of Justice kartellamt for The DMA leads to increased regulatory
Commission enforcement
fragmentation and the dangers of
Criteria for Article 3 of the Section 3(d) of Section 19a lays “Strategic mar- NA
designation of DMA enlists AICA defines down criteria ket status” (SMS) double jeopardy: The DMA has caused
the gatekeepers factors divided the companies for designating to companies the member states to increase regulato-
into quantitative which are “cov- undertakings which meet the
ry fragmentation, deviating from its ob-
and qualitative ered platforms” of paramount criteria
thresholds significance jective behind the idea of an integrated
Exemption from Article 10—for NA Section 2 of the Sections 3- 10A NA digital single market (DSM) (Portuese
the obligations public health or act—exempted provide for 2020). Operations in a fragmented digi-
safety agreements. exemptions.
Usage of Article 6 pro- Section 3(6) of Sections 47c DMU may NA
tal market increase the compliance costs
data by the hibits the usage AICA makes it and 47j—use provide for SMS for the designated gatekeepers and have
undertakings of data which unlawful to use of data and data to share data dangerous implications for innovation
is not publicly non-public data protection with third-party
available businesses
and infrastructural capacities (Portuese
Right to Article 36 Section 2(c) Sections 46 and NA The CCI 2020). Depletion in the economies of scale
professional provides for guarantees the 47j provide for (General) might stifle the expansion of activities, and
secrecy non-disclosure protection of confidential Amendment
service diversification, with a significant
of information “confidential information and Regulations,
and professional proprietary the obligation to 2022, provide reduction in the capacity of the plat-
secrecy business pro- maintain secrecy the confidenti- forms to engage in cross-subsidisation.14
cesses” ality regime
Decentralisation in the enforcement of
Fines for Article 30 con- Section 2(g)— Section 81c— Section 36 pro- Chapter VI
non- tains provisions remedies in the amount of vides for fines contains the the DMA authorises both the European
compliance for fines on the form of the civil administrative of up to 10% of provisions for Commission and the national competent
gatekeepers penalty fines the turnover penalties authorities to deal with the antitrust
14 SEPTEMBER 16, 2023 vol lViii no 37 EPW Economic & Political Weekly

laws (Surtees 2022). This in turn might
risk infringement of the right against
double jeopardy of the companies, in a
case where there is an overlap of the
national and EU-wide competition law
frameworks, as authorities at both levels
may institute proceedings against the
company for abuse of dominance.15
Critiquing the ex ante regulatory app-
roach: While it may come with some
merits, the pre-emptive ex ante regula-
tory approach proposed in the DMA is
not ideally suited for regulating a dy-
namic and evolving sector like the digi-
tal market, since it may impede the mar-
ket potential (Kerber 2021). The novel
shift to an ex ante regulatory regime has
a negative impact on the level of com-
petitiveness since it outlays a series of
obligations and prohibitions on the gate-
keepers, and mandates compliance to
the straitjacket requirements on their
part to keep a precursory check on the
abuse of dominance by them (Naray-
anan and Makiyama 2020). Considering
the significance of these gatekeepers in
the digital market, they provide core
platform services like online search en-
gines, web browsers, etc. It is quite inapt
to envisage a system with an ex ante
control regime and hinder the growth of
these core digital platforms.16
Unreasonable compliances in Articles
5 and 6 of the DMA: Article 6 of the
DMA provides for obligations of gate-
keepers susceptible to being specified
under Article 8. According to the provi-
sion, it is mandatory that the third-party
services are provided with effective
“high quality, continuous, and real-time
access to use and access of aggregated
data” which also includes personal data.
Article 6 has also been criticised consid-
ering the fact that providing real-time
access to the data to peers will have det-
rimental consequences on the company
itself. Further, Article 5 states that the
gatekeepers are prohibited from using
any “cross-use personal data from the
core platform service.”17 However, com-
mentators have pointed out that there
are many benefits of the cross-use of
personal data such as in the area of cloud
computing.18 Data usage and analysis also
Economic & Political Weekly EPW SEPTEMBER 16, 2023
lead to innovation; thus any blanket pro-
hibition on the usage of cross-personal
data will be detrimental to the platform.
The overarching boundaries of the
DMA: Article 5 of the DMA lists the obli-
gations that are required to be followed
by the gatekeepers. Further, Article 6
specifies additional obligations for the
DMA s susceptible to being identified as
gatekeepers. However, some of the pro-
visions seem to be crossing the breadth of
proportionality (Pablo and Fernandez
2021a, 2021b). For example, Article 6 (11)
states that the gatekeeper shall, on the
request of any third-party service, pro-
vide it with access to click, view, and
rank the data.19 Similarly, even if a com-
pany does not meet all the thresholds of
Articles 5 and 6, it can still be designated
as a gatekeeper if the commission be-
lieves that a company will “foreseeably”
enjoy an entrenched and durable posi-
tion in the market in the near future.
Such a provision raises the question if
the object of the DMA is to prevent the
“abuse” of the dominant position by the
big tech or to prevent the “dominance”
of a gatekeeper in the market. At the
same time, many qualitative thresholds
prescribed in Article 3 for the designa-
tion of the gatekeepers have not been
defined adequately.19 With such ambigu-
ous provisions, the commission can
wield tremendous powers.
Model for Platform Regulation
in India
The CCI, in its report, analysed the effects
of e-commerce market on competition
law (CCI 2020). The study highlighted
various concerns such as lack of plat-
form neutrality, the undue advantage
given to the platform over the sellers
through contract terms, exclusive agree-
ments, deep discounts, and so on. New
challenges due to the advent of big tech
giants have made it imperative for the
legislature to revamp the laws. Thus, in
the context of this scenario, the follow-
ing are suitable recommendations for
policymakers:
Establishing a digital markets unit in
India: In CCI’s latest endeavour, it is
considering setting up a digital markets
vol lViii no 37
COMMENTARY
unit in India (Mint 2022). It is suggest-
ed that the government should fast-
track the establishment of DMU in India
considering that the CCI deals with cases
of “anti-competitive conduct” only after
the same is brought before it. Unlike
DMU in the UK, which lacks legislative
backing, it is proposed that the DMU in
India must have clear statutory backing
for efficiency in functioning (House of
Commons 2022–23). The proposed DMU
will also work closely in collaboration
with a multitude of stakeholders such as
strategic market status (SMS) who may
face difficulty in operations on a digital
platform. This approach resonates with
the view of Rober Bork (1978) that the
best producer’s and consumer’s welfare is
considered. The task of DMU will be to
provide guidelines, highlight the poten-
tial issues emerging in the digital market
space, as well as suggest a mix of self-
regulated rules and changes in the laws.
Ensuring that digital market platforms
are not overregulated: One of the issues
that emerged in the previous discussion
about the drawbacks of the gatekeepers
regime was its excessive regulation. In
fact, the model of the DMA has gone well
beyond its mandate to regulate those
companies which may enjoy a dominant
position in the future. Therefore, any
regulation for the digital market must
ensure that there exists sufficient space
for market forces to operate with fewer
hindrances.
Data interoperability and data porta-
bility: The risks and after-effects of data
interoperability are still to be evaluated,
considering the fact that it is going to be
an all-new feature for the users of the
messaging service applications. The var-
ious concerns around privacy after the
applicability of data interoperability still
need to be mitigated (Doupi et al 2022).
Therefore, it is recommended that in In-
dia’s context, it will be better to wait and
see the effects that data interoperability
has on various fronts such as the eco-
nomic model of the company and how it
ensures that privacy remains intact.
However, there is strong evidence to
suggest that data portability increases
the choice of consumers since they do
15
COMMENTARY
not need to entertain the costs of switching
their data from one platform to another.
The same can be achieved after adding
suitable provisions in the Digital Personal
Data Protection Act, 2023.
Escaping the dangers of a DMA-like ex
ante regime in India: There is a high
possibility that a DMA-like ex ante regime
could fail in the Indian set-up due to legal
uncertainties and immature digital gov-
ernance, considering the deficiency of a
robust data protection regime. As a pri-
mary concern, the digital market and the
data protection laws will have to be rec-
onciled before any other market consid-
erations. Otherwise, the entire system
might be plagued by privacy issues and
infringement of intellectual property
rights (IPR). The risks of “regulatory cap-
ture” also arise in the DMA model, unlike
the alternative regime being considered
in the UK, which proposes a “participative
approach” that engages constructively
with all affected parties to resolve issues
through advice and informal engage-
ment (Ogus 2004). The ex post regula-
tions pose the idea of trust in the market
forces and provide a system with a free-
market mechanism that adjusts itself
without any external intervention. Unlike
developed nations, India has a compara-
tively budding digital economy, where
there is a need for an innovative amalga-
mation of the two regimes, that follows
a stakeholder-centric approach from the
outset. A vigorous ex post regime accom-
panied by a flexible, soft-touch ex ante
regulation could, in fact, produce opti-
mal solutions (Daripa and Varotto 2006).
Countering the problem with ‘deep
discount’ in e-commerce: With mas-
sive consumer benefits in e-commerce
comes the practice of “deep discount-
ing,” which has anti-competitive impli-
cations in the digital market, creating
unparalleled economic entry barriers
(Tripathi and Abhishek V 2021). The
players who are unable to participate in
this unilateral discounting face a severe
crisis, since their visibility declines con-
siderably, in contrast to the ones that
drive the majority of consumer traffic
onto their platforms, thereby creating a
lopsided digital market. Finding evidence
16
of the anti-competitive conduct of Ama-
zon and Flipkart, the CCI ordered an in-
vestigation into their exclusive agree-
ments and deep discounting practices,
on the grounds of an alleged violation of
Section 3(4) of the Competition Act,
2002. Many e-commerce giants escape
liability for “deep discounting” because of
the loophole in the definition of the “rel-
evant market” since the CCI has main-
tained that online and offline markets
are different channels in the same mar-
ket, in a number of cases.20 To avoid
some of the pitfalls of deceptive deep
discounting, there is a need for careful
assessment of the platform structure
and shifting the attention from the sole
checkpoint of dominance to practices
adopted by the players involved (Agar-
wal 2020). Measures like obligatory dis-
closure of exclusive agreements can in-
troduce sufficient transparency in the
system (Dhamor and Chhaier 2020).
Ensuring platform neutrality and reg-
ulating access to big data: Being one of
the major concerns in competition regu-
lation, platform neutrality emanates from
the fact that in certain cases, online plat-
forms perform a dual role in a market-
place—that of a marketplace itself and of
a competitor. And, thus, they wield power
to provide preferential treatment to
their products, demeaning the position
and ranking of other players to their ad-
vantage. And being the intermediary, the
platform has access to “big data,” which is
collected by it indiscriminately and pro-
cessed to produce valuable information
regarding consumer choices, to provide
customised and preferential products
(CAM 2018). This has resulted in highly
concentrated markets, foreclosing any
possibility of fair market competition. To
ensure against the manipulation of
search results and ranking, self-correc-
tion tools and a non-discriminatory,
uniform policy need to be introduced
(Sinha 2022).
Conclusions
From the proposed policy considerations
and all-inclusive stakeholder analysis,
the policy recommendations set above
could be considered for improving the
DMA model. The compliance mechanisms
SEPTEMBER 16, 2023
and the regulatory regimes need to be
more market-friendly to reconcile the
forces that contributed immensely to
shaping the digital market infrastructure
globally. Since these companies have es-
tablished a brand value and goodwill in
the market and have been enjoying con-
sumer trust for quite a long time, it will
be unfair to handcuff them based on a
regime that anticipates unfair business
practices and bombards them with stifling
compliances and penalties. This kind of
approach would merely cause the busi-
ness users and end users to suffer, crip-
pling the whole economy in the end. Dom-
inant companies can well be credited for
the seamless internet experience. These
companies use integrated business mod-
els to create competitive advantage and
simultaneously cater to consumer wel-
fare, create new economic opportunities
for start-ups, and protect user data.
Conclusively, the DMA is not compatible
with other jurisdictions, like the evolving
Indian digital market space, since it is
more suited to mature markets that have
home companies to provide close alter-
natives to the US “big tech” firms. The
antitrust and competition legislation in
countries like India is still at a nascent
stage, where ex ante regulation could
prove detrimental to the market driving
forces, and the companies would just get
stuck in a vicious cycle of strict compli-
ance. Balanced self-preferencing prac-
tices increase synergy in the market,
provide certified choices and recom-
mendations to unaware consumers, and
in turn, the profits incentivise quality
products. Dominant companies have a
brand value and cater to ethical data-
sharing, transparency, and access to data.
But the ideals of economic democracy
and the undue emphasis on intervention
in the global competition paradigm seem
available at
K K Puri News Distributors
9, Dacres Lane,
Ground Floor,
Suit No 2
Kolkata 700 069
West Bengal
vol lViii no 37 EPW Economic & Political Weekly

futile since excessive checks and intrusion
in the core infrastructure infringe on the
privacy and IPRs of the designated gate-
keepers (Pablo and Fernández 2021a,
2021b). In the time to come, the policy-
makers have to also watch the emerging
trends closely such as blockchain and
competition law and keep the existing
laws in tune with changing scenarios.
Notes
1 Matrimony.com Limited v Google LLC, 2018 SCC
OnLine CCI 1, para 391.
2 Umar Javeed v Google LLC, 2022 SCC OnLine
CCI 61.
3 Umar Javeed v Google LLC, 2022 SCC OnLine
CCI 61, para 20.
4 XYZ (Confidential) v Alphabet Inc, 2022 SCC
OnLine CCI 63.
5 Kshitiz Arya v Viacom18 Media Pvt Ltd, 2018
SCC OnLine CCI 41.
6 Kshitiz Arya v Viacom18 Media Pvt Ltd, 2018
SCC OnLine CCI 41, para 494.
7 Report of Competition Law Review Commit-
tee, Ministry of Corporate Affairs, Government
of India, July 2019.
8 Digital Markets Act, https://ec.europa.eu/com-
mission/presscorner/detail/en/IP_22_6423
viewed on 8 December 2022.
9 Regulation (EU) 2022/1925 of the European
Parliament and of the Council of 14 September
2022 on contestable and fair markets in the
digital sector and amending Directives (EU)
2019/1937 and (EU) 2020/1828 (Digital Mar-
kets Act).
10 Report on the Digital Services Act, the Digital
Markets Act, and the New Competition Tool,
CSIS, https://www.csis.org/analysis/digital-ser-
vices-act-digital-markets-act-and-new-compe-
tition-tool, viewed on 7 December 2022.
11 Report on the Digital Services Act, the Digital
Markets Act, and the New Competition Tool,
CSIS, https://www.csis.org/analysis/digital-
services-act-digital-markets-act-and-new-com-
petition-tool, viewed on 7 December 2022.
12 Judgment of the General Court in Case T-235/18
| Qualcomm v Commission (Qualcomm- Exclu-
sivity Payments).
13 Judgment of the General Court in Case
T-604/18 | Google and Alphabet v Commission
(Google-Android).
14 Case C-482/17 Czech Republic v Parliament and
Council (n 11), para 79.
15 The Treaty on the Functioning of the European
Union, Article 101 and 102.
16 Digital Markets Act, Article 2.
17 Digital Markets Act, Article 5.
18 Report on Implications of Digital Markets Act
for Transatlantic Cooperation, CSIS, https://
www.csis.org/analysis/implications-digital-
markets-act-transatlantic-cooperation, viewed
on 13 December 2022.
19 Digital Markets Act, Articles 6, 17(4), and 3(8).
20 Ashish Ahuja v Kunal Behl, 2014 SCC OnLine
Comp AT 68.
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17
COMMENTARY
Challenges in the Return of
Industrial Policy
Mausam Kumar, M Suresh Babu
Industrial policy seems to be
attempting a comeback to the
centre stage of policy discussions.
In a given milieu of global
economic conditions, it offers
opportunities for developing
economies to restructure
production. The challenges,
however, are multiple,
necessitating a move away
from conventional policy
paradigms and towards a
set of forward-looking,
futuristic elements.
Mausam Kumar (mausamk@iitb.ac.in) is
doctoral researcher at the Department of
Humanities and Social Sciences, Indian
Institute of Technology (IIT) Bombay.
M Suresh Babu (sureshbabum@iitm.ac.in) is
with the Department of Humanities and Social
Sciences, IIT Madras.
26
D
iscussions on the return of indus-
trial policy, with suitable adapta-
tions to the changing global
economic scenario, have surfaced re-
cently. This is fuelled primarily by the
disruptions in economic activity due to
the COVID-19 pandemic and the exoge-
nous shocks driven by uncertainties and
disruptions in supply chains. The push
by the United States (US) administration
to support the manufacturing sector
through a new industrial policy and the
implementation of the performance-linked
incentive scheme (PLIS) by the Indian
government in specific sectors, are both
clear signals of the return of industrial
policy aimed to design contemporary
strategies to support the firms to en-
hance economic performance. This re-
surgence of industrial policy as a tool to
arrest the effects of exogenous shocks
has two objectives: enhance the pace of
economic activity at the national level
and implant mechanisms to impart resil-
ience to the industrial sector. The latter
is to make sure that economies can
shield themselves from exogenous shocks
which have persisting and debilitating
effects on economic growth.
The re-emergence of industrial policy
as a vehicle to drive economic perfor-
mance raises important issues on its es-
sential elements, which are required to
endow it with the necessary credibility
to address the problems of economic
growth. Further, the emphasis on im-
parting resilience to supply chains runs
the risk of “turning inwards” and increas-
ed protectionism leading to decoupling
from production networks. Given this
setting, we trace the trajectory of some
important discussions around industrial
policy to locate its relevance for the pre-
sent as well as future. In our view, this
return of industrial policy is also the re-
turn of classical approaches to under-
standing the role of institutions in facilitat-
ing economic growth and the importance
SEPTEMBER 16, 2023
of state discipline in the arena of eco-
nomic activity.
The ‘What’ and ‘Why’
Broadly, industrial policy can be seen as
a set of interventions which seek to facili-
tate and extract economic performance
as a trade-off against incentives compris-
ing of concessions and subsidies. This
conceptualisation might not capture the
entire gamut of policy interventions, usu-
ally packaged as industrial policy, but
can be a good starting point to explore
what its elements are. One of the key as-
pects is its focus on addressing market
failures and reducing transaction costs
in economic activity. Transaction costs
could arise due to issues in product or
factor markets, innovations for scale or
due to the absence of critical institutional
arrangements which would drive eco-
nomic performance, among others. In
terms of market failures, firms which are
unable to participate in market transac-
tions at times in particular sectors,
because of their inability to address key
issues of demand and supply coordination,
organising factors of production, reaching
scale and profitability need some hand-
holding. These are considered as certain
critical areas which can be dealt with by
designing robust industrial policies.
In the early 1990s, when developing
economies were embracing liberal trade
and industrial policies, discussions around
industrial policy have revolved around
the state acting as the agent for address-
ing structural bottlenecks and the mar-
ket failures that arise thereof. Evans
(1995) points out the critical roles which
the state needs to play that it comes to
the goal of industrial transformation. He
emphasises on four key roles. First, is the
role of a “custodian” where the state acts
as the party in control when it comes to
the vision of industrial policy and its
actual execution. As a custodian, it is es-
sentially a regulator and an implement-
er of rules. Second, is the role of the “de-
miurge” where the state is not simply the
regulator but also an active player in the
production and delivery of specific
goods and services. This is important
when it comes to addressing the market
failures in infrastructural amenities
because of their inherent long gestation
vol lViii no 37 EPW Economic & Political Weekly

periods and proneness to exogenous
shocks. Third, is the “midwifery” role
where the state takes the role of facilitat-
ing the entrepreneurial spirit and help-
ing firms grow and providing them with
the necessary protection to achieve their
potential. Fourth, according to Evans, is
that of “husbandry” where the state not
only facilitates the entrepreneurial spirit
but also grooms firms that have the po-
tential to address deficiencies in particu-
lar sectors and rise to become the giants
of production in that sector.
Numerous strategies can be put in
place to achieve these four key goals but
it is imperative to understand that these
roles provide a rubric for a blueprint for
those states that are aiming to achieve
industrial transformation. Prior to Ev-
ans (1995), Amsden (1992) had put forth
the idea of a set of “reciprocal control
mechanisms” (RCMs) which could deliver
better firm performance. These are,
essentially, tools that seek to extract
economic performance from firms as a
reciprocal outcome of subsidies and
other facilitators which are assigned to
them. The RCMs are important not only
because they are able to extract eco-
nomic performance, but also because
they are designed around enhancing the
capacity of institutions in play, leading
to positive externalities whose spillovers
are not limited only to economic perfor-
mance. It is important to note that state
discipline is critical when it comes to the
success of RCMs. This revolves around
the ability of the state to allocate critical
resources with discipline which priori-
tises economic performance over rent-
seeking. It is important to note that both
Evans (1995) and Amsden (1992) have the
same country and regional context, East
Asian economies, transitioning into in-
dustrial behemoths on account of robust
policy interventions. However, these for-
mulations are important to understand
the role that industrial policy can play for
contemporary late-industrialising states.
Externalities
Rodrik (2004) brings out two key market
failures in terms of “information exter-
nalities” entailed in discovering the cost
structure of an economy, and “coordina-
tion externalities” in the presence of scale
Economic & Political Weekly EPW SEPTEMBER 16, 2023
COMMENTARY
economies, and how industrial policy can that the success of the elements of in-
be a tool to address them. These market dustrial policy is contingent on the in-
failures result in costs which are distinct stitutional framework which is put in
from other costs such as that of research place to install and implement these
and development or innovation because policy interventions.
of the inability of the firm to understand
the cost structure of the commodity right Getting Institutions Right
away. Such costs lead to drain of critical Institutions that are responsible for in-
resources which is not always remunera- dustrial policy must be embedded with-
tive, at least in the short run. When it in each other and at the same time be
comes to coordination externalities, there autonomous in their own rights, accord-
is information asymmetry in commodi- ing to Evans (1995). He further argues
ties, the scaling of which is contingent that embedded autonomy is a combina-
on simultaneous expansion in other nec- tion of Weberian bureaucratic insulation
essary facilitators for that particular which is still deeply connected to the
commodity. Tackling this information surrounding social structure. This means
asymmetry requires intervention on the that the bureaucratic institutional set-up
part of the policymakers to facilitate a put in place must prevent rent-seeking
simultaneous expansion in critical com- and at the same time be able to coordi-
modities which are linked to each other. nate with the stakeholders in the arena,
A well-crafted industrial policy is expect- towards the goals of industrial policy.
ed to play a huge role in achieving this. Embedded autonomy as an element of
Clearly demarcating a role for state, institution design is a precondition for
Mazzucato (2015) argues that industrial successful industrial policy interven-
transformation is not built simply around tions. He also points out the institutional
the entrepreneurial spirit of the private framework which can help achieve the
sector but is driven by a particular type of goal of embedded autonomy. One of the
state—a risk-taker. According to her, the important institutional arrangements
state needs to think of itself as a venture necessary is the establishment of a cen-
capitalist, seeking to promote necessary tral authority which is in control of the
ventures which have the potential for vision of industrial policy. This body must
economic performance in the long run. have the necessary mechanisms in place
This is a critical contribution when it which ascribes the required autonomy
comes to a rethinking of industrial policy when it comes to executing this vision.
since it dismantles the popular myth This central authority should then, in
that markets can take care of everything turn, be assisted by a network of nodal
on their own. In a way, industrial policy is agencies which execute this vision through
itself a negation of the unbridled market a network of bureaucrats. The goal is to
expansion myth as it advocates an active establish a chain of command which can
role for the state, which needs to be taken come together to execute this vision by
seriously when it comes to the visions of establishing the necessary ties with firms
economic transition. Though these dis- and other stakeholders in the arena.
cussions provide a rationale for well- Key insights on the relationship bet-
designed industrial policy, it emerges ween institutions and industrial policy
EPW Index
An author-title index for EPW has been prepared for the years from 1968 to 2012. The PDFs of the
Index have been uploaded, year-wise, on the EPW website. Visitors can download the Index for
all the years from the site. (The Index for a few years is yet to be prepared and will be uploaded
when ready.)
EPW would like to acknowledge the help of the staff of the library of the Indira Gandhi Institute
of Development Research, Mumbai, in preparing the index under a project supported by the
RD Tata Trust.
vol lViii no 37 27
COMMENTARY
are brought out in Rodrik (2004) also.
Building on Evans’ conceptualisation of
embedded autonomy, he argues that the
biggest challenge, when it comes to
achieving it, is to get the balance right
between embeddedness and autonomy.
To quote,
Too much autonomy for the bureaucrats and
you have a system that minimises corrup-
tion but fails to provide the incentives that
the private sector really needs. Too much
embeddedness for the bureaucrats, and they
end up in bed with (and in the pockets of)
business interests. (Rodrik 2004)
According to him, the institutional de-
sign for industrial policy interventions
must seek to get this balance right.
According to Amsden (2001), a control
mechanism should have four elements: a
sensor, to detect the “givens” in the pro-
cess to be controlled; an assessor, to
compare what is happening with what
should happen; an effector, to change
behaviour; and a communications net-
work, to transmit information between
all functions. These four elements are
essentially the institutional set-up which
w
Ne
Module on Employment Exchange Statistics
The EPWRF ITS has 32 modules covering a range of macro-economic, financial and social sector indicators on the Indian economy.
EPWRF India Time Series is an e-ShodhSindhu consortium approved online database.
For further details, visit www.epwrfits.in or write to us at its@epwrf.in
28
needs to be established when it comes to
achieving economic performance as a
trade-off against subsidies. Specifically,
in the context of India, when it comes to
understanding the institutional mecha-
nisms for industrial policy interventions,
Chibber (2003) argues that the twin as-
pects of “coordination” and “compulsion”
are critical to achieving economic per-
formance as part of industrial policies.
On the one hand, coordination allows
the state to manage and bring the stake-
holders in the area together; compulsion
makes it imperative on these stakehold-
ers to work towards the goals of indus-
trial policy. In a way, the concept of
coordination and compulsion, as argued
by Chibber, can be seen as an extension
of the concept of embedded autonomy
put forth by Evans.
New Challenges
The “return” of industrial policy in the
current global setting must learn from
the past and at the same time be malle-
able enough to adapt to the new chal-
lenges that have come up due to the
EPWRF India Time Series
www.epwrfits.in
SEPTEMBER 16, 2023
pandemic-induced disruptions, global
trade frictions, and growth slowdowns.
Viewing from this angle, a restructuring
of national and regional supply chains
can be envisaged on the shoulders of
industrial policy which will reduce the
risks and, at the same time, the depend-
ence on specific countries that produce
the bulk of critical components in the
production chain. This return must
revolve around establishing a set of
necessary preconditions for achieving
sustained economic performance. More-
over, the restructuring of production also
needs to consider the prevailing con-
cerns of employment generation and
environment sustainability.
Propelling industrialisation in develop-
ing economies faced a disadvantage as pro-
duction networks in the manufacturing
sector throughout the bulk of the first
two decades of the 21st century have
relied on a few countries for critical
components of the supply chain. Wheth-
er it was the electronics sector, automo-
biles or textiles, specific countries that
were able to leverage their institutional
Features
Contains data sets for
• Number of Employment
Exchanges
• Registrations on the
Exchanges
• Job Seekers on Live
Register ‒ by age and
occupational group
• Educated Job Seekers
• Educated Women Job Seekers
• Migrant Job Seekers
• Vacancies and Placement
• Disability-wise Differently
Abled Job Seekers
Data at All-India level are
available from 1947, and state-
wise from 1980 depending upon
their availability.
vol lViii no 37 EPW Economic & Political Weekly

capacity and firm performance directed
and controlled the supply chains in these
commodities. The exogenous shocks due
to the pandemic and other geopolitical
developments present an opportunity to
radically overhaul these supply chains
and move away from the dependence on
only few specific countries for critical
components. Hence, developing econo-
mies need to seize this opportunity to
kickstart their economic growth trajec-
tories by carefully designing industrial
policies that can bring autonomy and
performance in the long run.
The argument here is that there is a
need to shift the lens from global pro-
duction networks to regional production
networks. Developing economies must
look at themselves as whole entities
when it comes to facilitating the compo-
nents of the supply chain in a particular
commodity and allocate resources to-
wards reinforcing the supply chains as
part of the industrial policy. It is impor-
tant to note that policies such as the
PLIS, which seek to incentivise firms to
scale up performance, are significant
cogs in this return of industrial policy.
The success of these policies will be de-
termined by their ability to facilitate
and, at the same time, extract perfor-
mance from the firms in the sectors in
which they are to be implemented.
Another important agenda in indus-
trial policy must revolve around facili-
tating global as well as local firms in set-
ting up production units so that creation
of jobs can be a key outcome. As exoge-
nous shocks can wreak havoc on the eco-
nomic growth and employment genera-
tion in developing economies, production
restructuring must revolve around limit-
ing the risk and the negative spillovers for
employment generation. The challenge
here would be to strike the right balance
between deriving comparative advantages
using high-end technologies and automa-
tion, which are within the broad spec-
trum of fourth industrial revolution, and
absorption of semi-skilled workers moving
out of agriculture due to structural trans-
formation. Industrial policy must seek to
address this question and incorporate in
its design, the ability to blend employment
generation and enhance productivity-
driven approach, as a result of the shift
Economic & Political Weekly EPW SEPTEMBER 16, 2023
towards automation. This, in turn, also
raises the issue of embedding services in
manufacturing activities.
An industrial policy with a futuristic
vision has to pay careful attention to the
issues of climate change. Incorporating
climate goals in terms of reducing car-
bon emissions and finding ways to cre-
ate sustainable supply chains which do
not adversely affect the environment
needs policies and institutions to plan
and implement sustainable business
practices. Production structures need to
incorporate elements of technological
dynamism that not only maximises prof-
its but also finds innovative measures to
reduce and recycle inputs to prevent fur-
ther strain on environment. The idea of
a green industrial policy must be central
in looking forward.
Conclusions
Industrial policy as a tool of economic
policymaking has now appeared as a key
set of interventions to address the chal-
lenges emerging from disruptive techno-
logical transformations in addition to its
classical focus on addressing manufac-
turing growth. Industrial policy also
needs to be seen as a tool to address con-
cerns emerging from the growth of na-
tions as monopolies (for example, China),
export behemoths, and manufacturing
powerhouses at the cost of other devel-
oping economies. Late industrialising
economies have the necessary precondi-
tions for catching up but lack the policy
and institutional frameworks to achieve
that. In its new vision, the industrial policy
must address the challenges of possible
“premature deindustrialisation” for de-
veloping economies. It is important to
note that labour costs have been rising
in the early industrialising countries as
they are moving away from a growth-first
strategy to paying attention to the criti-
cal aspect of returns to labour. This can
help propel the transition of other coun-
tries, such as India, in terms of achieving
industrial capacity and higher growth.
Considering these critical issues, what
exactly then is the future of industrial
policy? Aiginger and Rodrik (2020) ar-
gue that the future of industrial policy
must be built around four key areas. First,
there is a need to design an industrial
vol lViii no 37
COMMENTARY
policy which addresses the need to nur-
ture and develop modern economic ac-
tivities more broadly, including but not
limited to manufacturing. Classical in-
dustrial policy has broadly revolved
around propelling manufacturing growth
but there is a need to diversify the sec-
tors into which industrial policy inter-
ventions can be envisaged. This also
means that there is a need to select ac-
tivities and sectors ex ante which show
the potential for productive capacity and
industrial policy be designed to build on
the comparative advantages of these
sectors or commodities. Second, to de-
sign industrial policies in a way which
do not focus simply on facilitating eco-
nomic activity but also pay attention to
the welfare needs of the consumers spe-
cifically. To achieve that, necessary reg-
ulatory mechanisms need to be put in
place which can assimilate these twin
goals. Third, to move away from the ide-
al-type classical ideas of top-down in-
dustrial policy which facilitated the Ko-
rean and the Japanese economic transi-
tion and create interventions that cater
to addressing the contemporary challeng-
es. The fourth and final element of the
vision that a new industrial policy must
seek is to steer technological change in a
direction which pays attention to the en-
vironmental goals and at the same time
to that of the interests of labour as against
a skewed focus on facilitating returns on
capital. These four key elements must be
at the centre of any vision of the return
of industrial policy, especially for India.
References
Aiginger, K and D Rodrik (2020): “Rebirth of Indus-
trial Policy and an Agenda for the Twenty-first
Century,” Journal of Industry, Competition and
Trade, Vol 20, pp 189–207.
Amsden, A (1992): Asia’s Next Giant: South Korea
and Late Industrialization Oxford: Oxford
Unity Press.
— (2001): The Rise of “The Rest”: Challenges to the
West from Late Industrializing Economies,
Oxford: Oxford University Press.
Chibber, V (2003): Locked in Place: State-Building
and Late Industrialisation in India. Princeton:
Princeton University Press.
Evans, P B (1995): Embedded Autonomy: States and
Industrial Transformation, Princeton, N J:
Princeton University Press.
Mazzucato, M (2015): The Entrepreneurial State:
Debunking Public vs Private Sector Myth,
London: Anthem Press.
Rodrik, D (2004): “Industrial Policy for the Twenty
First Century,” United Nations Industrial
Development Organisation Paper.
29
COMMENTARY
Characterising Economic
Activity in Near Real-time
Using High-frequency
Indicators in Haryana
Narendra Kumar Bishnoi, Sachin Sharma, Ranjan Aneja
There exists almost no
information on the dynamics
of the economy on a quarterly
or monthly basis at the state
level. The use of high-frequency
indicators opens the door for
nowcasting the state economy
and would also help to calibrate
policy changes in the very short
run. This is a pioneering attempt
for Haryana, where the HFIs were
observed and compared with the
gross state domestic product and
tax revenue performances and
were found to be in sync with
each other.
Narendra Kumar Bishnoi (nkbishnoi123@
gmail.com) is professor and chairperson at the
Department of Economics, Guru Jambheshwar
University of Science and Technology, Hisar.
G Sachin Sharma (sachin.econix@gmail.com)
is research Officer at the Department of
Economics, Guru Jambheshwar University of
Science and Technology, Hisar. Ranjan Aneja
(ranjananeja@cuh.ac.in) is professor at the
Department of Economics Central University
of Haryana, Mahendergarh, Haryana.
18
T
here are very few states in India
that are currently publishing quar-
terly gross state domestic product
(GSDP) estimates, namely Andhra Pradesh,
Uttar Pradesh, and West Bengal. These
estimates provide a snapshot of the
economy over a short period of time and
therefore play a crucial role in gauging
the performance of a state’s economy,
provided that they are made available in
time and are derived from the current
trends reflected by the ground reality
(NSO 2020: 9).
Due to the lack of timely and adequate
data collection, there has been very little
methodological work on the adoption of
measuring aggregate income at the state
level on a quarterly basis. So, it has re-
mained a challenging task to ascertain
how the state economy is behaving in
real time. This may be partly attributed
to the legacy of centralised planning,
which had made the state governments
heavily reliant upon the central statisti-
cal agencies for data that should ideally
have been collected and disseminated by
the state economic and statistical depart-
ment itself. Partly, it may be attributed
to the fact that there exists a lack of ade-
quate and trained human power to carry
out surveys and adopt methodological
processes at the state level (NSO 2020: 76).
Thus, we have tried to characterise the
real-time economic activity of Haryana
with the help of the available high-
frequency indicators (HFIs) to better un-
derstand the dynamics of the state econ-
omy. This analysis also provides a useful
benchmark index for the policymakers in
managing the economy in a more effective
manner, until the state publishes quar-
terly GSDP estimates at regular intervals.
This article starts with an introduc-
tion which is followed by a review of the
SEPTEMBER 16, 2023
literature on various aspects of the meas-
urement of real-time economic activities.
Then the article elaborates on the data
analysis and later discusses the major
observations of the article. It ends with
the broad conclusions of the article.
Review of Literature
The concept of measuring the momen-
tum of economic activity or market con-
ditions in real time using HFIs has been
in vogue for more than a decade now.
Such characterisations take place either
with or without the availability of past
monthly or quarterly economic indica-
tors such as the GSDP.
In the former case, we can now cast the
GSDP with the help of various forecast-
ing models such as dynamic factor model
(DFM), mixed data sampling (MIDAS),
traditional time-series forecasting and
machine learning prediction. For exam-
ple, DFM has been used by Aruoba et al
(2009) to assess real-time business con-
ditions using HFIs. Kumar (2013) has
also used monthly macroeconomic indi-
cators to construct a composite index for
Canada using DFM and Kalman filter.
With the easy availability of quarterly
gross domestic product (GDP) data, many
researchers have now casted economic
activity at the national level with vari-
ous combinations of HFIs and nowcast-
ing models. Bhattacharya et al (2011)
used bridge and factor models to fore-
cast quarterly GDP growth in India and
highlighted the challenges associated
with nowcasting of economic activity
in the emerging markets. Bragoli and
Fosten (2018) have used DFM to nowcast
India’s GDP and have shown prediction
improvements with the use of additional
variables from more timely sources.
Bhadury et al (2019) have built a coinci-
dent economic indicator for India and
have also used DFM to extract a common
trend among the HFIs. Even rainfall data
has been incorporated within DFM ap-
proach by Iyer and Sen Gupta (2019) to
nowcast India’s GDP. They found that the
rainfall has high predictive content for
nowcasting GDP growth in India.
But in the absence of monthly and
quarterly GDP data at the subnational
level, nowcasting methods are not suitable.
Thus, alternate methods have been used
vol lViii no 37 EPW Economic & Political Weekly
 COMMENTARY
Figure 1: Google Mobility Indices (Standardised)—Haryana Figure 3: Percentage of Cumulative Variance Explained with Increasing
Number of Components
4
100

Percentage of cumulative explained variance

2

80
Mobility

60
-2

-4
40
March 2020 August 2020 April 2021 July 2021
Time
Retail and recreation Grocery and pharmacy
Parks Transit stations 20
Workplaces Residential 1 4 19
Number of components
Source: Google LLC “Google COVID-19 Community Mobility Reports,” https://www.google. Source: Cumulative variance analysis based on PCA eigenvalues calculated in Appendix
com/covid19/mobility/ viewed on 10 December 2022. Table A2.

Figure 2: Scree Plot of Eigenvalues after PCA Figure 4: Standardised Index of Economic Activity—Haryana

6
2
Economic activity index

4
0
Eigenvalues

Economic
Index

activity index (z)

Mean
2 -2

0 -4
0 5 10 15 20
August 2017 May 2020 May 2021 December
Component
2021
Eigenvalues Mean Time
Source: Standardised economic activity index has been calculated for Haryana based on
Source: Scree-plot analysis based on PCA eigen decomposition of standardised data for
eigenvectors as given in Appendix Table A3.
variables in Appendix Table A1.

by various researchers to characterise eco-
nomic activity in such cases, especially to
monitor the impact of COVID-19 in near
real time at the regional level. Electricity
consumption and monthly night-time light
intensity have been used by Beyer et al
(2020) to assess the impact of the COVID-19
pandemic on economic activity in India.
Goyal et al (2022) built an economic activ-
ity index (EAI) using the principal com-
ponent analysis (PCA) for all states and
assessed the role of structural economy
in influencing the impact of COVID-19.
Data Analysis and Discussion
Collection of relevant HFIs at the state
level on a monthly basis could prove to
be an arduous ordeal and requires coor-
dinated efforts with the respective state
Department of Economic and Statistical
Affairs (DESA). We were fortunate to be
able to get the required compiled data
Economic & Political Weekly EPW
from the DESA of Haryana after the on- waves of the COVID-19 pandemic in the
set of the COVID-19 pandemic. summer of 2020 and 2021.
A total of 19 indicators (Appendix We have used the PCA technique to ex-
Table A1, p 21) which are available at tract the major factors underlying the
monthly frequency have been used to various indicators and characterised the
characterise the economic activity in momentum of economic activity with
Haryana, leaving aside the Google mo- the help of a standardised EAI.
bility indices. We believe that the level The PCA is a standard workhorse tech-
of consumption activity is already re- nique used by researchers to reduce the
flected by the state goods and service tax dimensionality of their data, especially
(SGST) data itself. Thus, Google mobility if the data set contains many highly corre-
serves as a trend gauge with which we lated variables. Our data set too contains
compare the movement of our EAI.
Within the Google mobility indices,
we see that residential mobility is nega-
tively correlated to the rest of the indi- available at
ces and to economic activity as well;
Gyan Deep
thus we also skip this index when build-
Near Firayalal Chowk,
ing a composite mobility index for com-
Ranchi 834 001
paring the composite EAI. For the rest
Jharkhand
of the standardised mobility indices, we
Ph: 09470564686
see a direct impact during the two
SEPTEMBER 16, 2023 vol lViii no 37 19
COMMENTARY
Figure 5: Correlation between Google Mobility and Economic Activity— Figure 6: Economic Activity and Mobility in Tandem in Haryana
Haryana
Economic activity index (z)
1.8 2
-3.3
Index
-2.4 1.4
Google mobility index (z) -2
1.8
-4
-3.3 March 2020
-3.3 1.8
Economic activity index (z) Fitted values
Source: Two-way plot and linear trend fit for standardised EAI (as calculated for Figure 4)
and standardised Google mobility index (calculated from Google mobility indices for Source: Trend plot for standardised EAI and standardised Google mobility index as shown
Haryana as shown in Figure 1). in Figure 5.
variables that are highly correlated revenue, vehicles registered and others.
which belong to a certain category. For Thus, the highly correlated indicators in
example, the indicators within the cate- our data set were collapsed to form four
gories of electricity consumption, reve- distinct principal components.
nue and vehicles registered are highly To build the composite EAI, we use the
correlated with each other. ratio of explained variation to total vari-
The results of the PCA technique on ation as weight for each principal com-
the standardised matrix of HFIs are giv- ponent and add them together.
en in Appendix Tables A2 and A3 (p 21). ͲǤ͵͵ͳͻ
 ‘‘‹ ƒ –‹˜‹–›‹†‡šሺ ሻ ൌ  ൬ ൰ ‫ͳ ’ כ‬
The eigenvalues for each component, ei- ͲǤ͹ͻͻͶ
genvalue difference between components, ͲǤʹͷʹͳ ͲǤͳ͸ͳͺ ͲǤͲͷ͵ͷ
the proportion of variation explained by ൅൬ ൰ ‫ ʹ ’ כ‬൅  ൬ ൰ ‫ ͵ ’ כ‬൅  ൬
ͲǤ͹ͻͻͶ ͲǤ͹ͻͻͶ ͲǤ͹ͻͻͶ
each component and the cumulative
proportion of variation explained are We further standardise this index
given in Appendix Table A2, whereas the with a baseline mean as zero and stand-
factor or component loadings of each ard deviation as one. This standardised
indicator onto each component, that is index could serve as a benchmark to see
the eigenvectors, are given in Appendix whether the economic momentum is be-
Table A3. having above or below for a given base-
Further, we have used the Kaiser line level, which in this case happens to
(1960) criterion to drop all components be the standard mean of zero.
with eigenvalues under 1.0, which is the As may be the case, it can be seen in
eigenvalue equal to the information ac- Figure 5, there is a direct positive corre-
counted for by an average single item. lation between standardised mobility
This cut-off is shown in the screen plot and economic activity in Haryana. Here,
of eigenvalues in Figure 2 (p 19), which standardised Google mobility index (GMI)
shows that there are four components has been calculated by averaging all
which have eigenvalues equal to one or Google mobility indices (as shown in
more. Thus, we have used the first four Figure 1, p 19) except residential index
components to build our EAI. on a monthly basis and taking their
These first four principal components simple average and further standardis-
of the standardised HFI matrix account ing it using z-score.
for around 80% of the proportion of Further, in Figure 6, the impact of the
explained variation in our data set lockdown policies due to COVID-19 could
(Figure 3, p 19). This result follows from be seen clearly on both the mobility and
the fact that all of our indicators can be composite EAI for Haryana. Adda (2016)
clubbed into four distinct groups or cate- highlighted the important role played
gories, namely electricity consumption, by government policies in reducing
20 SEPTEMBER 16, 2023
August 2020 April 2021 July 2021 December 2021
Time
Google mobility index (z) Economic activity index (z)
interpersonal contacts such as closure of
schools and public transport services to
stop the spread of viral diseases. As can be
seen in Figure 6, the imposition of first and
second lockdowns during late March to
August in 2020 and April to June in 2021,
corresponded with a significant dip in eco-
nomic activity as well within the state.
Conclusions
The onslaught of the COVID-19 pandemic
൰‫ ’כ‬Ͷ had left its impact across various sectors
within the state economy. Disruption of
supply chains, burdened healthcare sys-
tem, demand slump and muted business
activity were some of the key challenges
that the government had to deal with in
a firefighting mode in order to bring res-
pite to the state economy and the com-
mon masses.
With the help of HFIs, it has been ob-
served that even though the restrictions
imposed by the much-needed lockdowns
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vol lViii no 37 EPW Economic & Political Weekly
 COMMENTARY

had hampered economic activity and
brought the economy to a sluggish pace,
the state economy was still able to re-
gain its pre-pandemic growth momen-
tum on almost all fronts.
As the economic data becomes availa-
ble on a variety of HFIs and with the reg-
ular estimation of quarterly GSDP series
in the future, we could further use so-
phisticated models such as nowcasting
Appendix
Table A1: List of High Frequency Indicators—Haryana
S No Data Series
1 Google mobility index
(avg percentage change)
2 Domestic electricity consumption
3 Commercial electricity consumption Units (kWh)
4 Industrial electricity consumption
5 Agricultural electricity consumption Units (kWh)
6 Others electricity consumption
7 Electricity consumption (total)
8 Tractors registered
9 Two-wheeler registration
10 Three-wheeler registration
11 Four-wheeler registration
12 Commercial vehicles registered
13 Total vehicle registration
14 Central sales tax
15 State goods and service tax
16 Land revenue
17 Stamps and registration fees
18 State excise
19 Taxes on vehicles
20 Taxes and duties on electricity
Sources: For Google mobility index data, see Google LLC “Google COVID-19 Community Mobility Reports.”
https://www.google.com/covid19/mobility/. For Serial Nos 2 to 20, the data was obtained from the Department of
Economic and Statistical Affairs, Haryana.
to predict and understand the nature of No 4, pp 417–27, https://doi.org/10.1198/
jbes.2009.07205.
economic activity in real time.
Beyer, R C M, S Franco-Bedoya and V Galdo (2020):
“Examining the Economic Impact of COVID-19
References in India through Daily Electricity Consumption
and Nighttime Light Intensity,” Policy Research
Adda, J (2016): “Economic Activity and the Spread Working Paper 9291, World Bank, https://doi.
of Viral Diseases: Evidence from High Frequency
Data,” Quarterly Journal of Economics,
org/10.1596/1813-9450-9291.
Bhadury, S, S Ghosh and P Kumar (2019): “Now-
Vol 131, No 2, pp 891–941, https://doi.org/
casting GDP Growth Using a Coincident Eco-
10.1093/qje/qjw005.
nomic Indicator for India” [MPRA Paper], Uni-
Aruoba, S B, F X Diebold and C Scotti (2009): “Re- versity Library of Munich, Germany, https://
al-Time Measurement of Business Conditions,” econpapers.repec.org/scripts/a/abstract.pf?h
Journal of Business & Economic Statistics, Vol 27, =RePEc:pra:mprapa:96007;terms=bhadu
ry%20nowcast.
Bhattacharya, R, R Pandey, G Veronese et al (2011):
“Tracking India Growth in Real Time,” Work-
ing Paper 2011–19, National Institute of Public
Units Frequency Availability Lag Finance and Policy, New Delhi.
The baseline is the median value for the Monthly 1 Month Bragoli, D and J Fosten (2018): “Nowcasting Indian
corresponding day of the week, during GDP,” Oxford Bulletin of Economics and Statistics,
the five-week period 3 January– Vol 80, No 2, pp 259–82, https://doi.org/10.1111/
6 February 2020 obes.12219.
Units (kWh) Monthly 1 Month Goyal, S, A Kovuri and R Golait (2022): “Has
Monthly 1 Month COVID-19 Distorted the State-wise Conver-
gence in India? An Empirical Analysis,” Indian
Units (kWh) Monthly 1 Month Journal of Economics and Research, Vol 11, No 4.
Monthly 1 Month Iyer, T and A Sen Gupta (2019): “Nowcasting Eco-
Units (kWh) Monthly 1 Month nomic Growth in India: The Role of Rainfall,”
Units (kWh) Monthly 1 Month ADB Economics Working Paper Series No 593,
Numbers Monthly 1 Month Asian Development Bank, https://econpapers.
repec.org/scripts/a/abstract.pf?h=RePEc:ris:a
Numbers Monthly 1 Month
dbewp:0593;terms=iyer%20sen%20rainfall.
Numbers Monthly 1 Month Kaiser, H F (1960): “The Application of Electronic
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Numbers Monthly 1 Month https://doi.org/10.1177/001316446002000116.
Kumar, G (2013): “High-frequency Real Economic
` Monthly 1 Month
Activity Indicator for Canada,” Working Paper
` Monthly 1 Month No 2013–42, Bank of Canada, https://doi.
` Monthly 1 Month org/10.34989/swp-2013-42.
` Monthly 1 Month NSO (2020): Final Report of the Committee for Sub-
` Monthly 1 Month National Accounts, National Statistical Office,
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` Monthly 1 Month mentation, Government of India, https://www.
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Sub-National_Accounts_Committee_Final_
Report-16March_20201603371967260.
pdf/4619da5f-bfa9-8747-cf48-11a2b89e1cc4.

Table A2: Eigenvalues of the Principal Table A3: Principal Components (Eigenvectors) Based on Kaiser Criterion and Component Loadings
Components Analysis for HFIs in Haryana for Each Variable
Component Eigenvalue Difference Proportion Cumulative Variable Comp1 Comp2 Comp3 Comp4 Unexplained
Comp1 6.307 1.517 0.332 0.332 Tractors registered 0.288 0.070 -0.153 -0.469 0.160
Comp2 4.790 1.715 0.252 0.584 Two-wheeler registration 0.248 -0.226 0.227 -0.182 0.174
Comp3 3.075 2.059 0.162 0.746 Three-wheeler registration 0.151 -0.255 0.250 0.068 0.348
Comp4 1.016 0.197 0.053 0.799 Four-wheeler registration 0.348 -0.141 -0.085 -0.083 0.110
Comp5 0.819 0.183 0.043 0.842 Commercial vehicles registered 0.275 -0.217 -0.010 0.295 0.209
Comp6 0.636 0.095 0.034 0.876 Total vehicle registration 0.302 -0.221 0.152 -0.161 0.093
Comp7 0.541 0.063 0.029 0.904 Domestic electricity consumption 0.047 0.419 0.143 -0.098 0.072
Comp8 0.478 0.133 0.025 0.929 Commercial electricity consumption 0.098 0.182 0.456 -0.066 0.137
Comp9 0.345 0.132 0.018 0.948 Industrial electricity consumption 0.227 -0.023 0.238 -0.386 0.346
Comp10 0.214 0.016 0.011 0.959 Agricultural electricity consumption 0.085 0.358 0.154 0.369 0.130
Comp11 0.197 0.037 0.010 0.969 Others electricity consumption 0.066 0.405 0.176 -0.042 0.090
Comp12 0.161 0.012 0.008 0.978 Electricity consumption (total) 0.140 0.368 0.256 0.009 0.027
Comp13 0.149 0.031 0.008 0.986 Central sales tax 0.132 -0.179 0.336 0.303 0.295
Comp14 0.118 0.042 0.006 0.992 State goods and service tax 0.311 0.078 -0.084 0.338 0.221
Comp15 0.076 0.021 0.004 0.996 Land revenue 0.280 0.079 -0.080 0.015 0.457
Comp16 0.055 0.030 0.003 0.999 Stamps and registration fees 0.277 0.106 -0.275 0.245 0.169
Comp17 0.025 0.025 0.001 1.000 State excise 0.078 0.155 -0.348 -0.142 0.453
Comp18 0 0 0.000 1.000 Taxes on vehicles 0.344 -0.016 -0.166 0.156 0.141
Comp19 0 . 0.000 1.000 Taxes and duties on electricity 0.236 0.216 -0.275 -0.104 0.180
Source: Results based on PCA eigen decomposition of Source: Principal components chosen based on scree-plot analysis (Figure 2) of standardised data for variables in Table 1, and
standardised data for variables in Table 1. their corresponding component loadings and unexplained variance for each variable.

Economic & Political Weekly EPW SEPTEMBER 16, 2023 vol lViii no 37 21
COMMENTARY
Elusive Frontier
The Failure of a Rubber Plantation in
Colonial Assam
Tara Acharya
The forest management and
state-building efforts in the
late 19th century are analysed
by examining the failure of a
state-run rubber plantation in
Charduar, Assam. This plantation
needs to be understood as a
means of establishing state
control along an ecologically,
topographically and politically
volatile frontier. It emphasises
the importance of analysing
colonialism as a complex and
spatially diverse phenomenon
rather than a monolithic
juggernaut. The failure of the
rubber experiment symbolised
the failure of colonial authority in
the tribal hills.
Tara Acharya (tara.acharya13@gmail.com) is a
research assistant at Brown University, Rhode
Island, United States.
22
T
he colonial state established its
first and only rubber plantation in
the hills of Assam, in Charduar, in
1873. Unlike the success of the Assam
tea plantations or the rubber plantations
of British Malaya, the Charduar rubber
plantation had to be closed down due
to its inability to generate profits. The
state-run plantation illustrates how the
articulations of colonial “order” differed
vastly, and the need to understand the
plantation regimes and indeed imperialism
itself as complex and spatially differenti-
ated. The colonial government anchored
itself in the fertile plains, nourished
by the Brahmaputra and nurtured by
its settled agriculturalists. The rugged
hills surrounding the Brahmaputra Valley,
meanwhile, were left to their own devices
as “profitless jungles” within which roam-
ed the “marauding hordes” or the hill
tribes of Assam (M’Cosh 1837: 4). This was
no place for “civilised” governance and
these were no subjects, it was thought.
The discovery of rubber changed this
understanding. By freak of nature, Assam
rubber, the ficus elastica species, hap-
pened to be found along the hills of the
North East Frontier in regions that were
“more inaccessible than the rest of the
forest” (Public Works Department 1869),
predominantly in the tribal regions. In
this sense, the quest to control rubber
was also a quest to politically define the
autonomous tribal hills and bring them
within the orbit of the colonial state.
Natural Science and
the Frontier Province
The emergence of the natural science as
an established discipline went hand in
hand with the empire-building exercise.
The emphasis on the importance of
wealth generation, through the scienti-
fic study of natural resources, was at
the heart of how natural science was
SEPTEMBER 16, 2023
conceived in the 19th century. Both colo-
nial governance and natural science,
which came together in the form of
scientific forestry, were centred on the
importance of hierarchies—the science
of ordering and classification.
The botanists and colonial surgeon
generals ecstatically noted that rubber,
in the hands of the able state officials,
would generate massive returns and alter
the global rubber market significantly
(Collins 1869: 81–93). In order to achieve
this, however, rubber had to be divorced
from the anarchic realm of the forested
hill tracts and local rubber tappers to
unlock its true commercial potential. At
the same time, the state also saw this as
a conservation project aimed at regener-
ating a dying species within a controlled
plantation environment. Colonial percep-
tions about the forests, along the North
East Frontier, echo the orientalist depic-
tions of the tropics and the “jungle” as a
life-snuffing and uninhabitable realm.
David Arnold (2006: 81) notes that “this
identification with disease went back at
least to British military expeditions in the
1770s into areas like the sub-Himalayan
Tarai and Bengal’s ‘Jungle Mahals.’”
In addition to the orientalist literature,
the emerging field of medical topo-
graphy perpetuated the fixation with
disease as a recurrent leitmotif to de-
scribe the lands of the East. There is a
long European history, going back to the
ancient Greece, of disease and pathology
as intrinsically tied to climatic and envi-
ronmental conditions. The climate of
the Bengal Province, which came to be
associated with the Indian climate in
general, was a heady mix of heat, hu-
midity as well as “numerous miasmatic
fluxes” (Metcalf 1995: 171). The native
“abuse” of environment was attributed to
the ignorance and “savagery” of the forest-
dwelling groups. Colonial officials in
St Helena saw the destruction of gum
trees as an extension of the “barbaric”
practices of the island’s native inhabitants
(Grove 1995: 350). Similarly, the repeat-
ed refrain of native defilement of rubber
trees in Assam implied that the tribes of
the hill tracts lacked an understanding
of their environment. Thus, rubber had
to be rescued from its diseased habitat.
The state was deemed the most suitable
vol lViii no 37 EPW Economic & Political Weekly
 COMMENTARY

custodian of Assam’s forests hill tracts. It
was within this larger ideological climate
that the colonial government decided to
exploit the rubber trade and establish a
state-run rubber plantation at the Char-
duar hills in 1873.
The colonial characterisation of the
tribal hill tracts as comprising primitive
and politically fragmented societies can-
not be divorced from the frequent descrip-
tions of the hills as hostile and disease-
ridden (M’Cosh 1837: 165). State efforts
to make inroads into this area through
the regulation of rubber would prove to
be a protracted process. It would require
asserting political authority and forging
negotiations with the North East’s myriad
“hill tribes” where the colonial state
had little to no presence. The colonial
state was brought into direct contact
with the intractable hills, when it inter-
vened to regulate “illicit” forest rubber
trade that posed a threat to government
leaseholders (Foreign Department 1872).
Rather than assert a complete monop-
oly over rubber in the region, the state
adopted a more circumspect policy given
that political authority was tenuous in
the hills of the North East. This resulted
in the Inner Line Regulation of 1872–73.
The Inner Line was a boundary between
the British-administered regions and the
more or less autonomous tribes of the
northern hills. The legitimacy of the
Inner Line was regularly threatened by
intermittent tribal “raids” into the plains
(Mackenzie 1884: 122). These raids were
symbolic of the lack of consensus on the
colonial government as the sole and
sovereign authority in Assam and the
North East Frontier. The involvement of
the state in claiming a share over rubber
production through plantations in the
late 19th century, would only exacerbate
these conflicts and contestations. The
process of resource extraction proved to
be far from straightforward in a region
where state presence was weak, amid
communities that were yet to be brought
into the fold of the Empire.
The Construction of ‘Disorder’
and Unyielding Ficus Elastica
In the absence of sufficient knowledge of
the tribal tracts, which were an adminis-
trative no-go zone during this period,
a whole host of tribal practices were
lumped together through epithets like
“raid,” “plunder” and “blackmail.” What
the state failed to recognise was that the
precolonial political landscape of Assam
was fluid and its “sovereignties were
neither necessarily focused on one center,
nor unavoidably reliant on demarcated
borders” (Kar 2007: 30). One such prac-
tice that represented the warp and weft
of trans-regional, precolonial links tying
the plains and the hills into one amor-
phous yarn was posa. It refers to a form
of tribute that was historically exacted
by tribal chieftains on the ryots or farm-
ers of the plains. The colonial state inter-
preted the practice as tribal incursions
into the agricultural plains, aimed at
threatening the authority of the state.
Further, the so-called raids legitimised
the need to control the movement of
rubber and other minor forest produce
and bring order to the hills of the North
East. The tribal society, their ties with
the plains, and the ecological environ-
ment they inhabited symbolised disor-
der, profligacy and debauchery for the
colonial government.
Within this context, forest officials
understood the purported destruction of
the ficus elastica trees as symptomatic of
the absence of “proprietary rights and
conservancy” and according to them the
tribal did not understand the value of
natural resources as “he did not see any
reason why he should not enjoy the full
benefit himself, rather than leave it to

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Economic & Political Weekly EPW SEPTEMBER 16, 2023 vol lViii no 37 23
COMMENTARY
others” (Collins 1869: 81–93). The itiner-
ant and forest-dwelling societies, prac-
tices and knowledge systems were depict-
ed as disruptive, extractive and depletive
while conservation, under the aegis of a
just state, represented corrective meas-
ures. This was the founding principle
that undergirded the establishment of a
state rubber plantation in the Charduar
hills of Assam.
Forest officials responsible for over-
seeing the affairs at the plantation were
not only confronted by the state’s vul-
nerable political position in the hills, but
were also faced with a number of envi-
ronmental hurdles. Amid self-congratu-
latory pronouncements about the poten-
tial of Assam rubber, were also muted
admissions about the lack of sufficient
knowledge of the “physiology of the rub-
ber-bearing fici” (Office of the Inspector
General of Forests 1897). There were
shortages in labour supply caused in
large part due to the fractious political
landscape. In addition, the ficus elastica
itself proved to be stubborn and unyield-
ing to the principles of modern forestry.
The nursery adjacent to the plantation
produced saplings that were often of
sub-par quality and those that success-
fully managed to grow into trees failed
to produce a profitable caoutchouc yield.
During its inception, the conservator
of the Assam forests, Gustav Mann en-
visaged a sprawling operation in the
plantation. The reports of operations at
the rubber plantation during its first dec-
ade, however, were far from encourag-
ing. Seedlings were often destroyed due
to flooding and heavy rainfall, and there
were several instances of damage caused
by wild animals in the area. In 1877, ficus
elastica in all six of the “compartments”
or sections within the plantation failed to
survive (Office of the Inspector General
of Forests 1896). The acute labour short-
ages and poor supervision at Charduar
left the plantation exposed to destruc-
tion at the hands of torrential rains and
surrounding wildlife. Flying in the face
of self-congratulatory proclamations of
colonial order and governance, the opera-
tional lapses at the plantation revealed
a startling lack of oversight, the kind for
which officials routinely derided native
practices. Mann had envisioned the
24
plantation as a laboratory for cutting-edge
methods of cultivation based on plant
anatomy and the principles of scientific
forestry, free from the (supposedly) un-
scrupulous ways of the native rubber
tappers of the jungle. However, the nat-
ural world did not function like a labora-
tory. Even if the jungle was a wholly dif-
ferent operational realm, the plantation
was not immune to its idiosyncrasies.
It had become part of the prevailing
colonial wisdom that rubber would auto-
matically thrive, once it is shielded from
the jungle and brought into the fold of
the rational, scientific governance. This
colonial dogma went unquestioned de-
spite empirical evidence over the years
pointing to a vastly different reality. Not
only did the rubber plantation reveal the
fissures in colonial credo that govern-
ance steered by scientific forestry would
bring commercial returns, but it was
also an example of the state hubris. For
the colonial officials, the tea industry in
Assam was a living example of the trans-
formative effects of commerce, natural
science and colonial land policies. It was
a foregone conclusion that rubber, under
the stewardship of the state, would gen-
erate a superior product.
Did Assam Rubber Industry
Stand a Chance?
Environmental historians have ques-
tioned the treatment of agricultural and
forestlands as self-contained and imper-
meable units of historical investigation
(Agarwal and Sivaramakrishnan 2000).
The ephemeral rubber plantation in
Charduar affirms their observation that
plantations, agricultural lands and other
domains of human agency cannot be
studied in isolation as a rarefied embodi-
ment of colonial capitalism, divorced
from the surrounding hills and jungle. A
cursory glance at the global industry
reveals that there was no way Assam
rubber would ever be able to make its
mark in the world markets (Department
of Revenue and Agriculture 1894). The
British Empire was the largest buyer of
the Indian rubber varieties from Africa
and the Amazon in the 19th and early
20th centuries (Loadman 2005). In 1842,
Britain imported 3,17,184 lbs. of India
rubber out of which “Para” rubber from
SEPTEMBER 16, 2023
Brazil constituted 70% of the total im-
ports at 2,22,432 lbs (Hancock 1857). In
the 20th century, along with the emer-
gence of the Malayan rubber industry,
Britain became the largest source of rub-
ber supply. Assam rubber had no role to
play in this meteoric rise within the global
rubber industry. Although written about
as part of the Empire’s efforts to promote
scientific prowess and economic change
in its colonies, Assam rubber never real-
ly served the market need.
While the Charduar plantation stood
on shaky ground, rubber plantations in
Malaya and the Congo rose to dominate
global rubber exports. There are several
common strands tying the global rubber
story together. In 1822, much like India’s
North East Frontier, British officials in
Malaya found themselves treading un-
chartered territory—an “unreclaimed
jungle” (Lees 2017: 22). In both Assam and
Malaya, the “introduction of European
skill, energy and capital” was central to
the colonial vision of progress. This vi-
sion manifested itself in the plantation
regime. The rubber plantations of Assam
and Malaya were shaped by the same
ideology of human mastery over the nat-
ural world for the betterment of society.
This particular brand of colonial im-
provement emphasised science, reason,
order and control.
Where did their path diverge, then?
How did the rubber industry in Malaya,
which was established around the same
period (1860s–1870s), become one of the
highest rubber-producing regions in the
world, constituting 56% of the global
rubber cultivation?
A Plantation sans
a Plantation Regime
The most glaring difference between the
Malayan and Assam rubber story is the
issue of access to labour and the related
issue of control, or the lack thereof, over
the labour force. Although rubber plan-
tations are not highly labour-intensive,
they require a certain degree of skilled
labour and a high level of supervision,
which necessitates a stable and stratified
labour force. Unlike the Charduar plan-
tation, access to labour did not pose a
significant problem in British Malaya.
There already existed a ready pool of
vol lViii no 37 EPW Economic & Political Weekly

labour in the aftermath of the sugar
estates of the previous decades. The rub-
ber plantations were preceded by a pre-
existing history of “plantation complexes,”
which had devised methods to ensure
steady labour supply (Lees 2017: 175).
The managerial class at the plantations
came from the same section of Scottish
society that had sought employment in
the sugar plantations and the “foremen
returned to their home villages in Tamil
Nadu to recruit new field hands, as they
had for years.” In place of the sugar fields,
rubber cultivation came up. The rigid la-
bour economy bolstered by penal codes
compelled workers to be held hostage to
their contracts. Unlike the Charduar
rubber plantation, the Malayan planta-
tions benefited from a conveyor belt of
labour, well-oiled by a pre-existing penal
contract regime, which was established
for the sugar estates. Although the system
of indenture was done away with in
1914–15, “and workers were technically
free to leave their contracts, the assump-
tions of hierarchy and dominance con-
tinued to condition Europeans’ attitudes
to their workers” (Lees 2017: 199).
In Congo, a reign of terror wielded by
the Belgian King Leopold fuelled the ex-
traction of minerals, grain and rubber.
John Loadman provides a searing account
of the 19th century rubber behemoths
with their imperial mercenaries, systems
of indenture, slave labour, and the eco-
logical decimation that ravaged entire
societies. Similarly, in Congo, the rubber
enterprise was also stained with a trail
of oppression. Such a regime was entirely
absent in Charduar. In the absence of
political control over tribal country, in
the North East Frontier province of
British India, it was difficult to control
labour and the Charduar plantation was
thoroughly undermanaged.
Conclusions
The state-run Charduar plantation strad-
dled many roles and it was unclear what
the plantation truly represented. Its con-
servationist agenda was coupled with
the larger goal of showcasing how conser-
vation engenders capital accumulation
and long-term prosperity. The plantation,
as a result, was a peculiar hybrid bet-
ween a botanical garden and a more
Economic & Political Weekly EPW SEPTEMBER 16, 2023
conventional estate. It was meant to rep-
resent the ideals of colonial governance.
Despite claims of being governed by an
ideology rooted in Whiggish ideas of
progress, wealth generation, and just
governance, the British Indian govern-
ment was certainly not above facilitat-
ing a draconian plantation complex. As
the penal labour system that was estab-
lished in the plantations of British
Malaya showed, despite claims of just
and enlightened governance, the coloni-
al government had no qualms imposing
draconian systems of extraction. There-
fore, the failure of the Charduar rubber
plantation is rooted in a complex set of
historically contingent factors—the ab-
sence of political authority in the hills,
an unstable labour force and the vola-
tile agroecological environment of the
Charduar hills and forests.
There are other seemingly mundane
reasons for the failure of the rubber ex-
periment in Assam. Ficus elastica was
never found in abundance in the Assam
Valley. The evolutionary make-up of the
species was such that it germinated spo-
radically and was scattered across the
hilly terrain. Despite the studied recom-
mendations of forest conservators, ficus
elastica evaded regimentation. It obsti-
nately refused to comply with the agro-
ecological experiments it was being sub-
jected to by the experts. The marriage of
capitalism and resource management, in
a region where the colonial state’s politi-
cal authority was always in question,
produced a result that was far from a
happy union.
The writing was on the wall and
by the end of the 19th century various
officials confessed that nearly three
decades had only raised more doubts on
the viability of ficus elastica (Office of
the Inspector General of Forests 1897).
Officials contemplated the permanent
closure of the plantation and by 1920,
the government released a tender for its
sale. The rubber plantation in Charduar
was neither an earnest conservation
measure nor a viable enterprise. Follow-
ing its closure, state involvement in the
local rubber trade remained limited to
regulation. Despite the disdain towards
impure jungle rubber, the illicit rubber
trade between tribes and merchants
vol lViii no 37
COMMENTARY
proved to outlast the colonial scheme to
produce a superior global product.
The failure of the rubber experiment
symbolised the failure of colonial authority
in the tribal hills, which continued to
elude the machinations of modern state-
building exercises even in the postcolo-
nial period. Much like the much-awaited
superior caoutchouc, the colonial project
of order along the North East Frontier
remained elusive.
References
Agarwal, Arun and K Sivaramakrishnan (2000):
Agrarian Environments, Resources, Representa-
tions and Rule in India, Durham: Duke Univer-
sity Press.
Arnold, David (2006): Tropics and the Travelling
Gaze: India, Landscape and Science, 1800–1856,
Seattle: University of Washington Press.
Collins, James (1869): “On India Rubber, Its History,
Commerce and Supply,” Journal of the Society
of Arts, Vol 18, pp 81–92.
Department of Revenue and Agriculture (1894):
“Non-extension of the Area of the Charduar
Rubber Plantation in the Darrang District,”
Department of Revenue and Agriculture,
No 12, National Archives of India, New Delhi.
Foreign Department (1872): “India Rubber Trade in
Assam and Cachar-Proposed Introduction of
Government Monopoly,” Foreign Department,
Revenue-A, Nos 13–26 National Archives of
India, New Delhi.
Grove, Richard (1995): Green Imperialism: Colonial
Expansion, Tropical Island Edens and the origins
of environmentalism, 1600–1860, Cambridge:
Cambridge University Press.
Hancock, Thomas (1857): Personal Narratives of the
Origin and Progress of Caoutchouc or India-
Rubber Manufacture in England, London: Long-
man, Brown, Green, Longmans and Roberts.
Kar, Bodhisattva (2007): “Framing Assam: Planta-
tion Capital, Metropolitan Knowledge and a
Regime of Identities, 1790s–1930s,” unpublished
PhD thesis, Jawaharlal Nehru University.
Lees Lynn Hollen (2017): Planting Empire, Cultivat-
ing Subjects: British Malaya, 1786–1941, Cam-
bridge: Cambridge University Press.
Loadman, John (2005): Tears of the Tree: The Story
of Rubber a Modern Marvel, Oxford: Oxford
University Press.
Mackenzie, Alexander (1884): History of the Rela-
tions of the Government with the Hill Tribes of the
Northeast Frontier of Bengal, Calcutta: Home
Department Press.
M’Cosh, John (1837): Topography of Assam, Calcutta:
Bengal Military Press.
Metcalf, Thomas (1995): Ideologies of the Raj, Cam-
bridge: Cambridge University Press.
Office of the Inspector General of Forests (1896):
“Rubber Plantation at Charduar in Assam,” Of-
fice of the Inspector General of Forests, Working
Plans, Nos 1–2, New Delhi: National Archives
of India.
— (1897): “Charduar Rubber Plantation in As-
sam,” Office of the Inspector General of For-
ests- A, No 32, New Delhi: National Archives of
India.
Public Works Department (1869): “Report on the
India Rubber Forests, Assam,” Public Works
Department, Revenue-Forests, Nos 1–3, National
Archives of India, New Delhi.
25
PERSPECTIVES
Gram Sabha as a Body Corporate
The Emerging Reality
Milind Bokil, Satish Gogulwar
Since the passing of the
Constitution (73rd Amendment)
Act, 1992, the institution of
the gram sabha has assumed
significance as a basic unit of
self-governance but there area
lot of misconceptions about
its nature, and it is merely
understood as a “meeting of
village people.” However, in the
Scheduled Areas of Gadchiroli
district of Maharashtra, the gram
sabhas are demonstrating how
they could function as “bodies
corporate,” a fact recognised
only by a few of the state
panchayat acts. This has got a
great transformative potential
not just in ushering participatory
democracy but also in livelihood
generation, conservation and
management of natural resources.
The authors would like to thank Narendra
Singh Bais for drawing their attention to
the issues discussed in this article and
Keshav Gurnule of Srishti for supplying the
information on Kurkheda taluka.
Milind Bokil (msbokil@gmail.com) is a
writer and sociologist. Satish Gogulwar
(satish.arogyasathi@gmail.com) is a medical
practitioner and founder of Amhi Amchya
Arogyasathi.
Economic & Political Weekly EPW september 16, 2023
A
lthough the term “gram sabha”
was known to Indians for hun-
dreds of years, it received due rec-
ognition only after the ratification of the
73rd Amendment to the Constitution. Prior
to that, the Bombay Village Panchayats
Act, 1958, which was one of the pioneering
acts in this regard, had defined gram
sabha as “a body consisting of persons
registered in the electoral rolls relating
to village comprised within the area of
panchayat.”1 The 73rd Amendment Act
in 1992 retained this definition when it
stated that the “gram sabha means a
body consisting of persons registered in
the electoral rolls relating to a village
comprised within the area of Panchayat
at the village level.” As “panchayats” is a
state subject, the respective state gov-
ernments were asked to amend their
state laws in the light of the 73rd Amend-
ment. Most of the state governments
have retained the same definition.
The Concept of Gram Sabha
As stated in the preamble of the 73rd
Amendment, the panchayati raj institu-
tions (PRIs) had not been “able to acquire
the status and dignity of viable and re-
sponsive people’s bodies” and, hence, it
was necessary to “endow them with such
powers and authority as may be neces-
sary to enable them to function as units
of self-government.” It is known that the
73rd Amendment heralded the primacy
of the people over their representatives,
and this was being attempted through the
incorporation of the gram sabha at the
village level. In the schema of panchayati
raj, the panchayats at the lowest level
were considered as the governments
of the people but following the 73rd
Amendment, this status has been con-
ferred on the gram sabha.
In spite of such a clear definition of the
gram sabha, there are still considerable
vol lViii no 37
misconceptions and confusions about it.
First, although it is clearly stated that
the gram sabha is a “body” of persons, in
actual practice, it is construed as noth-
ing but a meeting or assembly (sabha) of
villagers. This mistake is made by both—
the common people as well as the policy-
makers and executives. Second, the
respective acts define the gram sabha as
being under the panchayat. It is well
known in our country that a panchayat
often consists of more than one village
and several small hamlets (called as
padas, wadis, tolas, pods, tandas, dhanis,
and so on). When there is only one village
in the panchayat, the present definition
of the gram sabha does not pose a
problem, but when there are multiple
units, the gram sabha of a panchayat
cannot simply come into existence. It is
not only operationally unviable but also
conceptually fallacious.
This deficiency in the panchayat acts
has been partially overcome in the
Scheduled Tribes and Other Traditional
Forest Dwellers (Recognition of Forest
Rights) Act (FRA), 2006 and the Panchayats
(Extension to Scheduled Areas) Act (PESA),
1996. The FRA is a union government legis-
lation, whereas the states had to modify
their respective panchayat acts in the
light of the PESA. The FRA defines that
“Gram Sabha” means a village assembly which
shall consist of all adult members of a village
and in case of states having no panchayats,
padas, tolas and other traditional village insti-
tutions and elected village committees, with full
and unrestricted participation of women.2
The most notable element of the FRA is
that the community forest rights (CFRs)
are bestowed on the gram sabha of that
particular village or habitation, and not
on the panchayat.
In the PESA, the basic definition of the
gram sabha is that of a village assembly
comprising all persons whose names
have been included in the electoral rolls
for the panchayat at the village level.
However, as for the composition, the gram
sabha is conceived at the village level.
For example, the PESA of Maharashtra
(modified in 2014) states that “All the
people included in the electoral rolls for
the Panchayats at village level shall be
35
PERSPECTIVES
the members of the gram sabha of that
village.”3 In PESA, there is a provision
for any habitation/hamlet or group of
habitations/hamlets to demand the status
of “village” and subsequently organise
the gram sabha of that village. Another
hallmark of the PESA is that the primacy
of people over their representatives is
recognised. The Maharashtra PESA clearly
states that: (i) the panchayat shall be
deemed to be the executive committee of
the gram sabha, and (ii) the panchayat
shall function under the general super-
intendence, control, and direction of the
gram sabha. As such, there have been
considerable deficiencies in the state-
level PESA formulations, but an attempt is
being made for the devolution of powers,
as per the aspiration of the Constitution,
at least in the Scheduled Areas. The
concept of gram sabha translates this
aspiration into practice.
The Concept of Body Corporate
In legal parlance, the term “body corpo-
rate” is broadly defined as a corporate
entity which has got a legal existence.
The Concise Law Dictionary: With Legal
Maxims, Latin Terms, and Words & Phrases
defines “Body” as “a number of indivi-
duals spoken of collectively, usually asso-
ciated for a common purpose, joined in a
certain cause or united by some com-
mon tie or occupation,” whereas “Body
Corporate” is called as one “because the
persons are made into a body politic and
are of [the] capacity to take, grant, etc, by
a particular name” (Aiyar 2009: 128–29).
Although the meaning of “corporation” is
implicit in this term, it is not considered
equivalent to an “incorporated company”
as many bodies corporate are not incor-
porated companies.
Conventionally, the panchayat acts
defined the “gram panchayat” as a body
corporate. For example, the Maharashtra
Village Panchayats Act (MVPA), 1959 under
the clause “Incorporation of panchayats”
specifies that
Every panchayat shall be a body corporate
by the name of “the Village Panchayat of ...,”
having perpetual succession and a common
seal, with the power to acquire and hold
property, both movable and immovable,
whether within or without the limits of the
village over which it has authority and may in
its corporate name sue and be sued.4
36
This is echoed by most of the other state
acts which have been reformulated after
the 73rd Amendment. This incorporation
is for all the three tiers, that is, village,
block or taluka, and district.
The incorporation of the panchayats
as bodies corporate not only makes
them legal entities but also enables them
to undertake a variety of functions
as detailed in the Eleventh Schedule
(Article 243G) annexed to the 73rd
Amendment. The panchayat, therefore,
does not just remain as a collective of
representatives but becomes an institu-
tion having a perpetual character. Rep-
resentatives may come and go but the
panchayat remains.
Gram Sabha as a Body Corporate
If the 73rd Amendment was an advance-
ment over the previous PRIs and if
the gram sabha was considered as the
government at the lowest level, then it
would have been natural and impera-
tive to incorporate the gram sabha as
a body corporate. However, this has
not uniformly happened. At present,
only Madhya Pradesh (MP) and Odisha
have been categorical in bestowing
this status on gram sabhas; other state
acts have either preferred to remain
silent or have taken ambiguous posi-
tions. The Madhya Pradesh Panchayat
Raj Avam Gram Swaraj Adhiniyam,
1993, while constituting and incorpo-
rating the gram sabha in Section 5A,
clearly specifies that
there shall be a Gram Sabha for every village.
The Gram Sabha shall be a body corporate
by the name specified therefor having per-
petual succession and a common seal and
shall by the said name sue and be sued and
shall subject to the provisions of this Act and
the rules made thereunder have power to
hold, acquire and dispose of any property
movable or immovable, to enter into con-
tract and to do all other things necessary
for the purpose of this Act.5
The provision of the MP Panchayat Raj
(Sanshodhan) Adhiniyam (No 3 of 2001)
inserting Section 5A providing for the
constitution of the gram sabha was chal-
lenged in the High Court of MP but was
constitutionally held valid vide Jankidas
Bairagi and Another v State of MP (2001).
In Odisha, the term “Gram Sasan” is
used synonymously with gram sabha.
september 16, 2023
The Orissa Grama Panchayats Act, 1964
in Section 4.2 says that
the Grama Sasan shall be a body corpo-
rate by the name of the Grama to which it
relates, having perpetual succession and
common seal, with power, subject to the
provisions of this Act and the rules made
thereunder, to acquire, hold and dispose
of property and to contract and may by the
said name sue and be sued.
In the next section, it goes a step further
and says,
the office and headquarters of the Grama
Sasan shall be situated within the limits of
the Grama and, unless otherwise ordered by
the state government, in the village bearing
the name of the Grama.6
This is significant because the local gov-
ernment is encouraged to hold property,
thereby signalling its corporate status.
In Himachal Pradesh, the govern-
ment is mandated to declare the “Sabha”
areas having a population of not less
than 1,000 and not more than 5,000 and
then establish a “Gram Sabha” for that
area. The norms for population could be
waived in exceptional circumstances like
difficult geographic location or the lack
of means of transport. Although the term
“body corporate” is not explicitly used,
the establishment of the “Gram Sabha” is
sufficiently indicative. The most signi-
ficant provision in the Himachal Pradesh
Panchayati Raj Act, 1994 is that of the
“Up-Gram Sabha.”7 The up-gram sabha
can be constituted for each ward of the
gram sabha and can feed in its recom-
mendations to the latter.
While some of these panchayat acts
have provided a suitable framework,
where is the practical evidence to demon-
strate that the gram sabhas are bodies
corporate? The article aims to answer this
question by studying the gram sabhas from
Gadchiroli district of Maharashtra.
Example of Mendha-Lekha
The whole issue of direct, participatory
democracy based on the principle of
consensus and heralding the idea of self-
governance was brought to the centre
stage by a small tribal village called
Mendha-Lekha in the Dhanora taluka of
Gadchiroli district. Even before the 73rd
Amendment Act, Mendha-Lekha coined
a very innovative slogan encompassing
vol lViii no 37 EPW Economic & Political Weekly

both representative as well as direct
democracy. The slogan was,
Delhi-Mumbai me hamari sarkar
Hamare gaon me, hum hi sarkar
(Our government in Delhi and Mumbai
we, the government in our village)
Mendha-Lekha worked steadfastly with
this ideal and became renowned in the
country for demonstrating the primacy
and efficacy of the gram sabha as the real
local government. The gram sabha made
a variety of rules and regulations in the
true tradition of self-governance (swaraj)
and developed its polity on the non-violent
principle of consensual decision-making.
Mendha-Lekha was also the first village
in the country to receive CFRs over the
1,809 hectares (ha) surrounding forest
under the FRA. The story and the heroic
struggle of this village to assert its self-
governance has been well-documented
(Bokil 2013) and has proven to be ex-
tremely enlightening for hundreds of
villages which followed its path and ac-
quired CFRs all over the country. Many
of the state governments also found this
to be the most effective strategy for over-
coming the deprivation of tribal commu-
nities and ushering in a peaceful process
of development. Following the footsteps
of Mendha-Lekha, Pachgaon village in
Chandrapur district also demonstrated
the efficacy of “gram sabha sarkar”
(Bokil 2018). Lately, the tribal villages in
the Melghat region of Maharashtra have
also demonstrated how they were en-
gaged in the quest for self-governance
after acquiring CFR s (Bokil 2021).
The significance of Mendha-Lekha lies
in the fact that it has very effectively
demonstrated how the gram sabha can
become a body corporate. After acquiring
forest rights, it obtained a permanent
account number (PAN) from the Income
Tax Department. Subsequently, it also
obtained a tax deduction and collection
account number (TAN) when it began to
sell its bamboo and received the proceeds
from the contractors. As it is known, TAN
is granted to all those entities which are
responsible for deducting tax at source
(also known as TDS) or which are
required to collect tax at source (also
known as TCS). Following the regime
prior to the goods and services tax (GST),
it had registered itself to pay the value
Economic & Political Weekly EPW september 16, 2023
added tax (VAT) and deposited significant
amounts into the state treasury. Needless
to mention, the gram sabha maintains
separate bank accounts for separate pur-
poses and has also instituted the “village
development fund.” Recognising the body
corporate nature of the gram sabha, the
government declared the gram sabha as
the “nodal agency” to implement its works
under the Mahatma Gandhi National Rural
Employment Guarantee Act (MGNREGA).8
Mendha-Lekha implemented this decision
so effectively that in November 2021, the
government recognised all the CFR hold-
ing gram sabhas in the state as nodal
agencies under the MGNREGA.9 Mendha-
Lekha also declared itself as a “Gramdani”
village under the Gramdan Act10 in
November 2013. It also established the
“Maha Sangh” (federation) of around 60
gram sabhas in Dhanora taluka in 2016,
effectively heralding the status of gram
sabhas as bodies corporate.
Gram Sabhas in Korchi and
Kurkheda Talukas
For understanding how the gram sabhas
were donning this new responsibility of
local self-governance, we undertook a
study of gram sabhas in Korchi and
Kurkheda talukas in Gadchiroli district.
Two voluntary organisations, namely
Amhi Amachya Arogyasathi (AAA) and
Srishti, which were closely associated with
the work at Mendha-Lekha, facilitated
the acquisition of CFR s in these talukas,
respectively. Following the example of
Dhanora taluka, they also mobilised the
“maha sangh/maha gram sabha” or fed-
eration of the gram sabhas in these two
talukas. The whole process of gram sab-
has’ empowerment and transformation
brought about in the region have been
well-documented in the pertinent liter-
ature (Sahu 2020; Pathak and Broome
et al 2022).
More than 90 gram sabhas in Korchi
and around 115 gram sabhas from
Kurkheda taluka have been endowed
with CFRs till 2022 (more than 1,400 gram
sabhas all over Gadchiroli). In the article,
however, only those gram sabhas which
were assisted by these two organisa-
tions were covered as part of the study.
Eighty-five gram sabhas in Korchi taluka,
for which the data was collected, have
vol lViii no 37
PERSPECTIVES
been granted CFR s over a total area
of 25,942 ha (average 305.2 ha each),
whereas 27 gram sabhas studied in Kur-
kheda taluka have been endowed with
10,052 ha (average 418.8 ha). The com-
bined population of 85 gram sabhas in
Korchi taluka was 29,419 (average 395),
distributed into 5,211 households (aver-
age 70 households per village). In Kur-
kheda taluka, the combined population
was 9,093 (average 350 per village),
distributed into 2,801 households (aver-
age 100 households). Clearly, these have
been small villages averaging between
70 and 100 households. Hence, the organi-
sation of the gram sabha as a unit of gov-
ernance and administration is eminently
viable. These gram sabhas are encour-
aged to follow the principle of consensus
as far as possible. Another important
feature is that women’s participation is
mandatory. While both the talukas come
under the Scheduled Area, the propor-
tion of Scheduled Tribes in Korchi taluka
(as per 2011 Census) was 73% and in
Kurkheda 54.4%. The principal tribal
community in this area is Gond, followed
by a small proportion of Kawar.
Among the various indicators signify-
ing the status of the body corporate, PAN
was obtained by all the 85 gram sabhas
in Korchi taluka (100%) and seven in
Kurkheda taluka (26%). While no gram
sabha in Korchi taluka obtained the TAN,
six gram sabhas in Kurkheda had obtained
it. The most distinctive indicator was
that of the gram sabha’s own office. In
Korchi, 10 gram sabhas (12%) had esta-
blished their own offices, whereas, in
Kurkheda, seven gram sabhas (26%)
had done so. As noted earlier, holding
immovable and movable property is a
clear characteristic of a body corporate.
Conducting statutory audits would be
another indicator of a corporation. In
Korchi, 19 gram sabhas (22%) had either
available at
Verma News Agency
1890 Railway Road
Hisar 125001
Haryana
Ph: 09813549996
37
PERSPECTIVES
conducted the audits or were in the pro-
cess of doing it, whereas in Kurkheda,
10 out of 27 gram sabhas (37%) had
conducted the audits.
The point that the Government of Maha-
rashtra recognised the CFR-endowed gram
sabhas as nodal agencies for MGNREGA
implementation, was mentioned in the
article. In Korchi taluka, 16 gram sabhas
(19%) and in Kurkheda, 10 gram sabhas
(37%) were thus recognised and their
names appeared on the official e-govern-
ance system (NREGAsoft). The Ministry
of Tribal Affairs started an innovative
scheme called “Van Dhan Development
Centres” in 2019 for encouraging the
collection and processing of non-timber
forest products (NTFPs). Under this
scheme, no gram sabha in Kurkheda but
eight gram sabhas in Korchi (9%) were
granted permission to establish such
centres in 2022. Under the Manav Vikas
Mission, a programme for empowering
gram sabhas by constructing storehouses/
godowns in the respective villages was
undertaken. Eight gram sabhas from
Korchi and three from Kurkehda bene-
fited from this facility. The gram sabha of
Andhali from Kurkheda taluka was also
granted a storehouse under the MGNREGA
funds. A programme of construction of
“Gotul” (traditional Gond dormitory)
was implemented by the tribal develop-
ment department (TDD) of Maharashtra
and seven gram sabhas from Korchi
were its recipients.
These gram sabhas have been united
into federations (maha sangh). The feder-
ation of gram sabhas is one of the most
novel political institutions born in the
21st century India. On the one hand, PRIs
are people’s institutions, but they are
also hierarchical structures, epitomising
representative democracy. On the other,
the federations of gram sabhas are egali-
tarian configurations epitomising direct,
participatory democracy. In the rest of
the country, such structures are unheard
of. These talukas in the Vidarbha region
have been the pioneering ones. The feder-
ations were necessitated to build unity
against unscrupulous contractors, and
to mobilise synergies in the collection
and sale of NTFPs. Both AAA and Srishti
put in considerable motivational inputs
to build the federations on a solid footing,
38
and, at present, they have been effec-
tively carrying out their mandate. All of
these gram sabhas have been involved in
the collection of tendu leaves (Diospyros
melanoxylon), and following the ideals
and practice of self-governance, they have
been doing it on their own. Previously,
the forest department used to auction
the patches of land containing tendu
plants, and private contractors would
collect tendu leaves by paying petty wag-
es to the tribal labourers. Since the pass-
ing of the FRA, the gram sabhas have
Table 1: Corporate Achievements of the Gram Sabhas in Korchi Federation
No Indicator
1 Number of labourers involved
2 Number of standard bags collected
3 Total wages paid (`)
4 Amount paid as royalty (`)
5 Total earnings (`)
Source: Information provided by the Korchi Maha Sangh.
been managing their forests and collect-
ing NTFPs, of which tendu and mahua
(Madhuca longifolia) have been the im-
portant ones. Collection of tendu leaves
is a major source of livelihood for the
tribal people in India. This is evident
from Table 1 in which the information
about corporate achievements from all
the 87 gram sabhas of Korchi federation
is presented.
The total earnings for all the four
years come to `27,58,55,703, that is, more
than `27.5 crore. Clearly, this is an indi-
cation of their corporate achievement. In
Korchi taluka, the federation had created
clusters, and the process of issuing tenders
and appointing contractors was carried
out by the clusters of gram sabhas. Indi-
vidual gram sabhas were signing contracts
on a judicial stamp paper and getting
them notarised. This model was followed
throughout Vidarbha, and various other
non-governmental organisations (NGOs)
also mobilised groups of gram sabhas to
collect and sell tendu leaves.
The TDD of the Government of Maha-
rashtra took a policy decision in 2018 to
financially support the CFR gram sabhas
in Gadchiroli and Chandrapur districts
to prepare forest conservation and deve-
lopment plans. Each gram sabha was to
be provided with a grant of `1,77,944
and 75 gram sabhas were thus selected
(24 in Kurkheda, 14 in Korchi, 34 in
september 16, 2023
Dhanora, and three in Chandrapur). Sub-
sequently, tripartite agreements were
signed in February 2019 between the
gram sabhas, the Tribal Research and
Training Institute (TRTI) of the Govern-
ment of Maharashtra and the partner
NGOs supporting this process. The ar-
rangement did not achieve the desired
result because of the apathetic treatment
by government agencies. Nevertheless,
the fact was underscored that the gov-
ernment recognised the gram sabhas as
legal entities.
Year
2017 2018 2019 2020
21,427 23,156 23,356 21,550
9,421 9,067 10,078 7,896
4,28,48,055 3,62,67,820 4,03,13,860 3,15,83,980
8,64,30,606 55,32,482 1,70,56,890 1,58.22,010
12,92,78,661 4,18,00,302 5,73,70,750 4,74,05,990
The district administration of Gadchiroli
launched a novel project called “Ekal:
Gram Sabha Empowerment Program” in
2022 for strengthening the gram sabhas
with CFRs through capacity building and
training activities related to minor forest
produce through people’s participation.
The newly formed Gondwana University
at Gadchiroli was the knowledge partner
in this endeavour and it was intended to
cover all the 1,438 gram sabhas in the
district endowed till date with CFRs. By
then, 5,110.07 sq km area of the district
was under CFRs out of the total forest area
of 9,902.8 sq km (51.6%). In Korchi taluka,
14 of the studied gram sabhas (16.5%) and
in Kurkheda 19 of the studied gram sabhas
(63.3%) had signed a “memorandum of
understanding” (MOU) with the District
Transformation Committee (headed by the
district collector), whereas, at the time
of the study, more than 300 gram sabhas
from 12 talukas had signed MOUs with
the district administration. This was yet
another proof of how the gram sabhas
proved themselves as legal entities.
A characteristic of a body corporate is
that it can sue and can be sued, that is, it
can take punitive action and the same can
be taken against it. The latter feature was
tragically realised by some of the gram
sabhas in the study area. The electrical
tower lines of the Raigarh–Pugalur–
Trichur high-voltage direct current (HVDC)
vol lViii no 37 EPW Economic & Political Weekly

transmission project (by the Power Grid
Corporation of India Limited–[PGCIL])
and the Raipur–Rajnandgaon–Warora
Transmission Limited (RRWTL by Adani
Transmission Limited) passed through
Korchi and Kurkheda talukas, and the
forests of more than 60 villages were
impacted by it. Of these, many villages
had secured the CFRs and they protested
against the loss of livelihoods due to the
felling of trees in their CFR area. Their
plea was considered legitimate and the
district collector of Gadchiroli decreed
in 2019 that due compensation should be
paid to the gram sabhas. Subsequently,
`8,38,88,544 were paid to 19 gram sabhas
by both the companies through the col-
lectorate. These were deposited into the
respective bank accounts of Korchi and
Kurkheda branches of Bank of India. The
gram sabhas spent a part of this com-
pensation towards forest-related activi-
ties such as tree-plantation, soil and wa-
ter conservation, village development,
and on COVID-19 relief. However, they
were met with a rude shock in April 2020
when they were told by the respective
banks that their bank accounts were fro-
zen following an order by the district col-
lector. The (successive) district collector
had issued an order on 18 March 2020
(Ref No 158/2020) to the two branch
managers that the accounts of the gram
sabhas should be completely frozen. No
reason was cited except stating that
these amounts were not received by the
true gram sabhas. At that time, COVID-19
was playing havoc and tendu season was
in full swing. This decision, as if from
the British raj, put the people and the
gram sabhas in great distress.
The gram sabhas protested against
this decision as no prior intimation was
given or no inquiry was conducted. The
issue was widely publicised in the media
and both the Korchi and Kurkheda federa-
tions appealed to the TDD. It issued a
letter to the collector of Gadchiroli on
26 May 2020 instructing them to allow
the gram sabhas to operate their accounts.
The collector let the gram sabhas operate
the account but froze the money received
as compensation. Till the time of the
article, that is, February 2023, the status
quo was maintained, although the col-
lector had been transferred.
Economic & Political Weekly EPW september 16, 2023
Whether the collector with a colonial
mentality had the right to freeze the
accounts of the gram sabhas is an issue
best left to the constitutional and legal
experts. However, the whole incident de
facto proved that the gram sabhas were
legal entities, that is, bodies corporate.
In Conclusion
The discussion clearly demonstrates that
the “gram sabhas” are bodies corporate
and this is emerging as a new political
configuration. This has got far-reaching,
positive implications for our republic and
democracy. Gram sabhas are not just an
assembly of people, it is an institution
and a natural, perpetual one. It comes
into existence wherever people exist. It
not only epitomises direct, participatory
democracy but also helps people to
establish control over their day-to-day
life. At present, this has become possible
because of the FRA and the PESA, but this
should happen through the panchayat acts
as well. Only MP has explicitly recognised
this potential, but this example must be
followed by other states too. If the gram
sabhas are incorporated as bodies corpo-
rate, then they could become the engines
for self-governance, livelihood generation,
and conservation of biodiversity, among
other functions. This is an issue of policy
engagement and the activists and NGOs
should persuade the respective state
governments not only to recognise the
body corporate status of gram sabhas but
also hand over the surrounding natural
resources to the gram sabha. This should
not remain restricted only to Scheduled
Areas. Following the mandate of the
73rd Amendment, all the gram sabhas
in the country should be endowed with
productive natural resources, be it land,
forest, lakes, grazing pastures or fisheries.
This would not only build capital from
below but also energise the people’s
genius, a task left unattended since inde-
pendence. The panchayati raj became
ineffective because it could not remove the
maladies of representative democracy.
It is high time that the direct, partici-
patory democracy should be ushered in.
It would not only ameliorate the depri-
vation and discontent in rural and tribal
areas but also realise the aspiration of
the Constitution.
vol lViii no 37
PERSPECTIVES
Notes
1 The various panchayat acts are available at
www.panchayat.gov.in.
2 See Chapter 1, Article 2(g) of the FRA, https://
forestrights.nic.in/doc/Act.pdf.
3 See Chapter 2, Article 3 of the PESA, https://
rajbhavan-maharashtra.gov.in/en/notice/pe-
sa-panchayats-extension-to-scheduled-areas-
act-1996/.
4 See Chapter II, Article 9 of the MVPA, https://
lj.maharashtra.gov.in/Site/Upload/Acts/
H-1742%20THE%20%20MAHARASHTRA%20
%20VILLAGE%20%20%20PANCHAYATS%20
%20ACT.pdf.
5 See https://www.panchayatgyan.gov.in/docu-
ments/448457/0/MP+Panchayat+Act+1993.
pdf/98da7215-9650-5fb6-78cc-04b7a307877b?-
t=1633270922901.
6 See https://panchayat.odisha.gov.in/sites/de-
fault/files/2021-05/ORISSA%20GP%20ACT%20
1964.pdf.
7 See https://himachal.nic.in/WriteReadData/
l892s/196_l892s/THE%20HIMACHAL%20
PRADESH%20PANCHAYATI%20RAJ%20ACT,
%201994(Final)-45689723.pdf.
8 See general resolution dated 18 April 2012/
Planning Department/MRE/2012/25/No 2012-
0423105749449001.
9 See general resolution No 202111301649324316.
10 After the Bhoodan–Gramdan movement led by
Vinoba Bhave, many state governments have
enacted Gramdan Acts whereby the villagers
can dissolve their private property in land and
hold it in common.
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Aiyar, P Ramanatha (ed) (2009): Concise Law Dic-
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Bokil, Milind (2013): Kahani Mendha Gaon Ki, New
Delhi: National Book Trust.
— (2018): Kahani Pachgavchi, Pune: Sadhana
Prakashan.
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Pathak Broome, N, S Bajpai, M Shende, M Raut,
with G K Jamkatan, I Katenge, S Halami,
Z Halami, S Deshmukh and S Gogulwar (2022):
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ment, and Alternative Transformation in Korchi
Taluka, Maharashtra,” Pune: Kalpavriksh with
Maha Gram Sabha, Korchi and Amhi Amchya
Arogyasathi, Kurkheda.
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30-265/25/19, Flat No. S-1,
Sai Enclave, Geetha Nagar,
Near Sai Vidya Vihar,
RK Puram Post, Malkajgiri,
Hyderabad 500 056,
Telangana
9908074973
39
SPECIAL ARTICLE
The Effect of Information Technology on
Banking Efficiency
Ahmad Shadab Khan, Abdulla
The effect of information technology in the Indian
banking sector is analysed using the stochastic frontier
production model to estimate technical efficiency
during 2002–18. The evidence suggests that the
adoption of IT has a positive and significant impact on
the performance of banks. On average, nationalised and
new private sector banks are more efficient than foreign
ones, while old private sector banks have fallen back in
efficiency. While a higher number of bank employees
adversely impacts efficiency, greater capital positively
impacts banking performance. It is also found that IT-led
performance is a promising strategy for a multiplier
effect on banking performance.
Ahmad Shadab Khan (zuhaib4khan@gmail.com) teaches at the Jamia
Millia Islamia University, New Delhi. Abdulla (abdullahalig007@gmail.
com) is a researcher at the ICAR-National Institute of Agricultural
Economics and Policy Research, New Delhi.
40
I
nformation technology (IT) has proven to be a valuable and
powerful tool for fostering development, growth, innova-
tion, and competitiveness. In an increasingly global envi-
ronment where time and distance are no longer constraints,
developing nations worldwide need to get connected and join
the globally networked community. Contrarily, they may fall
further behind the developed world. There is mounting evi-
dence that IT is an efficient tool when used as part of an overall
development strategy coupled with partnerships between
businesses, governments, and civil society (World Bank 2003).
The global economy has undergone a significant technological
transition in recent years due to the IT saga. Technological ad-
vancements augment per capita income rises by reducing the
quantum of inputs per unit of output for a given amount of
output. Technological change in an economy, thus, refers to
changes in the input–output relations of production activities
(Mathur 1963). As an economy progresses from lower to high-
er development junctures, there is a shift from simpler to more
modern and sophisticated production techniques.
Entire segments in the modern economy have made massive
investments in IT over the last two decades. The financial sec-
tor is one of the main areas to gain renewed attention, within
which the banking sector has become the cynosure of policy-
makers and academics alike. IT in banking infrastructures has
had implications on several nations’ economic development in
the developing world. It was one of the first sectors to adopt IT
back in the 1960s, thereafter evolving from a highly protected
government agency that only lends and borrows to an autono-
mous sector with a wide range of services, resulting in signifi-
cant improvements in services, support, and competencies. It
is one of the industries whose products have a high level of in-
formation content and whose processes have a high level of
information intensity (Bilderbeek and Buitelaar 1992).
IT and Banking Efficiency
The Indian banking environment has become more compati-
ble with international financial system standards. With inten-
sive competition from domestic and international players and
explosive growth in IT, commercial banks’ business has trans-
formed significantly. In order to thrive and adapt to the changing
environment, banks have focused on identifying the factors of
success to generate better financial performance. Instances of
poor performance are mainly outcomes of inefficient utilisa-
tion of resources, sluggishness at branches, and tolerance of
waste. The task of dealing with banking reforms would entail
September 16, 2023 vol lViii no 37 EPW Economic & Political Weekly

moving from low profitability, high working cost, and high
spread, to being increasingly proficient, competitive, and pro-
ductive (Jalan 1999). Recently, significant and considerable ef-
forts have been made to map the performance of banking sec-
tors. India has one of the fastest evolving economies globally
with one of the most significant public sector banking systems.
The Indian banking sector consists of 13,80,461 employees as
of March 2020 (RBI 2020a). The foundation of India’s finance-led
evolution and progress is the huge network of approximately
1,19,912 commercial branches of scheduled commercial banks
(SCBs) as of June 2020 nationwide (RBI 2020b).
Banks that operate in different nations often face quite
diverse managerial and supervisory conditions that might
affect their performance and productivity. An increase in the
number of bank branches decreases the operating cost of
European banks (Casu and Molyneux 2003). Some studies on the
efficiency of banks in developing versus developed countries
recommended the privatisation of the banking system (Bonac-
corsi di Patti and Hardy 2005; Kao and Liu 2004; Williams and
Nguyen 2005). However, in India, the public sector banks per-
formed better than others, and these banks enhanced their ef-
ficiency in the liberalised environment in the pre-reform era
(Bhattacharyya et al 1997). Different efficiency measures of
banks through various ownerships during the post-reform pe-
riod conclude that public sector banks performed profoundly
better than private sector banks on revenue maximisation cri-
teria (Das et al 2005; Mohan and Ray 2004). The private banks
displayed lower cost-efficiency than public sector banks during
1986–2003 (Sensarma 2006). Substantial literature, including
Bhattacharyya et al (1997), Das et al (2005), Mohan and Ray
(2004), Sahoo et al (2007), Sathye (2003), and Yue (1992 have
examined the technical efficiencies in the banking sector. In
most studies, it was evident that a critical source of performance
problems in Indian banks is inefficiency. On an average, public
sector banks are expected to have fewer non-performing loans
and high levels of technical efficiency (Das and Ghosh 2006;
Kumbhakar and Sarkar 2005).
The role of IT in the performance of an organisation is still a
paradox. Since technology is a tool for efficiency rather than a
solution, it entails organisational capabilities, planning, entre-
preneurship, and managerial skills to make it work. In the age
of competition, there is growing scrutiny over the effective-
ness of IT in enhancing organisational performance. India
offers a compelling context to examine the same, given its
unique and extensive history of social banking experiments
and adoption of IT. In this paper, we have tried to demonstrate
the adequate incorporation of quality using the stochastic
frontier approach and to estimate the efficiency of and effect
of IT on the Indian banking sector during 2002–18.
Database and Methodology
The paper utilised an unbalanced panel data of 71 SCBs, com-
prising 20 nationalised banks, eight State Bank of India and
associates, 12 old private sector banks, seven new private
sector banks, and 24 foreign banks over the span of 2002–18.
The required information was accessed from the following
Economic & Political Weekly EPW September 16, 2023 vol lViii no 37
SPECIAL ARTICLE
sources: PROWESS 2.5, a corporate database developed by the
Centre for Monitoring Indian Economy. The balance sheets of
banks have been assessed from the respective banks’ web-
sites. Various issues of the statistical tables relating to banks
in India have been assessed from the Reserve Bank of India
(RBI). Various issues of the “Performance Highlights of Banks”
have been assessed from the yearly publication of the
Indian Banks’ Association and the Basic Statistical Returns of
SCBs from the RBI.
Several studies (Deyoung 1993; Minh To and Tripe 2002;
Nippani and Green 2002) use return on assets to measure the
performance of banks. Researchers have also focused on the
determinants of the cost-efficiency of banks (Bhattacharyya et
al 1997), however, cost-based measures, such as requirement
of input price data, have some significant drawbacks. There-
fore, this paper has utilised the stochastic frontier production
function proposed by Aigner et al (1977) by defining the distur-
bance term as the sum of symmetric normal and negative with
an error term with two parts, one for random effects and an-
other for technical inefficiency. Most of the literature used
two-stage estimation methods, first estimating frontier pro-
duction function and obtaining predictive efficiencies of firms,
and then estimating the inefficiency effect model in the sec-
ond stage to determine the factors affecting efficiencies among
firms (Kumbhakar 1991; Reifschneider and Stevenson 1991).
We have utilised the time-varying stochastic production
frontier, initially proposed by Aigner et al (1977) in trans log
form as:
ͳ
Ž›୧୲ ൌ Ƚ଴ ൅ ෍ Ƚ୨ Žš୨୧୲ ൅ Ƚ୲ – ൅ ෍ ෍ Ⱦ୨୪ ൫Žš୨୧୲ ൯ ሺŽš୪୧୲ ሻ
ʹ
୨ ୨ ୪
ͳ
൅ Ⱦ୲୲ – ୧୲ ଶ ൅ ෍ –Ⱦ୲୨ Žš୨୧୲ ൅ ୧୲ െ ୧୲
ʹ
୨
where, yit is the output of the bank, i= 1, 2, 3, 4 …., N represents
the number of banks, and j is defined as deposit, borrowing,
total expenses, and net fixed assets. t= 1, 2, 3, 4…, T repre-
sents time of the study and the technical efficiency of ith bank
at tth time. Vit is a random variable assumed to be N⁓(0,σ V2),
and distributed independently of the Uit, which has the non-
negative truncation of the normal distribution, N⁓ (µ, σu2). TEit is
defined as the ratio of the actual output to the potential output
determined by the production frontier, which can be written
as follows: TEit = exp (-Uit).
The technical efficiency effect model is explained as follows:
ɔ୧୲  ൌ Յ଴  ൅ Յଵ  ୧୲ ൅ Յଶ ƒ„‘—”୧୲ ൅ Յଷ ƒ’‹–ƒŽ ൅ Յସ ‡–”‘୧୲
൅ Յହ ”„ƒ୧୲ ൅ Յ଺ ‡‹”„ƒ୧୲  ൅ Յ଻ —”ƒŽ୧୲ ൅ ɘ୧୲ 
where, ITit represents the IT index of ith Bank at tth time measured
in years.1 Labourit represents the total number of employees
working in ith bank at tth time measured in years. Capitalit rep-
resents total capital measured in ` of ith bank at tth time mea-
sured in years. Metroit represents the total number of metropoli-
tan branches of ith bank at tth time measured in years. Urbanit
represents the number of urban branches of ith bank at tth time
measured in years. Semi urbanit represents the total number of
41
SPECIAL ARTICLE

semi-urban branches of ith bank at tth time measured in years. with the output, that is, if total expenses and net fi xed assets
Ruralit represents the total number of rural branches of ith are separately increased by 1%, keeping all other variables
bank at tth time measured in years. t represents a time trend to constant, the output will decrease by 0.04% and 0.02%,
account for the change of inefficiency effect over time. ℵi rep- respectively. However, the coefficients of total expenses and
resents the parameters to be estimated and ωit represents the net fixed assets are not found to be statistically significant. It
white noise error. is clear from this study that deposits have higher elasticity
than any other variable, which is also justified by the sum-
Empirical Findings mary statistics table.
Presently, 135 SCBs are operational in India, and in this study, The positive coefficient on the linear time trend (t) sug-
we have utilised an unbalanced panel of 71 of them. Table 1 gests shifting the efficiency curve with higher efficiency on
provides a summary of the descriptive statistics of the output the frontier through time. The test results also show that the
and input variables used in the study. An acceptable amount of sum of the input elasticity is less than unity, implying that
variability has been observed in the variables. the production function exhibits decreasing returns to scale
Likelihood ratio tests were performed to examine which (Bhaumik et al 2012).
model is best for the present analysis and the results are reported A separate regression has been applied to evaluate the effect
in Table 2. The results of the first null hypothesis, H0: β0=0, are of IT and other determinants on predicted efficiency scores.
rejected as the test statistic value is 718.06. Therefore, it is The predicted score of technical (in)efficiency ranges between
specified that the constant term is appropriate for the model. zero and one; it clearly indicates censored data on left and
The second null hypothesis, H0: βit=0, that the production right. In such a circumstance, censored regression, especially
function does not have any impact with respect to technological tobit regression analysis, is necessary to obtain an unbiased
improvements is rejected (as the test statistic value is 696.42). result; simple regression analysis cannot fulfil this require-
Hence, the technical change terms are included in the model. ment (Lovell 1993). The tobit regression approach is also com-
The third null hypothesis, H0: βij=0, that there is no substitu- monly used by scholars (Abdulla and Kumar 2020; Bhandari
tion effect between the input variables is strongly rejected and Ray 2012; Joshi and Singh 2012; Khan and Abdulla 2019;
(test statistic value is 1,111.98), and the cross product must be Kumar and Abdulla 2020; Zheng et al 1998) and hence, is pre-
included in the model. The fourth null hypothesis, H0:γ=µ=0, ferred over simple regression.
that technical efficiency effects have a half-normal distribu- Table 4 (p 43) illustrates the maximum likelihood estimate of
tion is again rejected since the test statistic is 15.50. Therefore, the factors that affect the efficiency of banks. The coefficient of
the truncated (at zero) normal distribution is preferred to the IT index is positive and statistically significant, inferring that
half-normal distribution. Lastly, H0: γ=0 is also rejected with a Table 3: Maximum Likelihood Estimates of Production Frontier Model
test statistic of 15.50, confirming that the time-varying model Variables Parameter Coefficient z-values
is better than the time-invariant model. Deposit βl 0.50*** 9.16
Table 3 represents the estimates of the stochastic frontier Borrowing βk 0.35*** 11.99
analysis, and there are interrelationships between the differ- Total expenses βm -0.04 -0.7
ent input variables in the trans-log function. The deposits and
Net fixed assets βn -0.02 -0.47
borrowings are positive and statistically significant, inferring
Time βt 0.04** 2.87
a direct relationship with the output variable. The coefficients
Deposit*Borrowing βlk -0.09*** -20.09
of variables in the production function represent the share
of inputs or elasticities concerning inputs. Whereas total Deposit*Total expenses βlm 0.03*** 5.03

expenses and net fixed assets have an inverse relationship Deposit* Net fixed assets βln 0.05*** 8.22

Table 1: Descriptive Statistics (at Constant Price) Borrowing*Total expenses βkm 0.07*** 10.76
Variable Mean Standard Deviation Min Max Borrowing*Net fixed assets βkn 0.01 0.72
Output 858.07 1,756.53 0.08 25,000.00 Total expenses*Net fixed assets βmn -0.06*** -8.95
Deposit 769.45 1,433.27 0.04 18,400.00
Time *Time βtt -0.01*** -4.83
Borrowing 78.95 207.33 0.00 2,448.00
Total expenses 78.59 146.61 0.08 1,904.00 Time* Deposit βtl 0.02*** 6.87
Net fixed assets 8.01 16.82 0.00 300.65 Time* Borrowing βtk 0.01*** 6.12
Source: Authors’ calculation.
Time* Total expenses βtm -0.03*** -6.98
Table 2: Likelihood Ratio Test
Time* Net fixed assets βtn -0.01** -3.06
Null Hypothesis Degrees of Statistic Test Critical Value Decision
Freedom at 5% Constant β0 2.54*** 9.74
β0=0 1 -557.62 2.71 Reject H0 Mu(Inistat) µ 458.08 0.04
βtl=βtk=βtm= βtn =0 4 -696.42 8.76 Reject H0 Constant -5,255.73 -0.04
βlk=βlm=βln= βkm=βkn=βmn=0 6 -1,111.98 11.91 Reject H0 Gamma (Yeart) γ 0.01 0.12
γ=µ=0 2 22.86 5.14 Reject H0 Usigmas σu 6.98 0.25
γ=0 1 22.86 2.71 Reject H0 Vsigmas σv -3.51*** -76.2
Source:The critical values to compare test statistics are taken from Kodde and Palm (1986: 1246). Source: Authors’ calculation. *, **, *** indicate significance at 1%, 5%, and 10%, respectively.

42 September 16, 2023 vol lViii no 37 EPW Economic & Political Weekly
 SPECIAL ARTICLE

there exists a direct relationship between IT and the technical possible options to improve Table 5: Temporal Average
efficiency of banks in India (Berger and Humphrey 1997; Mittal their financial performance. Efficiency of Banks in India, 2002–18
Year Mean Standard Coefficient
and Dhingra 2007; Roy and Thangaraj 2020; Sharma 2012). It Reducing transaction costs, Efficiency Deviation of Variation
implies that banks need to invest optimally in IT infrastructure better customer service, and 2002 0.86 0.14 15.76
to increase their performance. A greater number of ATMs and intensifying competition by re- 2003 0.86 0.14 15.64
their usage, and greater issuance of debit and credit cards, further moving stringent entry and 2004 0.88 0.11 12.22
2005 0.88 0.12 13.30
reduces the transaction cost, thus enhancing banks’ efficiency. branch restrictions in Indian 2006 0.88 0.10 10.97
Table 4: Estimates of the Determinants of Bank Efficiency banking seem to have positively 2007 0.89 0.11 12.88
Technical Efficiency Coefficient Standard Error t-value Significance affected the banks’ overall per- 2008 0.88 0.11 12.93
IT index 0.004 0.001 6.48 *** formance (Reddy and Nirmala 2009 0.90 0.07 8.00
Number of employees -0.012 0.001 -13.26 *** 2013). However, over the study 2010 0.89 0.10 11.72
2011 0.88 0.12 13.58
Total capital 0.001 0.000 3.70 *** period, on average, there is a 2012 0.88 0.12 13.45
Metropolitan 0.011 0.001 8.06 ***
substantial level of operational 2013 0.89 0.09 10.50
Urban 0.001 0.001 0.39
Semi-urban 0.003 0.001 2.65 ***
inefficiency in Indian banks. 2014 0.88 0.10 11.11

Rural 0.001 0.001
Constant 0.949 0.006
sigma_u 0.029 0.003
sigma_v 0.002 0.000
Source: Authors’ calculation. *, **, *** indicate significance at 1%, 5%, and 10%, respectively.
As per our prior expectation, the number of employees is
negatively statistically significant, establishing an inverse
relationship with the efficiency level of banks. The results
indicate that banks should improve the current employee
recruitment, training, and deployment procedures. The criti-
cal problems include overstaffing, poor productivity (in terms
of managerial performance, customershandling, etc), and a
high age profile of staff (Campbell 1993; Cressey and Scott
1992; Quintas 1986). Restrictive staff deployment practices
have exacerbated the cost of overstaffing. Another source of
concern is the lack of skill and motivation. Foreign exchange,
treasury management, and other advanced skills are not
significant enough to sustainably generate business in these
areas (RBI 2005).
Total capital has a direct and significant relationship with
banking performance. It indicates that as the total capital in-
creases, it will lead to the expansion of banking infrastruc-
ture to all areas, including number of branches and ATMs,
and to the employment of the best and latest technology that
improves the overall performance of banks.
Among different branch locations, metropolitan branches
have the highest and most significant positive impact on the
efficiency of banks. The branches located in big cities outperform
urban, semi-urban, and rural branches as they have the best
infrastructure and utilise the best of technology. Besides, they
provide almost all sorts of financial services, such as demat ac-
counts, forex services, currency exchange, traveller’s cheques,
etc. In contrast, branches located elsewhere lack even basic infra-
structure, such as uninterrupted power supply and constant
network speed. These branches also have to deal with high
numbers of low-value transactions, which further increase
their cost per transaction and thus reduce efficiency.
The yearly summary statistics of means, standard deviations,
and coefficients of variation of the technical efficiency of
Indian banks over the period 2002–18 are depicted in Table 5.
The efficient implementation of IT and banking reforms in
India has given banks a free and novel way of exploring all
Economic & Political Weekly EPW September 16, 2023
1.92 * The average technical ineffi- 2015 0.89 0.10 10.85
2016 0.89 0.09 10.01
170.55 *** ciency of Indian commercial
2017 0.88 0.10 11.80
9.12 *** banks is 0.11, implying that an 2018 0.89 0.10 11.29
24.25 *** average Indian bank could in- Average 0.89 0.11 12.35
crease its efficiency by 11% if it Source: Authors’ calculation.
seeks to match its performance with that of the best-practice
banks sans investing additional resources.
In 2002, the mean technical score for banks was 0.86,
which remained the same in the subsequent year, increasing
to 0.88 in 2004. One of the reasons for this improvement was
the effect of the Securitisation and Reconstruction of Finan-
cial Assets and Enforcement of Security Interest Act, 2002,
which was facilitated for banks’ rapid recovery of non-per-
forming assets (NPA s). In 2003–04, electronic payment
systems were initiated in India, alongside the RBI’s imple-
mentation of the real-time gross settlement system, and the
Institute for Development and Research in Banking Techno-
logy, Hyderabad’s setting up of a national financial switch to
facilitate apex-level connectivity of other switches estab-
lished by banks for the better operation of ATMs nationwide
(RBI 2005). This further reduced banks’ cost of transactions
and increased their efficiency.
The mean efficiency scores remain almost constant for
2004–08. Then again, in 2009, the efficiency score increased
to 0.90 from 0.88. From 2004–08, many banks began setting
up core banking solutions, along with intensive attention to
networking. During this time, most banks have worked on
their own corporate networks to facilitate inter-branch and
branch-controlling office communication electronically, while
inter-bank and inter-city communication was carried out
through the Indian financial network (RBI 2005). The banks
have also incorporated various IT-enabled banking systems
such as magnetic ink character recognition and cheque trun-
cation system. These technological developments have result-
ed in better customer service and enhanced output, thereby
increasing efficiency.
The average efficiency scores of banks have seen a down-
fall from 0.90 to 0.88 for 2009–12, primarily due to the after-
effects of the global financial recession. Despite dealing with
challenging and stressful NPA conditions from 2013 to 2018,
the efficiency scores of Indian banks remained almost stag-
nant at 0.89. That is attributed to the gains emanated by
vol lViii no 37 43
SPECIAL ARTICLE

banks due to technology diffusion in banking systems, which
cancels out the negative impacts of NPA s.
Performance across Bank Groups
Table 6 depicts the bank group-specific overall average techni-
cal efficiency and standard deviation. With a standard devia-
tion of 0.022, the nationalised banks have detected minimum
variations in the mean Table 6: Mean and Standard Deviation of
technical efficiency. Almost Bank Group-specific Technical Efficiency
the same degree of fluctu- Ownership Mean Standard
Technical Deviation
ation (that is, about a Efficiency
standard deviation of 0.05) Nationalised banks 0.924 0.022
in the mean technical effi- Old private sector banks 0.871 0.052
ciency has been witnessed New private sector banks 0.927 0.049
in the old and new private Foreign banks 0.817 0.167
sector banks. The foreign Source: Authors’ calculation.
bank group’s mean technical efficiency has shown maximum
variation among all the bank groups.
It is specified that the new private sector banks are the best
performing group with a mean technical efficiency of 0.93,
closely followed by the nationalised banks with 0.92. Through-
out the study period, the technical efficiency of the old private
sector (0.87) and foreign (0.82) banks was consistently lower
than the sectoral average technical efficiency of Indian banks.
The foreign banks’ group is found to be the least efficient of all.
A certain level of inefficiency has been witnessed in the
Indian banking system. For instance, the average technical in-
efficiency of nationalised banks is 0.076, indicating that an
average nationalised bank could increase its efficiency by 7.6%
if it has to match its performance with that of the best-practice
bank. Likewise, the average technical inefficiency score for old
private sector is 0.129, new private sector 0.073, and foreign
banks is 0.183. On an average, an old private sector bank could
improve its efficiency by 12.9%, whereas an average new
private sector and foreign bank could improve their perfor-
mance by 7.3% and 18.3%, respectively, if they were to match
the best-practice bank.
During the study period under consideration, the new
private sector banks were found to be the most efficient bank
group, closely followed by nationalised banks. Both of these
groups outperform the sectoral average, whereas old private
sector and foreign banks performed below the sectoral aver-
age. The foreign bank’s group emerged as the least efficient of
all. The new private sector banks’ enhanced performance
over other groups could be that despite being subjected to
more regulations than foreign banks, their primary goal was
clearly different. The better performance of new private sec-
tor banks corresponds to competent management and opti-
mum utilisation of IT. They operate for the sole purpose of
making a profit and focus on urban-oriented operations un-
der corporate management. In contrast to high-risk and tar-
get-oriented low-return loans to priority sector loans, these
banks typically give loans to corporate and industrial pro-
jects, which give higher returns. These banks responded
swiftly to modern banking technology, introducing core
banking services such as online banking, mobile banking,
and extending banking hours to make it more convenient for
customers, particularly working-class people who can only
get to banks after regular office hours, all of which may have
contributed to their improved performance.
Nationalised banks’ superior performance over other groups,
except for new private sector banks, shows that they would

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44 September 16, 2023 vol lViii no 37 EPW Economic & Political Weekly

have found their tempo in business and competed with other
groups, significantly lowering inefficiencies in their operations.
They could have provided interest income-oriented services
and many non-interest income-related services through its
substantial branch network. Furthermore, because these banks
are public sector entities with a vast branch network, they
have been expected to manage a variety of fee and commis-
sion-related transactions by statutory organisations, business-
es, educational institutions, and private entities. This could
have given them an advantage over the other groups in terms
of generating more revenue. Furthermore, obtaining the
requisite financial capital through the stock market entails risk
and is costly. When these banks want capital, they are accus-
tomed to receiving it from the government. As a result, they
are not fully reliant on the stock market for money, allowing
them to have comparatively cheaper funds, lend more, and
improve banking operations, perhaps leading to increased
profits. Furthermore, nationalised banks have altered their
personnel recruitment processes, adopted and upgraded
advanced banking technology to provide better and faster cus-
tomer access to services, develop new products and services,
and benefit from the public trust in their operations, all of which
may have contributed to the improvement of their operations
and improved prospects for better performance (Reddy and
Nirmala 2013) specified by Battese and Coelli (1995).
The old private sector banks’ comparatively poor perfor-
mance may be related to their initial challenges and struggles
to transition their bank structure and operations from heavily
regulated government controls to market-oriented and com-
petitive conditions. As domestic banks were closer to regula-
tory restrictions than international banks, they experienced a
rise and fall in efficiency as they adjusted their business struc-
tures to the changing economic climate. In some cases, these
banks were asked to meet the governments’ social objectives,
such as opening zero balance accounts and providing subsi-
dised or low-interest loans to small and medium enterprises
and agricultural and allied sectors, potentially impacting their
interest margins. They also lacked competent management,
failed to integrate IT adequately in their banking operations,
and were sluggish to respond to current banking technology,
thereby contributing to low efficiency.
The relatively poor performance of foreign banks as com-
pared to other bank groups is due to their employment of
high-cost business strategies. The salaries paid to employees
of international banks, for example, are many times more than
those paid to employees of state-owned and local banks. Foreign
banks’ lower efficiency may also be for their role as agents of
parent banks seeking to meet the needs of their host country’s
financial transactions, and operating mostly in metros and cities,
not rural areas. In doing so, these institutions focus on offering
highly expensive and volatile real estate loans while also pro-
viding low-cost retail loans to capture retail markets, which
may have harmed their performance. These banks also have a
lower volume of demand deposits than domestic banks, which
are regarded as a less expensive source of financing. This
might have resulted in greater interest expenses, lowering
Economic & Political Weekly EPW September 16, 2023 vol lViii no 37
SPECIAL ARTICLE
their efficiency. Foreign banks’ poor performance reflects that,
unlike Indian public and private banks, they did not benefit
from well-established business structures and infrastructures.
These foreign banks’ poor performance was exacerbated by
their extensive use of expensive technology and enormous
expenditures in an attempt to push retail loans to expand their
asset portfolio (Sensarma 2006).
Conclusions and Policy Implications
This paper evaluates the impact of IT on the efficiency of the
Indian banking industry. A significant difference has been
observed in the efficiency level of banks concerning IT. At the
outset, the result shows that the sum of input elasticities is less
than unity, implying that the production function exhibits
decreasing returns to scale. The IT index has a significant posi-
tive effect on the efficiency of banks. It has been suggested
that banks need to invest optimally in the IT infrastructure to
increase their performance. More ATMs and their usage, and
more issuance of debit and credit cards could further reduce
the cost of transactions, enhancing banks’ efficiency. The de-
posits and borrowings have a direct relationship with output,
whereas the total expenses and net fixed assets have an in-
verse relationship with output.
It is also evident from this paper that the deposit has greater
elasticity than any other variable, which is also justified by the
summary statistics table. There is an increasing trend observed
in the efficiency level of banks over time. In 2002, the efficiency
level was 86%, which gradually increased and reached 89% by
the end of 2018. It is found that the new private sector banks are
the best performing bank group (with mean technical efficiency
of 0.93) closely followed by nationalised banks (with mean
technical efficiency of 0.92). The old private sector banks (with
mean technical efficiency of 0.87) and foreign banks (with
mean technical efficiency of 0.82) have comparatively lower ef-
ficiency. As expected, the number of employees has an inverse
relationship with the efficiency level of banks, whereas total
capital has a direct and significant relationship with banking
performance. Metropolitan branches among branch locations
have a significant positive impact on the efficiency of banks.
It is not merely spending more on IT that translates into
higher profitability, but its strong management and integra-
tion into business functions. The good governance of IT is a
need of the time. The critical problems impacting banking ef-
ficiency include overstaffing, poor productivity (in terms of
managerial performance, customers’ handling, etc), and a
high age profile. Restrictive staff deployment practices have
exacerbated the cost of overstaffing, which could be overcome
by adopting innovative technology in the banking sector.
Overall, the study concludes that in the banking industry,
performance is a positive function of IT. It also confirms that
the significant contribution of technology to banks’ perfor-
mance has a differential behaviour. Yet, IT-led performance is
a promising strategy for many banks to accelerate the develop-
ment process. Slight improvements in technology budgeting
may go a far way and can have a multiplier effect on the
performance of banking.
45
SPECIAL ARTICLE
Note
1 This index has been calculated by applying the
principal component analysis (PCA) and the
variables used are number of automated teller
machines (ATMs) per branch, number of debit
cards per branch, and number of credit cards
per branch.
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vol lViii no 37 EPW Economic & Political Weekly
SPECIAL ARTICLE
Institutional Quality and Foreign Direct Investment
in India
An Econometric Analysis
Nikhil Kumar Kanodia, Dipti Ranjan Mohapatra, Pratap Ranjan Jena
Foreign direct investments tend to gravitate to nations
with good governance. The quality of governance is
largely affected by institutional factors such as control of
corruption, government effectiveness, political stability,
regulatory quality, rule of law, voice and accountability.
This study contributes to the existing literature on
foreign direct investments by testing the impact of six
parameters of institutional quality on investment
inflows into India.
Nikhil Kumar Kanodia (nikhilkanodia@rediffmail.com) is a research
scholar at Amity Business School, Amity University, Noida. Dipti Ranjan
Mohapatra (drmohapatra@amity.edu) is a professor of economics at
Amity University, Noida. Pratap Ranjan Jena (pratap.jena@nipfp.org.in)
is at the National Institute of Public Finance and Policy, New Delhi.
Economic & Political Weekly EPW september 16, 2023 vol lViii no 37
F
oreign direct investment (FDI) is an important driver of
economic growth as evident from the empirical studies
conducted across the world. The magnitude of the impact of
FDI on growth may differ depending upon the different country
classifications such as developed, developing or least developed
countries. Some studies even find insignificant or negative
relations between the two. However, the fact remains that over
the last five decades, FDI has pole positioned itself as an important
factor of economic recovery and growth on the world stage.
Institutions are man-made structures, which restrain human
behaviour within well-defined rules and laid-out norms.
The quality of local institutions in the recipient economy is
considered to be an important factor for inward FDI. These
institutions are primarily government, semi-government or
autonomous bodies/forums, etc. The formal institutions have
a well-defined character based on laws and rules in comparison
to the informal institutions, which derive their power based on
social norms or conventions.
Bevan and Estrin (2004) in the study of East European tran-
sition economies highlighted that the quality of formal institu-
tions is positively related to FDI for all the countries analysed
in the study, whereas Russia as an exceptional case registered
the impact of informal institutions too.
Dunning (2000) analysed and reported that a country’s
institutions and institutional infrastructure have been signifi-
cant components of its overall productivity and effectiveness
in attracting FDI inwards.
Quality of governance affects FDI: The quality of governance
is largely affected by six institutional factors such as control
of corruption, government effectiveness, political stability,
regulatory quality, rule of law, voice and accountability. These
factors are derived from the Worldwide Governance Indica-
tors (WGI), which is a research database of the World Bank
aggregating the views of citizens, experts and enterprises
in developed and developing countries on the issue of quality
of governance.
This paper is conducted to identify the significant variables
accounting for institutional quality, which affect the flow of FDI
between nations. The proper identification of variables reflects
upon the gaps in the system and can further help in the estab-
lishment of such institutions with clear mandates. The research
gap in this area pertaining to India is sought to be addressed
61
SPECIAL ARTICLE
with the analysis of credible statistical data for a period of
20 years, that is, from 2000 to 2020.
Broadly speaking, FDI tends to gravitate to nations with
stronger institutional structures, whereas weak institutions might
discourage FDI. This study contributes to the existing literature
on FDI by testing the impact of six parameters of institutional
quality as identified by the World Bank on FDI inflows into India.
Literature Review
According to Acemoglu et al (2001), the literature on inter-
national business has seen a recent renaissance due to the
emphasis on the quality of institutional framework as a crucial
driver for cross-country disparities. Given that FDI already
accounts for a disproportionately high percentage of capital
creation in low-income countries (Unctad 2004), the ability of
strong institutions to attract more FDI might play a significant
role in facilitating economic growth and development. In par-
ticular, less corruption, more political and economic freedom,
and effective enforcement of civil and property rights have all
been linked to higher levels of prosperity.
Corruption and FDI: Krifa et al (2022) examined the relationship
between corruption and FDI by analysing the function of economic
development as a mediator. The authors suggest that in indus-
trialised economies, FDI is adversely associated with corruption;
however, in developing nations, corruption had a negligible effect
on FDI inflows since the investing nations were more tolerant of it.
Government effectiveness and FDI: The study by Saha et al
(2022) of 28 lower middle-income countries from 2002–18 sug-
gests that government effectiveness does not have any significant
impact on FDI inflows. Employing panel data (Kechagia and
Metaxas 2022) for BRIC (Brazil, Russia, India, China) and CIVETS
(Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa),
the paper evaluates the impact of institutional quality on FDI inflows.
Political stability and absence of violence and FDI: In the
context of the Group of 7 (G7) and the Gulf Cooperation Council
(GCC) nations over 2005–19, Alshubiri (2022) finds that
political stability is negatively associated to FDI in GCC coun-
tries and holds insignificant relationship in G7 countries.
Regulatory quality and FDI: The study by Chen et al (2023)
represents a nexus between quality of institutions, infrastructure
and FDI inflows in context of Southeast and East Asian economies.
The findings by Chen et al (2023) reveal that regulatory quality
of host nations acted as a barrier for Chinese outward FDI.
Rule of law and FDI: The paper by Saha et al (2022) of 28
lower-middle-income countries, empirically investigated the
impact of institutional quality on FDI. The findings suggest
that the prevalence of the rule of law mitigates inflow of
foreign investment to lower-middle-income countries.
Voice and accountability and FDI: High voice and accountability
are observed to mitigate FDI inflows in lower-middle-income
62
countries. A study by Raza et al (2021) of OECD (Organisation for
Economic Co-operation and Development) countries revealed
a considerable and positive link between voice and account-
ability and FDI inflows.
Research gap: One notable shortcoming of the research on FDI
and institutional factors is the surfeit of cross-country studies and
panel studies. But only limited studies are available linking insti-
tutional factors and FDI nexus in individual countries. Further,
the scope of quantitative relationship between FDI and institu-
tional factors in the Indian context is very extensive. However,
enough research literature is not available to draw a conclusion.
Objective: Based on the above research gap, the objective of
this research study is to examine the influence of institutional
factors on FDI inflows into India.
Research hypothesis: The following hypothesis has been
constructed and evaluated in order to achieve the objectives:
H1: Control of corruption has no significant impact on FDI inflows.
H2: Government effectiveness has no significant impact on FDI
inflows.
H3: Political stability and absence of violence have no signifi-
cant impact on FDI inflows.
H4: Regulatory quality has no significant impact on FDI inflows.
H5: Rule of law has no significant impact on FDI inflows.
H6: Voice and accountability have no significant impact on
FDI inflows.
Data collection and sources: The data for the WGIs is gathered
from various private firms, non-governmental organisations
(NGOs), think tanks, survey institutes and international organi-
sations of repute. The WGI project has been collecting and
aggregating separate governance indicators for more than
200 nations since 1996. Initially, it was done once in two years
until 2002, after which it has become an annual exercise. The
period covered for the present study is from 2000 to 2020. The
WGI relies upon about 34 data sources from different regions/
groups/countries across the globe. The WGI scores generated
for India are presented in Annexure 1 (p 67).
Dependent variable: The amount of FDI equity inflows as meas-
ured in rupees crore has been used as the dependent variable. The
variable is represented as “FDI” in the research model applied.
Independent variable: In this study, six dimensions of gov-
ernance are used, namely control of corruption, government
effectiveness, political stability and absence of violence, regu-
latory quality, rule of law, and voice and accountability.
(i) Control of corruption includes the perceptions of the extent
of public power being exercised for private gain, small- and
large-scale corruption and the hold of the elite class and pri-
vate players over the state leading to favourable policy formu-
lation for them.
(ii) Government effectiveness captures the perceptions on quali-
ty of civil services and its independence, quality of public service,
september 16, 2023 vol lViii no 37 EPW Economic & Political Weekly

policy formulation and implementation and the government’s
commitment to these policies.
(iii) Political stability and absence of violence/terrorism record
perceptions on likely political instability or political violence,
including terrorism.
(iv) Regulatory quality registers perceptions about the govern-
ment’s ability in formulating and implementing suitable policies
and programmes for the development of the private sector in
the country.
(v) Rule of law includes perception on the people’s confidence
in rules and regulations in the economy, specifically in contract
enforcement, property rights, police, courts and also on the
likeliness of violence and crime.
(vi) Voice and accountability involves perception about the extent
of freedom of expression and association, press freedom and
citizen’s ability to participate in the selection of government.
Empirical Observations
Qualitative analysis: India’s WGI scores—The analysis of the
scores obtained for India on WGI can be done for two
sub-periods, that is, sub-period 1, in 2000–10, and sub-period 2,
in 2011–20, and the overall period, from 2000 to 2020 thereafter,
for a meaningful analysis.
Control of corruption: Sub-period 1: The score of this indica-
tor has fallen from -.34 in 2000 to -.46 in 2010, which shows
further deterioration, although it touched a low of -.51 in 2002
and has risen thereafter. Therefore, corruption has increased
in this period.
Sub-period 2: During this period, the score reached a high
of -.53 in 2011 but rose steadily thereafter and reached to
-.24 in 2020, indicating a reduction in corruption over
this period.
Overall period: This governance indicator measures the degree
of corruption in the system, including bribes for personal gains,
misuse of government powers and privileges for wrongful
gain of self or others, thus depriving the deserving sections of
the society. It also signifies the control of the elite and private
individuals over the formulation of public policies and systems.
It can be seen that the indicator score has risen from -0.34 in
2000 to -0.24 in 2020, which shows a positive movement in
actions taken to control this menace in the system.
Government effectiveness: Sub-period 1: The score has risen
continuously from -0.13 in 2000 to 0.02 in 2010, which shows a
steady progress in the effective functioning of the government.
Sub-period 2: During this period, the score has risen from
0.005 in 2011 to 0.38 in 2020 while remaining negative for
three years in between.
Overall period: This indicator garners the facts about the
quality of public and civil services and its quality, policy
formulation and government’s commitment for their imple-
mentation. In the case of India, the score has risen from -0.13
in 2000 to 0.38 in 2020, showing an improvement of about
half a point, which appears to be significant. The liberal policies
Economic & Political Weekly EPW september 16, 2023 vol lViii no 37
SPECIAL ARTICLE
of the government implemented in a fair manner over the period
have resulted in such a change, although there have been sig-
nificant episodes of policy lapses.
Political stability and absence of violence/terrorism:
Sub-period 1: The score on this governance indicator has fallen
from -0.99 in 2000 to -1.27 in 2010, which has been a matter of
concern for the government and citizens as well. The score
even reached a low of -1.50 in 2003.
Sub-period 2: During this decade, the score started with a
further fall at -1.32 in 2011, rose thereafter steadily and ended
at -0.86 in 2020. Hence, there has been a marked improve-
ment for this indicator in this decade as compared to the
previous decade.
Overall period: This dimension of good governance provides
data on political instability in the country, including on the
union and states and events leading to political violence. For
India, there has been a change in score from -0.99 in 2000 to
-0.86 in 2020, which is not very significant for a period of two
decades. The primary reason behind it was political instability
in the country as there were coalition governments at the union
from 1991–2014 which were vulnerable to the demands
and threats of their constituent members. There were major
incidents of terrorist and Naxalite violence in the country dur-
ing the first decade, that is, in the 2000–10 period. Since 2014,
India has seen a stable single party majority government,
which was re-elected in 2019, thus giving a continuity to the
government policies and practices.
Regulatory quality: Sub-period 1: The score attained on this
governance indicator during this period fell from -0.15 in 2000
to -0.37 in 2010, which put a question mark over the quality of
regulation and policy implementation by regulators.
Sub-period 2: During this period of 10 years, the score im-
proved from -0.34 in 2011 to -0.13 in 2020 which shows some
improvement in regulatory qualities. The score reached a low
of -0.47 in 2012 and 2013 after which there was a steady rise
until the end of the decade.
Overall period: The indicator assesses the steps taken by the
government by way of policy and programme implementation
for the development and growth of the private sector in the
country. The idea behind this indicator is that the government
cannot assume the role of private enterprises especially in a
capitalist or mixed economy for which it needs to nurture them
by way of suitable policies, infrastructure, credit facilities and
regulatory bodies. For India, the two-decade estimate of this
indicator does not paint a rosy picture as the score rose from
-0.15 in 2000 to just -0.13 in 2020, which is insignificant.
Rule of law: Sub-period 1: During the first decade, the score on
this indicator declined from 0.33 in 2000 to -0.03 in 2010,
which is a negative trend.
Sub-period 2: The score attained in this decade further fell to
-0.09 in 2011 and ended at -0.01 in 2020, which is a minor
improvement, as the score is negative. The score remained nega-
tive for the entire decade, except in 2018 when it was 0.02.
63
SPECIAL ARTICLE

Overall period: This indicator provides the measure of the people’s non-linearity in the model for the short and long run, equation
confidence in societal rules, functioning of police and courts, (1) has been modified as below:
contract enforcement and likeliness of violence and crime,
ο  ୲ ൌ Ƚ଴ ൅  Ɂଵ  ୲ିଵ ൅ Ƚଶା ‘””—’– ା ି ି
୲ିଵ ൅  Ƚଷ ‘””—’– ୲ିଵ
which affects the lower strata of the society the most. This is ା ି ା ା
൅ Ƚା ି
ସ ‘˜– ୲ିଵ ൅  Ƚହ ‘˜– ୲ିଵ ൅ Ƚ଺ ‘Ž‹–‹ ƒŽ୲ିଵ
an important indicator for a country like India where consider- ൅  Ƚି ି ା ା ି ି
଻ ‘Ž‹–‹ ƒŽ୲ିଵ ൅ Ƚ଼ ‡‰—Žƒ–‘”›୲ିଵ ൅ Ƚଽ ‡‰—Žƒ–‘”›୲ିଵ
able sections of people live below the poverty line. The changes ା
൅  Ƚଵ଴ ା
ƒ™୲ିଵ ି
൅ Ƚଵଵ ି
ƒ™୲ିଵ ା
൅ Ƚଵଶ ‘‹ ‡Ƭ ‘—– ା
୲ିଵ
observed in this sphere with a score of positive 0.33 in 2000 ୮
ି
leading to a negative score of -0.01 in 2020 shall be a matter of ൅ Ƚଵଷ ‘‹ ‡Ƭ ‘—– ି
୲ିଵ ൅ ෍ Ⱦଵ୨ ο  ୲ି୨
୨ୀଵ
concern as it severely affects the common perception about ୯ ୯
enforcement of rules and laws in the country and makes a seri- ା
൅ ෍ Ⱦ ଶ୨ ା
ο‘””—’– ୲ି୨ ି
൅ ෍ Ⱦ ଷ୨ ି
ο‘””—’– ୲ି୨
ous dent on its image. ୨ୀ଴ ୨ୀ଴
୯ ୯
ା
൅ ෍ Ⱦ ସ୨ ο ‘˜– ା ି ି
୲ି୨ ൅ ෍ Ⱦ ହ୨ο ‘˜– ୲ି୨
Voice and accountability: Sub-period 1: There is an improve-
୨ୀ଴ ୨ୀ଴
ment in this score from 0.35 in 2000 to 0.44 in 2010, which ୯ ୯
ା
shall be recognised. ൅ ෍ Ⱦ ଺୨ ο‘Ž‹–‹ ƒŽା
୲ି୨
ି
൅ ෍ Ⱦ ଻୨ ‘Ž‹–‹ ƒŽି
୲ି୨
Sub-period 2: During this decade, there has been a marked decline ୨ୀ଴
୯
୨ୀ଴
୯
from 0.43 in 2011 to 0.14 in 2020, which needs to be addressed. ା ା ି ି
൅ ෍ Ⱦ ଼୨ —Žƒ–‘”›୲ି୨ ൅ ෍ Ⱦ ଽ୨—Žƒ–‘”›୲ି୨
Overall period: This dimension of governance records meas- ୨ୀ଴ ୨ୀ଴
୯ ୯
ures of freedom of press, expression and association. It also
ା ା ି ି
considers citizens’ rights and participation in the selection of ൅ ෍ Ⱦ ଵ଴୨୲ି୨ ൅ ෍ Ⱦ ଵଵ୨୲ି୨
୨ୀ଴ ୨ୀ଴
the government, which makes it a very broad indicator. There ୯
has been a clear fall in the score of this indicator from 0.35 in ା
൅ ෍ Ⱦ ଵଶ୨ο‘‹ ‡Ƭ ‘—– ା
୲ି୨
2000 to 0.14 in 2020, which is the lowest score during the ୨ୀ଴
୯
entire period. The cross-border impact of this indicator will ି
൅ ෍ Ⱦ ଵଷ୨ο‘‹ ‡Ƭ ‘—– ି
୲ି୨ ൅ ɂଵ୲
lead to a change in the perception of the country’s image.
୨ୀ଴
... (2)
Quantitative analysis econometric model: The structural
disruptions caused by financial and economic factors in the time The ∝i and βi in equation (2) represent long- and short-run
series data necessitate the application of increasingly sophi- coefficients of the non-linear autoregressive distributed lag
ା ି
sticated models to comprehend the intricacies of the actual (NARDL) model. The terms ‫ݐ݌ݑݎݎ݋ܥ‬௧ିଵ and ‫ݐ݌ݑݎݎ݋ܥ‬௧ିଵ depict the
world. This study is developed on the asymmetric autoregres- positive and negative changes in control of corruption. Similar
sive distributed lag (ARDL) framework developed by Shin et al is the case for other regressors as well. The short-run coeffi-
(2014) in order to develop the interconnection between FDI cients measure how the response variable interacts immediately
inflows and the institutional indicators. The empirical model to the changes in explanatory variables. On the other hand, the
is summarised below: long-run coefficients measure the speed of adjustment towards
ο  ୲ ൌ Ƚ଴ ൅  Ƚ୊ୈ୍  ୲ିଵ ൅ Ƚେ୭୰୰୳୮୲ ‘””—’– ୲ିଵ ൅  Ƚୋ୭୴୲ ‘˜– ୲ିଵ equilibrium. The variation in FDI is used as an estimation for
൅ Ƚ୔୭୪୧୲୧ୡୟ୪ ‘Ž‹–‹ ƒŽ୲ିଵ ൅  Ƚୖୣ୥୳୪ୟ୲୭୰୷ ‡‰—Žƒ–‘”›୲ିଵ the volatility of FDI (Buchanan et al 2012).
൅  Ƚ୐ୟ୵ ƒ™୲ିଵ ൅ Ƚ୚୭୧ୡୣƬ୅ୡୡ୭୳୬୲ ‘‹ ‡Ƭ ‘—– ୲ିଵ To examine the stationarity of variables, the conventional
୮ ୯ augmented Dickey–Fuller (ADF) test has been employed. The
൅ ෍ Ⱦ୊ୈ୍ ο  ୲ି୨ ൅ ෍ Ⱦେ୭୰୰୳୮୲ ο‘””—’– ୲ି୨ Zivot and Andrews structural break unit root test has been
୧ୀଵ ୨ୀ଴ implemented to avoid spurious results. The W A Brock, W Dechert
୯ ୷ and J Scheinkman (BDS) test is applied to examine the pres-
൅ ෍ Ⱦୋ୭୴୲ ο ‘˜– ୲ି୨ ൅  ෍ Ⱦ୶୔୭୪୧୲୧ୡୟ୪ ο‘Ž‹–‹ ƒŽ୲ି୨ ence or absence of non-linearity in the data set. The NARDL model
୨ୀ଴ ୨ୀ଴ was employed only when the variables under study are at a sta-
୫ ୢ
tionary level or first differencing and represent non-linearity.
൅ ෍ Ⱦୖୣ୥୳୪ୟ୲୭୰୷ —Žƒ–‘”›୲ି୨ ൅ ෍ Ⱦ୐ୟ୵ ୲ି୨
୨ୀ଴ ୨ୀ଴ Results
୴

൅ ෍ Ⱦ୚୭୧ୡୣƬ୅ୡୡ୭୳୬୲ ο‘‹ ‡Ƭ ‘—– ୲ି୨ ൅ ɂଵ୲ 

୨ୀ଴
... (1)
The α1 constant is a drift element and ε1 depicts the error
term, which is considered to be white noise. The residual errors
being white noise means that there is no autocorrelation,
residuals are not heteroscedastic, and the residual has a mean
of zero. According to Shin et al (2014), to incorporate the
64
Quantitative analysis: Table 1 (p 65) depicts the stochastic
properties for all the dependent and independent variables.
The findings exhibit the mean, median, minimum, maximum,
standard deviation, skewness, kurtosis and Jarque–Bera tests
for normality. FDI and political stability are observed to have
the highest standard deviation, which indicates that there is a
considerable degree of variance within the sample values. The
p-values associated with the Jarque–Bera test for normality
september 16, 2023 vol lViii no 37 EPW Economic & Political Weekly
 SPECIAL ARTICLE
Figure 1: CUSUM and CUSUM of Squares Plots
Diagnostic Tests
10 1.6

7.5

1.2
5

2.5
.8
0

-2.5 .4

-5
.0
-7.5

-10 -0.4
11 12 13 14 15 16 17 18 19 20 21 11 12 13 14 15 16 17 18 19 20 21

CUSUM 5% significance CUSUM of squares 5% significance

depict that the sample data is not distributed normally. These Structural unit root test: The structural break unit root test
parameters necessitate the use of asymmetric/non-linear developed by Zivot and Andrews (1992) is a sequential test that
models (Shahbaz et al 2017; Ullah et al 2020). The findings of incorporates the data set with a distinct dummy variable for each
the descriptive parameters of the variables validate the choice probable break point. The break point is determined based on
of the econometric model adopted. the minimal t-statistic from the ADF test. Table 3 exhibits the
results of structural unit root tests.
Unit root test: Before employing NARDL, it is essential to investi-
gate any stationarity issues posed by the variables. This is to Brock, Dechert, and Scheinkman test: The BDS test (Brock
confirm the absence of stationary at second differencing in the et al 1996) was carried out to investigate the non-linear
model. Table 2 exhibits the findings of the ADF test. The findings dependencies. The results of the BDS test indicate the rejection
depict that control of corruption is stationary at level, that is, of null hypothesis since the p-value is less than 0.10 for all the
I(0), while all other factors, including FDI, government effective- variables. The findings suggest the existence of non-linearity
ness, political stability and absence of violence, rule of law, regu- and recommend the use of NARDL model. The outcome of the
latory quality and voice and accountability, are stationary at BDS test is summarised in Table 4.
first differencing, that is, I(1). The stationarity of variables at Table 5 (p 66) highlights the findings of diagnostic tests
level and first difference justifies the use of NARDL model. employed. Lagrange multiplier and Brush–Pagan–Godfrey tests,
Table 1: Stochastic Properties of Variables Table 3: Zivot and Andrews Structural Break Unit Root Test
Variables FDI Control of Government Political Regulatory Rule of Voice and Variable Stationary at Level Stationary at First Differences
Corruption Effectiveness Stability Quality Law Accountability t-statistic Time Break t-statistic Time Break
Mean 1,51,023.1 1.6355 1.9885 0.9240 1.6788 2.0681 2.3807 FDI -3.4800** 2015 4.6279 2014
Median 1,21,907.0 1.6500 1.9000 0.9200 1.6700 2.0100 2.4100 Control of corruption -3.7312 2007 -5.4044* 2005
Maximum 4,42,569 1.8200 2.3900 1.3800 1.9200 2.3400 2.4800 Government effectiveness -3.7985** 2018 -8.6850** 2015
Minimum 9,654 1.4600 1.7900 0.4900 1.4500 1.8700 2.1000 Political stability/absence of violence -4.2788** 2014 -6.4048 2004
Standard 1,45,988 0.0981 0.1773 0.2038 0.1254 0.1485 0.1036 Regulatory quality -2.9295** 2017 -4.4390*** 2014
deviation Rule of law -4.0484** 2001 -4.4651 2005
Skewness 0.7306 -0.1742 0.8042 0.1231 0.2695 0.7498 -1.8165 Voice and accountability -2.2861* 2018 -4.3553** 2017
Kurtosis 2.2055 1.1054 3.1892 0.1404 0.7696 3.1501 20.0621 * Indicates significance at 1%, ** indicates significance at 5%, *** indicates significance at 10%.
Jarque–Bera 3.1123 0.5753 0.2029 0.9321 0.6805 0.2069 0.0000 Source: Authors’ calculations.
Probability 0.2109 0.5753 0.2029 0.9321 0.6805 0.2069 0.0000
Table 4: BDS Test Outcomes for Non-linearity
Source: Authors’ calculations.
BDS statistics Embedding dimensions = m
Table 2: Augmented Dickey–Fuller Test Results m=2 m=3 m=4 m=5 m=6
Variables Stationary at Level Stationary at First Differences FDI 0.1540* 0.2252* 0.2328* 0.2350* 0.2338*
Constant Constant and Trend Constant Constant and Trend Control of corruption 0.0825* 0.1148* 0.1232* 0.1220* 0.0857*
FDI 0.4060 0.4951 -5.1066* -5.3719* Government 0.0740* 0.0867* 0.0112*** -0.0701** -0.2517*
Control of corruption -3.1701** -3.6341** -3.8624* -3.9323** effectiveness
Government effectiveness -1.1084 -2.6665 -7.3829* -7.4896* Political stability/ 0.0450* 0.0291*** 0.0388*** -0.0003*** 0.0298***
Political stability/ -2.0635 -2.9028 -6.2366* -6.2113* absence of violence
absence of violence Regulatory quality 0.0975* 0.1141* 0.1067* 0.0866* 0.0857*
Regulatory quality -1.5410 -1.7653 -4.4140* 4.3245** Rule of law 0.1367* 0.2318* 0.3044* 0.3369* 0.3459*
Rule of law -1.5126 -2.2591 -3.6253** -4.1881** Voice and and 0.1086* 0.1086* 0.0051*** -0.2157* -0.2954*
Voice and accountability 1.0112 0.1736 -2.9858** -3.3557 accountability
* Indicates significance at 1%, ** indicates significance at 5%. * Indicates significance at 1%, ** indicates significance at 5%, *** indicates significance at 10%.
Source: Authors’ calculations. Source: Authors’ calculations.

Economic & Political Weekly EPW september 16, 2023 vol lViii no 37 65
SPECIAL ARTICLE

respectively, were used to investigate whether the residuals ex- significance level, suggesting that a 3.00% rise in rule of law is
hibited serial correlation and heteroscedasticity. The findings expected to enhance FDI inflows by 8.85%. Nonetheless, a
of both the tests indicate that the data set does not have any decline in this index will not substantially affect FDI inflows.
anomalies with residual correlation or heteroscedasticity. The The outcome of coefficient estimates of government effectiveness
findings of the cumulative sum (CUSUM) and CUSUM squares with positive and negative shocks are 0.34 and -2.78, significant
(CUSUMQ) test in Figure 1 (p 65) reveal that the coefficients of the at 5% level. The findings suggest that government policies are
model fitted into the series are stable. The result of Jarque–Bera significantly important in attracting foreign investors to lower-
test suggests that model residuals are distributed normally. middle-income countries. It is also observed that voice and
Table 5: Sensitivity Analysis accountability does not have a substantial influence on FDI
Diagnostic tests F-statistics p-value(s) Decision inflows. The short-run analysis of NARDL is comparable to the
LM test for autocorrelation 8.0510 0.1176 No serial autocorrelation results of the long-run analysis. The coefficient of CointEq in
Brush–Pagan–Godfrey test for 0.9814 0.5191 No heteroscedasticity Table 8 indicates that any changes in the referenced variables
heteroskedasticity
would adjust to their equilibrium with a speed of 0.75.
Jarque-Bera test 0.0334 0.9834 Normal residuals
Ramsey reset test 4.5042 0.0598 Model correctly specified Table 7: Long-run Results for NARDL Model
Dependent Variable: FDI Inflows
CUSUM for stability of parameters Stable parameters
Variable Coefficient Standard Error t-statistic Decision
CUSUMQ for stability of parameters Stable parameters
Control of corruption+ 3.1670 2.7452 1.1536* Significant
Source: Authors’ calculations.
Control of corruption- -11.1791 3.8070 -2.9364* Significant
Government effectiveness+ 0.3484 0.9865 0.3531** Significant
NARDL model for FDI and governance indicators: An NARDL Government effectiveness- -2.7866 2.7372 -1.0180** Significant
model was implemented in order to investigate the impact of Political stability/ 0.8094 1.2198 0.6635** Significant
absence of violence+
institutional environment on the FDI inflows. Table 6 exhibits
Political stability/ -3.7739 1.6110 -2.3424** Significant
the findings of the bound test for non-linear cointegration among absence of violence-
the variables. The F-statistic being greater than the upper Regulatory quality+ -2.4397 1.4074 -1.7334* Significant
bound value validates the rejection of null hypothesis, that is, Regulatory quality- 1.6088 3.2145 0.5004* Significant
absence of asymmetric cointegration. The results suggest that Rule of law+ 8.8548 2.9484 3.0032* Significant
Rule of law- -2.4490 3.9430 -0.6200 Insignificant
F-statistic (13.20) is higher than the upper bound value at 1%,
Voice and accountability+ 0.9536 6.8362 0.1394 Insignificant
which allows us to thereby Table 6: Bound Test for Non-linear Voice and accountability- -1.8515 2.8903 -0.6406 Insignificant
conclude the existence of non- Cointegration * Indicates significance at 1%, ** indicates significance at 5%. (+) positive, (-) negative.
linear cointegration among the Significance
Level (%)
Lower Upper
Bound Value Bound Value
F-statistic Source: Authors’ calculations.

variables under study. The ex- 10 Table 8: Short-run Results for NARDL Model
1.76 2.77 13.20
Dependent Variable: FDI Inflows
istence of asymmetric cointe- 5 1.98 3.04
Variable Coefficient Standard Error t-statistic Decision
gration among variables al- 1 2.41 3.61
Control of corruption+ 0.9850 0.8891 1.1078* Significant
lows us to identify the influ- Source: Authors’ calculations. ∆Control of corruption- -3.47722 1.3289 -2.6165* Significant
ence of both favourable and adverse changes in the institu- ∆Government effectiveness+ 0.1083 0.3038 0.3567** Significant
tional environment on FDI in the long and short run. ∆Government effectiveness- -0.8667 0.8488 -1.0210** Significant
∆Political stability/ 0.2517 0.3703 0.6799* Significant
Tables 7 and 8 present the findings of the NARDL model in
absence of violence+
the long and short run. The findings of the long-run NARDL ∆Political stability/ -1.1738 0.5518 -2.1272* Significant
exhibit that the coefficient estimates of control of corruption absence of violence-
with positive and negative shocks are 3.16% and -11.70%. The ∆Regulatory quality+ -0.7588 0.4513 -1.6812* Significant
∆Regulatory quality- 0.5004 1.0027 0.4990* Significant
coefficients of decreasing control of corruption are significant
∆Rule of law+ 2.7542 1.0523 2.6171* Significant
at 1% significance level, implying that a 2.93% decline in control ∆Rule of law- -0.7604 1.2202 -0.6232 Insignificant
of corruption would result in an 11.17% decline in FDI inflows. The ∆Voice and accountability+ 0.2966 2.1188 0.1399 Insignificant
coefficients of increasing political stability are significant at 5% ∆Voice and accountability- -0.5759 0.9027 -0.6379 Insignificant
suggesting that a 0.66% rise in political stability is expected to CointEq 0.75 0.08 14.63*
* Indicates significance at 1%, ** indicates significance at 5%. (+) positive, (-) negative.
enhance FDI inflows by 0.80%. The findings are in line with
Source: Authors’ calculations.
the studies by Saleem et al (2021), Muskan and Vij (2020), and
Paul and Jadhav (2020). The findings suggest that political insta- Conclusions
bility raises the level of risk associated with investments;
hence, a country with a better political environment will have Inferences of WGI score: From the detailed qualitative analysis
lower levels of violence and significantly improve productivity. done above, it can be seen that in the governance indicators,
Concerning the regulatory quality, it has been noticed that a India has improved in four of the six indicators during the period
significant increase in the government’s regulatory quality has of the study from 2000–20. The greatest improvement was
a dampening impact on the amount of FDI inflows. On the con- observed in government effectiveness, which means responsive-
trary, a deterioration in regulatory quality by 0.50% has a sub- ness and accountability have increased. The rise in other
stantial positive effect (1.60%) on foreign investment inflows. measures, that is, control of corruption, political stability and
The coefficients of increasing rule of law are significant at 1% regulatory quality, is small for the two-decade period covered.
66 september 16, 2023 vol lViii no 37 EPW Economic & Political Weekly
 SPECIAL ARTICLE

A fall in score is noticed in rule of law and voice and
accountability indicators. There is a need to involve and gain
confidence of the civil society, experts and intelligentsia of the
country to mark improvement. The FDI decisions are not purely
economic decisions but also depend upon the perception about
the country, its people and strength of its institutions.
Inferences of quantitative analysis: According to the find-
ings, a positive effort to control corruption leads to a rise in
FDI. Similar conclusions are drawn for rule of law, political
stability and government effectiveness. The level of corrup-
tion and the rule of law are identified as crucial determinants
of FDI inflows. It is observed that high regulatory quality dis-
courages foreign investment. Voice and accountability is not
significantly linked to FDI.
Implications
The findings validate the “grabbing hand” theory of corrup-
tion, which contends that corruption increases entry costs for
foreign investors and therefore has a detrimental impact on
FDI inflows. This finding suggests that the implementation
of anti-corruption measures enhance foreign investment
inflows in lower-middle-income economies. The empirical
findings of the study show that higher regulatory quality is
associated with lower levels of foreign investment. Similarly,
administrative changes, such as the modification of existing
laws and the liberalisation of existing norms and regula-
tions, need to be made in order to lessen the burden of redun-
dant compliance, lower costs, and improve the ease with
which businesses can operate. The threshold level of govern-
ment effectiveness implies that policies and initiatives that
strengthen FDI inflows are advisable. Laws and regulations
are subject to change whenever there is a shift in political
power in a country with an unstable administration. Thus,
sustaining political stability is essential to promote foreign
capital inflows.
The study is limited to an analysis of the impact of formal
institutions on FDI inflows. Further studies can be carried
out for analysing the impact of informal institutions on
FDI inflows.

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Annexure 1: WGI Scores for India, 2000–20

Institutional Factors 2000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Control of corruption -0.35 -0.52 -0.42 -0.41 -0.36 -0.28 -0.40 -0.34 -0.45 -0.47 -0.54 -0.51 -0.52 -0.43 -0.35 -0.28 -0.24 -0.18 -0.25 -0.24
Government effectiveness -0.13 -0.12 -0.09 -0.16 -0.11 -0.10 0.12 -0.02 -0.01 0.03 0.01 -0.17 -0.17 -0.21 0.09 0.07 0.09 0.28 0.17 0.39
Political stability and absence -1.00 -1.21 -1.51 -1.28 -1.01 -1.06 -1.15 -1.11 -1.35 -1.28 -1.33 -1.29 -1.23 -1.00 -0.95 -0.95 -0.76 -0.99 -0.77 -0.86
of violence/terrorism
Regulatory quality -0.16 -0.35 -0.35 -0.43 -0.29 -0.28 -0.30 -0.39 -0.33 -0.38 -0.34 -0.47 -0.47 -0.45 -0.39 -0.31 -0.25 -0.23 -0.16 -0.14
Rule of law 0.33 0.00 0.13 0.04 0.13 0.18 0.09 0.09 0.01 -0.04 -0.09 -0.07 -0.06 -0.06 -0.05 -0.03 0.00 0.03 -0.03 -0.02
Voice and accountability 0.35 0.43 0.45 0.40 0.41 0.44 0.45 0.46 0.46 0.44 0.44 0.40 0.43 0.41 0.43 0.44 0.39 0.35 0.27 0.15

Economic & Political Weekly EPW september 16, 2023 vol lViii no 37 67
SPECIAL ARTICLE
Characteristics of the Multipronged Agrarian Crisis
in Maharashtra
Dnyandev Talule, Shrikant Kalamkar
The agrarian crisis of Maharashtra predominantly comes
out in the form of its nationally largest, yet scanty and
inefficient irrigation sector, and development backlog
faced by about two-thirds (62.10%) of its geographical
area, with 57.29% of the total and 45.68% of the state’s
tribal population. Low crop yields and net negative
returns for cultivating most of the crops across seasons
result into the farm household level indebtedness and
highest number of farm suicides death toll at the
national level for over a period of three and a half
decades.
Dnyandev Talule (dnyanshrinit@gmail.com) teaches at the Department
of Economics, Shivaji University, Kolhapur, Maharashtra. Shrikant
Kalamkar (dearshri@gmail.com) is with the Agro-Economic Research
Centre, SP University, Vallabh Vidyanagar, Anand, Gujarat.
Economic & Political Weekly EPW september 16, 2023 vol lViii no 37
T
he authors deem it an unsatisfying academic endeavour
to locate the multi-charactered cumulative agrarian
distress in Maharashtra. It is the second populous state
in the country while both its gross state domestic product (GSDP)
and annual budget are the largest among other states. Also, the
state per capita income of Maharashtra is 40% higher than the
national average (GoM 2022). On the contrary, Maharashtra ac-
counts for 8.76% of the area under foodgrains but contributes
only 5.21% of the production of foodgrains in India, which has
declined from 9.5% in 1960–61. The state holds the first rank
with its large budget size, highest GSDP, and the second highest
per capita income, alternatively after Punjab and Gujarat. Despite
having good development records, Maharashtra belongs to the
group of six states housing India’s 70% poor along with Uttar
Pradesh (UP), Bihar, Madhya Pradesh (MP), Odisha and West
Bengal. While half of the country’s population belongs to
these states, 36% of the population belongs to UP, Bihar and
Maharashtra, and together they account for 48% of India’s total
poor (Vyas 2004).
The agrarian crisis of Maharashtra is different from the
other crisis-ridden states like Punjab, Telangana, Karnataka
and Andhra Pradesh (AP). While Maharashtra shares its com-
mon agrarian characteristics with these states, its low yields,
inadequate irrigation cover, predatory irrigation use of 75% of
the impounded water for about 5% of gross cropped area (GCA),
notional presence of minimum support price (MSP), and an ab-
sence of state procurement mechanism have further added to
the agricultural crisis and made it difficult for its agrarian
communities. The state is in an advanced stage of agricultural
distress, especially among its small and marginal farmers
and the areas of the Marathwada and Vidarbha regions. It is
evident from heavy farm indebtedness, continuous net nega-
tive returns for cultivating most of the crops across all seasons,
and farmer suicides. The net negative returns for cultivating
most of the crops are evident both at the state average model
market price and notional MSPs (Singh and Bhogal 2014;
Talule 2020, 2021).
The factors that underline Maharashtra’s agrarian crisis are
the neglected growth potential of its agriculture, worsening
terms of trade for agriculture, inequitable development of the
state and its regional imbalance with the development backlog
accumulated over the decades. Maharashtra has also exhausted
its agricultural growth potential (IFPRI 2007; Srivastava et al 2007;
Singh 2010). Per quintal and per acre net negative returns for
the majority of the crops are evident when the SAMMPs and
47
SPECIAL ARTICLE
the notional MSPs are compared with the per quintal and per
acre respective cultivation costs of C2, C2+50% and A2FL.
Notwithstanding the overall economic performance,
growth and development trajectory of the state economy of
Maharashtra, all is not well with the state economy as obses-
sion with economic growth and wealth generation has led to
the relative neglect of distributional aspects. Disaggregated
data sets on the regional economic realities indicate that if
Greater Mumbai and Pune division are taken out, then the rest
of Maharashtra would not be better than any other poor states
in India (Shaban 2006). The rural–urban divide in Maha-
rashtra further aggravates the agrarian crisis. A closer look at
the rural–urban income disparities in Maharashtra clearly
shows that the state economy has become highly metropoliti-
sised, which has changed the political economy of its fiscal
expenditure to a greater extent. Even if the state claims to
have the highest public investment in agriculture, it cannot
evade the creation of predatory minority versus majority prey
cultivating communities.
While the composition of state income of Maharashtra has
changed much in favour of tertiary sector followed by the
industry (accounted for 53% and 25.92% to gross domestic
value addition [GDVA] in 2022–23), it leaves behind the major
sections of state’s population dependent on agriculture for
employment (57.60%) and livelihood. The political economy
of Maharashtra did not address the issues of persistent region-
al imbalance and development backlogs ever since they were
identified in 1984 (plus 1997 and 2013). The economic imbal-
ance persisting on records for about four decades is even older.
The result of the rural–urban economic divide and the sectoral
shift in composition of Maharashtra’s economy in favour of
tertiary sector, followed by the industrial sector, is that the
primary sector has been further marginalised. In short, mar-
ginalisation of the state’s agriculture and primary sector is
nothing but the marginalisation of two-thirds of Maharashtra’s
population. This further aggravates the regional economic im-
balance for Vidarbha and Marathwada regions which together
comprise 42% of the state’s population, 52% of its total area
and about half of the state’s tribal population as well as little
less than half of the GSDP.
The review and the context of Maharashtra’s agrarian crisis is
interwoven into its multiple state macroeconomic dimensions.
State cultivators continue to grow more foodgrains without
diversification mainly owing to their orientation towards
food security, absence of post-harvest handling, processing
and marketability of commercial crops. Long persistent inter-
regional development disparities within the state is another
important characteristic of its regional-based agrarian crisis
(Mishra 2006). The state-level regional imbalance is mainly
witnessed in the Vidarbha and Marathwada regions with weak
industrial sectors that keep these regions as the most underde-
veloped for decades (Shaban 2006). However, both the Fact-
Finding Committee (1984) and the Committee on the Balanced
Regional Development Issues in Maharashtra (2013) reports,
despite having been appointed by the state, were rejected by
the government (GoM 1984, 2013). Except nine districts of the
48
state, Mumbai, Thane, Raigad, Sindhudurg, Pune, Satara, Sangli,
Kolhapur and Nagpur respectively, the human development
ranks for rest of the districts remain much below the state
average. Declining contribution of its primary sector to GSDP
with ever-declining growth rate and the highest (57.6%) de-
pendence for employment on agriculture is earning the lowest
per capita for cultivators. The lopsided development journey of
Maharashtra with the tertiary sector at the helm and greater
metropoliticisation leave rural areas far-off from the fruits of
urban-centric development.
Progressively, Maharashtra’s agriculture is acquiring the
character of smallholding. While at the national level, 46.9%
of the lands are operated by 86.1% of the small and marginal
farmers, 45% of the land in Maharashtra is operated by 79.5%
of the marginal and small farmers (51.1 marginal and 28.4%
small cultivators [GoM 2019]). Average holding size in Maha-
rashtra has slided down from 4.28 hectare (ha) in the 1970s to
1.34 ha in 2015–16. While in Maharashtra, the number of farm-
ers cultivating land below 0.5 ha in 1970–71 was 6.83 lakh, it
rose to 41.4 lakh in 2015–16.
The worsening of the terms of trade for Maharashtra’s agri-
culture is caused by the macro-level structural changes in the
state. Maharashtra’s economic development trajectory ac-
quired the obsession for economic growth with wealth con-
centration which neglected the distributional aspects (Shaban
2006). Therefore, for Maharashtra, the development shifted
from a stage of food scarcity problems to one of agricultural
adjustment problems. It is out of commercial shift in absence
of basic infrastructure, remunerative prices, better yields and
extension (Fujita et al 2023; Hayami 1998). The agrarian cri-
sis of Maharashtra culminated into even more strenuous condi-
tions as the state ranked top among five farmer-suicide-prone
states with about one-fourth of its share in total farmer sui-
cides of India. During the late 1990s, farmer suicides in Maha-
rashtra shook the sociopolitical sphere of the state. While the
suicide phase in Karnataka and AP was analysed by competi-
tive studies (Assadi 1998; Vasavi 1999; Shetty 1999; Reddy
1998; Revathy 1998) for Maharashtra, it remained mostly un-
explored till 2004 when the Bombay High Court directed it to
come out with the status report on the same. Maharashtra’s
agricultural crisis is characterised with confronting crop loss-
es owing to the sporadic monsoon, low irrigation, pest attacks
and low yields. Rain-fed nature of about 85% of the cultivation
distorts cultivators’ expectations (Deshpande 2002).
Data and Methods
This paper tries to locate the agrarian crisis looming over
Maharashtra’s agriculture for a long period of time. The crisis
is visible in the form of low yields, cultivators’ indebtedness
and repayment pressures, net negative returns for cultivating
majority of the crops across all seasons, loss of crops and liveli-
hood, scanty penetration and predatory use of irrigation, erratic
rainfall and farmer suicides. Thus, the authors engage in finding
out the reasons for these crisis characteristics. To arrive at the
state averages of the crop-wise model market prices, the aver-
ages of the major cultivation costs (C2, C2+50% and A2FL),
september 16, 2023 vol lViii no 37 EPW Economic & Political Weekly
 SPECIAL ARTICLE

district-wise data on all these variables were obtained from Figure 1: Actual Rainfall to Normal Rainfall (%)
the Directorate of Economics and Statistics (DES), Maharashtra 130
multivolume report on the “Collection of Farm Activities Data 125 123 124
120 123 120
and Other Studies (2018–19).” The crop-wise averages for the 119
113 115
state model market prices and the averages for the three major 110 112
cultivation costs for Maharashtra were computed from the 100
102 106
100 102

%%
district-wise data sets. Comparisons of the averages of these 99
96 98
two variables were used for obtaining the crop-wise net per 90 92 91
87 88 89
acre and per quintal returns from cultivation. The data on
average and actual rainfall were looked into for a sufficiently 80 78 78
75
long period of time from 1998 to 2022 and were traced to the 70
72
tune of hectarage and values of crop losses. The district-wise 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022
irrigation data for the state were examined for assessing the
disaggregated rain-fed segment of cultivation in the state. Low Figure 2: Normal and Actual Rainfall for Districts of Maharashtra for
yield rates and crop losses in Maharashtra are mostly caused 1998–2022
by the scanty irrigation and erratic monsoon. Besides these 350.00
340.54
346.36
341.17
326.68 334.03
huge data sets, the data sets on farmer suicides, the data to 310.45 328.15

276.91

276.91
276.91
276.91
276.91
276.91
276.91
276.91
276.91
276.91
276.91
276.91
276.91
276.91
276.91
276.91
276.91
276.91
276.91
276.91
276.91
276.91
276.91
276.91
locate the predominance of MSP crop group of the crops so 300.00 303.43 299.11
291.78 289.76
as to focus on the significance of expected active state inter-
272.86 270.06 271.09 264.91
vention in the agri-markets were also used.

229.04
258.37 257.35
250.00 252.87 254.89 251.74
239.03 238.99
Sporadic monsoon and crop damages 221.20 222.83
The agricultural economy of Maharashtra on the lines of its 200.00
187.43
neighbouring states is a typical combination of vast scanty irri-
gated drought-stricken regions coexisting with the regions 150.00
with assured irrigation and predatory commercial farming
2022
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
(Deshpande 2002). Maharashtra’s irrigation cover is about
Normal Sainfall Actual Sainfall
16.80% and it ranks seventh among the major irrigated states.
Hence, more than 80% of Maharashtra’s cultivation depends the lands. Surveys could be completed for only 45.85% of the
on monsoon. Therefore, the state cultivators have to face crop crop damages, leaving more than half of the farmers without
damages accrued to the double-edged water crisis caused by any government help. However, for those who got help, the
the monsoon deficit on the one hand, while hailstorms on the amount was disproportionately lower than their losses. Re-
other. Mostly, the crop damages out of untimely storms are ceipts of crop insurance claims also remained disproportion-
more than drought-caused losses as the full-grown standing ately lower than (6,000 crore) the gigantic losses. The year
crops are destroyed by erratic rains. A total of 4.5 lakh ha of 2022 was the second consecutive year when Maharashtra’s
crops were damaged by heavy rains of September 2022. Crop farmers suffered post-harvest losses. The water crisis in Maha-
losses faced by the Marathwada region alone were for 3.8 rashtra’s agriculture is twofold. During droughts, the crops on
lakh ha. It has affected more than six lakh farmers’ families as more than 80% of the state agriculture are exposed to vagar-
the region received 156.08% higher-than-normal rainfall. Spo- ies. In opposition to this, nobody knows as to when the fully
radic rains in Maharashtra from July to September 2022 coin- grown or harvested crops will be destroyed by untimely
cided with its political turmoil while the newly formed alli- storms. Sporadic rains destroy the whole of full-grown crops
ance partners were busy in adjusting their power equations. for which the entire cultivation cost is already incurred. How-
This left agriculture and cultivators to their own fate. In the ever, neither the state nor do the insurance companies come
complete absence of democratic leadership, there were no pan- forward as saviours. A close look at the comparison between
chanamas for assessing the crop losses for government ex gratia the normal and actual rainfall shows a sporadic monsoon be-
for these farmers. Administrative underperformance is not haviour (Figures 1, 2 and Figure 3, p 50). Such monsoon sporadic-
new for Maharashtra’s farmers. Similar experiences were faced ity coupled with scanty irrigation cover for the state aggravates
by the Marathwada and Vidarbha farmers in 2016 when, ow- its agrarian crisis.
ing to spurious seeds, they had to uproot their full-grown cot-
ton crops on more than 60,000 ha. Heavy untimely rains due to Maharashtra’s Irrigation Sector: Largest in the Country
cyclonic disturbance causing low pressure over south-central but Scanty and Inefficient
Maharashtra and its adjoining areas have destroyed the al- Maharashtra’s irrigation sector becomes the largest in the
ready harvested soybean crops. About 4.5 lakh ha of tur, country based on the number of irrigation structures and
maize, soybean, cotton, vegetables and sugar cane crops were human power employed. However, the state is known as one
damaged. By the time the state officials arrived for belated with more than 80% (some districts above 90%) of its GCA
surveys, there was no proof of standing crops remaining on under rain-fed conditions. Besides, more than 75% of the
Economic & Political Weekly EPW september 16, 2023 vol lViii no 37 49
SPECIAL ARTICLE
Figure 3: Normal and Actual Rainfall for Districts of Maharashtra from June Figure 4: Proportion of Cultivated Area under Irrigation Cover for the Major
to September (1998–2022) States in India

600
500
400
300 87.60

200
100
0
2022
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
June Oormal Sainfall June Bctual Sainfall
July Oormal Sainfall July Bctual Sainfall
Aug Oormal Sainfall Aug Bctual Sainfall

quantum of impounded water is used for less than 5% of the Powered by Bing
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GCA under sugar cane (Rath and Mitra 1989). It is the crop
The map is only for representational purposes and does not, in any way, indicate national
with assured marketing and statutory fair and remunerative
or state borders.
price (FRP). The ultimate irrigation potential of Maharashtra is
89.5 lakh ha of which 45.8% is expected through major and Figure 5: Proportion of Net Cultivated Area to the Net Cropped Area in
Maharashtra (2019–20) (%)
medium dams while 54.2% comes from minor irrigation struc-
tures. Maharashtra ranks fi fth in irrigation potential but
seventh in attainment. Punjab, Haryana, Tamil Nadu and Kar-
24.5
nataka have half of Maharashtra’s irrigation potential, yet
their attainment is higher than Maharashtra. It reflects Maha-
rashtra’s failure in tapping its irrigation potential. Maharashtra
could utilise only 39.3% of its irrigation potential while Tamil
Nadu (64.6%), Gujarat (51.5%) and Rajasthan (82.7%) have
gone quite ahead of it. Up to 1994, there were a total of 4,291 20.3

large dams in India of which 1,229 (28.64%) were in Maha-

rashtra while this number for India became 5,334 in 2022 and
the number for Maharashtra also rose to 1,821 (34.34%). Besides,
Maharashtra’s total live water storage capacity is 15.8% of storage Powered by Bing
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created in the country (Deshpande and Narayanamoorthy 2001).

However, despite having the highest number of dams, high stor-
age capacity and high potential, the state holds one of the bot-
tom ranks for the proportion of GCA under irrigation (16.80%).
While Maharashtra holds the seventh rank in irrigation, geo-
graphically the state is third, population and per capita income
make it second, while both the GSDP and annual budget size
put it at first in the country. Except five districts from western
Maharashtra and three from the eastern Vidarbha region
(with moderate irrigation between 24.5% and 34%), the irriga-
tion cover for the rest of the districts is far from satisfactory.
Even for these districts, the maximum irrigation cover is not
more than one-third of the NCA. Slightly better irrigation pen-
etration for three Vidarbha districts accrues to their traditional
Malgujari Tanks. Mostly, the low irrigation districts belong to
the Konkan, Marathwada and Vidarbha regions (Figures 5
and 6). Due to its scanty irrigation and low yields, Maharashtra
contributes only 6% of foodgrains with 12% of India’s GCA.
Districts of Thane and Ratnagiri belong to the nationally
highest rainfall areas but the irrigation cover remains between
4.2% and 8.5% (Figure 5). It is similar to five western Vidarbha
districts of Buldhana, Akola, Washim, Yavatmal and Wardha.
Irrigation cover for another two districts from the Konkan
region, namely Raigad and Sindhudurg is also among the
50
The map is only for representational purposes and does not, in any way, indicate national
or state borders.
lowest. Dhule from north Maharashtra and Jalna, Nanded and
Latur districts from Marathwada region belong to another
group of weak irrigation penetration. Weak irrigation pene-
tration in the Marathwada and Vidarbha regions is keeping
the districts as breeding grounds for farmer suicides continu-
ing for the last four decades. For the Konkan region, rain-fed
cultivation makes it a migration-oriented and money order
economy despite its local employment and income potential in
the non-farm sector.
Maharashtra’s irrigation cover is one of the lowest (18%)
among major Indian states. It forces more than four-fifths of
its cultivation to be reliant on erratic monsoon and thereby
low agriculture growth. The decadal population growth for
Maharashtra, except in the 1980s, remains higher than any
other state but the agriculture growth barely exceeds its pop-
ulation growth. Growth rates are often negative for districts
like Nandurbar, Osmanabad and Yavatmal while most of the
districts from the Marathwada and Vidarbha regions do not
show any bright picture. District-wise sporadic growth rates
for agriculture are a common phenomenon in Maharashtra.
Irrigation economy of the state has constrained the irrigation
september 16, 2023 vol lViii no 37 EPW Economic & Political Weekly

Figure 6: District-wise Net Irrigated Area as Percent of Net Cropped Area for
the Maharashtra and Vidarbha Region of Maharashtra (2019–20)
32.7
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The map is only for representational purposes and does not, in any way, indicate national
or state borders.
Figure 7: District-wise Net Irrigated Area as Percent of Net Cropped Area for
the Vidarbha Region of Maharashtra (2019–20)
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The map is only for representational purposes and does not, in any way, indicate national
or state borders.
outreach for the far-off areas located in the eastern lower
riverine regions of Maharashtra for which even drinking
water is a challenge. Even during the normal monsoon year,
about 20,000 villages across 20 districts of Maharashtra re-
main water-starved. Development backlogs for Marathwada
and Vidarbha regions identified for several sectors also un-
derline the irrigation backlog. More than 90% of the cultiva-
tion in two-thirds of Vidarbha districts are rain-fed, while
that for the Marathwada districts, 85% to 90% of cultivation
on 75% of the GCA is rain-fed. Under such circumstances, the
monetary losses caused by low crop yields remain huge as
the cultivation mostly includes commercial crops like cotton.
Districts with less than 10% irrigation cover from Vidarbha
region are Amravati (9.6%), Wardha (7.8%), Gondia (6.7%),
Buldhana (6.6%), Yavatmal (5.8%), Washim (5.2%) and
Akola (4.2%). Other districts reporting lower irrigation cover
within Marathwada are Hingoli (17.1%), Aurangabad (15.6%),
Parbhani (13.4%), Latur (12.1%), Jalna (11.8%) and Nanded
(10.5%) (Figures 6, 7 and 8). Annual average rainfall for
Konkan region is 2,900 mm. However, the weakest irrigation
infrastructure for the region makes almost 92% (91.46%) of
its cultivation rain-fed. Hence, the cultivation for the entire
Konkan region with nationally high rainfall becomes single
crop reliant.
Economic & Political Weekly EPW september 16, 2023 vol lViii no 37
SPECIAL ARTICLE
Figure 8: District-wise Net Irrigated Area as Percent of Net Cropped Area for
the Marathwada Region of Maharashtra (2019–20)
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The map is only for representational purposes and does not, in any way, indicate national
or state borders.
Figure 9: Proportion of Agricultural Households (HH) Facing Agricultural
Distress in Maharashtra and India, 2016–17
70
60
50
Maharashtra
40
30
All India
20
10
0
% of HHs Gaced Drop % of HH Gaced % of HH Gaced Narket % of HHs Gaced
Gailure Qroductivity Eecline Qrice Eecline Mivestock Moss
Source: NABARD Financial Inclusion Survey 2016-17.
About 63% of Maharashtra’s households reported crop
failure due to rainfall irregularities at least once in the given
reference period, while the same was 54% at the all India
level. About 39% agriculture households in Maharashtra
have faced problems caused due to pest infestation, while
34% and 18% faced problems due to price fluctuations for
crops and livestock losses due to the floods and diseases
(NABARD 2018).
The Konkan, Marathwada and Vidarbha regions together,
which are neglected in the state development paradigms, form
a significant place in the state economy of Maharashtra. The
three regions together account for 62.10% (9.79%, 20.99%,
and 31.32%) of the total state area with a combined share in
state’s population of 57.29% (15.53%, 18.74%, and 23.02%).
Besides 45.68% (17.84%, 2.42%, and 25.42%) of the state’s
tribal population, 42.82% of Maharashtra’s total drought-
stricken population lives in these three regions (8.95%, 7.21%,
and 26.66%). In fact, such characteristics of these regions
needed special attention and a region-specific development
approach. All sectors taken together, the development deficit
for Marathwada becomes 20.16%, while for Vidarbha, it is
48.30%. Irrigation backlog for Konkan when compared to the
rest of Maharashtra (23.69%) comes to 15.15%. While three
regions together contribute 36.35% of the SGDP of Maharashtra
51
SPECIAL ARTICLE
Figure 10: Ranks Based on the District-wise Net Irrigated Area as Figure 11a: Statewise Proportion of Agricultural Households in Rural
Percentage of Net Cropped Area for Maharashtra (2019–20) Households, 2018–19 (%)

Ratnagiri 4.2
Akola 4.9 Agri HHs (%) in Total Rural HHs

Washim 5.2
Yavatmal 5.8
Buldhana 6.6
Wardha 7.8
Palghar 8.1 Andhra Pradesh 33.4 Meghalaya 73.5
Thane 8.1 Arunachal Pradesh 69.1 Mizoram 74.2
Assam 53.5 Nagaland 79.9
Raigad 9.2 Bihar 44.4 Odisha 59.0
Chhattisgarh 66.8 Punjab 41.7
Amravati 9.6 Gujarat 61.1 Rajasthan 74.0
Haryana 61.4 Sikkim 66.3
Nanded 10.5 Himachal Pradesh 69.2 Tamil Nadu 26.4
Dhule 11.5 Jammu & Kashmir
Jharkhand
74.4
55.9
Telangana
Tripura
54.2
41.4
Jalna 11.8 Karnataka
Kerala
54.8
33.2
Uttrakhand
Uttar Pradesh
67.4
65.4
Latur 12.1 Madhya Pradesh 66.4 West Bengal 43.8
Maharashtra 54.1 UTs 39.7
Nandurbar 13 Manipur 64.6 All India 54.0
Sindhudurg 13.1
Parbhani 13.4 Powered by Bing
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Aurangabad 15.6
Jalgaon 15.9 The map is only for representational purposes and does not, in any way, indicate national
Hingoli 17.1 or state borders.
Nagpur 19.2 Figure 11b: Statewise Proportion of Indebted Agricultural Households,
Osmanabad 20.3 2018–19 (%)
Chandrapur 21.2
Solapur 21.7
Agri HHs Indebted (%)
Nashik 23.6
Beed 23.9
Gondiya 24.4
Bhandara 24.5
Sangli 27.2
Ahmednagar 29.7 Andhra Pradesh 93.2 Meghalaya 9.1
Satara 29.9 Arunachal Pradesh
Assam
12.5
31.0
Mizoram
Nagaland
8.0
6.0
Pune 30.4 Bihar
Chhattisgarh
39.7
31.2
Odisha
Punjab
61.2
54.4
Gadchiroli 32.7 Gujarat 42.5 Rajasthan 60.3
Haryana 47.5 Sikkim 10.6
Kolhapur 34 Himachal Pradesh 29.2 Tamil Nadu 65.1
Jammu & Kashmir 31.9 Telangana 91.7
Jharkhand 25.3 Tripura 47.7
Karnataka 67.6 Uttrakhand 46.6
0 5 10 15 20 25 30 35 Kerala 69.9 Uttar Pradesh 41.9
Madhya Pradesh 48.4 West Bengal 50.8
Maharashtra 54.0 UTs 27.5
Manipur 20.6 All India 50.2
(9.75%, 10.10%, and 16.50%), the region-specific SGDP per
capita is `1,80,589.40, `40,824, and `52,282. More than 73% Powered by Bing
© GeoNames, Microsoft, TomTom
of the Marathwada and Vidarbha populations depend on
The map is only for representational purposes and does not, in any way, indicate national
agriculture for employment and livelihood, while for Konkan or state borders.
region, it is above 65%. However, the irrigation cover for all
three regions is one of the lowest, namely 8.54%, 14.08%, development backlog. While the 77th NSS round brings out
and 12.82%. This leaves 91.46%, 85.92%, and 87.18% of the 54% of the indebtedness of agricultural households in
GCA for rain-fed cultivation. A minimum of 86% and a maximum Maharashtra, the comparable all-India figure was 50.2%
of 92% (91.46%) of the cultivation in these regions is mon- (Figure 11). The average debt burden in Maharashtra was
soon-reliant. No doubt that it is far below the state average of `11,492, while the all-India average was `10,218. As per the
16.80, while the state irrigation cover itself is about one-third 59th NSS, more than 62% of the indebted households belong
of the national average (43.73%) (Figure 4, p 50). When com- to small and marginal landholding categories, whereas infor-
pared to the rest of Maharashtra, the overall development mal credit accounted for 16% of total loans. Interest rates
gap for Marathwada is 37.27%, while the same for Vidarbha charged by these informal sources were between 36% and
remains at 38.83%. 120% as these rates were on a monthly basis (Parchure and
Talule 2012). Even though the annual net income from culti-
Growing Indebtedness among the Cultivating vation exceeded the cultivation costs in Maharashtra, the
Households consumption expenditure was higher than the total income.
Results of the 59th (2003) and 77th (2019) National Sample Thus the household expenditure exceeded the income from
Survey (NSS) rounds clearly showed that the indebtedness of all sources, implying that the farmers have to borrow both for
agricultural households in Maharashtra was increasing. It is their consumption and production expenditures (Narayana-
mainly on account of high instability of incomes, increasing moorthy 2006, Figure 9, p 51). Interstate comparison of
input costs and declining profits from cultivation. Continuation monthly per capita income places Maharashtra at 13th rank. It
of farmer suicides in the Marathwada and Vidarbha regions was (`1,901.70) slightly above the poverty line expenditure
highlight the disturbing reality of regional disparity and limits (Figures 12–16, pp 53–54).
52 september 16, 2023 vol lViii no 37 EPW Economic & Political Weekly
 SPECIAL ARTICLE
Figure 12: All-India and Statewise Annual and Monthly Per Capita Income (` ) Figure 14: Ranking of the States Based on Their Average Monthly
Household Income (`)
West Bengal Andhra Pradesh
Uttarakhand Jharkhand
Uttar Pradesh Uttar Pradesh
Tripura Bihar
Telangana Madhya Pradesh
West Bengal
Tamil Nadu
Odisha
Sikkim Chhattisgarh
Rajasthan Telangana
Punjab All India
Odisha Rajasthan
Nagaland Karnataka
Mizoram Sikkim
Meghalaya Tripura
Uttarakhand
Manipur Assam
Maharashtra Maharashtra
Madhya Pradesh Mizoram
Kerala Manipur
Karnataka Tamil Nadu
Jharkhand Arunachal Pradesh
Jammu Nagaland
Meghalaya
Himachal Pradesh
Gujarat
Haryana Jammu
Gujarat Goa
Goa Himachal Pradesh
Chhattisgarh Haryana
Bihar Kerala
Assam Punjab
Arunachal Pradesh
Andhra Pradesh 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000
All India
Figure 15: Ranking of the States Based on Their Annual Per Capita Income (`)
0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 45,000
Monthly per capita (`) Annual per capita income (`) 40,000
35,000
30,000
Figure 13: Ranking of the States Based on Their Average Annual
Household Income (`) 25,000
20,000
15,000
Andhra Pradesh
10,000
Jharkhand
5,000
Uttar Pradesh
0
Bihar
Goa

Nagaland

Rajasthan
Gujarat

Mizoram

Maharashtra
Assam

Madhya Pradesh
Bihar
Kerala
Punjab

Sikkim

Odisha
West Bengal
Haryana

Tamil Nadu

Jammu
Karnataka
Tripura

Uttarakhand
Manipur
Meghalaya

Telangana

Uttar Pradesh
Jharkhand
Chhattisgarh
Himachal Pradesh

Arunachal Pradesh

All India

Andhra Pradesh
Madhya Pradesh
West Bengal
Odisha
Chhattisgarh
Telangana
All India
Rajasthan Maharashtra’s agricultural productivity for two-thirds of
Karnataka
major crops when compared to all-India figures remains at
Sikkim
Tripura lower side and it fails to increase its total state production
Uttarakhand (Chand and Chauhan 1999; Narayanamoorthy and Kalamkar
Assam 2004). As it is clear that barring three crops in the list of nine,
Maharashtra
that is, maize, tur and soybean, the yield levels for all other
Mizoram
Manipur crops remains lower than national average. As it is evident from
Tamil Nadu irrigation reality that the crop cultivation on the major portion of
Arunachal Pradesh GCA is predominantly under rain-fed conditions, it becomes
Nagaland
Meghalaya
the main reason for such a low productivity scenario (Sawant
Gujarat et al 1999; Dev 1987; Mitra 1990). Crops like cotton, paddy,
Jammu wheat, bajra, gram and groundnut show a lower productivity
Goa range while similar trends emerge when the average yield
Himachal Pradesh
Haryana levels for 35 crops are compared with all-India averages for
Kerala the last four decades (Kalamkar 2006). It is evident (Figures
Punjab 17, 18 and 19, p 54) from the productivity comparisons with all-
India average figures that the state productivity for crops is less
0 50,000 1,00,000 1,50,000 2,00,000 2,50,000
than the national average minimum by 9.20% and the maximum
Economic & Political Weekly EPW september 16, 2023 vol lViii no 37 53
SPECIAL ARTICLE

Figure 16: Ranking of the States Based on Their Monthly Per Capita Income (`) Figure 18: Productivity Comparisions for Major Crops of Maharashtra with Their
All-India Levels (Kg/Ha)
3,500

-82 Cotton
3,000
Soybean 416
2,500
-341 Groundnut
2,000
Tur 143
1,500
-112 Gram

1,000
Maize 255

500 -433 Bajra

0 -1682 Wheat
Telangana

Meghalaya

Jharkhand

Uttarakhand
Jammu

Haryana
Karnataka

Chhattisgarh
Rajasthan

Maharashtra

All India
Odisha

Manipur

Nagaland

Tripura
Kerala
Mizoram
Bihar

Madhya Pradesh
West Bengal

Gujarat
Himachal Pradesh

Sikkim

Punjab

Uttar Pradesh
Arunachal Pradesh

Assam
Andhra Pradesh
Goa
Tamil Nadu

-643 Paddy

-2,000 -1,500 -1,000 -500 0 500 1,000

*Production of cotton in “000” bales of 170 kg each.

Figure 17: Productivity Levels of Major Crops in Maharashtra and India (2020–21) Figure 19: Statewise Productivity of Major Crops (2020–21) (Kg/Ha)
(Kg/Ha)
Average
Cotton*
West Bengal
Soybean
Uttarakhand
Groundnut
Uttar Pradesh
Tur
Tamil Nadu
Gram
Rajasthan
Maize
Punjab
Bajra
Odisha
Wheat
Maharashtra
Paddy
Madhya Pradesh
0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000
Kerala

India (Lg/Ia) Maharashtra (Lg/Ia) Karnataka

*Production of cotton in “000” bales of 170 kg each. Jharkhand

Himachal Pradesh
48.56%. Maharashtra’s major area under cotton is rain-fed as Haryana
the Marathwada and Vidarbha regions are mainly known for Gujarat
their cultivation under scanty irrigation. High cultivation cost
Chhattisgarh
with 17.75% less than all-India average yields for cotton makes
Bihar
it the driving force for agricultural indebtedness and farmer
Assam
suicides. Similar trends are witnessed when productivity levels
Andhra Pradesh
for major crops are compared with the rest of the states.
Eighty percent of India’s cotton cultivation is in Maharashtra. 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000
However, about 97% of its cultivation is rain-fed. It keeps the Cotton Soybean Groundnut Tur Gram Maize Bajra Wheat Paddy
crop productivity the lowest among all other states. For paddy,
the productivity rank for Maharashtra is 16 among 19 major income in Maharashtra would be a mirage. It will be impossible
paddy states. Similar is the case for the productivity trend of to provide irrigation cover for the entire GCA of Maharashtra
wheat, bajra, maize, gram and tur in comparison with the with present irrigation methods. However, by ensuring the
remaining major producing states. For example, 58.7% of cotton micro irrigation spread for more areas and rain water har-
cultivation in Gujarat is irrigated. For Maharashtra, more vesting structures, the irrigation cover can be taken to sub-
than 97% of its cotton cultivation is rain-fed which makes it stantially higher levels.
a state with abysmally low productivity (378.2 kg/ha) in
the country. A breakthrough in agricultural productivity in Cultivation Costs and Net Returns for Crops across Seasons
Maharashtra for attaining livelihood is a must as it employs This section of the paper predominantly attempts to locate
80% of the rural and 57.60% of its total workforce. However, the agrarian crisis faced by the cultivators of Maharashtra. It
the yield levels are abysmally low. Unless the irrigation and focuses on the crop-wise net returns for cultivation at the cul-
productivity concerns are addressed, doubling of farmers’ tivation costs of C2, C2+50% and A2FL. The analysis is carried
54 september 16, 2023 vol lViii no 37 EPW Economic & Political Weekly
 SPECIAL ARTICLE
Figure 20: Net Returns for Kharif Season Crops per Qntl at the Cultivation Cost Figure 21: Net Returns for Kharif Season Crops per Acre at the Cultivation Cost
of A2FL, C2 and C2+50% in Comparision to the Average Model Market Prices in of A2FL, C2 and C2+50% in Comparision to the Average Model Market Prices in
Maharashtra Maharashtra

Fenugreek 4017.47
6028.78 Fenugreek
6006.18
-5037.41 Coriander
Coriander -2459.48
-2488.05
2058.77
Green chili
Green chili 2947.19
2942.66 Peas
4612.32
Peas 5089.93
5082.49 Bottle gourd
448.02 Bitter gourd
Bottle gourd 807.65
803.25
Bitter gourd 1038.64
1799.77 Tomato
1797.22
742.91 Pumpkin
Tomato 1128.46
1126.57
896.79
Sweet potato
Pumpkin 1262.42
1257.31 Potato
889.19
Sweet Qotato 1445.11
1437.98 Onion
327.24 Okra
Potato -999.69 776.14
Onion 353.67
668.77 Brinjal
632.99
1974.39 Cauliflower
Okra 2526.49
2524.09
839.96
Cabbage
Brinjal 1383.12
1380.57 Beans
383.09 792.60
Cauliflower 787.07 Ajwain
281.42
Cabbage 622.32
618.17 Red chili
Beans 1158.70
2028.75 Turmeric
2025.32
Ajwain -4482.85 817.23
Cotton
754.77
839.35 Soybean
Red Chili 3877.69
3817.33 Groundnut
-806.92
Turmeric 2763.08
2693.17 UEad
Cotton -16876.78 -6873.83
-8155.00 Moong
475.32 2513.11 Tur
Soybean 2285.36
Groundnut -5449.01 -1643.45
Ragi
-1871.40
-4971.32 Jowar
UEad -946.79
-1416.07 Paddy
-7325.97
Moong -2006.73
-2863.03 Maize
-2212.84
Tur 819.22
490.52 Bajra
-344.96
Ragi 980.21
967.77
-4414.41 -1823.99 -1,50,000 -1,00,000 -50,000 0 50,000 1,00,000 1,50,000 2,00,000 2,50,000
Jowar -2153.97
-2424.33
Paddy -936.83
-985.26 NR@Acre@C2+50PerCent@MODMP NR@Acre@C2@MODMP NR@Acre@A2FL@MODMP
-269.26
Maize 665.29
495.25
-1942.64
Bajra -325.95
-564.54 `806.92, `4,482.85, and `5,037.41 for bajra, maize, paddy,
-20,000 -15,000 -10,000 -5,000 0 5,000 10,000 jowar, ragi, tur, moong, udad, groundnut, cotton, turmeric,
NR@QNTL@C2+50 PerCent@MODMP NR@QNTL@A2FL@MODMP NR@QNTL@C2@MODMP ajwain, and coriander. The cultivation of more than one-
thirds of kharif crops incur losses for Maharashtra farmers
out across kharif, rabi, summer season and the MSP group of (Figure 20).
crops. The analysis covers all the cultivation seasons and almost Figures for per acre net negative returns become more seri-
all the crops cultivated in Maharashtra. The majority of the ous. Per acre net losses at A2FL in comparison to the SAMMPs
crops cultivated in Maharashtra across all seasons received for bajra, paddy, jowar, moong, udad, groundnut, cotton,
per acre and per quintal net negative returns both at the potato, and coriander were for `1,717.46, `7,703.45, `7,347.91,
SAMMPs and the notional MSPs. Net returns for cultivation are `4,146.31, `2,407.35, `7,871.16, `10,398.73, `98,121.30, and
computed by accounting the differences between the crop- `11,923.55. Per acre cultivation losses at the cost C2 with the
wise major cultivation costs (C2, C2+50% and A2FL), the SAMMPs are realised for more amounts like `2,974.64,
SAMMPs and the notional MSPs both at per quintal and per acre `8,101.68, `8,677.24, `5,915.60, `3,600.55, `8,962.90, and
for cultivating these crops. 12,336.88 for bajra, paddy, jowar, moong, udad, groundnut,
Looking at the cultivation cost C2, the per quintal net nega- and cotton. Per acre cultivation losses with cost C2+50%
tive returns at the SAMMPs for kharif crops stood at `564.54, become more serious. Half of the kharif crops are cultivated
`985.26, `2,153.97, `2,863.03, `1,416.07, `1,871.40, `8,155.00 at net negative returns. Crop-wise per acre losses are worked
and `2,488.05 for bajra, paddy, jowar, moong, udad, ground- out at `10,236.02, `3,490.91, `19,935.09, `17,783.35, `1,587.70,
nut, cotton, and coriander. Per quintal net negative returns for `9,581.60, `15,136.92, `12,640.28, `26,097.47, `25,531.19,
these crops at A2FL were for `325.95, `936.83, `1,823.99, `12,216.81, `11,780.93, and `24,421.38 for bajra, maize, paddy,
`2,006.73, `946.79, `1,643.45, `6,873.83, and `2,459.48. Pota- jowar, ragi, tur, moong, udad, groundnut, cotton, turmeric,
to also incurred the per quintal cultivation losses at cost ajwain, and coriander (Figure 21).
A2FL for `999.69. Cost C2+50% became the most discussed Relatively, the rabi cultivation appears better as it is an
as it was recommended by the National Commission on Farm- irrigation-determinant crop. Mostly, the crops cultivated
ers. Per quintal net negative returns for these crops at C2+50% during this season are on irrigated lands. Hence, the magni-
and the SAMMPs are `1,942.64, `269.26, `2,424.33, `4,414.41, tude of losses remains less than the kharif crops. Per quintal
`344.96, `2,212.84, `7,325.97, `4,971.32, `5,449.01, `16,876.78, cultivation losses for jowar and gram at A2FL with the
Economic & Political Weekly EPW september 16, 2023 vol lViii no 37 55
SPECIAL ARTICLE
Figure 22: Net Returns for Rabi Season Crops per Qntl at the Cultivation Cost Figure 24: Net Returns for Summer Season Crops per Qntl at the Cultivation
A2FL, C2 and C2+50% in Comparision to the Average Model Market Prices in Cost A2FL, C2 and C2+50% in Comparision to the Average Model Market
Maharashtra (`) Prices in Maharashtra

Radish
Cucumber

Carrot
Muskmelon
Brinjal
Watermelon
Cucumber
Groundnut
Beans
Paddy
Garlic

Maize
Gram

Wheat Bajra

Jowar -3,500 -3,000 -2,500 -2,000 -1,500 -1,000 -500 0 500 1,000 1,500
NR@QNTL@C2+50PerCent@MODMP NR@QNTL@A2FL@MODMP NR@QNTL@C2@MODMP
Maize
Figure 25: Net Returns for Summer Season Crops per Acre at the Cultivation Cost
-3,000 -2,000 -1,000 0 1,000 2,000 3,000 4,000 A2FL, C2 and C2+50% in Comparision to the Average Model Market Prices in
Maharashtra
NR@QNTL@C2+50PerCent@MODMP NR@QNTL@A2FL@MODMP NR@QNTL@C2@MODMP
Cucumber
Figure 23: Net Returns for Rabi Season Crops per Acre at the Cultivation Cost
A2FL, C2 and C2+50% in Comparision to the Average Model Market Prices in Muskmelon
Maharashtra (`)
Watermelon

Radish Groundnut

Carrot Paddy

Maize
Brinjal
Bajra
Beans
-40,000 -20,000 0 20,000 40,000 60,000 80,000
Garlic
NR@Acre@C2+50PerCent@MODMP NR@Acre@C2@MODMP NR@Acre@A2FL@MODMP
Gram `1,012.95, while at A2FL, the losses were for `985.10 and
`969.53. At C2+50%, the respective per quintal losses stood
Wheat
at `284.12, `3,060.76, `2,481.49, `1,738.66, and `147.81 for
Jowar
bajra, maize, paddy, groundnut, and watermelon (Figure 24).
Maize and paddy incur losses both at C2 and A2FL and with the
Maize SAMMPs, while the number of crops became four at C2+50%.
The respective losses for these crops at costs C2 and A2FL with
-40,000 -20,000 0 20,000 40,000 60,000 80,000 1,00,000 1,20,000 1,40,000 the SAMMPs were for `6,097.19, `11,638.81, `8,595.05, and
NR@Acre@C2+50PerCent@MODMP NR@Acre@C2@MODMP NR@Acre@A2FL@MODMP
`12,159.96. While the incidences of per acre losses came for
`18,944.37, `29,789.25, `11,452.79, and `14,373.25 and the
SAMMPs are in the range of `1,764.62 and `340.89. While the crops incurring losses were maize, paddy, groundnut, and
same at C2+50%, it comes for `593.36 and `1,025.92 (Figure 22, watermelon (Figure 25).
p 56). However, the per acre losses at A2FL and with the In the absence of MSPs and procurement, Maharashtra
SAMMPs were for `6,560.86 and `1,465.03. With costs C2, farmers do not have any protection against the market glut,
the per acre losses at the SAMMPs became ` 7,674.14, `453.51 causing price nosediving. Nor do they have any protection
and `3,041.61 for jowar, wheat and gram, while at C2+50%, during untimely hailstorms causing crop losses. The propor-
per acre losses became ` 7,266.23, `15,932.15, `9,361.55 and tion of crop insurance claims during such losses remains dis-
` 14,448.40 for maize, jowar, wheat and gram (Figure 23). proportionately low. The Marathwada and Vidarbha farmers
Per quintal losses for summer crops, both at the costs C2 and have experienced it time and again for their crops like cotton,
A2FL and with the SAMMPs, are seen for maize and paddy. The tur, soybeans and gram. As these crops are predominant in
losses for maize and paddy at C2 were for `1,388.66 and both these regions, the losses incurred from cultivation are
56 september 16, 2023 vol lViii no 37 EPW Economic & Political Weekly

Figure 26: Net Returns for MSP Crop Group per Acre at the Cultivation Cost of
A2FL, C2 and C2+50% in Comparison to the Average Model Market Prices in
Maharashtra
Sugar cane
Gram
Wheat
Cotton
Soybean
Groundnut
UEad
Moong
Tur
Ragi
Maize
Bajra
Jowar
Paddy
-40,000 -30,000 -20,000 -10,000 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000
NR@ACRE@C2+50PerCent@MODAL NR@ACRE@C2@MODAL NR@ACRE@A2FL@MODAL
huge in size. Except the assured markets at FRP for sugar
cane, no price and procurement protections are available
for other crops in Maharashtra. The absence of MSPs for the
majority of the crops often results in cultivation losses during
overproduction and glut. Because, mostly the crop procure-
ment mechanism at MSP is not facilitated in Maharashtra.
Hence, for the state farmers of Maharashtra, the presence of
MSP becomes notional. The profits and losses from cultivation
significantly depended on the state average model market
prices and the major costs of cultivation (A2FL, C2 and
C2 + 50%). About 80% of the cultivation in most districts is
rain-fed, and the crop outputs and returns are affected by
monsoon shortfalls. Net negative returns for most of the crops
across all seasons are on account of increase in input costs,
price spirals and low yields owing to inadequate irrigation
cover in Maharashtra. Thus, the farm-level crisis in most of
the districts is accrued to these vagaries, which the state
farmers do not have any control over.
The MSP group of crops occupy a significant place in the
GCA of the state. Hence, we have worked out the per quintal
and per acre net returns for the cultivation of the MSP crop
group at the cultivation costs A2FL, C2 and C2+50%. The exer-
cise is conducted both with the SAMMPs and the
notional MSPs for these crops cultivated in Maharashtra.
About 86% of the MSP crop group faces net negative returns
with the cultivation cost C2+50% and at the SAMMPs.
Per acre net negative returns with the cultivation cost C2+50%
at the SAMMPs are incurred for paddy (`19,935.10), jowar
(`17,783.40), bajra (`10,236), maize (`8,549.30), ragi (`1,587.70),
tur (`9,581.60), moong (`15,136.90), udad (`12,640.30),
groundnut (`26,097.50), cotton (`25,531.20), wheat (`453.50)
and gram (3,041.60). While the per acre net negative returns
with the cost A2FL and at the SAMMPs remain for `7,703.50,
`7,347.90, `1,717.50, `4,146.30, `2,407.30, `7,871.20, and
`10,398.70 for paddy, jowar, bajra, moong, udad, groundnut,
and cotton. The same at the cost C2 were incurred for `8,101.70,
`8,677.20, `2,974.60, `5,915.60, `3,600.60, `8,962.90,
Economic & Political Weekly EPW september 16, 2023 vol lViii no 37
SPECIAL ARTICLE
Figure 27: Net Returns for MSP Crop Group per Acre at the Cultivation Cost of
A2FL, C2 and C2+50% in Comparison of Notional MSP
Sugar cane
Gram
Wheat
Cotton
Soybean
Groundnut
UEad
Moong
Tur
Ragi
Maize
Bajra
Jowar
Paddy
-40,000 -30,000 -20,000 -10,000 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000
NR@ACRE@C2+50PeCent@MSP NR@ACRE@C2@MSP NR@ACRE@A2FL@MSP
`12,336.90 and `1,465 for paddy, jowar, bajra, moong, udad,
groundnut, cotton and gram (Figure 26).
For clearing the distinction between the net negative and
positive returns from cultivation, both per quintal and per acre
for the MSP crops, the net returns were computed with the three
major cultivation costs (A2FL, C2 and C2+50%) and both at the
notional MSPs and the SAMMPs. Per acre net returns for about
86% of the crops remain negative at the notional MSPs and
with the cultivation cost C2+50%. The loss-incurring crops are
paddy, jowar, bajra, maize, ragi, tur, moong, udad, groundnut,
soybean, cotton and wheat. The amounts of losses are `18,643.24,
`15,313.47, `9,401.72, `9,201.10, `1,657.84, `1,638.63, `11,640.59,
`10,337.76, `23,385.72, `6,600.75, `30,158.19 and `2,182.02.
While the per acre net negative returns with the cost A2FL at
the notional MSPs are for `6,411.61, `4,878.03, `883.16,
`649.97, `104.83, `5,159.41 and `15,025.74 for paddy, jowar,
bajra, moong, udad, groundnut, and cotton, the per acre net
negative returns with the cultivation cost C2 at the notional
MSPs for the same crops remain in the tune of `6,809.83,
`6,207.36, `2,140.33, `2,419.26, `1,298.03, `6,251.15, and
`16,936.88 (Figure 27). There is an addition made to this list with
wheat for which the cultivation loss per acre was `1,454.69.
For clearing the understanding of the net returns from the
cultivation of MSP crops’ group, the comparisons were also
computed to arrive at the per quintal net returns. Per quintal
net returns were computed with the three major
cultivation costs (A2FL, C2 and C2+50%) and both at the
notional MSPs and SAMMPs. Per quintal net returns were neg-
ative for about 86% of the MSP crops. Per quintal net negative
returns with cost C2+50% when compared to the SAMMPs
were for `2,424.33, `4,414.41, `1,942.64, `816.86, `344.96,
`2,212.84, ` 7,325.97, `4,971.32, `5,449.01, `16,876.78, `61.64
and `707.75 for paddy, jowar, bajra, maize, ragi, tur, moong,
udad, groundnut, cotton, wheat and gram. A slightly better
trend emerges with cost C2 as the number of crops incurring
per quintal losses is lesser. Crops incurring per quintal
losses with cost C2 and at the SAMMPs are paddy (`985.26),
57
SPECIAL ARTICLE
Figure 28: Net Returns for MSP Crop Group per QNTL at the Cultivation Cost of Figure 30: Farmer Suicides in India and Maharashtra, 1995–2021
A2FL, C2 and C2+50% in Comparison to the Average Model Market Prices in
Maharashtra 20,000

Sugar cane 16,000

Gram Farmer Suicides in India
Wheat 12,000

Cotton
8,000
Soybean
Groundnut 4,000
UEad Farmer Suicides in Maharashtra
Moong 0
1990 1995 2000 2005 2010 2015 2020 2025
Tur
Ragi
Figure 31: Comparative Picture of Maharashtra and All-India Farmer Suicides,
Maize
2001–21
Bajra
20,000
Jowar
Paddy
16,000

-20,000 -15,000 -10,000 -5,000 0 5,000 Farmer Suicides in India

12,000
NR@C2+50PerCent@MODAL NR@C2@MODAL NR@A2FL@MODAL

Figure 29: Net Returns for MSP Crop Group per QNTL at the Cultivation Cost of 8,000
A2FL, C2 and C2+50% in Comparision of Notional MSP
Sugar cane 4,000

Gram
Farmer Suicides in Maharashtra
Wheat 0

Cotton 2000 2005 2010 2015 2020 2025

Soybean
groundnut, cotton and wheat. The tunes of crop-wise losses
Groundnut
were for `828.15, `1,540,87, `406.20, `1,170.88, `510.51,
UEad
`1,305.21, `11,213.56 and `197.72. No different scenario emerges
Moong
for the cultivation cost A2FL and the sale at the respective hypo-
Tur
Ragi
thetical MSPs for them. Cultivation of seven out of 14 crops
Maize were observed to be in losses. Crops incurring per quintal losses
Bajra were paddy (`779.72), jowar (`1,210.89), bajra (`167.61),
Jowar moong (`314.57), udad (`41.23), groundnut (`1,077.26), and
Paddy cotton (`9,932.40) (Figure 29).

-25,000 -20,000 -15,000 -10,000
NR@C2+50PerCent@MSP NR@C2@MSP
jowar (`2,153.97), bajra (`564.54), moong (`2,863.03), udad
(`1,416.07), groundnut (`1,871.40), cotton (`8,155.00) and
gram (`340.89). Half of the MSP crops (seven out of 14) incur
per quintal losses with the cultivation cost A2FL and at SAMMPs.
Crops with their respective losses are paddy (`936.83), jowar
(`1,823.99), bajra (`325.95), moong (`1,643.45), and cotton
(`6,873.83) (Figure 28).
The next stage of computation was to find out the net re-
turns for the MSP crops with the three major cultivation costs
(A2FL, C2 and C2+50%) and at the notional MSPs. Per quintal
net returns with the cost C2+50% were negative for 12 out of
14 crops (85.72%). These net negative returns were to the tune
of `2,267.23, `3,801.30, `1,784.30, `879.14, `360.20, `1,510.08,
`5,633.81, `4,065.76, `4,882.81, `1,130.13, `19,935.35 and
`296.58, while the loss-incurring MSP crops were paddy, jowar,
bajra, maize, ragi, tur, moong, udad, groundnut, soybean, cotton
and wheat. Similar trends are experienced with cost C2 and
the notional MSP for paddy, jowar, bajra, moong, udad,
58
-5,000 0 5,000 Farmer Suicides: Characteristic or Outcome of
NR@A2FL@MSP Agrarian Crisis?
No discussion on farmer suicides in India can begin without
the mention of Maharashtra. Both Marathwada and Vidarbha
regions are known for their agrarian distress and are the worst
hit by farmer suicides. These regions have also suffered for
their regional imbalance and development backlog. Between
2001 and 2022, a total of 18,595 farmers from the five districts
of western Vidarbha died by suicide. More than half of the vic-
tims’ families (9,820) were denied state compensation. Even
when suicide is an individual act, there are reasons behind it.
Time and again, the principal reasons underlined behind
farmer suicides are low crop yields, increasing cultivation
costs, volatile prices, accumulated debt and repayment pres-
sures, net negative returns from cultivation for most of the
crops across seasons, and crop losses on account of scanty irri-
gation and erratic monsoon. During Covid-19, Maharashtra’s
agrarian crisis reached its peak, leading to an unprecedented
increase in suicides by farmers as there was no offtake for
their crops. In 2020, a total of 1,206 farmers died by suicide
september 16, 2023 vol lViii no 37 EPW Economic & Political Weekly

Figure 32: Maharashtra’s Share in All-India Farmer Suicides, 2001–21
30
25
20
15
10
5
0 per acre losses are for `1,717.46, `7,703.45, `7,347.91, `4,146.31,
2001
2002
2003
2004
2005
2006
2007
2008
2009
from three western Vidarbha districts of Akola, Yavatmal, and
Buldhana. The irrigation average for these districts is at the
lowest. A strong positive correlation is witnessed between the
farmer suicides and the districts with maximum rain-fed culti-
vation and facing agrarian distress. Amravati, Yavatmal, Buldha-
na, Washim and Wardha from Vidarbha and Osmanabad from
the Marathwada region have always reported the highest sui-
cide mortality rates (SMR) for farmer suicides. It is mainly ow-
ing to the regional agrarian distress characterised by scanty
irrigation, rain-fed cultivation on about 85% of the land, crop
losses, and net negative returns for cultivating most of the
crops for all the seasons. Owing to the agrarian distress with
such characteristics, a total of 73,613 farmers from Maharashtra
have died by suicide between 2001 and 2022. While the
all-India number of farmer suicides during this period was
2,99,472, the share of Maharashtra alone remains almost one-
fourth (Figures 30, 31, p 58 and Figure 32). Hence, suicides by
farming communities of the state either should be recognised
as an indicator of long-standing agrarian distress in Maha-
rashtra or the problem needs to be accepted as the result of
agrarian distress in the state.
Concluding Remarks
The paper locates the agrarian distress caused in some parts of
Maharashtra. Despite the largest-ever central farm debt waiv-
ers of 2008, followed by state debt waivers, it is unsettling that
Maharashtra still has the largest number of farmer suicides.
Despite the majority of both its polity and administrative class
belonging to the farming communities, the state farmers have
to face divine indifference and embrace suicide to end their
lives. The analytical exercise has also attempted to locate the
reasons for the most pertinent agrarian distress in Maharash-
tra. The prominent reasons for distress are the nationally
scanty irrigation cover, predatory capitalist use of public irri-
gation water for less than 5% of GCA, low crop yields, net nega-
tive returns from cultivation and debt overdue. Predatory irri-
gation use has caused low yields from rain-fed cultivation and
it leaves about 85% of the cultivable lands permanently mon-
soon-dependent. Hence, the net negative returns from culti-
vation for most of the crops with three major cultivation costs
(A2FL, C2 and C2+50%) when compared to the SAMMPs and
the MSPs mainly accrue to the rain-fed nature of cultivation.
Net negative returns are evident for more than 85% of the
crops or even above 90% in some districts of western Vidarbha
Economic & Political Weekly EPW
SPECIAL ARTICLE
(%) and Konkan regions. Monetary incidences of per acre and per
quintal net negative returns for crops across seasons are
shocking. The magnitude of the monetary losses caused by the
net negative returns for crops poses a question as to how these
farmers continue to remain in cultivation. Against the state
Farmer Suicides in India average cultivation costs of A2FL, C2 and C2+50% and with
the SAMMPs, the tunes of per acre net negative returns for
kharif season crops remain very high. When the kharif season’s
crop-wise SAMMPs are compared with A2FL, then the tunes of
`2,407.35, `7,871.16, `10,398.73, `98,121.30, and `11,923.55,
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
while the respective loss-making crops are bajra, paddy, jowar,
moong, udad, groundnut, cotton, potato and coriander. Crop-wise
per acre incidences of net losses for kharif cultivation become
even higher at the cost C2, which are for `2,974.64, `8,101.68,
`8,677.24, `5,915.60, `3,600.55, `8,962.90, and `12,336.88
for bajra, paddy, jowar, moong, udad, groundnut, and cotton.
Cost C2+50% was recommended by the Swaminathan Com-
mission, hence, it remains the most politicised cultivation
cost. A comparison of the cost C2+50% with the SAMMPs
makes the per acre crop losses even higher.
Thus the tunes of losses are for `10,236.02, `3,490.91,
`19,935.09, `17,783.35, `1,587.70, `9,581.60, `15,136.92,
`12,640.28, `26,097.47, `25,531.19, `12,216.81, `11,780.93, and
`24,421.38. These losses are faced for cultivating bajra, maize,
paddy, jowar, ragi, tur, moong, udad, groundnut, cotton, turmeric,
ajwain, and coriander. The number of crops incurring losses
from cultivation during the rabi season is little less than kharif
crops. However, the total number of crops cultivated during
this season is also less as kharif cultivation is monsoon-de-
terrent, while the rabi season is irrigation-determined, which
enables double cropping. The crops incurring losses for culti-
vation during rabi season are gram, wheat, jowar and maize.
However, when we look at the summer season, the amounts
of per acre and per quintal losses become higher.
Agrarian distress for Maharashtra’s cultivators becomes
more prominent when the analysis shifts towards the MSP crops
group. For this group, net per acre and per quintal returns were
computed in comparison to the major cultivation costs of A2FL,
C2 and C2+50% with the SAMMPs and the notional MSPs in
Maharashtra. When the SAMMPs and MSPs were compared
with cost C2+50%, about 86% of the crops of this group were
found incurring losses. The loss-making crops at C2+50%
against the MSPs are paddy, jowar, bajra, maize, ragi, tur, moong,
udad, groundnut, soybean, cotton and wheat, while the tunes of
losses are for `18,643.24, `15,313.47, `9,401.72, `9,201.10,
`1,657.84, `1,638.63, `11,640.59, `10,337.76, `23,385.72,
`6,600.75, `30,158.19, and 2,182.02. While the per acre net
negative returns with the cost A2FL at the notional MSPs are
for `6,411.61, `4,878.03, `883.16, `649.97, `104.83, `5,159.41,
and `15,025.74 for paddy, jowar, bajra, moong, udad, ground-
nut, and cotton, the net negative returns per acre with the
cultivation cost C2 at notional MSPs for the same crops are for
`6,809.83, `6,207.36, `2,140.33, `2,419.26, `1,298.03, `6,251.15,
and `16,936.88. Wheat makes an addition to this list with a
per acre net negative income for `1,454.69.
september 16, 2023 vol lViii no 37 59
SPECIAL ARTICLE

Maharashtra is one of the economically forerunner states,
but it cannot be termed as an agriculturally advanced state.
The share of agriculture in its GSDP, with two-thirds of the
state’s population has got marginalised over the decades. The
state has failed to address the issues of regional imbalance
and development backlog faced by more than half of its popu-
lation (57.29%), 62% of the geographic area, 45.68% of the
state’s tribal population and 42.82% of the drought-stricken
people. In Maharashtra, it is not only the diminishing share of
agriculture in GSDP but also the declining per capita income
in absolute terms originating from cultivation that is a cause
for concern. There are no signs of any political will to put an
end to the thousand suicides by Marathwada and Vidarbha
farmers every year. Suicide by farmers is the major character-
istic or the eminent resultant outcome of agrarian distress
persisting in Maharashtra for about four decades. Notwith-
standing the claim of overall economic performance of
Maharashtra, the trajectory of growth and development
records owing to its urban centric industrialisation and
predominant tertiary agglomerations, all is not well with the
state’s economy. The obsession with growth and wealth
generation has led to the relative neglect of distributional
aspects and it has left the state’s agricultural economy and its
peasantry in a permanent state of crisis.

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60 september 16, 2023 vol lViii no 37 EPW Economic & Political Weekly
DISCUSSION
Good and Bad Statistics
G Raveendran
There has been a public debate
on the quality of official statistics
being produced by the Indian
statistical system. The debate
was initiated by persons holding
high positions in the Economic
Advisory Council to the Prime
Minister and claimed that the
existing survey mechanisms
were archaic and not adapted for
rapid changes, and thus grossly
underestimated India’s progress.
It also made an assessment
that India’s official statistics are
excellent on the administrative
side and mediocre on censuses
and surveys. This article
examines the basis on which the
above statements were made and
proves its fallacy.
G Raveendran (gravi19@hotmail.com) is
former additional director general, Central
Statistical Office.
68
O
fficial statisticians are primarily
responsible for meeting the data
needs of governments around
the world for development planning,
policy formulation, monitoring, impact
assessment and other allied activities on
an objective basis. Ensuring the recogni-
tion of statistics produced by them as
“good” has often been a subject of agony.
This group of statisticians, who contri-
bute significantly to the development
process of the country, are therefore
distinguished from other categories of
statisticians in this article.
The specific characteristics of good
statistics generally include relevance,
timeliness, adequacy, and unbiasedness
apart from its consistency with the pre-
vailing public perception about the sub-
ject of study. The ongoing public debate
on the statistical system and the views
expressed by those in high positions and
former members of the statistical system
are therefore of significant importance
in shaping the future of the Indian sta-
tistical system. The Indian Express has
already published a series of articles on
the subject, which include one by the
chairman of the Economic Advisory
Council to the Prime Minister (EAC-PM),
two by one of its members and two by
former chairpersons of the National Sta-
tistical Commission (NSC) (Mohanan and
Kundu 2023a). Yet another paper on a
related topic is by Mohanan and Kundu
(2023b), published in EPW.
The first paper on the series titled
“The Sample Is Wrong” by Shamika Ravi
(2023a) appeared on 7 July. While em-
phasising the need for high quality data
at periodical intervals for framing poli-
cies on critical national issues, she has
stated that the existing survey mecha-
nisms are archaic and not adapted for
rapid changes, and thus grossly underes-
timate India’s progress. The arguments
advanced by her in support of it are:
(i) the proportions of rural population
september 16, 2023
estimated from different sample surveys
in different years are much higher than
those obtained from projected popula-
tion estimates; and (ii) the rate of non-
response is higher in the case of affluent
households in surveys. It appears that
the author has not taken enough interest
to study the technical details of sample
surveys conducted in India. Neither the
National Family Health Survey (NFHS)
nor the National Sample Survey (NSS) are
designed to obtain absolute estimates of
population either for urban or for rural
areas. Both the surveys are designed to
derive rates and ratios of persons with
certain attributes or satisfying specific
conditions like labour/worker participa-
tion, unemployment, and so on. This has
been clearly stated in all the survey
reports but the author seems to have not
read the original reports. Further, as
stated by Pronab Sen in his paper pub-
lished on 10 July 2023, any comparison
between apples and oranges is ridiculous.
The population projections published
by the National Commission on Popula-
tion in July 2020 are formulae-based
numbers using projected fertility, life
expectancy, and migration rates, apply-
ing several assumptions and smoothing
of past data. The urban population is pro-
jected separately by applying urban–rural
growth differential (URGD) in the pro-
jected total population and URGDs for
different states were computed by com-
paring population estimates of 2001 and
2011. As per these projections, the rural
population of Kerala is just 18.3% in
2021 and it will further reduce to 9.4%
by 2031; a rapid urbanisation process in a
state with total fertility rate lower than
the replacement level! In the National
Capital Territory of Delhi, the rural male
population has already become negative
as on 1 July 2022 and the entire rural
population consists of only females. The
situation is the same even in Chandigarh
with a negative rural population starting
from 2021. The author chose to rely on
these formula-based projections to con-
demn the surveys.
It is very fundamental that scientific
comparisons need to be between compar-
able objects and it is therefore necessary
vol lViII no 37 EPW Economic & Political Weekly

to establish comparability before under-
taking comparisons between different
sources of data. The violation of this
fundamental principle by such a high-
ranking dignitary cannot be considered
as just an oversight. The second argu-
ment relates to higher non-response by
affluent households, leading to mislead-
ing estimates. Here again, the author
seems to be totally ignorant of the NSS
sampling design, substitution procedures
and the survey-taking mechanism. The
design provides for sub-stratification of
listed households in each selected urban
block/census village on the basis of afflu-
ency characteristics and the sampling is
done from each substratum separately.
All efforts are made by the field staff
to motivate the informants by applying
extrinsic and intrinsic motivational tech-
niques and by seeking appointments
for multiple sittings so as to avoid non-
responses. In an extreme situation, the
originally selected household is substi-
tuted by another household from the same
substratum. Thus, the production of mis-
leading estimates due to differential non-
response rates is just wild imagination.
Her second paper, “Statisticians Can Be
Wrong” (2023b) was published on 13 July.
There is no doubt that statisticians can
be wrong and for that matter every hu-
man being can be wrong. Statisticians
are more prone to be wrong as they are
often applying statistical techniques to
measure uncertainties and non-visible
characteristics. What makes them dif-
ferent from others is that they have
mechanisms to measure the likely extent
of error or the degree of confidence in
the estimates. A large part of the article
disputes the arguments made by Sen in
his article published on 12 July 2023,
quoting extensively from a publication of
National Sample Survey Office (NSSO)
without going into the details of prepa-
ration of sampling frames. The lists of
census villages are available only once in
10 years after the quinquennial censuses
and that too with a time lag. In the urban
sector, the NSS prepares the frames by
conducting urban frame survey (UFS) in
areas identified as “urban” by the very
same censuses. Thus, any change in the
urban–rural composition can be incor-
porated in the sampling frame only with
Economic & Political Weekly EPW september 16, 2023
DISCUSSION
a time lag after the censuses. Thus, the undertaken only once in 10 years. It is
survey estimates of population totals also mentioned that the results of Eco-
can never tally with the census esti- nomic Census 2019 are still not available
mates. But the rates and ratios estimat- and some of the important surveys such as
ed from the surveys are reliable and re- the (i) Annual Survey of Unincorporated
main invariant to changes in population Sector Enterprises, and (ii) Consumer
totals. It is because any correction in the Expenditure Survey have not been con-
denominator (population total) is equal- ducted in recent years. Concern is also
ly applicable to the numerator (popula- expressed about the non-availability of any
tion satisfying the given condition). handle on unorganised/informal sector
It is not clear as to how the author and its contribution to gross domestic
jumped into the conclusion that the sur- product (GDP). The practice of setting
veys need a major sampling overhaul to up of “working groups” for each survey
reflect the true status of India’s real being undertaken and non-allocation of
economy. Is it a syndrome of firing adequate time for survey design by the
the cook if the dish is bad? It is also survey design and research division (SDRD)
not known how the true status of of the NSSO are also criticised. Finally, it
India’s real economy was assessed by is concluded that “India’s official statis-
the author without even a survey or an tics are excellent on the administrative
analysis. It would have been better if side and mediocre on censuses and sur-
the author had avoided such irresponsi- veys.” The administrative statistics com-
ble public statements. mended in the paper relate to MCA-21 and
Bibek Debroy, chairman of the EAC-PM, goods and services tax (GST) data sets.
in his article “The Janus of India’s Official The article expresses the frustration
Statistics” published on 10 July 2023, that the statistical system of the country
endorsed the views of Ravi. In addition, has not been able to meet its data needs.
the article enlists a number of censuses However, it needs to be clarified whether
which are fairly old without any latest the data needs have been communicated
updates, although these are usually to the National Statistical Office (NSO)
BUDGET 2023–24
March 25, 2023
An Introduction and Overview —Pinaki Chakraborty
Independent Fiscal Councils: Lapdogs or Watchdogs? —Y V Reddy, Pinaki Chakraborty
Electoral Cycle and the Union Budget 2023–24:
Some Departures from the Past? —Ashok K Lahiri
Concerns about Balancing Growth and Stability —M Govinda Rao
Union Budget 2023–24: The Long View —Ashima Goyal
Massive Capital Expenditure, Modest Fiscal Consolidation,
and Cut in Pillars of Social Safety Net —Sudipto Mundle, Ajaya Sahu
Balancing Growth with Fiscal Consolidation —D K Srivastava
The Union Budget 2023–24 and the Financial Sector:
The Devil May Lie in the Details —Partha Ray
Agriculture and Rural Areas in Budget 2023–24:
A Need for Comprehensive Approach for Transformation —S Mahendra Dev
For copies write to:
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email: circulation@epw.in
vol lViII no 37 69
DISCUSSION
and the necessary human and financial
resources made available. If not, the blame
cannot be passed on to the statistical
system and it remains with the EAC-PM.
The chairman of EAC-PM is also critical
about the non-completion of tabulation of
data relating to the Economic Census 2019.
It is a clear case of criminal wastage of
public funds and the EAC-PM may order
an investigation both by the Comptroller
and Auditor General of India and the
central bureau of investigation to fix the
responsibility and recover the amount
spent. The erstwhile Rangarajan Com-
mission had categorically stated that
economic censuses do not serve any
useful purpose. Instead, it recommended
the establishment of a live business reg-
ister and efforts have been made in the
NSO to develop a prototype business
register and piggyback it with the TAN
database of the income tax department.
The scheme seems to have been aban-
doned and even today there is no provi-
sion for online updating of the list of
units to be covered under the Annual
Module on Insurance Statistics
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70
Survey of Industries. Nevertheless, private
agencies were commissioned to under-
take Economic Census 2019 by spending
huge amounts of public funds. The deci-
sion to assign such a highly technical
activity across the country to private
agencies that are not aware of even the
definition of economic activity cannot be
justified by any stretch of imagination.
The enumerator and supervisor who
were assigned the job in my place did
visit my house and collected the demo-
graphic particulars of myself and my
wife. The moment I told them that both
of us were retired government servants,
they stopped further probing and walked
away. I called them back and asked why
they had not enquired about my economic
activities. The reply was really amusing.
They were asked to enlist only poultry
farms, manufacturing units, tailoring
units, restaurants, grocery shops, trading
establishments, transport units and the
like and they found none in my house.
Then I asked what if I undertook consul-
tancy services, software development or
EPWRF India Time Series
www.epwrfits.in
september 16, 2023
trading of stocks by sitting in my room?
The emphatic answer was “those are not
economic activities.” One can well imag-
ine the outcome, if the economic census
is undertaken by those not knowing even
the definition of economic activity and
its related classifications. Census and
survey taking are highly technical activ-
ities and can be undertaken only by
technically qualified and trained field
staff. No doubt, the Economic Census 2019
is simply a wasteful exercise and can
produce only garbage even after several
years of data cleaning.
Yet another comment by the author is
about the internal functioning of one of
the divisions of NSSO. The comment about
the formation of “working groups” for
finalising the sampling design is perhaps
due to complete ignorance about the
design process. No survey design can
be finalised without adequate domain
knowledge and a clear understanding of
the requirements of concerned subject
ministry. For example, if a survey has
to be mounted to meet the demands of
Contents
• Life Insurance in India
• Reinsurance
• General and Health
Insurance in India
• International
Comparison
Provides company-wise
data.
The data series are
available on annual
basis from 2000-01
and quarterly series
from 2005-06,
depending upon their
availability.
vol lViII no 37 EPW Economic & Political Weekly

Ministry of Agriculture and Farmers’
Welfare, the design group should have
a mechanism to understand the exact
requirements and the prevailing agricul-
tural practices in different regions of
the country. The sampling design and
survey instruments, including the ques-
tionnaire and instructions to field staff,
can be finalised only through such a
consultation process and formation of
working groups is, thus, an essential re-
quirement. How much time the officers
of the SDRD of NSSO spent for sampling
design should not be of concern for any
external agency. Also, the SDRD has nev-
er faced lack of survey statisticians as all
officers posted in the Division belong to
the cadre of Indian Statistical Service
with adequate theoretical knowledge,
training and experience. If needed, they
can also take the help of Indian Statisti-
cal Institute located in the vicinity. It is,
therefore, better if the survey agencies
are left to themselves without any exter-
nal interference.
The remark that “India’s official statis-
tics are excellent on the administrative
side and mediocre on censuses and sur-
veys” is subjective and incorrect. Being a
person of eminence occupying a key
position in the government could have
avoided such a comment on the statisti-
cal system as it has the effect of tarnish-
ing the image of India as a progressive
nation, and that too at a time when India
is becoming a member of the United
Nations Statistical Commission.
This is not to say that the Indian
statistical system is perfect and needs no
correction. In fact, the glory of Indian
statistical system has diminished signi-
ficantly over the last decade due to
excessive interference earlier by the NITI
Aayog and now by the EAC-PM. The on-
slaught on the statistical system is con-
tinuing with renewed vigour and the
motivation remains doubtful. As stated
by Ravi in her paper, data systems are
not to be designed to make govern-
ments look good or bad but should pro-
vide an objective picture of the ground
realities across the country to anybody
interested—policymakers, scholars, and
citizens alike.
The fundamental requirement in this
regard is to maintain the independence
Economic & Political Weekly EPW september 16, 2023
of the statistical system and protect the
statisticians from external interference.
This principle has been violated in the
recent past in several instances. The
publication of some of the survey reports
were prevented and some others were
delayed due to the fear of inconsistency
with the government narratives. Also,
the sudden switchover to MCA-21 data
sets in the computation of GDP without
examining the comparability and quality
of data, under compulsion, created un-
necessary controversies in the growth
story of India. Such interferences in the
independence of statistical system reduce
its credibility and badly affect the image
of the country.
Earlier, no government agency had
prior access to NSS reports unless they
were approved and released by the gov-
erning council of the NSSO which had al-
ways been headed by eminent econo-
mists/statisticians. The governing coun-
cil of the NSSO disappeared after the es-
tablishment of the NSC. The NSC, howev-
er, remained as a paper tiger without any
teeth since its establishment. A change is
necessary, at least to avoid external in-
terferences in the statistical system. The
newly constituted “Standing Committee
on Official Statistics” should take the
role of earlier governing council of NSSO
and necessary legislations/orders need
to be made in this regard. The statisti-
cians should be given the responsibility
of maintaining high standards of quality
and efficiency in statistical activities. In
order to ensure it, an independent mech-
anism for statistical audit of statistical
outputs needs to be set up as suggested
by the Rangarajan Commission. There
are several statisticians of repute both
within the country and abroad who
could form part of the mechanism.
Yet another major issue plaguing the
statistical system of the country is trivi-
alisation of statistical survey operations.
It is believed at least by some persons in
the government hierarchy that statisti-
cal surveys do not require any expertise
and can be done by anybody on the
street. It was in this belief that Economic
Census 2019 was outsourced and contract
investigators were hired for the conduct
of Periodic Labour Force Surveys (PLFS).
This myth needs to be removed as survey
vol lViII no 37
DISCUSSION
taking is both an art and a scientific
technique. The enumerator should have
adequate technical knowledge of survey
instruments, domain of study and art of
interviewing. These can be achieved only
through continuous training and field
experience. It is, therefore, necessary
to provide regular survey staff to NSSO
and stop outsourcing urgently. It is also
necessary to revive the training infra-
structure of NSSO and make it mandatory
for every functionary in the NSSO to
attend a two-week refresher training
at least once in two years. It must be
in addition to the initial induction train-
ing and annual survey-based training.
As Professor P C Mahalanobis stated,
survey operations need to be carried
out with the same precision as that of
military operations.
Absence of list frames with real-time
updating, despite the emergence of Digital
India, is a major weakness of the Indian
statistical system and this needs to be
addressed on a priority basis. The NSC
needs to consider this issue with utmost
seriousness.
The last but not the least important
point that I would like to mention as
weakness of the national statistical sys-
tem is that it does not carry the state
governments in the process of statistical
upgradation. For example, state govern-
ments are not participating in PLFS and
the usual Employment–Unemployment
Surveys are not being conducted for the
last several years. This is a major issue
being faced by the state governments
that needs to be addressed.
References
Debroy, Bibek (2023): “The Janus of India’s Official
Statistics,” Indian Express, 10 July.
Mohanan, P C and Amitabh Kundu (2023a):
“Narrative in Search of Data,” Indian Express,
12 July.
— (2023b): “Atmanirbharta in Statistics and the
Thrust on Make in India,” Economic & Political
Weekly, 15 July.
National Commission on Population (2020): Report
of the Technical Group on Population Projec-
tions, July.
National Statistical Commission (2001): Report of
the National Statistics Commission, August.
Sen, Pronab (2023): “Statisticians Are Not Stupid,”
Indian Express, 10 July.
Ravi, Shamika (2023a): “The Sample Is Wrong,”
Indian Express, 7 July.
— (2023b): “Statisticians Can Be Wrong,” Indian
Express, 13 July.
71
CURRENT STATISTICS EPW Research Foundation

Wholesale Price Index Foreign Trade

The WPI-based infl ation rate stood at -1.4% in July 2023 against 14.1% The trade deficit narrowed down to $20.7 bn in July 2023 from $25.4 bn reported
registered a year ago and -4.1% a month ago. The index for primary articles a year ago. Exports contracted by (-)15.9% to $32.3 bn from $38.3 bn registered a
grew by 7.6% compared to 14.8% a year ago and -2.8% a month ago. The rate year ago and imports decreased by (-)17.0% to $52.9 bn from $63.8 bn. Oil
of infl ation for food articles increased to 14.3% from 10.8% a year ago and imports stood lower at $11.8 bn compared to $18.6 bn a year ago and non-oil at
1.3% a month ago. The index for fuel and power declined by (-)12.8% against $41.2 bn compared to $45.2 bn. During April–July 2023–24, cumulative exports
44.6% a year ago and that for manufactured products decreased by (-)2.5% declined by (-)14.5% to $136.2 bn and imports by (-)13.8% to $213.2 bn compared
compared to 8.2%. to $159.3 bn and $247.3 bn, respectively, reported a year ago.

Consumer Price Index Index of Eight Core Industries

The CPI-inflation rate decreased to 6.8% in August 2023 from 7.0% reported a year The index of eight core industries increased by 8.0% in July 2023 compared
ago and 7.4% a month ago. The consumer food price index stood higher at 9.9% to 4.8% reported a year ago. Growth rate in coal segment rose to 14.9%, steel
compared to 7.6% recorded a year ago. The CPI-rural inflation rate was down to 7.0% to 13.5%, cement to 7.1% and electricity generation to 6.9% from 11.4%, 7.5%,
and the urban inflation rate to 6.6% from 7.2% and 6.7%, respectively, registered 0.7% and 2.3%, respectively, reported a year ago. Production of refi nery
a year ago. According to Labour Bureau data, the CPI for agricultural labourers products grew by 3.6%, crude oil by 2.1%, natural gas by 8.9% against their
(CPI–AL) stood at 7.4% in July 2023 compared to 6.6% a year ago and the CPI respective growth rates of 6.2%, -3.8% and -0.3% recorded a year ago.
for industrial workers (CPI–IW) at 7.5% against 5.8%. Growth rate in the fertiliser segment stood at 3.3% compared to 6.2% a year ago.

Movement of WPI-Inflation Rate January 2022–July 2023 Merchandise Trade July 2023
Year-on-Year in % July 2023 Over Month Over Year April–July
($ bn) (%) (%) (2022–23 over 2021–22) (%)
60
Exports 32.3 -2.2 -15.9 -14.5
Imports 52.9 -0.3 -17.0 -13.8
40 Trade balance -20.7 2.7 -18.7 -12.5
Data is provisional. Source: Ministry of Commerce and Industry.
Fuel and Power Primary Articles
20
Trade Balance January 2022–July 2023
7.6%
$ billion
0 0
Manufactured -2.5%
Products -5
-12.8% Non-oil Oil
-20
Jan F M A M J J A S O N D Jan F M A M Jun Jul -$7.2 bn
2022 2023 -10
* Data is provisional; Base: 2011–12 = 100.
-15
-$13.5 bn
Trends in WPI and Its Components July 2023* (%)
-20
Financial Year (Averages)
Weights Over Month Over Year 2020–21 2021–22 2022–23 Total Trade Balance -$20.7 bn
All commodities 100 1.9 -1.4 1.3 13.0 9.4 -25

Primary articles 22.6 8.1 7.6 1.7 10.2 10.0

-30
Food articles 15.3 10.5 14.3 3.2 4.1 7.3 Jan F M A M J J A S O N D Jan F M A M J Jul
2022 2023
Fuel and power 13.2 -0.5 -12.8 -8.0 32.5 28.1
Oil refers to crude petroleum and petroleum products, while non-oil refers to all other commodities.
Manufactured products 64.2 -0.3 -2.5 2.8 11.1 5.6
*Data is provisional; Base: 2011–12=100. Source: Ministry of Commerce and Industry.
Movement of Index Values of Components of IIP January 2022–July 2023
Index Value
Movement of CPI Inflation January 2022–August 2023 Electricity
210
Year-on-Year in % 205.6
168
15 141.0
126
12
9.9% 122.3
Consumer Food 84
9 Manufacturing Mining
6.8%
42
6 CPI
0
Miscellaneous 4.9% Jan F M A M J J A S O N D Jan F M A M J July*
3 2022 2023
* July 2023 are quick estimates; Base: 2011–12=100.
0
Index for Eight Core Industries July 2023* (%)
-3 Weights Over Over Financial Year (Avgs) in %
Jan F M A M J J A S O N D Jan F M A M J J Aug*
2022 2023 Month Year 2021–22 2022–23
* Data is provisional. Source: National Statistical Office (NSO), Ministry of Statistics and Programme Implementation,
Base: 2012=100. Infrastructure industries 40.27@ -2.2 8.0 10.4 7.8
Coal 10.3 -6.1 14.9 8.5 14.8
CPI: Rural and Urban August 2023* (%)
Latest Over Over Financial Year (Avgs) Crude oil 9.0 3.2 2.1 -2.6 -1.7
Month Index Month Year 2021–22 2022–23 Natural gas 6.9 7.7 8.9 19.2 1.6
CPI Combined 186.2 -0.1 6.8 5.5 6.7 Petroleum refinery products 28.0 -1.4 3.6 8.9 4.8
Rural (2012=100) 187.6 0.0 7.0 5.4 6.8 Fertilisers 2.6 0.7 3.3 0.7 11.3
Urban (2012=100) 184.5 -0.1 6.6 5.6 6.4 Steel 17.9 -0.9 13.5 16.9 9.3
CPI: Occupation-wise# Cement 5.4 -14.7 7.1 20.8 8.7
Industrial workers (2016 = 100) 139.7 2.4 7.5 5.1 6.1 Electricity 19.9 -1.6 6.9 8.0 8.9
Agricultural labourers (1986–87 = 100) 1215 1.6 7.4 4.0 6.8 (Base: 2011–12=100); *Data is provisional; @ The revised eight core industries have a combined weight of 40.27% in the IIP.
* Provisional; # July 2023 Source: NSO (rural and urban); Labour Bureau (IW and AL). Source: Ministry of Commerce and Industry.
Comprehensive current economic statistics with regular weekly updates are available at: http://www.epwrf.in/currentstat.aspx.

72 september 16, 2023 vol lViii no 37 EPW Economic & Political Weekly
 CURRENT STATISTICS EPW Research Foundation
India’s Quarterly Estimates of Final Expenditures on GDP
2021–22 2022–23 2023–24
` Crore | At 2011–12 Prices Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
Private final consumption expenditure 1822102 (17.6) 2121839 (14.2) 2426098 (10.8) 2333501 (4.7) 2182357 (19.8) 2298123 (8.3) 2478700 (2.2) 2399515 (2.8) 2312601 (6.0)
Government final consumption expenditure 403808 (-2.1) 346501 (11.7) 350565 (5.8) 474406 (11.8) 411243 (1.8) 332450 (-4.1) 348329 (-0.6) 485284 (2.3) 408300 (-0.7)
Gross fixed capital formation 1077836 (61.0) 1209609 (12.4) 1179221 (1.2) 1412108 (4.9) 1297588 (20.4) 1325580 (9.6) 1273453 (8.0) 1538071 (8.9) 1400832 (8.0)
Change in stocks 28895 (974.6) 31402 (655.9) 29902 (618.9) 33964 (613.8) 31050 (7.5) 30591 (-2.6) 29868 (-0.1) 35954 (5.9) 32256 (3.9)
Valuables 22035 (481.3) 134378 (156.6) 73595 (44.5) 48751 (-51.7) 34959 (58.7) 108206 (-19.5) 45595 (-38.0) 37330 (-23.4) 27633 (-21.0)
Net trade (Export–Import) 15631 -46285 -91258 -65580 -86460 -146624 -97506 -6264 -258496
Exports 765031 (46.1) 826729 (25.1) 825929 (27.8) 888144 (22.4) 915111 (19.6) 927872 (12.2) 917492 (11.1) 994047 (11.9) 844252 (-7.7)
Less imports 749401 (44.8) 873014 (26.6) 917188 (19.7) 953723 (6.7) 1001571 (33.6) 1074495 (23.1) 1014998 (10.7) 1000311 (4.9) 1102748 (10.1)
Discrepancies -59256 (-173.6) -145787 (-293.2) -117350 (-388.8) -124790 (-758.1) -126452 (113.4) -70326 (-51.8) -55812 (-52.4) -128375 (2.9) 114019 (-190.2)
Gross domestic product (GDP) 3311050 (21.6) 3651659 (9.1) 3850772 (5.2) 4112360 (4.0) 3744285 (13.1) 3878000 (6.2) 4022625 (4.5) 4361515 (6.1) 4037144 (7.8)

India’s Overall Balance of Payments (Net): Quarterly

2021–22 ($ mn) 2022–23 ($ mn) 2021–22 (` bn) 2022–23 (` bn)
Item Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 04 Q1 Q2 Q3 Q4
Current account 6559 -9734 -22167 -13424 -17964 -30902 -16832 -1356 484 [0.9] -721 [-1.3] -1661 [-2.6] -1010 [-1.5] -1387 [-2.1] -2466 [-3.8] -1384 [-2.0] -111.6 [-0.2]
Merchandise -30715 -44511 -59750 -54483 -63054 -78313 -71337 -52587 -2266 -3298 -4477 -4099 -4867 -6249 -5864 -4326.1
Invisibles 37275 34777 37583 41059 45090 47411 54505 51231 2750 2577 2816 3089 3480 3783 4481 4214.5
Services 25808 25579 27809 28319 31069 34426 38713 39075 1904 1895 2084 2130 2398 2747 3182 3214.5
of which: Software services 25136 26781 28356 29266 30692 32681 33541 34370 1854 1984 2125 2202 2369 2608 2757 2827.4
Transfers 19013 18991 21312 21132 22874 24773 28467 24762 1403 1407 1597 1590 1766 1977 2340 2037.1
of which: Private 19222 19212 21447 21350 23065 24991 28641 25080 1418 1423 1607 1606 1780 1994 2354 2063.2
Income -7547 -9792 -11538 -8392 -8853 -11788 -12675 -12606 -557 -726 -865 -631 -683 -941 -1042 -1037.1
Capital account 25392 39622 22500 -1707 22055 1461 28887 6540 1873 [3.7] 2936 [5.2] 1686 [2.7] -128 [-0.2] 1702 [2.6] 117 [0.2] 2375 [3.4] 538.0 [0.7]
of which: Foreign investment 11956 12575 -1283 -1439 -1238 12741 6641 4691 882 932 -96 -108 -96 1017 546 385.9
Overall balance 31870 31189 465 -16024 4595 -30379 11069 5579 2351 [4.6] 2311 [4.1] 35 [0.1] -1205 [-1.8] 355 [0.5] -2424 [-3.7] 910 [1.3] 459.0 [0.6]
Figures in square brackets are percentage to GDP.

Foreign Exchange Reserves Variation

1 September 2 September 31 March Month Year Financial Year So Far Financial Year
Excluding gold but including revaluation effects 2023 2022 2023 Ago Ago 2022–23 2023–24 2018–19 2019–20 2020–21 2021–22 2022–23
` crore 4539923 4068891 4340297 -30056 471032 -168726 199626 68050 668976 590416 302585 102680
$ mn 548886 509899 528083 -2788 38986 -49715 20802 -14168 56831 94535 21435 -31532

Monetary Aggregates Variation

Outstanding Over Month Over Year Financial Year So Far Financial Year
` Crore 2023 2022–23 2023–24 2020–21 2021–22 2022–23
Money supply (M3) as on 25 August 23316865 57433 (0.2) 2265442 (10.8) 557694 (2.7) 973105 (4.4) 2044615 (12.2) 1649151 (8.8) 1850031 (9.0)
Components
Currency with public 3205046 -10633 (-0.3) 142567 (4.7) 26790 (0.9) -71390 (-2.2) 402080 (17.1) 283860 (10.3) 240747 (7.9)
Demand deposits 2346219 -52025 (-2.2) 182232 (8.4) -49005 (-2.2) 25621 (1.1) 257428 (14.8) 217872 (10.9) 107606 (4.9)
Time deposits 17693713 119327 (0.7) 1925945 (12.2) 581163 (3.8) 1024747 (6.1) 1376262 (10.9) 1136327 (8.1) 1482361 (9.8)
Other deposits with RBI 71887 764 (1.1) 14698 (25.7) -1255 (-2.1) -5874 (-7.6) 8844 (23.0) 11093 (23.4) 19317 (33.1)
Sources
Net bank credit to government 7274511 49633 (0.7) 803197 (12.4) -6316 (-0.1) 108978 (1.5) 890012 (17.9) 627256 (10.7) 687903 (10.6)
Bank credit to commercial sector 15055287 130255 (0.9) 1848653 (14.0) 590114 (4.7) 625651 (4.3) 629822 (5.7) 948054 (8.1) 1813116 (14.4)
Net foreign exchange assets 5075585 17930 (0.4) 496330 (10.8) -274808 (-5.7) 163819 (3.3) 777810 (20.5) 275217 (6.0) 57703 (1.2)
Banking sector’s net non-monetary liabilities 4119665 140607 (3.5) 885095 (27.4) -247925 (-7.1) -73794 (-1.8) 253594 (8.4) 202474 (6.2) 710964 (20.4)
Reserve money as on 1 September 4513608 152160 (3.5) 414762 (10.1) 29959 (0.7) 126849 (2.9) 570276 (18.8) 468905 (13.0) 317872 (7.8)
Components
Currency in circulation 3305734 -22370 (-0.7) 123545 (3.9) 48473 (1.5) -72787 (-2.2) 406451 (16.6) 279953 (9.8) 244805 (7.8)
Bankers’ deposits with RBI 1134948 173780 (18.1) 279816 (32.7) -21595 (-2.5) 204471 (22.0) 154979 (28.5) 177860 (25.4) 53750 (6.1)
Other deposits with RBI 72926 751 (1.0) 11401 (18.5) 3081 (5.3) -4835 (-6.2) 8844 (23.0) 11093 (23.4) 19317 (33.1)
Sources
Net RBI credit to Government 1318142 5167 (0.4) 81810 (6.6) -214264 (-14.8) -132983 (-9.2) 107495 (10.8) 350910 (31.9) 529 (0.0)
of which: Centre 1295281 5387 (0.4) 67682 (5.5) -221373 (-15.3) -155095 (-10.7) 106606 (10.8) 352626 (32.2) 1404 (0.1)
RBI credit to banks & commercial sector -75507 178066 (-70.2) 90050 (-54.4) 378144 (-69.5) 18935 (-20.0) -168464 (83.9) -174344 (0.0) 449259 (0.0)
Net foreign exchange assets of RBI 4788173 -28149 (-0.6) 530734 (12.5) -185039 (-4.2) 200818 (4.4) 608998 (17.0) 243078 (5.8) 144877 (3.3)
Govt’s currency liabilities to the public 31148 0 (0.0) 2357 (8.2) 778 (2.8) 863 (2.8) 565 (2.1) 1100 (4.1) 2272 (8.1)
Net non-monetary liabilities of RBI 1548348 2924 (0.2) 290188 (23.1) -50340 (-3.8) -39216 (-2.5) -21682 (-1.6) -48160 (-3.5) 279064 (21.3)

Scheduled Commercial Banks’ Indicators ( ` Crore) Variation

Outstanding Over Month Over Year Financial Year So Far Financial Year
(As on 25 August) 2023 2022–23 2023–24 2020–21 2021–22 2022–23
Aggregate deposits 19232174 65061 (0.3) 2238318 (13.2) 528542 (3.2) 1188260 (6.6) 1546019 (11.4) 1351802 (8.9) 1578600 (9.6)
Demand 2207176 -50962 (-2.3) 184177 (9.1) -49747 (-2.4) 26746 (1.2) 244190 (15.1) 211553 (11.4) 107684 (5.2)
Time 17024997 116022 (0.7) 2054141 (13.7) 578290 (4.0) 1161514 (7.3) 1301831 (10.9) 1140246 (8.6) 1470917 (10.2)
Cash in hand 93150 -3773 (-3.9) -15378 (-14.2) 22602 (26.3) 2887 (3.2) 3487 (4.0) -4822 (-5.3) 4337 (5.0)
Balance with RBI 1010361 111082 (12.4) 246247 (32.2) 80677 (11.8) 200454 (24.8) 6507 (1.2) 140744 (25.9) 126470 (18.5)
Investments 5901588 62228 (1.1) 834330 (16.5) 338311 (7.2) 486440 (9.0) 715177 (19.1) 266421 (6.0) 686201 (14.5)
of which: Government securities 5900814 62207 (1.1) 834345 (16.5) 338290 (7.2) 486492 (9.0) 722935 (19.3) 266547 (6.0) 686143 (14.5)
Bank credit 14920147 116935 (0.8) 2461489 (19.8) 567344 (4.8) 1244911 (9.1) 578649 (5.6) 1044026 (9.6) 1783922 (15.0)
of which: Non-food credit 14900791 118416 (0.8) 2469894 (19.9) 594593 (5.0) 1245461 (9.1) 569159 (5.6) 1050270 (9.7) 1819026 (15.4)

Capital Markets 8 September Month Year Financial Year So Far 2022–23 End of Financial Year
2023 Ago Ago Trough Peak Trough Peak 2020–21 2021–22 2022–23
S&P BSE SENSEX (Base: 1978–79 = 100) 66598.91 (11.6) 65846.50 59688.22 (2.5) 59106.44 67571.90 51360.42 63284.19 49009 (63.7) 57362 (18.4) 58992 (0.7)
S&P BSE-100 (Base: 1983–84 = 100) 20355.28 (11.3) 19977.21 18290.24 (3.8) 17644.91 20355.28 15562.65 19137.18 14689 (68.2) 17423 (20.1) 17602 (-0.7)
S&P BSE-200 (1989–90 = 100) 8704.17 (11.1) 8492.39 7837.13 (4.5) 7406.09 8704.17 6602.62 8144.55 6211 (71.1) 7412 (20.9) 7389 (-2.0)
CNX Nifty-50 (Base: 3 November 1995 = 1000) 19819.95 (11.4) 19570.85 17798.75 (2.6) 17398.05 19979.15 15293.50 18812.50 14507 (67.9) 17153 (19.7) 17360 (-0.6)
CNX Nifty-500 17487.45 (13.3) 16949.25 15440.70 (4.3) 14601.95 17487.45 12950.75 16003.95 12149 (73.7) 14652 (22.2) 14558 (-2.3)
Figures in brackets are percentage variations over the specified or over the comparable period of the previous year. | (-) = not relevant | - = not available | NS = new series | PE = provisional estimates
Comprehensive current economic statistics with regular weekly updates are available at: http://www.epwrf.in/currentstat.aspx.

Economic & Political Weekly EPW september 16, 2023 vol lViii no 37 73
 74
Secondary Market Transactions in Government Securities, Forex Market and Money Market—August 2023
1 Settlement Volume of Government Securities Transactions 2 Netting Factor 3 Instrument-wise Break-up of Securities Transactions (` Cr)
Settlement Outright Repo Daily Average (Outright) Daily Average (Repo) a Securities b Funds a Outright Trades b Repo
Period Number Volume Number Volume Number Volume Number Volume Gross Net Netting Gross Net Netting Central Govt Treasury State Central Govt Treasury State
of Trades (` Cr) of Trades (` Cr) of Trades (` Cr) of Trades (` Cr) (` Cr) (` Cr) Factor (%) (` Cr) (` Cr) Factor (%) Dated Bills Govt Dated Bills Govt
August 2023 81539 1075273 43901 6265271 3883 51203 1909 272403 7340544 2550727 65.25 7396001 707561 90.43 902036 142201 31037 2313834 178243 637530
August 2022 75422 888832 32127 5251883 3970 46781 1530 250090 6140715 2273673 62.97 6081745 671567 88.96 737287 109739 41806 1800137 359186 474024
2023–24^ 433817 6059942 216084 34665447 4295 59999 1947 312301 40725389 15129469 62.85 41230131 3621693 91.22 4893692 903863 262387 12765312 1253015 3292449
2022–23^ 339790 4286862 156915 25899617 3398 42869 1414 233330 30186470 11210145 62.86 29784352 3339160 88.79 3346513 644841 295508 8934518 2006409 2027142
4 Tenor-wise Settlement Volume of Central 5 Deal Size Analysis (%) 6 Market Share of Top ‘n’ Securities (%)
Government Dated Securities Settlement Period < 5 Cr 5 Cr > 5 Cr <=10 Cr >10 Cr <=20 Cr > 20 Cr Period August 2023 August 2022 2023–24^ 2022–23^
Year August 2023 2023–24^ 2022–23^ % to Total % to Total % to Total % to Total % to Total % to Total % to Total % to Total % to Total % to Total
2023 10482 43514 (0.89) 51791 (1.57) Top 5 72.93 82.81 73.83 73.91
CURRENT STATISTICS

Trades Value Trades Value Trades Value Trades Value Trades Value
2024 5756 62552 (1.28) 49468 (1.50) Top 10 84.32 89.33 82.37 83.67
August 2023 4.79 0.31 55.22 20.94 17.76 13.32 7.75 10.00 14.48 55.44
2025 6980 56444 (1.15) 45662 (1.38) Top 15 89.16 91.53 87.01 86.88
2026 24342 148303 (3.03) 358105 (10.83) August 2022 4.95 0.41 58.19 24.69 18.40 15.59 7.37 10.56 11.09 48.75
2023–24^ 4.27 0.28 54.97 19.68 18.50 13.15 7.40 9.02 14.86 57.88 Top 20 92.02 93.19 89.97 88.99
2027 46344 357958 (7.31) 141609 (4.28)
2028 47916 262924 (5.37) 34628 (1.05) 2022–23^ 5.41 0.39 57.27 22.70 17.92 14.07 7.07 9.48 12.32 53.36 8 Market Share of Top Five Members
2029 13477 109919 (2.25) 82873 (2.51) (Category-wise) (%)
2030 22989 131683 (2.69) 23183 (0.70) 7 Intercategory Member Turnover Activity for All Category
Buy Sell Categories August 2023 August 2022 2023–24^ 2022–23^
2031 4083 13223 (0.27) 120604 (3.65)
2032 20480 507929 (10.38) 1700001 (51.43) Category Outright Reverse Repo TREP Uncollateralised Forex Outright Repo TREP Uncollateralised Forex Cooperative Banks 58.22 58.14 50.54 56.81
2033 514629 2178725 (44.52) 15358 (0.46) (Funds Lending) Lending@ Money Market Borrowing@ Money Market Foreign Banks 59.03 61.24 56.76 68.19
2034 5814 25282 (0.52) 18245 (0.55) Lending* Borrowing* Public Sector Banks 75.86 74.36 73.14 68.86
2035 1825 23014 (0.47) 216102 (6.54) Cooperative Banks 1.90 0.25 0.42 62.23 0.22 1.76 0.61 1.52 3.49 0.23 Private Sector Banks 82.10 94.40 88.53 84.15
2036 45302 592235 (12.10) 303999 (9.20) Financial Institutions 0.74 0.45 0.79 - 0.77 0.04 0.00 6.43 - 0.81 Mutual Funds 45.41 51.21 47.12 52.55
2037 66896 86226 (1.76) 1157 (0.04) Foreign Banks 20.43 34.15 2.82 3.68 41.93 20.76 30.72 5.88 4.06 42.41
2038 461 2826 (0.06) 1157 (0.04) Primary Dealers 89.61 86.43 91.24 85.97
Insurance Companies 3.20 1.69 13.67 - - 1.77 0.00 0.01 - -
2039 715 5338 (0.11) 2541 (0.08) Mutual Funds 9.40 36.44 67.58 - - 10.03 0.00 1.54 - - 9 Market Share of Top ‘n’ Members (%)
2040 539 3402 (0.07) 2358 (0.07)
Others 5.98 0.26 12.08 - - 5.13 1.44 4.04 - - Period August 2023 August 2022 2023–24^ 2022–23^
2041 491 5029 (0.10) 4285 (0.13)
2042 899 4477 (0.09) 3210 (0.10) Primary Dealers 16.90 6.86 0.00 0.00 - 24.26 41.82 6.50 79.27 - Top 5 27.17 27.40 27.86 28.80
2043 848 5041 (0.10) 2704 (0.08) Private Sector Banks 24.09 7.45 1.60 9.72 31.22 22.09 16.02 25.77 5.08 31.02 Top 10 43.67 42.79 43.69 44.28
2044 551 5458 (0.11) 4158 (0.13) Public Sector Banks 17.38 12.47 1.04 24.38 25.86 14.15 9.38 48.31 8.10 25.53 Top 15 56.09 55.06 56.01 55.57
2045 498 3429 (0.07) 2152 (0.07) Total 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 Top 20 65.44 64.64 65.30 64.09
2046 495 3688 (0.08) 1846 (0.06)
2047 460 2740 (0.06) 1157 (0.04) 10 Trading Platform Analysis of Outright Trades 12 TREP Trading @
2048 460 2833 (0.06) 1157 (0.04) Period OTC NDS-OM Settlement Period Total Daily Average
2049 539 3978 (0.08) 2426 (0.07) Trades % Share Value (` Cr) % Share Trades % Share Value (` Cr) % Share Trades Value Trades Value
2050 1472 8842 (0.18) 12981 (0.39) August 2023 5275 6.38 234560 21.56 77367 93.62 853543 78.44 August 2023 20248 7034358 880 305842
2051 1698 14277 (0.29) 44166 (1.34) August 2022 25057 7353051 1193 350145
2052 10115 64523 (1.32) 872 (0.03) August 2022 4364 5.67 193952 21.51 72638 94.33 707551 78.49
2053 20031 42591 (0.87) 872 (0.03) 2023–24^ 27486 6.32 1515957 25.11 407090 93.68 4522445 74.89 2023–24^ 97692 31567981 880 284396
2054 243 1815 (0.04) 872 (0.03) 2022–23^ 24470 7.12 1149785 26.68 319232 92.88 3159665 73.32 2022–23^ 132132 37997125 1190 342316
2055 256 1936 (0.04) 947 (0.03) 11 Type-wise Settlement Volume of Government Securities Transactions (` Crore) 13 Top 5 Securities—Basket Repo 14 Top 5 Securities—Special Repo
2056 243 1815 (0.04) 870 (0.03)
2057 244 1815 (0.04) 872 (0.03) Period Outright Repo Security Trades Value Rate Security Trades Value Rate
2058 244 1815 (0.04) 870 (0.03) Proprietary Constituent Proprietary Constituent
FRB 2028 218 100242 6.56 7.26% GS 2033 1326 224012 6.47
2059 605 2572 (0.05) 1650 (0.05) Trades Volume Trades Volume Trades Volume Trades Volume
2060 938 5691 (0.12) 3788 (0.11) FRB 2033 173 66135 6.57 7.41% GS 2036 773 150330 6.48
August 2023 64965 869803 16574 205470 18965 2558542 2960 571065
2061 2670 12349 (0.25) 44582 (1.35)

september 16, 2023

August 2022 55285 658571 20137 230261 11841 1803875 4237 829471 7.54% GS 2036 189 62686 6.54 7.36% GS 2052 303 69312 6.51
2062 5306 45378 (0.93) 0 (0.00) 7.06% GS 2028 187 55270 6.63 8.20% OMC SB 2024 120 45913 6.54
2063 13700 40103 (0.82) 0 (0.00) 2023–24^ 338305 4715219 95512 1344723 91447 13805960 16605 3504815
Total 902036 4893692 (100) 3305278 (100) 2022–23^ 259438 3314945 80352 971917 63491 9516638 15077 3451431 7.41% GS 2036 144 53332 6.64 7.38% GS 2027 251 31768 6.49
15 Forex Settlement 16 Category-wise Forex Activity—Deal Type
Settlement Period Cash Tom Spot Forward Total Average Netting Factor: Forex Category Cash Tom Spot Forward
Trades Value Trades Value Trades Value Trades Value Trades Value Trades Value Gross Net Netting
(` Cr) ($ Mn) (` Cr) ($ Mn) (` Cr) ($ Mn) (` Cr) ($ Mn) (` Cr) ($ Mn) (` Cr) ($ Mn) ($ Mn) ($ Mn) Factor (%) Foreign Banks 40.43 46.99 39.51 45.64
August 2023 3687 1011509 122217 4883 1200673 145092 205938 3166931 382748 8373 1257336 152050 222881 6636448 802108 10613 316021 38196 802108 29773 96.29 Public Sector Banks 25.09 17.67 29.29 24.78

vol lViii no 37
August 2022 3622 871321 109577 4667 1041733 131079 172498 2812782 353869 7805 1244285 158033 188592 5970122 752558 9926 314217 39608 752558 34102 95.47 Private Sector Banks 31.86 33.06 30.78 29.53
17 Forex Deal Size Analysis (%) Cooperative Banks 0.11 0.06 0.40 0.05

EPW
Settlement Period < 1 mn 1 mn > 1 mn <= 5 mn > 5 mn <= 10 mn > 10 mn <= 20 mn > 20 mn
% to Total Trades % to Total Value % to Total Trades % to Total Value % to Total Trades % to Total Value % to Total Trades % to Total Value % to Total Trades % to Total Value % to Total Trades % to Total Value
Financial Institutions 2.52 2.22 0.01 0.00
August 2023 24.84 2.38 56.11 15.61 9.83 9.04 3.04 7.94 1.49 7.05 4.70 57.98
20 Forex Trading Platform: FX Clear (Amount in $)
2023–24^ 23.64 2.15 56.34 15.34 10.19 9.36 3.34 8.58 1.61 7.49 4.88 57.09
Period Spot Daily Average
18 Market Share—Forex (%) 19 Tenor-wise Forward Trade Analysis (%) Trades Value Trades Value
Period August 2023 August 2022 2023–24^ 2022–23^ Settlement Period < 30 Days > 30 Days & <= 90 Days > 90 Days & <= 180 Days > 180 Days & <= 365 Days > 1 Year
% to Total % to Total % to Total % to Total % to Total August 2023
% to Total 47923
% to Total 28655
% to Total 2282 1365
% to Total % to Total
Top 5 33.51 37.05 33.27 35.96
Trades Value Trades Value Trades Value August 2022 Trades27496 Value
16224 1447 Trades
854 Value
Top 10 54.00 58.41 54.52 56.69 August 2023 16.30 24.19 22.17 27.28 16.96 17.57 38.33 26.81 6.25 4.15
Top 15 70.79 72.91 70.48 71.04 2023–24^ 188967 101709 1871 1007
August 2022 17.19 25.01 34.53 39.68 16.86 13.98 29.63 19.92 1.78 1.41
Top 20 83.17 83.25 82.09 82.22 2023–24^ 15.48 22.97 21.78 26.51 17.95 19.00 41.56 29.28 3.23 2.24 2022–23^ 143191 79088 1432 791
^ Data pertains to April–August. * Call and Term Money Segment; ** Includes Small Finance and Payment Banks; @ 5 November 2018 onwards; (i) Figures in brackets are percentage to total; (ii) Tables 1 to 11 relate to Government Securities Market; (iii) Tables 12 to 14 relate to Money Market; and (iv) Tables 15 to 20
EPW Research Foundation

Economic & Political Weekly

relate to Forex Market. Source: Clearing Corporation of India Limited (CCIL).