Modinomics rings hollow

Look beneath government hype, and signs of deep economic distress are evident
By Kapil Sibal – This government is in denial.

It believes that black economy has been given a fatal blow. At 7.1% India continues to be the fastest growing economy in the world. Spurt in public investment has created jobs. FDI flows are evidence of investors’ confidence in the growth story of India. Reforms have led to ease of doing business.

Let us critically examine each of these claims.

On November 8, when the prime minister announced demonetization of all 500 and 1,000 rupee notes freezing 86% of India’s economy. If this ill-thought decision was an attempt at eradicating unaccounted wealth then it failed miserably. Most cash is either invested in real estate, gold or is stashed abroad. Undisclosed cash in circulation represented only around 5% of unaccounted wealth.

Now that real estate is outside the GST net, cash will continue to be a factor in real estate transactions. What is alarming is that unaccounted cash entered the banking system and is slowly being withdrawn and reconverted into undisclosed cash.

Modi believes in seducing foreign investors in digitizing the economy, little realizing that most of India earns less than Rs 10,000 a month and seldom accesses digital platforms for bank transactions.

Record levels of Sensex, we all know, do not reflect the true state of the economy. With real estate giving no returns and interest rates down, the only option for investors is in equities. This is risky because once the bubble bursts investors will be badly hurt. more>


Farmers revolt

India’s farm distress needs structural solutions, quick fixes such as loan waivers won’t do
Times of India – All of a sudden it seems to be Kashmir in Madhya Pradesh: at least five protesters shot dead in Mandsaur district, prohibitory orders and internet shutdowns enforced.

This is testimony to the deep-seated crisis in India’s agricultural economy and must serve as a wake-up call to the Centre as well as state governments. The usual populist fixes – such as farm loan waivers – is not going to defuse this crisis.

Rather, policy makers must now remove the structural bottlenecks in India’s farm economy. Agriculture supports more than half of India’s population but makes up just 15% of its economic activity. It follows that holistic solutions to farmer distress will have to combine creation of non-farm jobs and enhancement of farm incomes.

A bird’s eye view of agriculture points to an anomaly. Around 77% of farmland is devoted to staples such as cereals. This results in output almost equivalent to what high value crops such as fruits and vegetables yield on less than 20% of the land.

Rectifying this mismatch will solve many problems. This is where government policy has a crucial role to play.

The Indian farmer has to function in an over-regulated environment made worse by capricious bans on exports. This is compounded by restrictions on internal food trade, unfounded fear of new technology such as genetically modified crops and the new bogey that has coincided with the unchecked rise of gau rakshaks: restrictions on cattle trade. more>


Head off digital colonialism

How Indian IT can compete with Google and Facebook and show the world a better way
By Mishi Choudhary and Eben Moglen – The world’s major societies are now wrestling with the enormous social power wielded by the internet’s “platform companies.”

In Europe they speak of “GAFA”: Google, Apple, Facebook and Amazon. Twitter, Uber and other aspirant companies hover just out of the main ring. Europe’s open and democratic societies have been as fully colonized by the platforms as the US: the plurality of their citizens’ email is read by Google, most of their citizens’ social and family lives are surveilled by Facebook, and so on.

Essentially, three basic approaches to deal with the power of these American data miners have emerged.

First, the US government sees them as pillars of post-industrial American power, and as an immense national security intelligence resource. It is therefore their strategic ally.

Second, proponents of “digital sovereignty,” mostly autocracies, have chosen to build national search engines and social media structures, favoring domestic private market entrants (as has happened in Russia and China), and by exercising control over national telecommunications networks to block the US companies.

Third, the European Union has attempted to control the companies’ behavior by regulation and litigation.

India has a golden opportunity to find a fourth way.

India can. India can invent competition that challenges not just the platform companies but their basic, anti-environmental business model.

Indian internet companies can provide global digital service platforms that protect, rather than destroy, privacy. Indian internet industries can provide reasonably priced, universally available, privacy respecting services that compete directly with services provided by the US data miners, priced reasonably in local terms in all the developed and developing societies. more>


Mind our language

Attempts to depose English subject our universities to dangerous social engineering
By Indrajit Hazra – To artificially push the case of ‘vernacular languages’ at the cost of endangering higher education learning and teaching – especially in, but hardly confined to, science and technical subjects where textbooks and research material in non-English Indian languages are overwhelmingly unavailable – is a recipe for widening the very knowledge divide being sought to be bridged.

“.. Technical education is entirely due to English [language] education. It is no use saying that ancient India was very advanced technically, for it will not alter the fact that today we are more backward than any Western country.”

India that doesn’t need any prodding any more to use Hindi, the ‘new’ aspirational language, let’s stick to English for our higher education. It’s just more fruitful – and easier – to not end up dumbing things down just to try and balance a lingering ‘cultural imbalance’. more>


A breakthrough strategy

According to The Times of India report, “Path-breaking economic strategy” (Sep 27, 2016), the finance and coir minister, Dr T M Thomas Issac stated, “My first objective is to find the resources for government expenditure. All available funds are now being used run the government and with the salary arrears for government personnel due next year, it is even more critical. The next target is bring revenue deficit below one per cent. The third and the biggest mission is to source loans and investments on the budget of Rs 20,000 crores ($3B) for the first year.”

That doesn’t read like a “path-breaking strategy,” but a desperate effort to continue the failed Kerala status quo activities. Here is a breakthrough strategy for reviving Kerala economy.

Bruce Katz at the Brookings Institution provides an effective formula for regional economic development. He says, “The development of new platform technologies benefits entire economies, but the big winners are the cities and regional ecosystems that invent them and become centers of entire new industries.” Couple this formula with a historic trend to act as effort multiplier, and you have a true path-breaking strategy.

The historic trend to take advantage is internet adoption. Internet adoption has greater potential for economic transformation than the developments that followed postal mail service, telephone or printing press by enabling rapid exchange of information that aid economic interactions. However, focus in the developed economies have shifted more to entertainment applications [2, 3, 4, 5] of internet. The net result is that currently available network products are entertainment-centric. Deploying fully capable networks for economic development targets (such as e-payments) with currently available products incur excessive costs, since they are designed for high bandwidth entertainment applications.

This has created a market gap for economic-development enabling network systems and solutions. The author invented and patented underlying broadband technologies.

Developing economic-development-enabling network products will help fill the market gap, create new product categories and help emergence of a sustainable industrial base in Kerala.

A similar effort was launched in the past with KELTRON, but was not successful due to insufficient preparation and less than optimum market conditions. Now, conditions are ripe for an industrial initiative using KELTRON as a base for creation of a world class network industry sector.


Pollution control is not a priority

The Times of India report, “Order industries to bear cost, CPCB requsts NGT” (Aug 26, 2016), illustrates the bureaucratic setup by the state and central governments for pretending to be doing something about the Periyar pollution, without producing actual results.

The report says, “The Central Pollution Control Board (CPCB) has pleaded to the National Green Tribunal (NGT) to direct polluting industries to bear the remediation cost to save Periyar in Eloor area.” [2, 3, 4]

“The treated effluents should not be discharged through Kuzhikandom canal as it may continue to wash the sediments further down the creeks. The flow has to be contained to facilitate remediation activity. Therefore, the industries should be directed to submit a time-bound action plan to stop discharging treated effluents to the canal, the board submitted.”

“It said that multiple contaminants including DDT, endosulphan, chlorobenzenes and metals such as manganese, vanadium, zinc and chromium have been found in soil, groundwater, sediment and surface water and immediate steps need to be initiated to rejuvenate the river body.”

Apparently, the Central Pollution Control Board (CPCB) and the Kerala State Pollution Control Board (KSPB) do not have any real authority. KSPB appeals to the CPCB, and CPCB in turn appeals to the National Green Tribunal (NGT). If governments were serious about solving pollution problems, KSPB would have had real authority. (And provided an appeal process regarding its decisions.). An empowered KSPB would have been able to take action on its own. For example, shutdown a polluting plant. Instead, it has to go through laborious legalistic procedures, while the pollution problems continue to deteriorate. Even though it was determined that Eloor region is one of the most polluted places in the world in 2006, no real action to control pollution has been taken so far.

The CPCB pleading to the NGT is also meaningless. Most of the polluting companies are running at a loss. So even if the NGT rules that the companies to bear the remediation costs of the pollution, it won’t produce any tangible results. The current situation is the result of bad industrialization policies in the 1930s. And time has shown that chemical industries are a disaster for kerala.

So the logical course of action is to close down the loss making chemical factories, and the Kerala Government to assume the cleanup costs. In addition, implement an Eloor-Edayar Redevelopment Program. Anything else will be prolonging the misery of the people in the Eloor area, and further collapse of the Periyar ecosystem.


My encounter with the curse of God’s own country

By Rajeev Sunu – Last week, I was trying to soft sell Kerala to a multinational company director in Sydney [2, 3, 4, 5] and was listing out the unique advantages that give my home state an edge over Tamil Nadu [2, 3] for setting up an international logistics operation and an e-commerce platform.

But the executive asked me bluntly: “Isn’t that the south Indian state with 100 percent literacy and all those smart ones working in the Middle East and other countries? I have heard horror stories about trade union activism in that state and we don’t want to get caught in such politics and mess up our business.”

My own experience of trying to facilitate a global business group’s investment has taught me that doing business in Bangalore [2, 3] is far easier than doing it in Thiruvanthapuram [2, 3]. In a way it was simple: in Kerala the potential investor was made to feel that they are sort of receiving a favor from the administrators; in Karnataka [2] there were committed resources to market the investment-destination product and to service the clients on an ongoing basis.

Kerala’s tragedy is that it has no business development managers to market its potential in national and global markets. Innovation and change are alien to the state’s bureaucracy, which is primarily trained in the art of balancing socio-political equations while acting as advisory channels to ministers. more>


Intellectual freedom yet to be won

The Times of India report, “Scientists and academics hit out at draft education policy” (Aug 23, 2016), highlights the regressive policies of the Government of India. It is a good sign that professionals in Kerala are able to see through the gimmicks promoted by politicians.

The report says, “The draft of the new education policy (NEP) 2016 has drawn flak from the state’s scientific community with many of the members pointing out that instead of addressing the real problems faced by the education system, it proposes measures which will further stagnate the education performance in the country. It also mentions that the proliferation of sub-standard institutions has contributed to the falling education standards. However, the policy is silent on replacing such profit-oriented private ventures with well-funded government schools and colleges, said Francis Kalathunkal, General Convener of the Breakthrough Science Society.

“The NEP 2016 document steers away from directly spelling out the Hindutva agenda of the NDA government but academicians point out that the preamble of the NEP 2016 says that the education system which evolved first in ancient India is known as the Vedic System.”

“Scientific methods and the lives and struggles of great scientists are not included in the curriculum. Naturally, students learn science just as any other subject, without understanding that it is a guide to thinking. That is why we see so many people who have studied science subscribing to all sorts of superstitions,” said a senior scientist.

“Our system gives no priority to value-based education. Instead, it looks at making education big business in order to reap profits,” said Calicut University’s life sciences department head Dr. E Sreekumaran.

“Science textbooks are overloaded but there are no facilities to conduct experiments. Science students should be told in the beginning itself that there is no Bible and no God in science. Only then, they can challenge existing paradigms and invent out of the box thinking,” said Praveen Raj, senior scientist at the SIR-National Institute of Interdisciplinary Science and Technology.

India sorely needs to improve its R&D capabilities to achieve the ambitious goals set by Prime Minister Narendra Modi, such as Smart Cities, Make in India, Startup India, Standup India, etc. R&D means original thinking, which is in acute short supply in India. Probably, the best example of this situation is illustrated by the fact that the impressive achievements of ISRO (Indian Space Research Organization) are the result of mimicking or borrowing developments from America or Russia. And, in spite of access to practically unlimited funding to DRDO (Defense Research and Development Organization), India is importing technology [2, 3, 4, 5] for its defense needs wholesale.

Mahatma Gandhi won political independence for India. But India is yet to achieve intellectual independence. Intellectual independence is independent thinking, unhindered by blind faith [2, 3]. It is similar to the situation in Europe in the middle ages, after the collapse of the Roman Empire (“Dark Ages“) [2]. Europe won intellectual independence through the Renaissance [2, 3, 4, 5, 6]. What India needs is a similar transformation to achieve intellectual independence.

Education is at the heart of this problem, without which industrial development, a key component for economic development, cannot progress. Regardless of how glorious the Vedic System may have been, it is rooted in a world that no longer exists. We are in the process of transitioning from the Holocene Epoch to the Anthropocene Epoch, with increasing existential threats to humanity. To be a “superpower” today means having a strong science and technology industrial base in the economy. It also means having citizens with forward looking outlook and independent thinking, not hindered by blind faiths, or clinging to customs and traditions, afraid of today’s challenges.

The purpose of education is to prepare a person to face life effectively. In today’s technology-driven fast changing world, that means scientific thinking skills, and ability to learn new things throughout life. The education system should be helping people achieve intellectual independence, become forward looking, overcome inhibiting behaviors rooted in customs and traditions, in addition to helping learn subject-matter skills in various disciplines.

Unless such a transformation is brought about in the education field, Prime Minister Modi’s ambitious goals will remain just empty words.


Redevelopment of Eloor-Edayar region

The Times of India report, “CPCB report shows need for urgent action” (Aug 24, 2016), illustrates another instance of decentralized responsibilities resulting in gridlock, health hazards, and government agencies lacking purpose.

“A report submitted by the Central Pollution Control Board (CPCB) before the NGT (National Green Tribunal) on action to be undertaken in the Eloor-Edayar contaminated area, says remediation measures are to be given utmost priority.”

In addition, “It says that multiple contaminants including DDT, endosulphan chlorobenzenes and metals such as manganese, vanadium, zinc and chromium have been found in soil, groundwater, sediments and surface water and that immediate remediation measures must be taken to rejuvenate the water body.”

Kerala State Pollution Control Board (KSPCB) had informed CPCB that “the four main industries identified (causing the pollution) were Hindustan Insecticides Ltd (HIL), Fertilizers and Chemicals Travancore Ltd (FACT), Merchem and Indian Rare Earths (IRE).”

The report adds, “A preliminary investigation of the Eloor area [2] was carried out in 2006 wherein it was found that the soil and sediments in Kuzhikandom Thodu (creek) and the adjoining paddy fields are contaminated (pdf) with DDT (dichloro-diphenyl-trichloroethane) [2, 3, 4], BHC (Benzene hexachloride) [2, 3] and endosulphan [2, 3, 4],” and more.

Besides, “The NGT is hearing a petition filed by local residents demanding zero-discharge by industries into the Periyar. Periyar Maleenikarana Virudhha Samithi (PMVS), an NGO which is in the forefront of protests against the pollution of the river has a Clean Periyar Green Periyar action plan on the lines of the Ganges Action Plan.”

The report adds additional details: “The Eloor-Edayar industrial cluster is home to more than 280 industrial units, out of which 75 are in the red. The discreet discharge of trade effluents and waste in slurry form into Periyar has turned the river into an illegal “Treatment Storage and Disposal Facility (TSDF), the Supreme Court Monitoring Committee on hazardous waste has observed.”

Many state and central government agencies are involved in controlling or preventing the Periyar river pollution. But the net result, as the Supreme Court says, is “the river Periyar has has turned into an illegal ‘Treatment Storage and Disposal Facility.” Even with all these agencies, pollution control is practically non-existent, and “massive fish kill is a frequent phenomenon downstream of river Periyar.” (“75% of waste water released back into river”)

One thing striking about the situation is that in spite of the state and central government agencies (Central Pollution Control Board, Kerala State Pollution Control Board. National Green Tribunal) to protect the environment, it is the NGO, Periyar Maleenikarana Virudhha Samithi (PMVS), that is actually trying to do something about it through legal action.

Greenpeace India reports, “Eloor has become one of the most toxic parts of the country and figures on the list of most polluted areas put out by the Central Pollution Control Board in India. Poisoned land, waters and air, hreaten the health and very existence of people and the ecology of the area. Polluted rivers transport the toxins over much larger distances endangering more people and other living creatures.” [2]

In addition, the Status of Human Health report says, “Contrary to the expectations based on the initial literature survey about possible increases in particular types of diseases due to air and water pollution; this health assessment has discovered that there is an overwhelming increase in most types of systemic diseases across Eloor (target village) when compared to Pindimana (reference village). Broadly one can say that the cocktail of poisons in the air and water of Eloor affects all body-systems adversely. Potentially the immune system seems to be affected too.”

The Kerala State Pollution Control Board produced a “preliminary” report stating that there is a serious problem in 2006. The polluted Eloor-Edyaar site was selected as one of the priority sites in the country needing remediation under a National Clean Energy Fund (NCEF) project to be executed by CPCB. The Central Pollution Control Board produced a report and submitted to the National Green Tribunal, which is conducting a hearing on the issue. It looks the state and central governments are geared towards producing reports and conducting legal proceedings, but not taking action. Since nothing was been done even after the 2006 report, the NGO (PMVS) petitioned the Supreme Court, which concluded that the polluted site, which in reality should be nourishing river, has turned into a “illegal Treatment Storage and Disposal Facility” for highly toxic pollutants.

Finding a real solution means going into history to understand the causes of the current problems. The origin of the problems started in the 1930s with the decisions of the Travancore Administration to establish chemical industries for economic development. “A policy decision of the Travancore administration in the 1930 — to attract large-scale, chemicals-based industries to the State by the advertisement of cheap hydroelectricity as the basis for industrialization,” says Jayan Jose Thomas, an an Associate Professor at the Indian Institute of Technology Delhi. Unfortunately, it was an administrative policy decision lacking sound industrial development plan and follow-up actions.

Industrial scale chemical production, to be viable, need to act as a feeder to a strong supply chain manufacturing derivative products. Downstream industrial ecosystem failed to develop for the these chemical factories. Most of the industrial production, especially chemical industries, are centered around the MumbaiPune [2, 3] metro-regions in Maharashtra [2, 3, 4] and Gujarat [2, 3, 4]. With underdeveloped transportation systems, it was not feasible for Kerala based chemical industries to be viable suppliers to those distant regions. As a result these industries have been stagnating, except when India operated a centrally planned economy. Most of these industries now are not profitable, making it impossible to implement effective pollution control systems.

The logical solution is to disband results of the 1930s failed industrial policy and create a redevelopment plan for the region. However, it needs to be implemented after a careful review of the possibilities. Some parts of the chemical factories and businesses in the Eloor-Edyaar region are profitable and can be self-sustaining. A redevelopment plan need to be formulated consisting of these components:

  • Identify factories and businesses with current and long-term sustainability
  • Identify factories and businesses without current and long-term sustainability
  • Implement assistance programs to strengthen factories and businesses with long-term sustainability to incorporate strong pollution controls
  • Implement assistance programs to help factories and businesses that do not have a sustainable future to exit or migrate to other areas/ sectors
  • Develop and implement a cleanup plan for the Eloor-Edyaar region to remove accumulated pollution
  • Make Eloor-Edyaar redevelopment part of a Kerala Transformation Plan

Such a comprehensive approach is necessary to solve the pollution problems in the Eloor-Edyaar region. Bandage efforts like offering financial loans will not produce a permanent solution.


A power grid gridlock

The Times of India report, “City stands to lose central funding for power project,” (Aug 15, 2016), reveals critical skills deficits in Kerala for project implementation.

According to the report, “The delay in executing the Rs 240 crore ($36m) ring main project is likely to cost Kochi a central assistance of nearly Rs 94 crore. The project — which aims to reduce transmission loss and ensure steady power supply in city and suburbs — has to completed by October 31 to receive the full central aid of Rs 188 crore ($2.83m). KSEB (Kerala State Electricity Board Ltd) was to provide the rest of the amount.”

“The problem is that the implementing agency has finished only half the work in two-and-a-half years though the Center extended the project deadline twice. The project under restructured accelerated power development and reforms program (R-APDRP) was awarded to NCC, a Hyderabad based firm, in June 2014 and the deadline set was 20 months.”

“Once complete, there won’t be power failure in the city and suburbs even at night,” said a KSEB official.” The Ring Main Initiative is an automation of power substations and their networks. Once completed, there won’t be power failures due to technical snags. All substations, feeders included in the project would be networked in such a way that if a particular substation develops a problem, power would be drawn to its supply lines from other substations and feeders.”

Here is summary of the situation. Government of India, ministry of power, has an initiative, “Integrated Power Development Scheme.” Under this scheme there is a program, R-APDRP to improve the electric power supply performance and loss reduction. KSEB was awarded Rs 188 crores ($2.83m) grant for upgrading the power grid in the Kochi area. KSEB contracted the work to NCC in 2014, for completion by February, 2016. Due to project delays, an extension has been granted till October, 2016. Based on the progress so far, the project is unlikely to be completed by the October 2016 deadline. The Government of India will make payments only after project completion.

The problem facing Kochi region is that due to the delay in the work by a Hyderabad based company, the power grid may not be upgraded resulting in the continued unpredictable power outages.

For Nagarjuna Construction Company Limited (NCC), upgrading power grid in the Kochi region may not be a priority, as the Government of India is giving out development projects left and right (“304 plans worth Rs 12,75,877 cr ($191.4B) stuck; stalled projects continue to haunt policymakers“) [2, 3].

Based on the funding arrangement, the Government of India seems to be interested in concentrating control through the funding mechanism. The R-APDRP program structure involves the use the following categories of consultants:

  1. Process consultant, Web Advision, and Cap Bldg consultant
  2. Capacity building – RIs (Resource Institutes) and PTIs (Partner Training Institutes)
  3. Third party Independent Evaluation Agencies (TPIEAs)
  4. IT Implementation Agencies (ITIA)
  5. IT Consultants (ITC)
  6. SCADA (supervisory control and data acquisition) DMS (distribution network management) consultants (SDC)
  7. SCADA/ DMS implementation agencies (SIA).

The R-APDRP program structure creates artificial problems for the KSEB. The R-APDRP program mandates external dependencies in the project implementation by requiring consultants, causing potential delays. By providing funding only after project completion, the Power Ministry is creating contingent liabilities for the KSEB.

The R-APDRP program can be improved in so many ways that are too numerous to describe here.

The KSEB should improve their project execution and management skills, and incubate businesses in Kerala that can develop the skills needed to execute KSEB projects.

Providing political support to the KSEB is a job for the Kochi Corporation, if they can get their act together.

Many of the issues are systemic. Hence the problems are unlikely to be isolated to Kochi, but similar problems must be occurring throughout India.