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2018

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PR INC IPAL ’ S

FACULTY ADV ISOR ’ S

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

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

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

It is indeed a matter of pride for the college that the annual magazine of the society is being released. On behalf of the entire faculty of SRCC, I wish them all the very best.

SIMRIT KAUR

AVINASH JHA

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At this time in the world, there is a growing disconnect between the mainstream narrative presented to us and people’s lived experiences. Our conventional and antiquated understanding of our society is in the need of inspection and investigation. We have attempted to do just this. Our highlights look at the ever evolving nature of the oft-touted ‘empire’. The Cambridge Analytica scandal has sounded the death knell for digital firms-calling for a departure from the established pattern of negligence towards privacy. Users everywhere are logging off and the backlash has plunged internet firms into a reputational crisis. Our article, ‘Modern East India Compa-nies’, written a few weeks prior, foretold this erosion and further comments on the nuances of digital privacy. Elsewhere, as Xi re-establishes stronghold over China, the Dragon continues on its rampage to amass geopolitical influence through overseas investments, forging- you could say- an empire of its own. In ‘Debunking China’s Economic Growth’, we have attempted to comprehend the not-so-subtle alchemy of China’s growth, which has fuelled this remarkable rise to the status of a superpower. In India Unbound, we have taken a closer look at the issues that persist in our country. One of the major talking points this year was the PNB scam which rattled the Indian banking sector, exposing the dire need for reform. Its nuances have been elucidated in our piece ‘The Misery of the Indian Banking System’. This year, we have re-introduced Jargon Minimised which seeks to deconstruct complex economic ideas, which are often misunderstood. Further, we have introduced a new section, The Firing Line, where we look at contemporary issues through the lens of different political perspectives. Finally, we have also included a special report on our annual fest, the Shri Ram Economics Summit.

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

-Varsha & Rahul

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09My Hero, China

12Modern EastIndia Companies

15Trump’sEconomics: Sounds Good, Doesn’t Work?

16NHPS:Ayushman Bharat?

17Farm Loans: Waiving orDrowning

19Economics ofElections in India

21Code Blue

23Scams: The Misery of the Indian Banking System

26The TelecomShakeup

29How to Get Richin America

31DebunkingChina’s Economic Growth

33High Time for Change:Drug Decriminalisation

36The Economics of Immigration

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39Karan Thapar

42Rohit Azad

45Prabhat Patnaik

47Isher Ahluwalia

49Sanjeev Sanyal

53Ivy, Not Rosy

55Going the E-way

57In Pursuit ofHappiness

60Environmental Dumping

63Gender Lens Investing

65DecryptingCryptocurrencies

68The Cost of Financial Stability

70Microfinance:Revolutionary or Not?

75Theme

76Speaker Sessions

79Events

81Summit Exhibition

83Annual Report

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Friedrich Hayek

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MAGNUM OPUSMAGNUM OPUS

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state capitalism

nouna political system in which the state has control of production and the use of capital.

What could possibly be the underlying similarity between Portugal’s electricity grid, Greece’s largest port- Piraeus and Apartment blocks in Sydney? All of them have been surreptitiously acquired by state-backed Chinese companies or Chinese policy banks. China’s state-led capitalism has created a nexus of Chinese influence around the world, fervently pushing forward the agenda of the Belt and Road Initiative, which seeks to cover about 65 percent of the world’s population, about one-third of the world’s GDP, and about a quarter of all the goods and services the world moves. China, the world’s largest saver, has been dol-ing out large sums of money to struggling third world and developing nations in Asia, Africa, and Latin America. These transactions have primarily taken the form of infrastructure investments, wherein China offers to fill the dearth of public infrastructure in these nations in return for establishing new export markets. This alleviates its domestic overcapacity and helps its companies globalize their operations by gaining cheap assets, market share, and key marketing, distribution, and engineering capabilities. However, China gains something of larger significance than commercial consolidation through its provision of such capital: geopolitical influence.

China’s ambitious journey towards global supremacy has left a large number of western liberal democra-cies perturbed. The Global North’s influence around the globe, traditionally uncontested by an outsider, is today challenged by a rising China. Countries per-turbed by China’s growing influence include a cohort of European countries reeling under the burden of

large amounts of debt, Australia which is struggling to finance public infrastructure projects and the ever-in-secure USA.

Donald Trump issued an executive order barring Singapore-based chipmaker Broadcom from acquiring Qualcomm, in fear of China overtaking the USA in 5G Technology.

Huawei’s undersea cable project raised a red flag in Australia.

European Commission President Jean-Claude Juncker, in an apparent reference to China, said: “If a foreign, state-owned, company wants to purchase a European harbour, part of our energy infrastructure or a defence technology firm, this should only happen in transpar-ency, with scrutiny and debate. It is a political respon-sibility to know what is going on in our own backyard so that we can protect our collective security if need-ed.” All of the above represent the growing concern among the leaders of several countries over China’s bour-geoning economic and geopolitical prowess. They argue that China seeks to exploit the target nations by coercing them to trade short-term gains for long-term dependency. China’s rising prominence in Latin Amer-ica has irked several world leaders, most notably the President of the United States of America. Rex Tiller-son, the erstwhile United States Secretary of State, has echoed the President’s disdain and paranoia on nu-merous occasions while cautioning the world against the predatory nature of China’s investments and the casualties arising out of poor governance of these funds in the target countries. Primary examples of misgovernance include Venezuela, which is embroiled in the quagmire of a political and economic crisis and Sri Lanka’s Hambantota Port, which has been leased to China on account of Sri Lanka’s inability to repay the

My Hero, China

BY ARNAB DUTTA AND TUSHAR SINGH

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loans borrowed from it to build the port.

However, instead of partaking in the vilification of China, what this piece intends to highlight is that in the wake of western liberal countries increasingly growing protectionist, China is acting in the spirit of multilateralism, free trade, and globalization. As the USA continues to build trade barriers by imposing tariffs and quitting trade agreements, it is China which is coming to the rescue to of a globalized world order. China’s Belt and Road Initiative (BRI) brings together countries spread across different continents on a single platform to facilitate infrastructural investment. BRI is China’s response to growing protectionism and uni-lateralism. This became clear last year when Xi Jin-ping spoke vehemently in favor of globalization at the World Economic Forum right after the USA had quit the Paris Climate Agreement to retreat into its shell.

We recognize that China is inflicted with a certain degree of unwarranted ‘villainization’ by the western media. It resonates the inability of western liberal na-tions to reconcile to the fact that China is a burgeon-ing power seeking to expand its political and economic presence in struggling third world nations. Institutions like the World Bank and the IMF have exploited such vulnerable nations since time immemorial by impos-ing severe conditions like fiscal austerity and sanctions while doling out aid packages. Amidst such historical exploitation, China is a messiah for these nations.

Interestingly, China’s BRI dwarfs the Marshall Plan, for which the USA received glorification for ‘reviving’ war-torn Europe. Marshall Plan gave away $100 billion (in today’s worth) of aid, while China is spending

roughly $150bn a year in the 68 countries that have signed up to the BRI. If anything, BRI will make the poor and infrastructure hungry Eurasia one of the most well-connected regions, rivalling the transat-lantic, dominated by America. USA used the Marshall Plan to export its currency (the US dollar) to increase its interna-tional acceptability by provid-ing subsidies in the US dollar. China is doing the same with BRI, by increasing the accept-ability of the renminbi (RMB),

which threatens the dollar’s position as an internation-al currency. No wonder The Eagle is insecure about The Dragon.

The criticism leveled against China’s growing influ-ence in Africa is unfounded. Some western intellectual circles have even labelled it ‘neo-colonialism’ (Pretty ironic, isn’t it?). The myth that western aid has ‘saved’ Africa needs to be busted. If anything, the West and the institutions it controls, like the IMF and World Bank impose conditions on African countries in re-turn for monetary benefits. Many of these conditions require democratization of the political system and adoption of neo-liberal principles by the country. If this is not an imposition of ideology and an attack on a country’s sovereignty, then what is? Unconditional aid is good, aid with conditions is a bribe. China, mean-while, does not impose any political conditions while loaning to African countries. As these countries are increasingly looking in the direction of China for aid, the World Bank is taking corrective actions: it imposes 15% fewer conditions on Africa in return for aid for every 1% increase in Chinese aid to the continent. Talk about paranoia and standing by ‘one’s own principles’.

Africans, traditionally exploited by the US and Europe for centuries, are increasingly growing a favorable opinion of China (63% according to one survey, more than any other country). In just 10 years, Africa’s trade with China has grown 20 fold, from $10 billion to $200 billion, making China its largest trading partner. How can the West not be wary? The land it ‘owned’ every inch of until a few decades ago is now sleeping in bed with a rival superpower.

The BRI is not just limited to Africa, Asia, and Europe. It expands well into Latin America as well. China is the top trade partner of Brazil, Chile, and Peru. China is following what many call the ‘patient capital’ approach: providing state-to-state packages to incentivize exports and following a policy of non-intervention in political affairs. China believes by negotiating favorable trade agreements today, it will benefit in the future when these Latin American countries realize their economic potential and boost their exports and imports simul-taneously. Compare this professional trading relation-ship which China maintains with Latin America to the USA, which is infamous for staging coups and setting up puppet governments in the region throughout the cold war. America has lost the moral high ground to speak on Latin America decades ago.

“China’s am-bitious jour-ney towards global su-premacy has left a large number of western lib-eral democ-racies per-turbed.”

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China often turns out to be generous. It has loosened the terms on Venezuela’s outstanding loans, by ex-tending deadlines and allowing it to only pay interest until stable conditions prevail. Had it not done so, and instead put sanctions on Venezuela (like the USA), it would have been the Venezuelan people who would’ve suffered the most because of worsening economic conditions, and not the government. Australia is real-izing the same. Its Foreign Investment Review Board (FIRB) has stated that Australia needs to be more relaxed about Chinese cash flowing into the country. This comes after Australia had blocked Chinese bids for its electricity grid at the last moment on grounds of ‘national security’.

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

Sure, China is lacking on several fronts. It has con-stantly challenged its neighbors’ sovereignty. It has an abominable human rights record and lacks freedom of speech. Its president, Xi Jinping only recently amended

the constitution to remove limits on his term. Howev-er, it is time we stop letting the skewed opinions of the west towards China dissuade us. To put it succinctly, in a world where countries are closing their borders for trade, “China is not the hero we deserve, but the hero we need.”

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Beep, beep, beep.

It’s 7 AM. You roll over to the oth-er side of the bed, reach out, and switch off the alarm on your flashy new iPhone. Then follows the daily ritual of checking your WhatsApp

messages, listening to your favourite playlist (on Apple Music, of course) while you shower and checking your friends’ snaps and stories as you polish off your break-fast. You then proceed to book an Uber, and surf the internet. The cab ride allows you to check the prices of shoes that you need for next week’s party, on Amazon and check out trending events on Facebook. It’s 9 a.m., and you finally reach your destination. While this might seem to be the morning routine of an average Joe, you have unwittingly shared everything you did over the past two hours, with some of the world’s most powerful corporations: Apple, Google, Uber, Amazon, and Facebook- the modern day East India Companies.

Despite these MNCs’ diverse product offerings and unique value propositions, they all have one thing in common- they failed in the world’s biggest market- China. Uber was left red-faced and sold off its Chinese subsidiary to Didi Chuxing. Facebook was forced to shut down its operations, after posts publicizing the Xinjiang Independence movement were shared on the platform. Google was coerced into leaving the coun-try, as it couldn’t navigate around the Government’s infamous internet censorship. Amazon couldn’t put its finger on the pulse of the market as well as the indigenous giant, Alibaba could. In order to counter the problem of saturating demand back home, these conglomerates had to pursue growth strategies outside of Western countries. Thus, they turned to India, a free market with speedy economic growth, internet expan-sion and a colonial hangover that made it much more appreciative and trusting of all things Western. If data is new the oil, then these companies could become the

next OPEC (which will be equivalent to an apocalyptic end to privacy and free speech).

Companies can monetize data: Facebook can track the activity of its users in a region and sells this to an FMCG. Besides this, the social-media giant can use past data to improve its key revenue stream-adver-tising, by allowing companies to have personalized advertising services, thus enabling very effective market segmentation. Apple can collect your medical status from your morning jogs, and sell it to phar-maceutical majors, under the illusory notion of per-sonalizing your exercise experience. Uber knows the most frequented restaurants and bars in town, which it can then sell to food chains, in order to let them get a sense of the competition. Amazon has a goldmine of data on consumer spending habits, and business revenue which it can sell to practically anyone. With advancements in the field of Internet of Things and Artificial Intelligence, data will become much easier to collect and process. The most dangerous aspect is not that a considerable portion of our country’s big data is in the hands of a foreign entity, but rather the fact that they have much more advanced systems to make bet-ter use of this than indigenous startups. Moreover, we can’t predict whether they will use this for good, or for possible iniquitous motives. Thus, akin to The East In-dia Company, these tech giants will soon have control over citizens’ lives. The fact that they know how Indian consumers think and make decisions, draws frighten-ing parallels with an Orwellian future.

The next aspect deals with how tech giants are stifling Startup India. Vast experience in the industry, econo-mies-of-scale, much more efficient internal operations, and access to unlimited capital, give these foreign giants a significant edge. For the past decade or so, In-dian startups (such as Ola, Flipkart, Paytm) benefited from ideas arbitrage (using Western product ideas and platform models, and making it profitable in an Indian space). However, they failed to reckon with the fact

Modern EastIndia Companies

BY ADITYA JAIN AND KARAN MEHROTRA

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that their duplicate models will struggle, when their Goliath versions come knocking on the door. Smaller competitors with similar models have either closed down or were sold off to these tech giants. Junglee was sold off to Amazon, Guruji.com couldn’t face the Goo-gle onslaught, just to name a few. The only way small startups can exist is by forming a distinctive ‘blue ocean strategy’, and targeting a particular segment.

Moreover, lack of funding and customer coverage has closed down many desi startups. It has now come down to a duopolistic situation in most tech spaces, pitting an indigenous entity with a foreign behemoth (Amazon vs Flipkart, Ola vs Uber, Paytm vs Google Tez), with seeming monopolies when it comes to search engines (Google has a mind-blowing 98% market share)

and social media sites (Facebook has 250 million In-dian users). Besides this, recent examples of Amazon venturing into the foods and private label business, Uber into logistics, and Facebook into the mobile payments business, showcase a big threat to other B2C firms. It’s only a matter of time before the former turns into the latter, and darkness falls over Startup India. Similar to the British Raj, were the handlooms indus-try was destroyed, our startup space is being broken down, under the guise of ‘free markets’, while our weak government watches with its ‘hands tied behind its back’, and oblivious Indian consumers continue to pre-fer foreign products (over false better quality notions).

The most frightening aspect of this is the ‘network effect’, and what makes this story different from a generic piece on the threat of dominance by ‘brick-and-mortar’ MNCs. Data being the holy grail of modern-day businesses, fuels the network effect. This nomenclature essentially means that as more and more consumers use the services of a platform model/tech business, it serves as an engine for internal product innovation and personalized services. This implies that once a firm becomes the market leader, it becomes harder to displace their dominance. This is because a higher market share means more customer data and hence better innovation. This cycle continues till a monopoly is achieved. This is why the advent of tech companies is much more harrowing than the domi-nance of a foreign manufacturing firm.

The fact that we are allowing foreign enterprises to exploit such a precious national resource (data), with-out any regulation or privacy laws in place, and also destroy our entrepreneurship fabric is egregious. China’s transformation from being a part of every ‘copycat’ reference, to a becoming a global hub for technological innovation and application, can largely be attributed to the BAT (Baidu, Alibaba, Tencent) trio. These companies have a combined market capital-ization of $900 billion, and after vanquishing Google, Amazon, and Facebook (respectively) domestically; they are now giving them a run for their money in global markets. The BAT trio had blossomed due to favorable government policies and patronage, which gave them an impetus to become what they are today. This included a 10% lower corporate tax rate, R&D expenses rebate, and staff training expenditure rebate, to name a few. Though of course banning foreign tech-nology companies (similar to China) will be a gross violation of our free-market and democratic setup, the Indian government can at least revamp its data privacy laws, on the lines of EU’s GDPR. However, we have a lot to learn from China, on how it made this giant leap to get this ‘technological trendsetter tag’. The fledgling Indian startup world needs to be provided incentives such as the ones provided to Chinese companies, and the Indian government needs to turnaround its cur-rently archaic and impractical policies, to something that can truly be useful to this promising entrepre-neurship ecosystem. Besides this, Indian companies need to focus on increasing R&D capital expenditure, and improving the overall customer experience, to become much more competitive.

The role of foreign technology companies should be that of an incubator on a larger level. All of these big enterprises need to be mandated to hold quarterly startup accelerator programs, for local firms. More-over, regulatory bodies need to keep a closer watch on them, and antitrust laws should be placed to pre-vent them from acquiring competitors and creating a monopoly setup. Besides this, these companies should adopt the ‘blockchain’ method of storing data, which will not only allow customers to know where their data is being used but also lower the chances of a data breach.

As the clichéd ‘kings’ in this marketplace, be careful where you spend your next rupee, it might be fueling your own colonization.

“If data is new the oil, then these compa-nies could become the next OPEC.”

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THE FIRING LINETHE FIRING LINE

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THE FIRING LINE

While the world was busy crying ‘apocalypse’ over an impending nuclear war, the American economy was booming under Trump. Domes-tically, his policies were impecca-ble. Unemployment is at one of the lowest while economic growth is at one of the highest levels in recent years. His $1.5 trillion infrastructure spending plan will bring even more jobs to construction and manu-facturing sectors. Trump has put national interests first and limited his government’s size: he increased military spending by 10% while weakening Obamacare. Trump is also working increasingly towards cutting red tape. He has issued 29 deregulatory executive actions and reversed 14 Obama era regulations. He plans to revise the Dodd-Frank Act and allow banks to invest depos-itors’ funds in derivatives, which if done, will boost economic growth. By repealing Obama-era limits on carbon emission at power plants, Trump has revived the US coal in-dustry. Quitting Paris Climate Deal helps the government save money which would’ve otherwise gone to India and China. Trump’s trade policies, however , are questionable. Quitting TPP and putting NAFTA on the line only hurts international economic growth. Tariffs on steel, aluminum and other Chinese goods are a step away from free markets. An otherwise progressive economic policy is marred by this, and it would behoove him to correct course on the international front. Also, tax cuts are love.

Prior to election, Donald Trump proposed sizeable income tax cuts alongside deregulation, consistent with Republican ideas. Also among his promises were significant infra-structure investment and status-quo protection for entitlements for the elderly (typically considered Dem-ocratic). His anti-globalization policies of trade protectionism and immigration reduction cross party lines. This combination of poli-cy positions could be considered “populist” and has played a role in convincing some of the 2012 Obama voters to vote for Trump. President Trump’s 2018 United States federal budget was a statement of his ad-ministration’s economic priorities for the following decade. It indicated a

rightward shift relative to the2017 current law baseline but also contained a few left of centre el-ements. Here is an overview: Re-publican agenda elements: Nearly $2 trillion reduction in healthcare spending (mostly from Medicaid, a program for lower-income persons), about $1.5 trillion in non-defense discretionary spending cuts, and about $1 trillion in corporate and income tax cuts (mainly benefiting the upper class), representing a net deficit reduction of $2.5 trillion. Democratic agenda elements: A net reduction in defence spending of $300 billion, and approximately $200 billion more for infrastructure.

If there is anything ‘fake’ in Amer-ica right now, it’s not the CNN, but Donald Trump’s claims to solving the US economy’s problems. The US’s economic growth and drop in unemployment have come because of a global recovery and not because of Trump’s policies, but his tweets claim otherwise. Unfortunately, at a time when international trade should pick up pace after the 2008 crash to the benefit of all coun-tries, Trump’s trade war might play spoilsport. His tariffs on steel and aluminum will also destroy more jobs in metal-based industries than they will create in metal-making industries. In a country where real wages of the bottom quartile have been stagnant for decades, Trump’s tax cuts do not provide any relief to the lowest income bracket. Instead, rates have been cut for big corpora-tions and rich individuals (most of whom are his friends). The estate tax exemption has been doubled which only helps the top 1 percent of the population, who pay it anyway. And his spending? While military sees a 10% increase, welfare has taken a hit. Obamacare has been weakened by choking essential funds for volunteer groups and advertising. Trump said he quit the Paris Climate Agreement because of the unnecessary expendi-ture USA had to incur. If spending money to fight global warming is ‘unnecessary’, then what will you call the expenditure on a border wall?

Trump’s Economics: Sounds Good, Doesn’t Work?

RIGHT

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THE FIRING LINE

The National Health Protection Scheme (NHPS) is an investment towards a healthier future; a fu-ture which promises universal health coverage, efficient primary healthcare, reduced out-of-pocket expenditure and improved access to healthcare services. Most devel-oped nations provide some form of universal healthcare to their citi-zens. By announcing this scheme, the government has taken a step towards a developed India. The NHPS aims to build a healthier India. Providing insurance coverage on such a huge scale will not only allow poverty-stricken people to access the healthcare system but will also make it cost-effective. General-ly, insurance premiums are high as only sick people tend to get insured. But mass insurance will reduce the cost by reducing the probability of a claim. India severely under-invests in healthcare and this consequent-ly affects the health and economic well-being of its citizens. Around 7% of our population is nearly impov-erished due to the healthcare costs. By providing insurance coverage for secondary and tertiary treatment, NHPS will give everyone the oppor-tunity to seek medical treatment. One of the best features of NHPS is that it aims to improve the primary healthcare system as well. One of its objectives is to build over 150,000 wellness centers which form the first and most crucial link between the public and the public healthcare system.

Every solution has it own set of problems. This should not stop us from finding solutions butshould us encourage us to improve those solutions and strive for per-fection. Similarly, the NHPS might be flawed but it has a huge room for improvement. We should endeavor to to formulate and finalise a scheme where quality medical services are assured to a majority of the popu-lation. Access to healthcare is the universal right of every citizen and the NHPS is a step to ensure that. The quality of healthcare offered to a country’s citizens shows its stage of development and India has been lagging behind on this front for a long time. It spent a dismal 1.4% of

its GDP on public healthcare and has one of the highest child mortality and malnutrition rate in the world. Any step to improve the health of the people should be welcomed, critical-ly analysed and honed after serious deliberations. The public should not consider it god’s gift to humanitynor should it be dismissed as use-less. Everyone should accept that although it is a forward-looking scheme, it is a work in progress.

NHPS is the perfect combination of grandiose and populist, announced to garner maximum support to the government. Touted as one of the largest healthcare scheme in the world, NHPS is a scheme that seems to lack substance. There are all sorts of unanswered questions regarding the NHPS, ranging from the lack of information regarding its method of implementation, premature assumption of states’ support and the disproportionate allocation of resources. In the last budget, the government allocated Rs 2,000 crores for the scheme. But the estimated cost of implement-ing it varies from person to person. One official put it at 30,000 crores while other projected it to be around 11,000 crores and a economic think tank in Delhi pegged it at 1 lakh crores. No matter what the cost, the question that stands is: How will the government finance this ambitious scheme as it already struggles with fiscal consolidation? Another ma-jor problem is that the government has still not explained the working of this scheme. It has not clarified whether the government will pay for premiums or pay for the cost of treatment. Both these models come with their own set of problems and these problems cannot be tackled until the government can come up with a viable model to first restrict the input prices.

NHPS: Ayushman Bharat?

RIGHT RIGHT RIGHT

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THE FIRING LINE

The neo-liberal structure has been established on the premise of ben-efiting industrialists at the cost of farmers. Modern agriculture requires investment in advanced machinery and purchase of seeds, fertilisers, chemicals and diesel. Savings are generally insufficient to meet such requirements, as a result of which marginalised farmers have to resort to informal sources of loans, where money lenders charge interest rates as high as 70%. Due to insufficient rainfall or lack of market demand, farmers get trapped in debt, which increases farmer suicides. Many farmers have quit farming to find better jobs. This may lead to a food scarcity in the future and drive infla-tion up. In fact, waivers can encour-age more farmers to borrow from formal sources, thereby bringing them into the banking system. The Centre has clearly overlooked this issue and argued that agricultural problems are essentially a state prob-lem. It contends that it cannot take up NPAs of the agricultural sector because waivers will destabilise the financial system. Why then, did the Centre write off Rs. 2.46 lakh crore of corporate NPAs during the 2012-17 period? It is a shame that the government can go miles to protect corporates but cannot even take one step towards addressing the plight of the nation’s farmers.

Firstly, we should not view ‘populist’ moves like loan waivers and ‘criti-cal’ expenditure like infrastructure development in absolutes. Undertak-ing one does not necessarily mean un-doing the other. A good policy maker has to balance these two aspects of the same coin. The truth is that both the Indian farmer and In-dian agriculture are struggling. You need loan waivers to save the farmer who will otherwise commit suicide if the burden of his loan becomes too heavy for him; you also need infrastructural reforms to improve agriculture. The farmer is in distress because agriculture is in distress, not the other way round. Saving agricul-ture may not save the farmer. This

is why farm loan waivers cannot be ignored. They are a relief, however temporary. Loan waivers also come in handy during elections. But how do we stop politicians from just giv-ing waivers without solving the real problem? This is where the FRBM which curbs excessive spending, comes into play. We can only hope that politicians realize that unless irrigation, supply chain and land reforms are undertaken, a new group of farmers will hold their re-election ransom on the demand of another loan waiver.

Farm Loan Waivers as a scheme is not an economic policy but a popu-list trend. The scheme helps you win elections but it is neither econom-ically viable nor socially desirable. Here, the borrowing cycle alters from borrower-lender to that of taxpayer-lender. This leads to higher expenditure by the government. To keep fiscal slippage under check, only has two options remain: either to decrease expenditure (mostly capital) or to increase borrowing. Neither of these are desirable in a growing economy. Waivers also reduce the chances of fixing a broken loan recollection system in rural areas. Studies showed that honest taxpayers became defaulters and that it led to a threefold increase in NPAs between 2009 and 2013. The farm loan waivers are based on the the-oretical argument that high level of outstanding debt reduces the debt-or’s extra efforts to repay the loan. But it does not take into account the general behavior of debtors about committing to future debt repay-ments. Frequent farm loan waivers create an expectation of government intervention amongst the farmers and they are likely to use the bor-rowed amount for consumption rather than productive investment purposes. Thus, farm loan waivers are only a source of temporary relief to a small section of farmers while causing a distress to larger sections of the society in the long run.

Farm Loans:Waiving or Drowning?

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From friends to foes and from rivals to allies; every election story witnesses radical changes in the ideologies of the so-called “peo-ple’s representatives”. Good politics takes an upper hand over good economics. The winning party’s

high-headedness and inability to fulfill the promised reforms come into the limelight while the opposi-tion starts demanding changes in the foundational system. Hurling accusations and throwing of shoes aren’t uncommon either. What integrates every facet of elections is the underlying politics and what disinte-grates them is the overlying economics. Every election is followed by a criticism of the “First Past The Post” System, mostly in the form of protests by the oppo-sition which claims the unfair nature of the elections in which just 31% of the voters ended up deciding the Prime Minister of the country in 2014. An alterna-tive called “Proportional Representation” is suggested which has its own pros and cons. Very recently, an-other aspect of making the elections more simplified (read: complicated) is the concept electoral bonds. This article aims to examine the aforementioned ideas and their economic implications, along with an overall impact of elections on the economic working of the country.

India and UK follow a system called the Westminster electoral model in which the procedure of voting, as well as the candidates’ elections, depends on the FPTP system. Under this, the deciding factor of the composition of the Lok Sabha is the number of seats, instead of the count of votes. BJP’s victory of 2014 was a historic one as it was the first time that a single party won a majority since Rajiv Gandhi’s monstrous win in 1984. However, the opposition tried to delegit-imize the victory by questioning how only 31% of the votes channelized into a humongous but unjustified triumph. However, if other countries’ elections are analyzed, who follow the same system of voting, it is

seen that in the previous four elections in Canada and the UK, where politics is less fragmented. the vote share of the winning party was somewhere around 40%, which is greater than that of BJP’s. In a country like India where the competition is not only fierce but also cut-throat, winning one in every three votes was no less than a feat for Narendra Modi. Donald Horow-itz, a legal scholar, mentioned in one of his essays on electoral systems, “The best electoral system is the one that straightforwardly and most accurately reflects the preferences of voters.” Therefore, it is indispensable to analyze the working of an alternative system called Proportional Representation and whether this sys-tem upholds the values of democracy and equality or poses a threat to our culture of unity in diversity. The underlying fundamental of PR is that the number of seats won by a party is in proportion to the number of votes the party receives. The foremost argument to support such a system is that it reduces the digression between the votes won and the seats obtained. But such a system is bound to make the election process more party-oriented rather than people-oriented and coalitions will become inevitable as no single party will be able to secure a majority. Also, the parties are likely to nominate more influential members to occupy the won seats. Under FPTP, all parties and independent candidates except the winning party get a higher num-ber of seats as compared to their vote shares. Thus vote bank politics becomes rampant. Conclusively, FPTP ensures clarity, transparency, and simplicity. It comes with its downsides but the choice is between the two evils: FPTP (status quo) and PR (whose disadvantages outweigh those of the former). A clear choice would be to support good politics and good economics and FPTP seems to justify both.

Electoral bonds are instruments of certain denomina-tions issued by banks to the general public, who can donate these bonds anonymously to the party they wish to support. The party can convert these bonds into money through their bank accounts. Seen as an

The Economics of Elections in India

BY SUHANI SINGHAL

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attempt to cleanse the country’s electoral system, the bonds were recently launched in denominations rang-ing from INR 1000 to INR 1,00,00,000, with a validity of 15 days to prevent these bonds from becoming parallel currency. The Finance Minister defends the move saying that anonymity prevents harassment and promotes transparency as under the current system, “unclean money comes from unidentifiable sources.” However, a major criticism is that corporate sharks will rely on funding the parties by black money so as to prevent anonymity. This is because they would want the parties to know their identity and if electoral bonds come into the picture, the purpose of getting political favors in the corporate sphere won’t be served. Since an introduction of electoral bonds wouldn’t allow any alternative way, this portion of the funding would be carried out by under the table transactions which could only be facilitated by the use of black money. Also, another aspect is that the Government, through the RBI will eventually discover who has do-nated to whom because of the KYC norms that need to be fulfilled with SBI before buying these bonds. How-ever, the voting public will not know which party has been funded by whom, and if not anything else, this system is likely to increase the opaqueness rather than promoting transparency. Also, this system of electoral bonds only allows donations to the parties which se-cured at least 1% of the votes in the preceding election, and this regulation may pose an entry barrier to new candidates. If the rollout of these bonds is supposedly affecting democracy, it won’t serve its inherent pur-pose.

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

A country’s politicians play a major role in the econom-ics of the nation. For pro-gressive growth, the need of the hour is to focus on good politics which converts itself into better economics. Electoral reforms which can bring about more account-ability among other factors like transparency and equal-ity need to be introduced but the demographic structure of India and the mindset of the typical Indian voter and of the typical Indian politician needs to be considered carefully before introducing reforms in the machinery of elections. These reforms can be in any form, ranging from a change in the sys-tem of elections to an introduction of instruments like electoral bonds, but the underlying motive should be to ameliorate and not “deform” the structure of the de-mocracy. This can only be analyzed after due consider-ation of multidimensional factors and the comparison of the pros and cons. As James Freeman Clarke says, “A politician thinks of the next election; a statesman thinks of the next generation”. Thus the focus should be to improve the status of upcoming generations by using the election as a means to this end.

“For progres-sive growth, the need of

the hour is to focus on

good politics which con-

verts itself into better

economics.”

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The Global Burden of Disease Study (GBD) ranked India 154th among 195 nations on its health index. Countries like Sri Lanka, Bangladesh, Bhutan and Nepal, whose GDP is significantly lower than India’s were all ranked above

it. India was among the biggest underachievers in Asia. Seeing this ranking and numerous others, we should ask ourselves what the fundamental causes of this dis-tressing situation are. What have we been doingwrong for the past seventy years that we are still not able to ensure quality healthcare? The people have repeatedly blamed the government for being ineffec-tive and in response, it is trying to revamp its image by overhauling the health sector.

One major action taken by the government to fix the ailing healthcare system of the country is the plan to implement the National Health Protection Scheme. It will be the world’s largest healthcare scheme and would assure secondary and tertiary healthcare to over 10 crore families, covering around 50 crore people, for 5 lakh rupees a year. Even though the scheme may seem like the solution to our problems, we should analyse the situation at hand more critically.

Through this scheme, the government is trying to focus on improving the demand side of the problem and is trying to increase the number of the patients that visit the hospital for treatment but the supply side plays an equally important role: what can the patients do with the Rs. 5 lakhs if they do not have access to doctors in their area?

There is an 81% shortage of specialists in the rural area. According to a KPMG Report, 74% of the doc-tors in India work for 1/3rd of the urban population. This clearly shows that the rural community health centres in our country are understaffed and under-fi-nanced. They do not have the facilities that are re-

quired to treat the patients properly. The availability of funds will not benefit the patients if the efficiency and access to hospitals is not increased and malpractices are not curbed. Patients will not be able to recover if the hospitals fail to provide them the proper care. A striking example is the Gorakhpur tragedy where 290 children died in a month from encephalitis due to lack of oxygen tanks. This clearly shows that the willingness to go to hospitals and getting treated alone does not solve the problem.

There is another problem that the scheme fails to recognise. The most common ailments in the poorest states are heart and respiratory diseases like asthma, bronchitis and tuberculosis, which require regular outpatient consultations. 80% of the out-of-the-pocket expenses made by the people belonging to the low-in-come group are on these consultations. Many patients are impoverished due to the burden of the indirect ex-penses that are a part of the hospitalisations. Given the paucity of hospitals with good facilities in rural areas, people often have to move to bigger cities to avail of private services.

The control of the private sector in the healthcare scenario is worrying. It is one of the biggest hurdles in this scheme’s path to success. According to the Na-tional Sample Survey Office, majority of India relies on the private sector for their treatment. Over 72% of the rural and 79% of the urban population go to private hospitals for treatment. This forces us to ask if these profit-making institutions are ethical enough to not exploit the 5 lakh cap. The private hospitals, which are statistically more ‘scalpel-heavy’, may subject the patients to unnecessary tests and procedures to earn quick bucks. These profiteering hospitals could be the probable cause of the C-section rates in India going from 10% to 30% within 20 years.

Along with the government’s ambitious plan to pro-vide healthcare coverage by providing insurance to all,

Code Blue BY AYUSHI SRIVASTAVA AND SHIVANUPRAV

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

Any policy that the government introduces to reform the country has to be accompanied by edu-cation and proper dissemination of information. It is the general tendency of the poor to ignore a problem until it completely pre-vents them from working. They consider hospitals as a last resort. The policy of providing coverage for secondary and tertiary care will only accentuate this mental-

ity as people would prefer cure over prevention. The effect of going to the hospitals at such a stage does not give a fair chance to the doctors to actually help the patients. This further aggravates the existing distrust among the uneducated people.

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

“In order to revolu-tionise our healthcare system, we need to attack it on all fronts.”

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Sixty-one thousand, two hundred and sixty crores rupees.

This is the amount of losses pub-lic-sector banks have incurred from the loan frauds in the bank-ing system in the last five years.

India, in fact, has historically been known for banking frauds. Even the renowned economist John Maynard Keynes wrote about the impending threats to the Indian banking system in his book ‘Indian Currency and Finance’ after surveying the banking system of the country

The recent banking fraud involving rich diamond merchant, Nirav Modi and India’s second largest public-sector bank, Punjab National Bank has proved Keynes’ apprehension correct. Only a few days ago, Bank of Baroda was in the news because of its fraudu-lent dealings in South Africa with the Gupta brothers, who were accused of ‘state capture’ when Jacob Zuma was President. Such activities in the banking system of the country makes one doubt the administration and functioning of Indian banks both inside and outside the country.

While the frequency of number of bank frauds has decreased post liberalisation, the amount involved has been increasing at an alarming rate, especially in case of public sector banks. This negatively affects the econ-omy and is also a headache for the Reserve Bank of India. According to RBI data, 83% of the total amount of bank fraud involves public sector banks. Why is the percentage of frauds higher in the public sector? The reason behind this is the kind of people they lend to.

A majority of the industrialists and high-profile busi-nessmen in our country are involved in these scams and frauds. These people are the ones who take loans from banks for their large business, buy property abroad and fly away as fugitives after committing the

breach. Private sector banks do not fall prey to this, thanks to their superior governance. Hence, these defrauders target the public-sector banks and because of the mismanagement in the structure of the banks, fraud happens: Nirav Modi and Mehul Choksi with the Punjab National bank (Rs12,600 crore), Vijay Mallya with the State Bank of India (Rs 9000 crore), Jatin Mehta, the owner of Winston diamonds with 15 banks (Rs 7000 crores). The list does not end with these high-profile businessmen but also includes many others. Lalit Modi, Sanjay Bhandari, Deepak Talwar, Vikram Kothari are just a few more of them. In spite of all this, public sector banks continue to issues letters of credit to businessmen. These business-men continue to swindle the banks. Therefore, why would public sector banks continue to issue LoCs?

This can, in part, be attributed to the tough competi-tion they face from private sector banks. In order to sustain, they take decisions in haste, compromise with the procedures and as a result, fraud happens.

The internal working environment of a bank and its corporate culture largely determine its performance. A survey by Harvard Business Review states that there is a positive correlation between the HR of a company and its performance. The employees of the bank play a vital role in determining the efficiency of its perfor-mance. Poor HR results in poor selection. In order to overcome the lags in the system, each branch should ideally have a personalised recruitment procedure (specific to the branch) and the employees should be selected on the basis of certain qualities and traits.

Further, the employees should be made to undergo training. Due to a lack of proper training, the workers are ill-equipped to prevent scams of this magnitude. Moreover, the incentive structure requires overhaul-ing. The current low-pay structure does little to incen-tivise employees. As per the RBI, compound annual

Scams: The Misery of the Indian Banking System

BY YASH MALPANI

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growth rate of wages and salary per employee which was 13.7% from 2004-05 to 2010-11, decelerated to 6.4% from 2010-11 to 2016-17. The lack of incentives coupled with low pays leaves the employees dissatis-fied. As a result, he becomes dishonest and indulges

in illegal activities. In fact, it was this very dishonesty on part of the branch managers which led to the PNB fraud case. The use of redundant technology in PSBs could be an-other contributing factor to the increase in the quan-tum of default as it fails to detect potential defaults. Frauds can also arise because of the misuse of the technology- not entering the data in the core banking system and transferring money via SWIFT technology are, in fact, some of the reasons which led to the loss of around Rs12,600 crore to Punjab National Bank. The list of reasons seem endless.

But has the government taken any steps to prevent this?

To exercise a right on the fugitives flying abroad after defaulting, the government came up with Fugitive Economic Of-fender Bill, 2018. Currently, the government lacks the authority to exercise legal rights over the fugitives running abroad, which is a major loophole defaulters often take advantage of. The provisions of the new Bill allow the legal department of the country to take charge of all the people commit-ting a breach of more than Rs. 100 crores and trying to evade Indian

legal services by flying abroad.

After the PNB fraud, the government has discontin-

ued the practice of issuing ‘letters of undertaking’ for trade credits for import. The banks were also required to check and monitor all the records and data of loans given by them of value exceeding Rs 50 crore.

Privatisation of the PSBs is often talked about as a measure to save banks from frauds. But will privatisa-tion help the banks to reduce the amount of loans? Is it the ownership of the banks which leads them to a mis-erable state or the inefficiency in the internal working environment?

Even private banks do face losses by frauds and have to face defaults. The communal reasons shared by the banks is their improper managerial structure. Involve-ment of too many third parties in the procedure and flawed managerial structures are problems universal to all banks, public or private. These are major chal-lenges that have to be tackled. Chartered accoun-tants, auditors (at all levels) play an important role in the lending procedure of a bank. There should be a two-level auditing process. Both banks’ and the bor-rowers’ accounts should be thoroughly scrutinized and audited before the procedure. This will definitely help in minimising the frauds as the approval and credibil-ity of both the parties will be required before a loan is passed.

Banks’ recruitment and selection policies can also be improved. Proper background checks should be con-ducted before selection. All the employees should be selected on the basis of specialisation required by each branch. Remuneration should be of such an amount that the employees are motivated to work for the or-ganisation.

With the changing dynamics and growing complexity in the industrial world, it is important for bankers to have financial literacy. This can be done only if proper and regular training is provided to the employees to keep them updated thus enabling them to supervise in an efficient manner and minimize risks.

Banks should have a strong internal rating team which will help them analyse the risk involved while lending a loan to a particular person. The borrower’s credit status has to be properly verified. Taking the mac-roeconomic environment of the particular industry, evaluating the valuation of the work for which the loan has been granted, etc. will be the primary duties of this department.

“Private sector banks do not fall prey to this, thanks to their supe-rior gover-nance.”

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

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The telecommunications sector, you could say, has launched India into the 21st century. In fact, if it weren’t for the liberalisation of this industry and the consequent entry of private telecom service provid-ers, we wouldn’t have had more

than a billion mobile phone subscribers today, 40 percent of which access the internet via their phones. This number is only expected to rise.

The sector contributed a massive 6.25 percent to the GDP. Telecommunications matters economically for two reasons. First, it plays a vital role to power the functioning and the rapidly expanding productivity of the modern “information-based” economy. Second, the evolution of telecommunications from a natural monopoly to a more competitive industry has raised many challenging economic issues such as a top-sy-turvy downhill battle, bruised by cut-throat com-petition, policy paralysis, CBI probes, high spectrum prices and the stick of the Supreme Court.

With Jio’s launch in September 2016, the industry has been strife with legal wars over non-payment of dues, insolvency cases, mergers, predatory pricing, and alle-gations of the regulator being biased.

Legal battles in the telecom industry have reached unprecedented levels in the past year or so. One such legal issue is the tariff order given by TRAI on Feb-ruary 16 which mandated a new formula to identify predatory pricing. It changed the definition of signif-icant market player (SMP), giving pricing flexibility only to operators with less than 30% of the market’s subscribers or revenue. Earlier, the SMP parameters included volume of traffic, including data and switch-ing capacity, which have been dropped in the amended regulation. India’s first and third-ranked telcos argued that the order was unconstitutional as it prevented them from retaining customers and conducting busi-

ness. The incumbent telcos contended that the rules favoured new entrant Reliance Jio at their expense. Jio has 13-14% share of revenue and users, while Airtel and the Vodafone-Idea Cellular combined would each have over 30% revenue market share.

Jio, with more than 160 million subscribers, has been blamed for low tariffs that forced others to follow suit amid growing debt and shrinking revenue. In the short term, mobile data revenue growth is likely to be af-fected due to the lower tariff. A further decline in data tariffs and erosion of domestic voice revenue would impact operators’ profitability and sustainability.

As compared to other developed and emerging tele-coms market, India boasts of one of the lowest data tariffs. However, in the long term, lower tariffs are not sustainable because of high spectrum fees and ongoing capex requirements. This tariff war model is not viable and the average revenue per user is much lower than the global average.

The thought is that these changes in the industry are part of the normal transition from voice to a data play market. All these assumptions of the long run do not answer the question at hand: What effect does the present dip in tariff have on the margins of these companies?

Considering that wireless voice revenues accounted for approximately 65% of the total circle revenues in India, offering free voice is likely to have the biggest impacton operator revenue. Going forward, data revenues are likely to cannibalize voice revenues as well. This will adversely impact the margins of operators. Customeracquisition cost would increase for operators owing to increased competition. In addition, operators are likely to face increased pressures to retain customers, and will have to resort to offering freebies and larger allowances, further lowering margins.

The Telecom Shakeup

BY SHIVANUPRAV

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With pricing concerns due to discounts and lower tariffs, operators are likely to witness stagnant EBITDA growth. It is going to be impacted by the short-term decline in wireless data revenue growth. In addition, voice and data realization are also expected to drop significantly over the next few quarters. Overall, mar-gins are expected to decline by 250 to 300 basis points and remain under pressure for the coming few years.

With lower incremental revenue and stagnating EBIT-DA, the profitability of operators is expected to remain subdued. A lot would depend on the data volume growth of all operators, once the sector EBITDA is sta-bilized. Thus it’s prominent that the sector is currently facing its worst phase ever and needs the government to step in. The sector is currently finding it increasing-ly difficult to manage its cumulative debt of almost ₹5 lakh crore, with revenues of less than ₹ 1.8 lakh crore, and steadily falling.

We can relate the present condition of telecom compa-nies with our government’s ambitious plans. For instance, Make In India’s efficient execution is largely depen-dent on the telecom sector but is contingent on its sound financial health. This is per-haps why the government formed the Inter Ministerial Group (IMG) to look into the deteriorating health of the telecom sector. The IMG has

made some bold recommendations. Reportedly, the

panel has suggested deferring the spectrum auction to the next fiscal, providing more time for payment for the auctioned spectrum, and recommended a cut in interest rates.

However, this may still not be enough. The fact is these recommendations address only debt issues of the sector, not fundamental concerns. There is an immedi-ate need for relief on licence fees and spectrum usage charges as recommended by the telecom regulator. Unless these issues are resolved, the industry will con-tinue to struggle financially.

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

The principle of survival of the fittest applies even to the telecom sector, where companies like Aircel, Tata and Telenor perished, leaving behind four giants- Bharti Airtel, Idea, Vodafone and Reliance Jio. Among these four, Idea and Vodafone are in talks for a merger which will have an adverse impact on the economy. Even though this merger is going to be one of the larg-est in the telecom industry in India (yielding a revenue of 42%, slightly higher than that of Bharti Airtel), here is a possibility that it could lead to unemployment within this sector.

“With lower incremental revenue and stagnating EBITDA, the profitability of operators is expected to remain subdued.”

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Taking into consideration the pro-longed challenges one experiences in today’s modern economy and the socio-cultural shifts that have been brought about by the inces-sant developments in all sectors, Americans have taken a closer

view of their personal situations and their priorities, creating new personalized perspectives of success. According to a survey conducted in 2014, by the Busi-ness Insider, a whopping 90% considered success to be less important than happiness, prestige, and satisfac-tion. Americans are also surprisingly (and admirably) optimistic about shaping their own future. One survey found that nearly 75% of Americans thought hard work was a “very important” component of success, while 62% put it down to a good education and just 20% to coming from wealth. “How to Get Rich in America” might sound like the title of an article in a lifestyle magazine or a clickbait link on the internet. But the essence of it is seen when we look at the trends in income distribution in America, which ranks poorly when it comes to social mobility and income equality. So what does the average American have to do to get rich in America?

In America, the wealthiest 1% of the population owns about 40% of the wealth available. It is, in fact, one of the highest ever seen since 1962, according to the U.S. Survey of Consumer Finances. The top 10% owning more than the bottom 90% combined, goes to show the widening of the prevalent gap between the ul-tra-wealthy and the poor. Quoting Greek philosopher, Plutarch, an imbalance between the rich and the poor is the oldest and most fatal ailment of all republics. This ‘ailment’ has now begun to take its toll on Amer-ica. If you were designing a tax schedule to reduce the magnanimous inequality in the United States, one would probably try to find ways to redistribute some of the wealth from the richest households to the poorest ones. But the Senate GOP tax plan does precisely the

opposite of that. According to the Congressional Bud-get Office (CBO), in the short-term, the richest house-holds get the biggest tax cuts, while in the longer term the taxes of the poorest households actually increase.An easily forged path to the top 1% exists, of course, for everyone who has an Ivy League degree. But, some-times, the discipline matters more than the institution. On average, graduates of lesser-known engineering colleges such as Kettering University and the Stevens Institute of Technology do just as well as those from the Ivy League. However, as was also witnessed in most of the cases, 10 years after starting college, the typical Ivy League grad earns more than twice as much as the typical graduate of other colleges. In fact, the median Ivy graduate is making more money than the top 10 percent of graduates at other schools. So is an Ivy League degree the way to get rich in America?

To reach the Ivy League after having grown up poor seems like hitting the jackpot. The online confession pages allow students at elite colleges to confess about their food insecurity and the habit of skipping meals due to financial constraints. A Harvard student had confessed to living off peanut butter and jelly for a week due to the closure of the University’s food ser-vices during the break. Looking at this from the poor man’s perspective, we see that getting into an Ivy League will leave the poor with a cultural shock. Ivies play a huge role in this by having a multiplier effect on the income of those households who could previously afford a good standard of living nevertheless. Only 52 percent of Yale students receive financial aid from the university. Meanwhile, according to a Yale report, 100 percent of families making under $100,000, and 99 percent of families making between $100,000 and $200,000, qualified for aid. In other words, you need to make a ridiculously large amount of money to not qualify for aid. You have to be in the 1 percent or very close. And approximately half of Yale students are just that rich. About 4 in 10 students from the top 0.1%

How to Get Rich in AmericaBY MANASI MERTIA

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attend an Ivy League or elite university, roughly equiv-alent to the share of students from poor families who attend any two- or four-year college. At elite colleges, the share of students from the bottom 40 percent has remained mostly flat for a decade. Access to top col-leges has not changed much, at least when measured in quintiles (The poor have gotten poorer over that time, and the very rich have gotten richer).

Most students who grow up stricken by poverty remain poor as adults, and most students who grow up affluent remain the same, with more endowments. The data provided by a New York Times Report shows that children born between 1980 and 1982, who are around 36 years old today. Most Ameri-cans remain in a similar place on the income distribution

statistical graph from their late 30s through the end of their careers, previous studies have found, so the highest-earning 36-year-olds are likely to become the highest-earning 60-year-olds, at least on average. Even though most lower-income students fare well at elite and prestigious Ivy League colleges, there are relatively few of them there, so less elite colleges may be more important engines of social mobility. Researchers developed a new statistic they call a college’s ‘mobility rate’, which combines a college’s share of students from lower-income families with its success at propelling them into the upper part of the distribution. In this data, not even one of the Ivy Leagues featured, show-ing that social mobility is the last priority for an Ivy League which stands to maintain standard and pres-tige.

Economic diversity in Ivy League colleges seems to be a far-fetched thought. The American Dream, they say is still alive. In recent times, due to the need for a di-versity within the Universities and a heightened need for the inclusion, they made appropriate strategies and introduced programmes to enable social mobility. Preferential treatment at Ivy Leagues for alumni and donors shows that the more affluent you are, the more likely is it for your future children to be richer. Legacy admissions are particularly an issue at dozens of selec-tive colleges and universities, which have become ever more difficult to gain admittance to in recent years. Every spring, the most prestigious colleges and uni-

versities announce their acceptance rates for next fall’s freshman class, and every year it seems the number gets smaller and smaller (now somewhere south of 10 percent for Harvard, Stanford, and Princeton). That suggests that the simplest way to become extremely rich is by being born to the right parents.

Or you could think about starting an innovative busi-ness, a new brilliant startup which shines through the thousands out there to emerge successful.

Despite Silicon Valley providing a safe space for booming startups, starting a company for the ordi-nary American remains the riskiest move. Further, we see that Silicon Valley and certain other financially better-off metropolitan cities remain the cradles for startups. The wealthy, thus make more wealth. It is a sane choice for several startups since they need employees, engineers and these kinds of facilities are inhibited in only a few particular zip codes. America needs to think of ways to empower the startup found-ers across the income spectrum, despite its inherent love for elitism. One of the world’s biggest startups was founded by a college dropout lacking in wealth, and by allowing the concentration in economically well-off hands, how can America be sure that it is not leaving the next biggest thing behind? The correlation even fits well in San Francisco, where the richest neighbour-hoods have quickly become hotbeds for startups, while the poorest ones remain far removed from that poten-tial for economic growth. While causation is difficult to prove here, it seems clear that companies leading us to the future are concentrating themselves as far away from those who most need the future to arrive.

With the relative likelihood of divorce in America being 39% less likely for couples with income greater than $ 125k as compared to an income of $25k, we see that marrying rich is also a way to stay rich in Ameri-ca. So if the startup or the expensive elite college does not work out, marry rich, if your definition of success includes money and not happiness.

“About 4 in 10 students from the top 0.1% attend an Ivy League or elite uni-versity.”

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For over three decades now, the world has witnessed the spectac-ular growth of the Chinese Econ-omy, and the People’s Republic of China has successfully managed to surprise the world with its high GDP numbers. The world has

been as suspicious of China’s growth as it has been surprised. Since 1978 the Chinese economy has main-tained economic growth at an average of nearly 8% which is remarkable as per the western standards.

China’s initial stellar growth was undoubtedly fuelled by huge government expenditure and investments. The government made constant attempts to stimulate eco-nomic growth in the country and hence, continuously kept increasing its spending to boost the economy. Today, State-owned companies make up 25 percent of total industrial output, down from 75 percent in 1970. The Chinese government has overstepped its role when it comes to the economy and their economy is clearly “overbuilt”.

In a bid to increase investment and give a boost to the economy, the government has often indulged itself in wasteful expenditure. It has more often than not built and rebuilt airports and skyscrapers, only to flush money into the economy.

However, the truth is, China now has a huge set of un-used apartments, highways, and airports. All this at the expense of its middle class and low-income families. The role of infrastructure comes into play when it is used and it is not merely a tool of economic expansion. So, a highway to nowhere can boost GDP temporarily, but it will have no long-run positive effect.

Over-investment is not the only problem facing the Chinese economy, China’s growth is still unsustain-able and unbalanced, to say the least. Reckless lend-ing by public-sector banks in China is another major

problem. The banks pay less interest on deposits, in order to be able to lend out to companies at a cheap rate. However, the banks end up lending to some not-so-profitable businesses and are risky to lend out.

In a supposedly communist setup, the officials heading the companies are judged for their ability to be able to generate more business by expanding their companies, rather than by their ability to generate profits. At the same time, bank officials are put under a continuous pressure by the government to lend out to businesses. It is not problematic to have an economy fuelled by investment, but when a lot of investment (with ques-tionable profitability) is backed by bank loans, it leads to mounting of bad loans in the economy. Thus, the kind of risky lending that China’s economy is basing itself on is immense and it’s some risky waters that the economy is wading into.

The Chinese are in a trap. If they continue aggressive lending to failing businesses, they have to face infla-tion. That increases costs and makes the Chinese less competitive in exports. Allowing businesses to fail brings unemployment, a massive social and political problem.

The issue of unemployment is at large connected with the broader issue of standard of living. If econom-ic growth is not accompanied by an increase in the standard of living for the residents of the country and helps only the elite few, growth serves little purpose.

Hence, in order to assess the viability of a country’s economic growth, it is important to check certain growth parameters and how they are reflected in the standard of living of the residents.

Pollution in China is at an all-time high with China indulging in unsustainable ways of growth. According to the Chinese Ministry of Health, industrial pollution has made cancer China’s leading cause of death. At the

Debunking China’sEconomic Growth

BY SALONI CHHABRA

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

manipulating the employment rates and it has been safely con-cluded by sources like The Econ-omist that the unemployment rates could be as high as double the rates reported by the govern-ment in their official figures.

A widening rich-poor gap is also being caused because of this and government’s lack of involvement in the lives of the poor. The gov-ernment in China has been fo-

cussing on macro-level growth rather than harnessing growth at micro-levels and hence, adversely affecting the poor.

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

“China’s economic growth is of course not entire-ly a sham but it is structurally flawed.”

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The subject of growing substance usage and its tribulations has been a conventional topic for debate over the past few decades, with no conclusive solution. While some countries like the US have resorted to stringent laws on drug usage,

others like Uruguay and Portugal have enacted more clement laws. This article explores the impact of policy making on drug usage and trade, on its various stake-holders, namely the government, victims and perpe-trators, and finally goes on to explain how decrimi-nalisation of such substances can work wonders for a nation’s economy and its populace.

In this competitive world, one might often find himself lost, and seeks sanctuary in a world where there’s no pain, the future is non-existent and high is the new normal. This world of ‘ecstasy’, according to conserva-tives, ensnares a person to such an extent that the real world seems oblivious to him. To prevent this from happening, an external agent in the form of govern-ment steps in. It imposes upon its subjects certain laws which prevent them from acting upon their will.

These laws compel people into finding alternative sources of drug supply and have in fact paved the way for an estimated $300 billion black market for drugs, which continues to grow at a rampant rate and affect more lives than ever before. Marijuana, heroin, co-caine, crystal meth, you name it – they are available right across the street where you live. Mind you, they are illicit, well at least according to the government laws. But why would an addict care as long as it makes him high? Several countries today have imposed se-vere regulations on drug usage and trafficking. But the question remains – is it actually reducing the num-bers?

The scale of production of such substances is indefi-nite. They are sold on the ‘Dark Web’ or simply put,

the Internet’s secret black market through platforms like Silk Road, or through other devious channels. It is almost impossible for addicts to rid themselves of addiction because drug use directly affects their brain’s reward system controlled by the hormone dopamine. Over time, their body adapts to these drugs, and drug intake simply makes them feel “normal”. This effect is known as “tolerance”, and once people develop this, not using drugs leads to withdrawal symptoms. Avoiding these symptoms acts as a strong motivator for them to continue consumption of such substanc-es. Therefore, it is not feasible to curb this menace through demand and supply channels. When Peru decided to drive away its coca farmers, they migrated to Colombia, and when they were later kicked out of Colombia, they returned to Peru. The sealing of the Caribbean trafficking route saw the advent of a new bloodier one in Mexico and Central America. In fact, the video of young ‘Kamlesh’ and his ‘Solution’, which went viral on the internet recently, highlights exactly this.

The government’s answer to the ‘drug menace’ has been drug interdiction, which basically refers to the interception of illegal drugs being smuggled by air, wa-ter or land. Let us, for once, assume that interdiction on drugs is successful and the authorities are able to prevent drugs from entering the country, and succeed in arresting smugglers. Supply will, therefore fall. As a result, equilibrium price will rise, and quantity will fall. But given that only few addicts are likely to break their habits, and demand for drugs is fairly inelastic, addicts will have a greater urgency for cash to purchase the expensive drugs.They will run down their savings and might as well take to crime, as is often the case. Let’s take an example of the world’s greatest super power – the United States. It spends approximately $40 billion interdicting drugs every year, but has made little prog-ress in eradicating them.

In a nutshell, prohibition is actually a recipe for disas-

High Time for Change:Drug Decriminalisation

BY PIYUSH BATHWAL

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ter. Supply should be managed and not suppressed. Case in point - Portugal. Portugal formerly had a rather hard-line approach to the fight against drugs. But in 2001, it decriminalised drugs and possession of small amounts of drugs became permissible. Being caught with small quantities would now mean referral to a treatment programme, or a nominal fine. Addicts could now openly come out to discuss their problems and seek help. Drug offences would now be dealt in

special courts, where the jury comprised psychologists, legal ex-perts and social workers. Portugal invested 90% of its budget alloca-tion on drugs towards treatment and prevention programmes and a mere 10% towards policing. At the same time, it rolled out massive job programmes and

micro-loan schemes for these “junkies”. As a result, drug induced deaths have reduced by 75% during the 2001-2012 period and the number of heroin addicts has halved. Similar versions of Portugal’s policy are now present in various countries across Europe today. The rich world is progressively treating addiction as an illness rather than a crime. It is important here to draw a line between decriminal-isation and legalisation. Decriminalisation means that any person found in possession of drugs for personal use will not be deemed guilty. The person will have to depend on illicit markets, however, for these drugs. The criminal law will be applied only if a person is caught selling, importing, smuggling or trafficking drugs. Legalisation, on the other hand, means that buying, selling and importing drugs are absolute-ly legal under law and any free citizen is allowed to practice such acts. It is argued that decriminalisation will increase drug usage, but this is not true. In fact, it is legalisation that can increase the number of drug ad-dicts, but not decriminalisation, because it only works towards remedies.

Decriminalisation has many benefits, as has been evident from its enactment in several countries. Firstly, it will reduce the criminal justice cost, and will allow money to be redirect to preventing the crime. Second-ly, it will save the government tremendous amount of money on costs of imprisonment, for it will direct addicts into treatment programmes, rather than plac-ing them in the criminal system. Most importantly, there will be reductions in transmission of HIV, and

the number of drug-related deaths will reduce signifi-cantly. Today, people use a new method of getting high – ‘flashblood’, where some users inject blood extract-ed from another drug users. If decriminalisation is brought to the fore, such activities can be prevented and volunteers bring clean needles to drug users and spread awareness as in the case of Portugal.

Proponents of criminalisation argue that it controls addiction and prevents people from committing rape, assault, murder and property damage. From a social perspective, they believe criminalisation keeps crime under control, and prevents people from experiment-ing with recreational substances. The UNDP, however, has stated that drug control efforts are responsible for “creating a criminal black market; fuelling corruption, voice and instability; threatening public health and safety; and generating high scale human rights abuses.”

Though it is inhumane to have stringent laws on drug usage, many countries across the world have taken harsh steps to curb this drug menace - not knowing its repercussions. Take Philippines, where, allegedly, people accused of drug usage or trafficking are killed without the opportunity of a trial. Around 9,000 Fili-pinos have been killed by agents on the suspicion that they were drug users. This shortcoming in the sys-tem allows the corrupt in the agency to kill innocent enemies and later allege them of being a drug user by fabricating false evidence.

Since drugs have to be sold in black markets because of criminalisation, these drug cartels have a huge advantage due to their financial backing and econo-mies of scale. Their business will never run dry, since drugs will always be in demand and since they are being sold through black markets, they can charge exorbitant prices. Such prohibitions on drug trade are actually helping these cartels and have turned these dealers into well-financed killers. Colombian drug dealers in Guinea Bissau are alleged to have funded the re-election campaign of President Vieira, which goes on to show the network that these cartels have gone on to establish with the authorities. For all we know, the political class could even be promoting criminal-isation, so that illicit drug trade through cartels can continue to expand, as a result of which they may get cuts as a source of funding for elections. It is alleged that even in India, elections of some states like Punjab may be influenced by drug lords who smuggle drugs from Pakistan. These drug cartels are also a big source

“In a nut-shell, pro-hibition is actually a recipe for disaster.”

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of funding for terrorist organisations and pose a more direct national security threat as a result.

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

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The Economics ofImmigration

BY RAHUL GERAHuman migration is the move-ment of people from one place to another, permanently or tempo-rarily, with an aim to live a better life and earn a livelihood there. There have been countless ac of large-scale migration between

countries. In the early 19th century, unskilled and cheap workforce immigrated from developing coun-tries to developed countries. With the recent tech-nological advancements, there has been a shift in the type of immigrants to developed countries. Now, more people from the technical and skilled labour force migrate to developed countries, where they are able to find jobs that pay them better.

Immigration from India also follows this same pattern. Before independence, international migration from India mainly comprised of unskilled workers from poorer socio-economic groups who went to other col-onized countries. Following independence, migrants from India majorly belonged to the richer socio-eco-nomic groups who either left for a better job with a higher pay, educational opportunities or for a better quality of life in general.

Migration, a worldwide phenomenon, has often been seen as beneficial for both sender and recipient countries, it now has become more of a double-edged sword. Even though immigration brings with it diver-sity to the receiving country, which can render it soft power, it has many downsides which often outweigh the positives.

According to a survey by The Independent, the immi-gration policy of the European Union has been cited as a major concern for voting in favor of Brexit. The fall in real wages, inadequate housing, pressure on public expenditure- predominantly for education and healthservices- are some reasons why immigration is seen as a problem in Britain. The immigration policy can

be listed as one of the leading causes of the rising euro-scepticism in Britain. In South East Asia, India’s geographical location, its relatively sound economic position in comparison to its neighbours and its politi-cal environment and opportunities make it animmigration hub for citizens of peripheral countries who are looking for a better life.

Refugees/immigrants from Pakistan, Bangladesh, Ti-bet, Sri Lanka, Myanmar, and Nepal have found shelter in India. As of 2015, about 5.2 million immigrants live in India, making it the 12th largest immigrant popula-tion in the world. A majority of these immigrants have been from neighbouring countries, with Bangladesh, Pakistan, and Nepal being the major contributors(4.85 million). While India has been able to keep a check on refugees from regions like Pakistan and Sri Lanka, there has been no record whatsoever of the refugees/immigrants from Bangladesh.

India has been regularly facing the problem of illegal immigration from Bangladesh. The fact that Bangla-desh is surrounded by India on three sides coupled with the fact that there have been continuous border disputes between the two gives a window to Bangla-deshis to cross borders illegally and find respite in India. The census carried out in 2001 by the Indian government estimated, based on place of birth and place of last residence, that there were 3.1 million Ban-gladeshis residing in India. The largescale migration is mainly because of the porous India-Bangladesh border of 4,096 kilometers which has not been properly fenced so far. Moreover, frequent floods and cyclones make it difficult for people in Bangladesh to stay back and earn a livelihood there. With the availability of better economic opportunities across the border, they are tempted to move away from their homeland.

It doesn’t end there. These immigrants have to earn a livelihood to sustain and feed their families. They need shelter, they need space and they need resources.

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India is already overpopulated (especially in the West Bengal and Assam regions which are subject to immi-grants from Bangladesh) and the influx of migrants further pressurizes it to cater to their needs as well. This also adds to the demand for consumer goods in a country where there already exists a problem of excess demand. Moreover, illegal immigration also alters the population dynamics and demographics of places. Increases in the supply of workforce in a region lead to fall in wage rates and unemployment and creates

a divide between the new and existing communities.

The government has miserably failed to address this situation and this has led to drastic conse-quences. In Assam, for example, the agitation by the Assamese under the leadership of the All Assam Gana Sangram Parishad (AAGSP) and the All Assam Students Union (AASU). This

resulted in political instability which turned into a violent protest by the people. The Assam Accord was the result of this agitation. Further, due to rampant corruption and ease of forging documents in India, most of the Bangladeshi immigrants have got their names enlisted in the voting list illegally. They claim themselves to be a citizen of the state and this makes it difficult to identify the immigrants. The immigrant population acts as a vote bank for the political parties in Assam. This might be the only instance in the world where illegal immigrants who are being used as a vote bank have considerable impact on the elections. In several districts of Assam and Bengal, the immigrant population has outnumbered the native population, thus making the native population a minority.

These immigrants need space to live. They encroach forests to build their settlements and undertake ag-riculture which disturbs the ecological balance and further damages the depleting biodiversity. The state governments have to provide facilities for these im-migrants and also have to incur expenditure on their healthcare and education. There is this constant fear that the immigrants will take up the jobs that would have been taken up by the locals in their absence and this problem is aggravated during a recession. This creates competition and conflict between them.

This free cross-border movement also facilitates illegal

smuggling to-and-fro India. A large number of smug-glers, enter India through the West Bengal and smug-gle away livestock and goods to Bangladesh to avoid high tariffs imposed by the Bangladeshi government. Bangladeshi women and girls are also trafficked into India and further to the Middle East for forced labor and sexual exploitation. The Centre for Women and Children Studies estimated that 27,000 Bangladeshis have been forced into prostitution in India. Accord-ing to a CEDAW report, 1% of foreign sex workers in India and 2.7% of all sex workers in Kolkata are from Bangladesh.

An even greater threat posed by illegal immigration is that of national security especially for a country like India which does not have cordial relations with its neighbours. The largely lenient political class has been prompted to take a close look at the issue as an increasing number of Bangladeshis have, of late, been found to be involved in terror activities. Pakistan’s ISI is believed to be active in Bangladesh, support-ing militant movements in Assam. There have also been many cases where there are militants among the illegal immigrants who cross the border to carry out terror-related activities. Allegedly, many of our neigh-bouring countries use our vulnerability on the border to sponsor terrorism in the country. The similarity in appearance, culture and language of the immigrants and the natives makes it difficult to deport the illegal immigrants back to Bangladesh. Further, the absence of national refugee laws has made it nearly impossible to differentiate the illegal immigrants from the eco-nomic immigrants.

A problem which is so deeply entrenched in history cannot be solved overnight. The dangerous conse-quences of large-scale illegal migration from Bangla-desh need to be emphatically stressed. Illegal migra-tion from Bangladesh is no longer confined to the North Eastern regions of the country. The immigrants have spread all over the country to find a better life. The problem of immigration is threatening the very existence of India. Further delay in addressingthe problem will only make matters worse.

“A problem which is so deeply entrenched in histo-ry cannot be solved overnight.”

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INTERVIEWSINTERVIEWS

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Sir, do you think journalism today has become all about shouting and heckling? Have we lost quality content over attempts to win TRP? No, of course not. Let us not exaggerate but there is an awful lot of mindless, thoughtless shouting on television encouraged often by anchors who them-selves have not researched the subject and find it easier to conduct the program by getting people to quarrel rather than by asking sensible, probing questions. I don’t think it is journalism, I think it is a tamasha or a spectacle being staged to win TRP but sadly a large number of our countrymen fall for it. The truth of the matter is that if large audiences didn’t watch these TRP hogging shows on television, they wouldn’t be there. So, you could argue the opposite that if a few channels were to stick their necks out and make their programs thoughtful, probing, intelligent, interpretive, balanced, well-researched, you could find that the audiences like them and begin to watch and listen because they are reliable programs, after all at the end of the day the In-dian people are no different to the British, the French, the American, the German and they all enjoy sensible television discussions that are well-researched, well-ar-gued, balanced, objective, informative and credible.

Sunday Sentiments, written by you imparts information in a creative manner. Do you feel creativity hides the true sense of information and makes it difficult to inter-pret the text at times or does it help enhance it?Creativity is not a barrier to communication, it facil-itates communication. The objective of creativity is to make what you have to say more interesting to the

other person to read, so you find artful, clever, witty, thoughtful and exotic ways of saying things that previ-ously you have said in rather pedestrian ways. Creativ-ity is therefore the handmaiden of communication, not the obstacle to it.

Independent news outlets like The Wire have sought to mould the news business into a joint venture between journalists, readers and a concerned citizenry in the public sphere-one that is starkly different from the traditional models of family-owned, corporate-funded and advertising-driven media outlets. Could you explain the fundamental differences between the functioning of a conventional media outlet and an independent news outlet like The Wire? Also, why is it that independent news outlets have a greater propensity to unearth and report news on political wrongdoings than most of the established media houses? Also, do you think that independent outlets like The Wire, Newslaundry etc. are going to define the future of news in our country?I can’t for the simple reason that I don’t work for the Wire. My knowledge of their internal functioning is no better than yours. However, what I can quarrel with is your initial statement regarding how outlets like The Wire are remodeling the news industry. Instead what they are doing is that they provide an essential but separate ingredient. Organizations such as the Wire, The Quint, etc. exist because their proprietors believe that existing news channels are not providing suffi-cient good quality, objective and balanced news. They believe that it tends to be one-sided, hindutva-oriented and supporting government influence and therefore,

COMPILED BY ARNAB DUTTA AND SHEREEIN SARAF

Karan Thapar

Karan Thapar is an Indian journalist and news commentator who was associated with esteemed press organisations such as The Times, CNN-IBN, India Today and The In-dian Express. He graduated with a degree in Economics and Political Philosophy from Pembroke College, Cambridge and holds a doctorate in International Relations. He is also a recepient of the International Press Insti-tute-India Award for excellence in journalism

Eminent Indian Journalist

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the opposition or the alternate view point is not being heard. And these organizations exist to make up for that lapse. They believe that because such develop-ments and exposés are not adequately covered by the traditional news outlets, they have an opportunity to do so by themselves and major in it. Also, the future of news depends not on what Quint and The Wire or the Print are seeking to do, although that would be an influencing element in it, but I think the future of news depends on the nature of the technology by which it is communicated.

Referring to your interview with Mr. Shashi Tharoor on the subject of the Padmavaat Controversy, what is your personal take on the subject – do you think we should pursue artistic freedom vociferously, even if it leads to unrest in the state given that we as a country haven’t matured enough to accept diverse and contrasting opin-ions?He was torn between the argument he was making as a politician and the position an author or an intellectual ought to take. I don’t think he was fully committed to either, which is why I feel he was swaying between the two. It is very interesting, because the second part of the question reflects the position that Shashi was tak-ing. However you put it more bluntly, which being that we haven’t matured to the point that we can be fully democrat. We haven’t learnt to tolerate opinions that we dislike, and so our response is to be either violent towards them or to censor them. Whereas in a mean-ingful democracy, people have matured to the point where they can live side by side even if they find cer-tain views completely offensive. They may even peace-fully protest against it but they do not seek to censor them. We haven’t reached that point here in India. But we should strive towards it. Secondly, I do believe that every time politicians come down on the wrong side in instances like Padmavati, they embolden the intolerant viewpoint and strengthen it, and make organizations

like Karni Sena able to stand out and demand a movie to be banned else they threaten to burn down the cinema hall or kill the director. If from the very beginning politicians and chief ministers had unequivo-cally said that such behaviour is unacceptable then they would’ve quietened down much sooner. I am not say-ing that Karni Sena would’ve tucked its tail between its legs

and disappeared, but the more you stand up to these intolerant bullies, the less likely they are to stand up and respond.

Considering your illustrious academic journey, what is your take on the significance of a liberal arts education and how does it mould a student’s value system?I think a liberal education system is one where you are encouraged to think for yourself, to explore. There is nothing wrong in getting it wrong, as long as you’re reflective of it. One is in contact with people from dif-ferent walks of life, cultures, nationalities and classes. And in contact with them you broaden your horizon and you start thinking differently and that opens your mind, it opens your eyes and one of the disadvantag-es of being in a more homogeneous setup is that you learn nothing of other disciplines.

In one of your pieces for the Hindustan Times you spoke of how constructive criticism levied against the state should be gracefully accepted. Amidst the slew of reports that the political machinery vehemently stifles critical voices, what according to you is the way forward for our country?God that’s a difficult one! I suppose as a country, we need to be more accepting of other people with differ-ent viewpoints. And, the word tolerant is an extremely patronizing term. It suggests that you’re wrong but nonetheless I will put up with you. Instead our attitude should be that I disagree, but you may well be right. Let’s just agree to differ. Let’s agree to live side by side with different viewpoints. There is no earthly reason why that shouldn’t be the case.

How mature do you think the Indian populace is in distinguishing between structural reforms and populist propagandas? This is in relation to the post-truth era that we are living where people prefer to wear patrio-tism on their sleeves.I don’t think wearing patriotism on your sleeve affects your ability to distinguish between populism and jingoism on the one hand and structural reforms on the other. So let’s leave patriotism aside for now and let’s look at the binary that you’re drawing of whether Indian people can distinguish between populism and structural reforms. And I think they can. Speaking more instinctively than analytically, but most people do know in their hearts and often in their conversa-tions as well, that things aren’t right in our country. We know there are people who are hungry and sometime even starving, there are people who are woefully un-educated and illiterate and there are people who don’t

“The more you stand up to these intol-erant bullies, the less likely they are to stand up and respond.”

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

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

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COMPILED BY TUSHAR SINGH AND VANSHIKA YADAV

Rohit Azad is Assistant Professor at the Centre for Economic Studies and Planning, JNU. His interest lies in macroeconomics, growth theory, monetary theory and policy with special refer-ence to developing countries. He also held the position of Fulbright Scholar at the University of Masschusetts, Amherst. Author of the book “It’s Not Over: Structural Drivers of the Glob-al Economic Crisis”, he is known for his great insight into financial crises

Rohit Azad

How do you think the government should approach the fiscal condition in the country?My first advice to the government will be to not adhere by the FRBM, which has affected the Indian economy. The next question which comes here is where should that extra expenditure go? According to me, the most important expenditure the government should look into is agriculture which it well knows needs priority especially, after the Gujarat elections.

So, where should that added expenditure on agriculture be directed towards - building long-lasting infrastruc-ture or populist measures like loan waivers? Let me correct you there. There is no such thing as populism as long as you are doing something for the people of the country. Any expenditure should be judged on how it affects the livelihoods of the poor. Furthermore, corporate loan waivers given to few rich businessmen are never termed as populist, but the same is not the situation when a loan waiver is given to the poor. Farmers who need these waivers are those who cannot service their debt and a loan waiver is sure to help them gain more out of their livelihood, income from which would’ve otherwise gone as loan repayment. With the FRBM gone, you can have both types of expenditure since both aren’t exclusive of each other.

India, despite its good GDP numbers especially for the last 15 years, has seen a rise in inequality. Relatively high unemployment persists. What are other indices which we should look at to measure India’s success story

apart from GDP?For that, you will have to go to the Human Develop-ment Index and its different indices like health, educa-tion, mortality, etc. After having a look at that, it could be easily comprehended that the last 15 years haven’t been as exceptional as misleading by the growth rate. Inequality being just one aspect, there are many metrics such as open defecation where India hasn’t performed well. For India to become a superpower, we drastically need to improve on these indices by looking beyond the GDP and increasing expenditure on health and education. This essentially brings us back to why we should not adhere to the FRBM.

Were the reforms of 1991 the only way to achieve these impressive growth rates? Has the pace at which we have liberalized since 1991 been adequate?As mentioned above the growth numbers have surged only in the last 15 years, that is 2003, so 1991 should not be credited with the impressive increase in our growth. Had liberalization been responsible for it, then we would have seen similar growth rates in the 90s as well. It was during the 2003-07 period when our exports surged due to global demand which benefitted the ‘emerging economies’ like Brazil and China as well. Moreover, the financial crisis had a say in our growth numbers as well. Thus, it’s not purely the internal poli-cy which affects growth.

Now, coming to the question of liberalization as a pol-icy. I agree that there were problems with the license raj, but the adopted reforms were far from perfect.

Assistant Professor, JNU

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They were supposed to make the economy a plat-form free of government intervention and corruption because of ‘efficiency’ which is contrary to the present

scenario where an entire government was toppled on the issue of corruption in 2014. Therefore, I would say liberalization has not re-formed either our economic or political situation but has led to private sector-led cro-ny capitalism, as compared to state-led crony capitalism before 1991.

Talking about China, can we learn from the Chinese example of how they fought-off NPAs or are our systems too different?The Chinese system is very different from ours. Firstly, their political systems are different, but majorly their debt is of the public sector itself. A large part of their manufacturing still comes from state-owned enterpris-es. For China to write-off a debt is like the left hand giving money to the right hand which is not the case with India. The Indian case would involve bailing out the private sector which has political implications. Why should the Indian public bail out corporate giants like Vijay Mallya?

Today, the news which comes from the economic circles inside the government is that the country needs to solve its structural problems. What exactly are these ‘struc-tural problems’ which almost every government policy targets?NPAs, as discussed above, is one, but the most import-ant structural problems which requires an immediate response is employment. The employment elasticity of the Indian growth story was very low which gave rise to inequality and jobless growth. To tackle this, we re-quire higher government intervention for giving prior-ity to employment generating sectors, which can never be done by the markets which prioritise profits. To give you a concrete example on which I am currently working on, the green sector generates a lot more em-ployment than fossil fuels, but expenditure is not di-rected there as it is less profitable. Adequate attention must be directed here, and this requires more than just slogans like “Make in India”. The private sector should be allowed to do whatever it is doing in profit inten-sive sectors, however, there should be a genuine level playing field and not crony capitalism which we see right now. Moreover, the government should focus on

creating adequate infrastructure for attracting invest-ment in employment generating sectors.

Sir, in one of the articles you mentioned about the missing ‘third pole’ or the ‘missing left’ in India. Who do you think can be the Bernie Sanders or Jeremy Corbyn of India?I think at the moment you don’t have the third pole but that doesn’t mean you will never have a third pole. Instances like Una and people like Jignesh Mevani clearly show a possibility of that happening. There is no doubt that there is anger amongst the youth which may result in young people like you providing for that missing space. The country doesn’t need oldies like Bernie Sanders and Jeremy Corbyn for filling that open space.

BR Ambedkar did not want the word Socialist to be included in the preamble as he believed the constitution should not dictate government policy in the future. However, Indira Gandhi eventually did include the word. Do you think the constitution should dictate gov-ernment policy so overtly?I have come to believe that Ambedkar was a socialist at heart. At least, he was more socialist than Indi-ra Gandhi who brought the emergency after all. He proposed two things to annihilate the caste system: land reforms and inter-caste marriages. The first is so radical that no government has been able to do that. I still believe the vision that Ambedkar had is the one India should have.

As JNUSU president, you started a protest against George Bush’s War on Terror. 15 years down the line, what do you think would have been a better alternative than US interventionism?First of all, there was not a conflict it was all self-cre-ated arising out of the want to access oil. The fact is well established now. Even if there was a conflict who are you to intervene in it? You wouldn’t want the USA to intervene if there is a conflict between India and Pakistan. War is never a solution; the only way out is through dialogue. The United Nations should in no way allow the war against sovereign countries.

Sir, today we see an ideological war between Russia and the West through semi-controlled media outlets like RT and CNN. For example, Russian media will compare Trump’s authoritarianism to Stalin while western media will accuse Russia of interfering in US elections. Is this the new form of conflict where ideas, and not military will be at war against one another?

INTERVIEWS

“There’s no such thing as populism as long as you are doing something for the people of the country.”

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

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In 2017, we witnessed the Bengal elections where the CPI(M) considerably lost its hold. The PM’s “anti-Con-gress” propaganda has worked wonders, and he has successfully uprooted Congress from the Centre and in many states. With the BJP gaining influence and the Left losing its hold in India, where does the future of Marx-ism in the country stand? Moreover, do you think India is pushing itself towards dead-end imperialism?Let’s just take the Modi question that you asked. This is not specific to India. There is Trump in the USA, Ma-rine Le Pen in France etc. The forces of this kind are coming up all over the world and the fact that they’re coming up reflects the economic crisis which exists. The problem is that the liberal bourgeoisie leadership which was pioneering this globalisation has not been able to recognise this economic crisis. Hillary Clinton even denied the fact that there was an economic crisis. So, to the extent that they deny this, it becomes an op-portunity for all kinds of other forces to strike a chord with people who are victims of the crisis even though these other forces do not have a solution to the crisis, not even Trump. He only says the Chinese and Mex-icans are responsible for this, but that does not solve the problem. Even if you prevent Chinese or Mexican immigration, the point is that capital is global, which he cannot change. Similarly, Modi has no idea of how to tackle the crisis. In the last three years, the unemployment situation has worsened. As far as the agriculture-dependent popula-tion is concerned, their real incomes have marginally declined over the three-year period. And this was before demonetisation and GST. Large segments of the

population are actually witnessing a worsening, or, at best, a stagnation in their living condition. Modi has no solution to this because the only thing he’s saying is “invite investment from outside”, but the point is that this is a world where not much investment is being undertaken anyway, whether in India or the US or anywhere, so there’s no reason why an investor should come and invest in India. This plays a political role-it prevents the emergence of a concerted working class of peasant struggles because if you divide people along the lines of Hindu-Muslim, white and black, you’re preventing the emergence of a concerted movement as far as the workers and peasants are concerned. Such a role becomes important in a period of crisis and they get the support of the upper classes. Modi enjoys the support of monopoly capital in India. Similarly, Trump is very popular because of his tax measures in the United States.The second question is about the decline of the Left. I think Marxism is the only view which sees the capi-talist system as a spontaneous system. Individuals in capitalism behave in ways which are thrust upon them. Therefore, even though the system appears to act on the basis of individual decisions, it is like a self-driven system, which means the only way you can get out of the ills of this system is by getting out of this system altogether. That is why Marxism is different from every other reformist kind of position and that perception of capitalism, to my mind, rings true. The abiding rele-vance of Marxism consists in the fact that it has a view of capitalism which can get transcended only when capitalism is transcended. Now, there is a weakening of

COMPILED BY PIYUSH BATHWAL AND SNEHA CHOUDHARY

Prabhat Patnaik

Prabhat Patnaik is a distinguished academi-cian and political commentator. An alumnus of St. Stephen’s College and Oxford Universi-ty, he has taught at the Centre for Economic Studies and Planning in the School of Social Sciences at the Jawaharlal Nehru University in Delhi for more than 35 year and has also been a part of the Faculty of Economics and Politics, University of Cambridge. He also served as the vice-chairman of the Planning Board of Kerala

Renowned Marxist Economist

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INTERVIEWS

existing Leftists not just in India but the whole world. The Left had come up in a particular historic conjec-ture which Lenin had written about. The world today is different and I don’t think the Left has managed to cope with this new world. In particular, it has not been able to cope with globalisation.

What, according to you is the most important metric for judging how developed a country is?Every group’s position has to be looked at before you can say that social welfare has increased. It is not enough to say potential welfare is large, and it is not enough to just look at the GDP. You also have to look at the living conditions and the access to goods and services. I’m not raising deeper questions about whether increased access to goods and services in-creases welfare. But even if we assume that it does, you have to look at the access to goods and services of every single group. Even that is not enough, because access to goods and services to some groups may in-

crease a little bit and to others a lot more in which case the distribution is skewed. If every group is better off and if we can ascertain that the distri-bution is better, then we can say we have made progress. I believe there should be a set of economic rights, like we have

political rights, which everybody is entitled to. Those mean right to employment, right to food, right to free and quality healthcare, right to universal, publicly funded, free and quality education (at least up to a cer-tain level), right to old age pensions, right to disability benefits, and so on. I believe these are economic rights essential for building up citizenship which transcends castes and communal differences.

We’ve seen many suicides among farmers. They are in-centivised to move to urban areas where they might find employment but even there the job markets are saturat-ed. So the farmers are stuck in a helpless situation. So do you think capitalism actually helps in the generation of employment?Capitalism is actually what has brought us to this situation. I think there is a view that capitalism, even though it destroys small production, ultimately ab-sorbs everybody into the workforce, which is a wrong view. In European capitalism, even though small production was destroyed, the fact that a certain tightness emerged in the labour market was because of the massive emigration which took place from Europe

to countries like US, Australia, New Zealand and so on. Those possibilities are not there, so what hap-pened historically (because possibilities then existed) was wrongly attributed to the internal working of the capitalist system which is wrong. If capitalism is replicated elsewhere, it is assumed that the same thing would play itself out which is not the case. Peasants who move into cities don’t find jobs because no jobs are being created. Consequently, they swell the army of reserve labour. You have casualisation of employment, intermittent employment, etc. Employment rationing does not take the form that 20% are unemployed and 80% are employed and 20% keeps increasing and 80% keeps decreasing. Everybody is unemployed for 20% of the time which keeps increasing over time, that is what is happening. So, this weakens the working-class movement which is one of the factors for the weaken-ing of the Left. Capitalism is incapable of solving the problems of societies like ours because it only works to destroy the petty peasantry and agriculture, and not to revive. As a result, it increases poverty.

Do you think Nehruvian socialism worked out well for India? If we draw a parallel between countries like Sin-gapore, they have developed at a much faster rate than ours.Firstly, Singapore and India are non-comparable. Sin-gapore has no peasantry. Countries like India, China, Bangladesh and Indonesia are very different because there is a substantial peasant population and work-ing-class population. In the pre-liberalisation period, the state protected the peasantry in many ways. It pre-vented them from competition from the world market, price fluctuations, it gave institutional credit through bank nationalisation, and it gave procurement prices. You did not have an agrarian crisis at that time. Conse-quently, when people say that Nehruvian socialism did not work, their point is that the rate of growth was low. But the point is, as I was arguing, the rate of growth means nothing. So, if an acceleration of the rate of growth is associated with primitive accumulation of capital where peasants are being crushed, that is not social progress. You’ll find that the rate of employment growth in the period of high GDP growth under neo-liberalism is lower than in the earlier period. Similarly, take standard indices like food grain absorption. Food grain absorption, which had gone down greatly by the time of independence, actually came up and it is much lower now than it was prior to the beginning of liber-alisation. So, by any such criteria, you cannot say that the current period marks an improvement over the Nehruvian period.

“I believe there should be a set of economic rights, like we have political rights.”

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In your book, Transforming Cities, you talk about how small cities were able to transform themselves. In old cities, the infrastructure, although poor, has been already built and it will be very difficult to bring about a change in it as it will require a lot of overhauling. Given this, how can we transform our old cities?Transforming old cities is a difficult task. After com-pleting my report on urban cities, I was invited by fourteen Chief Ministers to discuss the relevance of my report in their state. When I was talking to the Bihar Chief Minister, Mr. Nitish Kumar, he told me that Bi-har had extremely narrow roads with tall building on both sides. He asked me exactly the same thing you are asking me. To this, I would say that out of the multi-ple challenges, try to pick the one that is relatively less challenging and show that you can turn things around. Once people see that you have been able to change one thing, their aspirations will grow, then they come forward and say, “Okay, let us widen this road.” In In-dore, people actually gave up their own land that they had encroached for pavements. Change cannot come without community engagement. The people have to understand that the benefit bounces back to them.

The government recently launched the Smart City Mission which aims at developing 100 smart cities. Do you think the government was smart enough about this mission regarding the finances and planning?The Smart City Mission is not really about cities but a specific area. The government is thinking of using advanced technology and developing infrastructure so as to transform an area and hold this out as a pilot. The

cities that have been selected are mapping a particu-lar area where they are promising to provide wifi or improve the water supply. According to me, a city can be called smart only if its citizen is smart enough to demand good governance from the government and the government, along with high technology, brings about governance reforms in order to improve ser-vices in a transparent and accountable manner. To me, that is a complete definition of Smart City. The cities, just like a human being, cannot be smart unless they are healthy. Hence, health and sanitation become a priority. Infrastructure and technology are important but they are not sufficient. Good governance and the capacity to manage enable a better Smart City. Our cities need to be equipped with the funds to manage themselves. In the current scenario, the municipali-ties are accountable but they do not have the funds to manage the cities. The cities should be allowed to raise funds through bonds or through public-private part-nership. For this, they need to have a revenue model and the autonomy to decide the prices to be charged. If not, the state government should ensure that they are compensated for the reduced prices.

Ma’am, the standard of living in the cities is decreasing due to pollution and overpopulation. This overpopu-lation can be attributed to the continued migration of people from villages to cities. So, don’t you think that India needs ‘Smart Villages’ and not ‘Smart Cities’? If you want 6-8% percent growth, you have to move towards urbanization. Villages can give you 4-4.5% growth. At a 4.5% growth rate, if your population

COMPILED BY AYUSHI SRIVASTAVA AND DEVANSHI BHATI

Isher Ahluwalia

Isher Ahluwalia is currently Chairperson on the Board of Governors for the Indian Council for Research in International Economic Rela-tions. She was awarded the Padma Bhushan in 2009 by the President of India for her services in the field of literature and education. An alumnus of the Delhi School of Economics and MIT, Dr. Ahluwalia has also written a number of books, the latest being “Transforming Our Cities: Postcards of Change”.

Renowned Indian Economist

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growth is 1.5%, you are growing at 3% per annum and at 7.5% growth, you are growing at 6% per annum. If a doubling of income at 4.5% growth rate were to take ‘x’ number of years, it will take half the time at 7.5% growth rate. The only time poverty actually declined in the country was when the growth was rapid. One might think that rapid growth leads to inequality but that just means that you have to work harder to ensure that the growth is sustainable and inclusive. Without growth, poverty cannot decline. No one would make a case to ignore your villages. You have to ensure that there is regional development, where villages are con-nected to the cities but the focus has to be on the ur-ban areas for development. It’s not about rural versus urban but the development of both rural and urban areas in a synergistic manner.

Ma’am we read one of your articles about the Bellandur lake fire. In January 2018, the lake caught fire again. Even then, the officials claimed that they did not know the reason for this fire. What can ordinary citizens like us do, when the authorities are completely clueless and refuse to act?The officials are not clueless. They are ignorant enough to not know that it is the effluents from the industries that are polluting the rivers and causing this damage. But if you acknowledge the cause, the next question that arises is what steps have been taken to stop the damage. Also, there is a lot of corruption. I am ex-tremely relieved to see that you all are asking these questions at such a young age. I only learned about these things in the last ten years. When I finished my book on industrial growth and productivity in 1982, I would go to seminars, talks, and sessions and if any-one asked me if India would open up or if industrial controls would be removed, I would say, “Not in my lifetime” and then liberalization took place in 1991. So now when someone asks me if we will be able to han-dle urban challenges, I say yes because I have faith in the young generation. You have never seen the country grow at 3.5% and I know that you will not take the inaction of the government lying down. You will be more forthright and active and demanding. It is only when governance is demanded that it is delivered. So I have a strong belief that you will not tolerate incidents like Bellandur lake and the Bawana incident.

With the rising levels of pollution and the high levels of smog we witness every year, do you feel that in the quest for development, we have neglected the issue of envi-ronment? And is pursuing development without paying much attention to the environment worth it??

I absolutely agree with you, but we need growth. However, there’s a need for sustainable growth; growth which is inclusive. We cannot have growth which is not sustainable. Environment is not something that will be put in there by the government as an adjunct, there’s a need to educate people. People who have moved to the cities are unable to recognize their con-tribution toward this issue, hence, this is something that people should understand and thereby take small yet significant steps in the direction to conserve the environment. For instance, more colleges and insti-tutions should have solid waste management units. The more it is advertised, the better it will be. Hence, there’s no question about whether we should give environment space on the same stage. I would not say environment versus growth but would rather advocate sustainable growth.

An article in the World Economic Forum talks about how urban cities in the rest of the world are losing their charm because of increasing pollution and traffic. With improved accessibility to goods and services and the advent of the work-from-home facility, living in urban cities is not as attractive as it used to be. Is India close to that stage and if not, then how can we achieve a stage where rural areas are able to manage the urban area growth?Our salvation lies in fixing cities like Mysore, Surat, Indore, Bhopal and all the areas situated next to our villages, we should start getting in touch with them and start focussing more on these cities and create a development plan for them. We must begin at the other end and treat them as investment goals and work towards creating mobility. We would have terrific results. Developing these cities will help in preventing the concentration of the population in a few cities and will lead to a more inclusive growth.

“Our salvation lies in fixing cities like My-sore, Surat, Indore, Bho-pal and all the areas situated next to our villages.”

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Sir, your current role in the Ministry of Finance as the Principal Economic Advisor has been a remarkable shift in career path from your previous role as Managing Director at Deutsche Bank, an organization where you had spent over twenty years. What inspired you to take up this job and what do you find different?Being an economist, I have all sorts of ideas and suggestions with respect to policy making and it’s an opportunity to have those ideas implemented. That’s probably why I decided to switch to this job. There’s an effort by the government to bring in people from outside and I’m grateful for the opportunity of getting to work here and contribute to policy making. I spent a lot of time in the banking sector and I was not a mainstream banker. I was an economist in a financial environment. That world was exciting in its own sense. So, I can’t say I didn’t enjoy that. This is a different environment and it’s an exciting time to be a part of policymaking in India.

India, being a growing economy, needs to make in-creasing budgetary allocations to both welfare and core sectors. Given that, what needs to be done to increase our tax base and generate more revenue?This is one thing we spent a lot of time thinking about, and one of the major issues was, of course, GST, which is something that has been debated in India for years. Despite being a united country; from a market per-spective, we were all divided. Introducing GST was not easy and many taxes that had to be synchronized were state taxes. This made the job a little too chal-lenging. We needed to give some structure to the tax

system. We recognize that GST may not be perfect at this point, but over a period of time, we’ll make cer-tain modifications by taking into consideration the feedback that we get. Talking about the tax structure in general, a good tax system is ultimately a simple tax system. We will smoothen the tax structure over a period of time. We have recently lowered the cor-porate taxes for small companies to 25%. The reason why it wasn’t done for the big companies was that they already enjoy a lot of exemptions and privileges. Over a period of time, as we take away those exemptions, we will simplify the tax structure and charge a flat rate of 25% as corporate tax. So, a simple tax structure is needed and we need to sequence the change well.

The RBI recently overhauled and simplified the way we deal with stressed assets and NPAs. The new system is centred around the Insolvency and Bankruptcy Code (IBC). Why is the IBC so important?Well, the IBC is important because any financial system must have a provision for an exit. In an en-trepreneurship based economy, huge risks are taken and when that happens, some go wrong and that can be for all kinds of reasons and not necessarily fraud. In India, we moved from ‘Socialism without entry’ to ‘Capitalism without exit’. IBC is a critical part of how you run a market-based economy. Talking about its relevance in the banking system, the way BIFR dealt with stressed assets was really an unviable way as it perpetuated the same mistake and never rectified it. IBC is a very simple framework- if risks fail, banks have a way and they can auction the resources off and

COMPILED BY RAHUL GABBITA, SALONI CHHABRA AND SHRUTHI RAMESH

Sanjeev Sanyal

Sanjeev Sanyal is an internationally acclaimed economist and bestselling author. He spent two decades in the financial sector and was Global Strategist & Managing Director at Deutsche Bank till 2015. He is widely regarded as one of Asia’s leading economists and was named “Young Global Leader 2010” by the World Economic Forum in Davos. He is also a well-known environmentalist and urban theorist.

Principal Economic Advisor, Ministry of Finance

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thus the system goes on continuously cleansing itself. IBC was used to cleanse the banks. The initial idea was to create a bad bank but it wasn’t a very good idea. IBC is basically about resolution and not retribution. There needs to be retribution if there’s been a fraud but when risks go wrong, we need to resolve the issue and not seek retribution. If you create a system where every small misdemeanor, say someone’s cheque not coming in for three days, is punished, the whole system will go bankrupt.

Sir, the Economic Survey (2017-18) talks about an investment dip by companies due to stressed balance sheets. In this context, how far do you think the recent reforms by the government, such as tax cuts, would go in assisting the creation of new jobs?The investment dip is attributed to a lot of reasons. In order to ensure investments, it is important to cleanse the system, which is being done by reforms like IBC. If the kind of auctions being done right now work effi-ciently and the resources are acquired by the right kind of investors, and the banks are cleaned up, there will be a generally positive outlook towards investment. There needs to be greater accountability in the system.

Sir, you often talk about a ‘strong but limited state’. Considering this, where do you think the state should allocate its resources, and what areas need immediate attention in this economy?I often say that the problem with the Indian state has been that it’s an all-pervasive but weak state. We should rather aim for a state that does a few things but does it well enough. I’m a proponent of the ‘Chanakyan’ view of the state which elaborates that the state’s role is limited to defense, providing law and or-der, justice and maybe some social services for which there is a market failure like public health and disaster management. It is not the job of the state to optimize things for everyone. It is not the business of the state to make everyone happy. The state should rather provide a framework for people to lead their lives and what people do with their lives is then their private matter and not that of the state.

We observe that there are high rates of educated un-employment among the youth. Will you attribute this to low standards of education or is there a structural problem in the employment sector, which needs to be corrected?There are several issues here. One major issue is that the education sector is producing degrees but not people with adequate skills. Another failure can be that

it is creating a lot of degrees in sectors where there is little or no demand. If you look at the debates in Indi-an academia, academicians have enormous resistance to having job-oriented courses and I fail to understand

why. This is something that the students should demand, courses that would give jobs. That is one major part. An-other issue here is the rapid changes in artificial intelli-gence. The job market will change drastically because

of artificial intelligence, but I don’t think that we have readied ourselves for the change. It has become quite clear that the kind of jobs that will get wiped out will be those of the educated people. It does certain jobs more efficiently than the humans. Every innovation creates new jobs and AI also will, but, at this juncture, it is unclear what those jobs will be.

In the context of urbanization, we have myriads of slums that are not even recognized by their respective municipalities. How should we be moving towards erad-ication of slums?One of the key things to understand here is that slums should not be thought of as deterrents to develop-ment. They are rather routers to the development process. Try and understand that a migrant to a new city in search of employment will find his home in a slum and not a prime location. In any society that has developed, be it the European cities in the early 20th century or the early years of American development, people used to migrate to cities and settle in slums in large numbers. To get rid of slums is, therefore, a bad idea. I do not mean to say that we should let housing spring up in any corner of the city but rather, cities should be planned in a way that they allow enough space for where this kind of churn can take place. Whenever you create a city, you anticipate a space where such kind of residences will come up. If it is not done, gradually, unorganized versions of slums will come up. Also, in a rapidly urbanizing system, renting is extremely important. A migrant to a city wouldn’t want to buy a cheap house, what he rather wants is a place with low rentals and that is essentially the role that slums play in rapidly urbanizing cities. So, slums should rather be anticipated and spaces for their devel-opment be created or else, they will gradually come up.

You speak extensively about ‘Real Indian History’, and have also highlighted in your books that we never read about India winning wars, or how small empires centred

”We moved from ‘Socialism without entry’ to ‘Capitalism without exit’.”

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

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ECONOMICS MAXIMISED

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ECONOMICS MAXIMISED

Ivy, Not RosyBY KARAN MEHROTRA

AND YASHASWI SHARMAThe image that usually comes to mind when the word ‘Ivy League’ comes up is that of a picturesque setting with a combination of rustic and contem-porary buildings, pristine lakes, and expansive gardens; world-class aca-

demic reputation, and a path to a better life. But these universities’ questionable admission practices, the scale at which their enormous endowment funds are being deployed in equity and fixed-income markets, and their attempts to further reach across different countries (through college branches and online plat-forms) completely elude us.

In order to consider the revenue of an Ivy League Uni-versity, we will have to look into their two principal sources of fresh revenue- tuition fees and donations/grants. The cost of going to an Ivy League University is five times the average cost of attending an American state university, a considerable difference in tuition fees. In fact, on an average, one-fourth of the graduat-ing class of an Ivy League College ends up knee-deep in student debt. In addition to this, the other reason why the selected candidate pool of an Ivy League has a high number of wealthy students is that richer can-didates have access to professional college counselors and tuition teachers, to ‘crack’ the admission process. Moreover, students whose family members have at-tended the college, in question, have a higher chance of being selected for admission. Stories of rich parents donating millions to the University in order to secure a seat for their ‘precious’ ward are not uncommon.

Ivies often try to justify this flawed admission practice by a certain theory called ‘The Happy Bottom Quarter’, which posits that having a quarter of the student body which is not academically-inclined, makes the intellec-tual portion of the student body less competitive, and campus life much more vibrant. However, this is often a glib excuse for letting in wealthy students, mostly

because the wealthier student population tends to be better performing at standardised tests (again by virtue of their access to tutors and resources) which helps these universities achieve higher ‘rankings.’

Now, while it might not be the most suitable channel, donations are in fact the primary reason for Harvard having the largest academic endowment fund in the world (around $37 billion), while Yale comes up at a respectable second place with $27 billion, and Brown finishes last with $4 billion. To put things into perspec-tive, if Harvard stopped outsourcing its fund manage-ment and turned its endowment into a hedge fund, it would become the sixth-largest hedge fund in the world.

These funds are primarily financed by the colleges’ ul-tra-high net worth alumni who are well-placed in the echelons of power, be it in the government, interna-tional organisations, corporates, or even in the creative industry. In fact, the Ivy Leagues have produced more than 130 billionaires. And again, the millions that rich parents pay definitely add up.

With such huge funds at their disposal, Ivy Leagues often have such elaborate investment mechanisms that even full-time wealth and fund managers take cues from what a university such as Yale or Harvard choos-es to do with its endowment. And these universities often end up achieving much better returns than indi-vidual investors. In fact, for the two decades preceding the recession in 2008, Yale’s endowment fund grew at an annual rate of 16.6%, exceeding the returns on the S&P 500 index by at least 500 basis points.

Interestingly, this isn’t only about having the best brains, it is also about long time horizons (some Ivies are over three centuries old) allowing these universi-ties to make riskier investments, because the volatility smooths out over longer periods of time. Exclusive ac-

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cess to private equity partnerships and a large number of employees handling endowment funds are believed to be other major factors leading to universities real-ising better yields than their individual counterparts. Tax exemptions on returns, however, is by far the big-gest reason these investments played out better than the market. In fact, this is why it became such a signifi-cant political issue that the Republican Senate tax plan decided to ask universities with endowments exceed-ing $250,000 to pay up 1.4% excise on the returns real-ised, and a 20% excise on remuneration to investment executives (if it sums up to more than $1 million). An intriguing pattern that has been observed very recently is how universities such as Dartmouth and Columbia have been outperforming the likes of Harvard and Yale in terms of returns, with UPenn, Columbia and Brown all reaping returns higher than 12.6%, while Harvard lagged behind by at least four percentage points.

Parallely, the Ivies are now trying to cash in on their brand recall by setting up branches overseas and pro-viding MOOCs (massive open online courses). While the Wharton School of Business has established a campus in Dubai, Harvard has executive programmes running in both Mumbai and Shanghai. Not only do they help the Ivies tap into a larger (and possibly bet-ter) pool of talent, but they translate into significantly higher earnings for them. This is because more people who have the willingness to pay are now able to avail an Ivy education while also avoiding problems such as dislocation of the executives and difficulties in getting a visa to the US. On the internet, MOOC provider edX.org (which is Harvard’s lovechild with MIT and has many Ivies on board) is witnessing lifetime highs in terms of the number of visitors and registrations. While one is allowed to be “auditing” the courses free of cost, verified certificates usually cost anywhere be-tween $50-200 for the more popular courses. Although

the edX platform is a non-profit one, participating universities and institutions are usually able to secure a sizeable part of the certificate fee, again leading to revenue generation.

If you think that all of this money is being used to primarily fund research and enable scholarships for financially weak students, you are sadly mistaken. In 2015, Yale dished out $480 million as com-

mission to fund managers for generating above-aver-age returns on investments in equity markets, private equity, and fixed-income instruments. In the same time-period, the renowned ‘cradle of leadership and promoter of liberal values’ only spent a paltry $170 million on tuition assistance.

With revenue growth slowing down due to stagnation in the tuition income and number of students, these universities are becoming increasingly dependent on income from investments, and interest income on the same now makes up more than 22% of the total reve-nues for Harvard.

Both federal and non-federal grants have been fall-ing at Ivies even as universities try to contain costs to ensure profitability and continue to be favorites of international rating agencies. While these universities claim to be doing as much as they can to provide equal access to research finances, things aren’t nearly as rosy in the real world. Since their investments have lately been yielding some of the lowest interest rates among competitors, the Ivies have been looking at containing costs by limiting real expense on education and re-search, while continuing to use conventional methods of debt restructuring, portfolio repositioning, among other things. All of this explains, to quite an extent, as to why commission payouts and other forms of remu-neration to people managing the Ivies’ finances are now touching record highs.

This brings us to the question- if academic endowment funds are not being used for their fundamental pur-pose- the betterment of the institution’s facilities and aid programme, then what is the point of just sitting there and watching the money grow? This certainly doesn’t feel like something that the ‘flag-bearers of the Great American Dream’ should be up to. It seems imperative that the Ivies need to set their priorities right and look at maintaining their prestige as centres of academic excellence in real terms instead of de-pending on rankings or other such overly simplified quantitative instruments of comparison for validation. Investments needed in research and education cannot suitably be replaced by spending of any other kind. And by no means should they continue to ignore their social responsibility of providing inclusive education, if these universities were to think of shedding their image of being “bastions of coastal elitism.”

“Interest income on investments makes up more than 22% of the total rev-enues for Harvard.”

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The advent of e-commerce has had a profound impact on the market as a whole. The way markets func-tion. The dynamics of consumer choices. The mechanics of supply chain. All these have been dis-

rupted by the world of e-commerce. E-commerce has heralded a new technology era which is driven by fast payment methods, burgeoning growth of electronic money and increasing personalization and customi-zation. This article aims to offer a deeper insight into how the world of e-commerce has impacted the con-sumers, the sellers, and the way in which organizations as a whole function and of course how economics is all closely attached to it. Let us first look at how the consumers have been affected by the advent of e-commerce. Firstly, let us delve deeper into the way consumers shop online versus the way they shop conventionally. Conventional shopping involves a lot of time spent, which means the opportunity cost associated with conventional shop-ping is quite high. We hop from one shop to another, see a lot of shopping catalogues, compare the prices of the same products in different shops, and finally if we feel the product is giving us utility worth its price, we decide to strike a deal with the seller.

What happens in online shopping is completely differ-ent. Consumers’ search costs are minimized to a great extent. They no longer have to move from one store to another to find which vendor is selling at the low-est price and having the best quality product. Speedy comparisons with the help of shopping search engines help consumers find what they want, and this low-ers their opportunity associated with shopping from online platforms. Moreover, personalization is a key feature of e-commerce which helps in utility maximi-zation. E-commerce websites like Amazon personalize the entire shopping experience by suggesting other

good purchases for a customer who is buying a spe-cific product which helps the consumer to tailor the existing purchase to his own liking. This is done by providing real-time reviews, recommendations and showcasing all the possible prices at which the product is available from different vendors.

This ensures that the consumer is able to decide which product to buy on the basis of all the possible param-eters and hence he can decide what point is the opti-mum point of his marginal utility curve i.e. the point where he can maximize his satisfaction. The main idea here is that to come to the equilibrium, the time involved in conventional shopping is a lot more and the opportunity cost is higher whereas in e-commerce both the time and opportunity cost of time are lower.

Another advantage of e-commerce is that it blurs all the boundaries across markets. A customer sitting anywhere can order anything and his geographical location no longer acts as a constraint for him to buy a specific product, which otherwise, in conventional shopping would have been a roadblock.

If we assume accessibility to be one of the determi-nants of demand we can very easily postulate that in-creased accessibility to a wide basket of products leads to increased demand for those products.

Having looked at how e-commerce has made the shop-ping experience for a consumer economically viable in terms of utility maximization, lower opportunity cost of time etc. let’s move on to look at how this has helped in establishing efficient and economically productive markets for the sellers. First, let us analyse the reasons for the costs to sellers coming down. Firstly, to set up an e-commerce com-pany one doesn’t require a sales force, a massive brick and mortar building, excessive inventories or volumi-nous physical facilities. In other words, the barriers to

Going theE-Way

BY SANKET JAIN

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entry in the e-commerce market are substantially low and so are the costs. The e-commerce world also helps in skimming down the interaction costs between the buyer and seller in terms of the time and money spent on sales presentation, phone calls etc.

This is mostly true for B2B e-commerce platforms. In case of B2C e-commerce markets, the barriers to entry are present but are less tangible. Building better sup-plier relationships/ supply chain networks to reduce the time taken to deliver, or a recognizable and trusted brand name to dispel consumer’s apprehensions and safety or quality concerns require a lot of resources al-though it is not as apparently noticeable as the money required to buy land or machinery. All these costs are hence spread over time and don’t pose a monumental problem for the e-commerce giant as over time his profits will also increase if he is operating with opti-mum efficiency and if the brand name is flourishing.

E-commerce also offers efficient markets. When con-sumers are being rendered with the facility of differ-entiation and personalization they are ready to pay a higher price for the product being offered. This further helps the e-commerce company to mint good money as the costs of operation are comparatively lower than the price they get for the products being sold. The huge non-operating costs to cater to a wider consumer base – advertising, incentives, discounts, offers etc. do eat into profit. But these costs stabilize and become substantially less once the e-commerce giant is able to muster a good clientele in the market.

The efficiency of e-commerce markets is further strengthened because the barriers for a seller to be-come a part of the e-commerce network in terms of size, language or location are negligible. Any company, of any size, located anywhere and using any language for transacting can be a part of this circuit. Hence the competition between companies is of how well they are advertising, how extensive is their network with Web companies which help them to increase their reach, and how well they are able to communicate with their potential audience. So, all these qualitative factors are important for an e-commerce company. E-Commerce has also allowed for direct advertising of products which is more profitable than mass adver-tising and has hence made the communications with consumers more rich and interactive. The cost of dis-seminating information over the Internet is very low and results in substantial savings for the companies.

Market operations and ordering systems are further very economically viable in e-commerce markets. Taking online orders helps in ensuring that the orders are routed to the requisite retailers and the sales team which otherwise would have been busy fulfilling these orders can now be employed to better use.

A significant change because of e-commerce has been in that of supply chain management. In a supply chain if activities are shifted say from producers to consum-ers a lot of money and time is saved. E-commerce pro-motes self-configuration of products whereby consum-ers can track their orders online and this significantly reduces the burden on the employee force team making the supply chain efficient. Otherwise to answer the or-der related queries from customers a separate and hu-mongous workforce of call center employees is needed, but in the presence of e-commerce platforms, online tracking has scrapped the need for the same. These small but significant changes in supply chain make the platform all the more economical.

E-commerce has also changed a lot of things about finance and accounting. The e-commerce giants have to ensure that electronic orders (or in other words back-office transactions) are executed with utmost swiftness or otherwise they may hamper the overall efficiency of the companies.

With all the positives being talked about, now let us talk about a potential threat which the e-commerce market is fostering. The threat being talked about here is that of the creation of gig economies. Gig economies are those which are primarily characterized by tempo-rary job positions for short-term engagements. E-com-merce which is characterized by such high degree of digitization and automation is prone to short-term jobs. Only a few people have permanent jobs, while the rest have to experience turbulent work conditions, subjected to a lot of changes. Thus, this can be a disin-centive for many to enter this industry.

All in all, with its own set of eccentricities and char-acteristics, e-commerce is surely an alluring prospect but only for those who can crack the all the more mind-boggling economics behind it!

“Personaliza-tion is a key

feature of e-commerce

which helps in utility maximi-

zation. ”

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If pleasure and pain could be ex-pressed as quantities, then plea-sure minus pain is the measure of happiness. Add the happiness across all men, deduct the unhappiness, and the government that produces the greatest net happiness for the

greatest number has de facto applied the best policy.

When David Cameron was elected as the British prime minister, he proposed the ‘happiness formula’ and argued that it’s more important to think about putting joy in people’s hearts than just about putting money in their pockets. But aren’t these one and the same? Doesn’t happiness come with money? If it does, does that mean the richer you are, the happier you will be?

Every year, the Sustainable Development Solutions Network for the United Nation releases the World Happiness Report. The report ranks countries on six key variables that support well-being: income, free-dom, trust, life expectancy, social support, and gen-erosity. This year, Finland secured the first position, followed by Norway and Denmark.

Finland has always been considered one of the most secure and socially-advanced countries in the world. Its banks are healthy; police, reliable; government, least corrupt. There’s no doubt that Finland’s pro-wel-fare policies have played a substantial role in making it the happiest country in the world.

The government largely funds the education and healthcare systems. No or nominal fees are charged for any level of education-be it kindergarten or uni-versity- and the expenditure on each student is more than $13,865 per annum. Education, in fact, consti-tutes about 5.7 percent of its GDP. Further, the Labour Administration (which is entrusted with the respon-sibility of the labor market) sponsors various training programmes, to enhance the medium for seeking job

opportunities, where unemployed are given training for 6 months.

The Finnish healthcare system is also top-notch. The “Kela Card”, issued to all those covered under the Na-tional Health Insurance Scheme of Finland, guarantees medicines at a subsidized rate and provides on-the-spot reimbursements at pharmacies and clinics for all costs. Maternity and child health care is also free. The expense on health per capita is more than $3701 and about 9.7 % of GDP is assigned for health. It is no wonder that the Finnish have a very high life expec-tancy rate: 78 years for males and 84 for females.

Countries like Finland, Norway, and Denmark, which have been on the top of the World Happiness Report for a while now, all have one thing in common: they follow the Nordic model of policy-making which aims at “embracing globalization and sharing risks” vis-a-vis ensuring quality healthcare systems, strengthening property rights and enabling market freedom. The density of labor unions in Nordic countries is quite high: 86% in Iceland, 69% in Finland, 68% in Sweden, 67% in Denmark and 52% in Norway. Unemployment benefits and early retirement programmes are allocat-ed a handsome amount.

Burundi came at the very bottom of the Happiness Report. Having experienced a civil war, a series of fragile governments, political conflicts and mass killings, the unhappiness is justified. The second-last ranker was the Central African Republic (CAR). Its score on labor market flexibility and taxation has been so far abysmal and its development is constrained by an unskilled workforce, an indisposed transportation system, and unhealthy policies. Rural areas are home to a significant proportion of the population which hangs on subsistence agriculture as a source of liveli-hood. Though the constitution claims to provide an independent judiciary, however, the courts are in a bad condition, with very few resources and citizens have

In Pursuit of Happiness

BY DEVANSHI BHATI

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narrow access to justice and corruption is ubiquitous.

The United States, surpris-ingly ranked 18th rank, de-spite having a very high per capita income. This could be because its performance on social measures has been be-low the par. Life expectancy has deteriorated, inequality has intensified and confi-dence in the government has tumbled. One of the other

reasons behind this fall is also the rise in diseases such as obesity, substance abuse (opioid addiction) and depression.

Latin America, on the other hand, synonymous with corruption, high crime rates and violence, and dispar-ities in income accompanied by widespread poverty has scored relatively higher. Researchers believe that social support is to be credited for this upswing.

Recently, there has been a worldwide movement which aims at measuring happiness and well-being. There have been studies about what makes a country “happy”. National measures, such as gross domestic product (GDP) and gross national product (GNP) have been used to gauge happiness. Research suggests that there is an intrinsic relationship between GDP and happiness. People living in countries with a high growth tend to be happier than those living in poorer countries. It is claimed that this relationship stretches only to an average GDP per capita of about $15,000.

A renowned economist Richard Easterlin, in 1971 ar-gued that an upsurge in GDP was not always accompa-nied by the increase in happiness levels as the marginal gain in happiness to decrease after a point. This came to known as the Easterlin Paradox. Earlier, econo-mists considered well-being to be a simple function of income, however, once wealth reached a certain level, its efficacy in delivering and raising levels of well-being depreciated. In 2010, Daniel Kahneman and Angus Deaton discovered that higher income reported better life satisfaction, but the rise in emotional stability rose with earnings until an annual income of $75,000. How you spend your income is also an important element. It is claimed that people who spend their income on experiences and charities are usually happier than

those who spend on material products.

Other significant determinants of happiness com-prise of employment, social security, taxes. Employed people are believed to be more content with their lives than unemployed people. Employment gives a sense of independence and freedom and also provides with sources of income which add to satisfaction.

However, there are divergent views regarding the social security payments. On one hand, It is believed that social security does not contribute to happiness as it’s not earned income and people who think that they control their lives are better off. Whereas a counterin-tuitive approach focuses on how the quality of life is ameliorated and how these benefits provide an incen-tive to employees as their other needs are also met and all of this boosts productivity. Similarly, the relation-ship between taxes and happiness is also paradoxi-cal. Though it might seem that taxes have a negative impact on happiness, however, instances suggest this generalization might not always be true, as happiness depends more likely on what is taxed and how. For instance, taxes on cigarettes are always a subject of various conflicts.

Gary Becker, a renowned American Economist, pro-posed a rational addiction model which suggests that smokers are worse off after a rise in taxes. And the other model, an alternative time-inconsistent model proposes that higher taxes would make smokers better off as it would act as a self-control mechanism. After scrutinizing and prioritizing the subject of well-being factor, it was realized that smokers were happier with higher taxes. Similarly, in Nordic countries, the tax rate is relatively higher, however, there’s a widespread public support as people perceive them as investments in the quality of life. Free healthcare and subsidized education are considered to be one of the biggest con-tributors to satisfaction.

“People who spend their income on ex-periences and charities are usually happi-er than those who spend on material prod-ucts.”

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

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

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Environmental Dumping

BY PRABHMAAN THAPAR In this world of ours, everyone agrees on the survival of the fittest, however, there even exists a sce-nario where resources, greed, and the urge to surge take over and there comes the action of the cat-alyst; known as foreign relations.

This article studies the harmful and obnoxious effects of one’s doing on another’s country/continent.

The African western horn is often regarded as the most vulnerable area when we refer to pollution, especially water pollution. Most of the waste dumped here by the third parties, including nations and organisations, is generally radioactive. What this waste includes is a question of paramount importance. It is of the follow-ing 3 types: building/construction waste, radioactive waste, and hazardous waste including e-waste and industrial waste.

The effects of this dumping include, but are not limited to harmful cosmic radiations which initiate a chain of actions and reactions which ultimately affect the topography; including the soil and biodiversity of that area and human lifestyle and demographics.

The topography of the region takes precedence in this case. This is because a nation can only possess a work-force which is healthy and efficient due to a diverse and environmentally-enriched area. This is a prereq-uisite for every developing country so that the growth and development of that region can be spurred at a faster rate. This leads to a positive shift in the overall demographic trends, in terms of the birth rate and death rate, which are important parameters in decid-ing how healthy a nation can be.

We need to understand, what exactly gives the leverage to the organised syndicate criminal groups and west-ern companies to indulge in such activities. Firstly, we need to understand, that most of the western African

nations have a weak political structure, which accounts for a huge amount of instability in the region. The history of West Africa is replete with a series of consis-tent conflicts. Most of the Western African states have seen civil wars like in Sierra Leone, Liberia, Guin-ea-Bissau, Ivory Coast, coups in states like Gambia, Niger, Guinea as well as ethnic and religious clashes in the nations of Benin, Nigeria, Mali; since gaining independence. As a consequence it is valid to state that poverty, political despotism, corruption and foreign interference have turned the dreams of a common Af-rican citizen into a distant reality, and has now become a nightmare. Moreover, during the era after the Cold War, most of the countries experienced destructive civil wars on their soil. This led to the irrevocable and irreversible instability in the region. Thus, the quest for power of different social groups in these nations, especially Somalia, continues. With the urge to come to power, comes a need for re-sources. They are required in order to become popular and win the majority. When resources come to play, no one on such a large scale bothers about the trade-off. And in this case, the trade-off being so large, especially the quality of life and development of their own nation has led to the negative consequences that are high-lighted here. This sends out the narrative that econom-ic prosperity of a few is more important than the life of people in that region. Hence, it leads to concentration of economic wealth in the hands of few influential and diplomatic people. This causes many problems because of the involvement of certain external elements in this scenario, i.e. the organisations and nations involving themselves in such acts.

We need to understand the problem through a time-line. The concentration of waste grew in the Western African region post the Industrial Revolution and the second world war. This is also a time when the capital-ist world was involved in growing its base for Weap-ons of Mass Destruction. The number of experiments

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increased, which served as a catalyst for more waste, hence more dumping.

All this dumping is centered around the coast, which is ex-tremely rich in nutrients. This leads to soil degradation and pollution of the underground water and the shallow seas. The consequences of this devastating

act are not only causing harm and substantial loss of life quality to humans but also the surrounding biodi-versity.

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

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

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

spective of a body monitoring the working of waste disposal in this region and strict law formation by an international organisation is the need of the hour so that substantial measures can be taken up.

“With the urge to come to power, comes a need for re-sources.”

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Merriam-Webster has declared ‘Fem-inism’ as the word of the year. You will have to be totally cut off from the outside world if you do not know why. From the dethroning of Har-vey Weinstein which sparked off the

#MeToo movement to a South Korean governor, once considered a potential president of the country, resign-ing because of sexual assault allegations, the feminist movement influenced entertainment to politics from East to West. Be it Wonder Woman’s march at the box office or the women’s march against Trump, the word feminism was never out of trend.

More groups of people are coming together for wom-en’s causes. Is this true for the financial world as well? Why are we discussing this in an Economics Jour-nal?  Can there be a ‘coming together’ of investors for a social cause? In the selfish world of finance where earning profits is a matter of life and death, this may seem impossible. Turns out it isn’t.Today, more people are investing with a gender lens. ‘Gender lens investing’ is simply considering the impact of your investment on women. You view your investments with a lens of gender. It falls under the growing ambit of impact investing.  Impact investing is investing which aims to generate a societal benefit, apart from financial gain. Take the example of ‘green lens investors’ who only invest in projects that are ben-eficial to the environment.

There are several kinds of gender lens investors. Moderate ones invest in firms that have a good female representation in senior management or in wealth funds managed by women. They also seek businesses started by women. The radicals invest in firms making products that directly benefit women and consider the role of women throughout the value chain.

“It may sound good on paper but is it a good oppor-

tunity to make money?”, you might (very selfishly) ask.  To give you an idea, women launching and expanding ventures around the world face a credit gap of $320 billion (Credit gap is the difference between the capital women entrepreneurs are seeking and the credit to which they have access). Therefore, if you are not driven by feminist ideals, the Benjamin Graham in you should be able to identify the huge potential of in-vesting in business ventures which are ready to expand but are starving for capital.  Some of these businesses, especially in the global south, have been traditionally deprived of capital due to no access to formal sources of finance, and some others simply due to gender bias. To add an Indian perspective, Amartya Sen’s concept of “Missing Women” also talks about how we have faced a notional loss of 4% of GDP growth per year be-cause of lack of women in the working force. We have a $158 billion financing gap for women-owned micro, small and medium enterprises in India. Gender lens investing fills this vacuum between the demand and supply of capital (and in no way ‘distorts’ the capital market.)

“Not every prodigy turns out to be a star performer. Why will gender lens investing be one?”, your scepti-cal self will ask. To draw a comparative, gender lens investing is today where green lens investing was 20 years ago. At that time, investing taking into consid-eration its effect on environment was unthinkable and considered impractical. Yet, as people’s attitude changed with growing awareness around climate change, so did the green lens investment market.

Today, there is an entire market infrastructure and ecosystem that considers ESG (environmental, social, governance) and climate-related investment analytics. With corporate gender equity becoming more import-ant day by day (or year by year), there is every reason to believe gender lens investing will take centre stage soon. Gender lens investing (GLI) is outperforming

Gender LensInvesting

BY TUSHAR SINGH

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all other aspects of impact investing. GLI assets grew 41% last year. There are over a 100 funds that specifically cater to gender lens investors in the US (We need more in India). More funds were launched in 2017 than any other year tracked. GLI is generating so much heat that Goldman Sachs has announced a $600

million fund for investing in women entrepreneurs globally.

Investment in women is increasing and the women are not disappointing. It is no secret that companies with women in senior positions outperform those with don’t. Several researchers have also found a causal link between higher female representation and a company’s profits. Here are a few: Aa 2015 MSCI World Index study showed that companies with strong female lead-ership generated a return on equity of 10.1% per an-num versus 7.4% for those without; Fortune 500 com-panies with the highest percentages of women board directors outperformed those with the least by 53 percent return on investment. Although this is correla-tion and not causation, to an investor that distinction should not matter as long as the investment has better prospective returns.  Surveys have also shown how women wealth fund managers are inherently more risk aware than men and have more targeted investments. Academics Brad Barber and Terrance Odean, through their research have shown that women have outper-formed men in the market by one percentage point a year. They believe it’s primarily because men are tradi-tionally more overconfident than women, and hence tend to carry out riskier and unprofitable trade.

More importantly, GLI benefits society more than anyone else. GLI It also has the potential to trans-form traditional forms of aid like philanthropy. While philanthropy is still desirable, it is largely indirect and restricted. Only the super-rich give their money to charitable organizations. How effectively these charita-ble organizations use this money is very debatable. On the other hand, GLI, and other forms of impact in-vesting directly go as capital to firms promoting social causes. What’s even better is that the middle class (and not just the rich) can contribute. The stock market is open to all, unlike philanthropy which only some can afford.

This can unlock the true potential of private capital. If GLI takes off, capital-hungry firms will be forced to bring gender reforms. After RobecoSAM, an impact investment specialist, introduced a gender equality fund in 2015, the share of companies reporting the gender make-up of senior management to RobecoS-AM rose from 35% in 2012 to 54% in 2016 and the number reporting gender pay gaps rose from 21% to 31%. This might seem like a small step but imagine a thousand more RobecoSAMs and you are on the verge of a corporate gender reformation revolution.GLI will help capitalism regain the human face it is so desperately searching for. It will create a “gender dividend”: women reinvest their increased earnings in health, education and nutrition at a higher rate than men- 80% vs. 40%. With more GLI funds coming up, we will see more impactful goods and services, and of course more gender equity.

However, it is easier said than done. There are two major obstacles. Firstly, there is a lack of data which will tell us which companies promote women and how much. This is only a short-term problem as more and more institutions are coming up with their gender eq-uity indices and trackers.  The second problem is per-ception. People generally are unaware of such forms of impact investing existing. Even if they have heard of it, they misinterpret GLI as microfinance given to women. To add onto these two problems, many scep-tics have written off the profitability of GLI. They say if GLI is providing above average returns today, it might as well lead you into losses in the future.

Don’t worry.  The most positive aspect of GLI is that men need not ‘lead’ this time. There are a growing number of women investors- women today represent significant capital in the Global North and will inherit 60 per cent or more of the wealth in the intergener-ational wealth transfer over the next 20 years. They are more than looking for social returns apart from financial ones from their investment. People not mo-tivated by the social impact may also join in if women entrepreneurs continue to provide better returns. One of the most exciting things that’s brewing is the Global Gender Lens Investing Summit this November in the U.K. To be a gender lens investor you need not ‘move’ money from one asset to another or from one invest-ment to another.  It might mean keeping everything in place and just asking yourself what social impact your investments have. It’s is a dual benefit an icing on the cake if you get solid profits and help the world.

“Gender lens investing is today where green lens investing was 20 years ago.”

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DecryptingCryptocurrencies

When you think about how to get rich enough to fill bathtubs with dollar bills, the first thought that may come to your mind is investing in Bitcoin. But could this cryptocurrency really make that happen? The recent media

spotlight has paved the way for more people to take note of it and to attempt delve a bit deeper into the world of cryptocurrencies. Invented by Satoshi Nakamoto (a fictional name, believed by some to be a pseudonym for a group of people) the Bitcoin domain was registered in 2008. Bitcoin.org was up a year later. Bitcoin was intended to be a peer-to-peer electronic cash system and not a currency. To this day the identity of the inventor is not known. But what we do know is that he has already left an incredible legacy on the financial industry. Cryptocurrencies are distributed digital currencies (much like a form of digital cash) over which you have full control. This means you don’t have to rely on a central authority like RBI to validate your transactions as the same is done by the cryptocurrency network itself. These currencies, often referred to as coins, are stored in digital ‘wallets’ and are protected by a private key (which can be thought of as an extremely complex password) that is only known to you. But anyone could authorize payments on your behalf if they were to get your key. So, it is of utmost importance to keep your private key, well, private. Just like cash, the money in this wallet can be spent wherever you want. The block-chain technology is what has made cryptocurrencies possible. A blockchain is a complex mathematical problem based on cryptographic technology (called a ‘hash’) which computers aim to solve. People who solve these mathematical problems are called miners. As an incen-tive to mine, they receive new coins, transaction

fees or both. These miners ensure that the transactions are valid. Bitcoin (BTC) is the market leader, valued at $96 bil-lion (i.e. having a market share of about 57%). While it is the original cryptocurrency due to its established reputation worldwide and its security, it is not the only one. Ethereum (designed to help companies deploy ap-plications on the distributed blockchain), Ripple (XRP, a digital asset targeted to allow financial institutions to make global payments more easily), Litecoin (LTC, the ‘lite’ version of Bitcoin) are some other leading crypto-currencies.

There’s a reason why cryptocurrencies are gaining popularity lately. In fact, there are many. One of them, of course, is if you purchase a specific crypto and it shoots up in price, you’re buying pennies on the dollar. Other than that, though, cryptocurrency is readily available to the public, decentralizes operations and allows payments in a matter of seconds. It also offers quick settlements due to the peer-to-peer nature of its networking structure which cuts off the middlemen. It has a miniscule transaction fees which only the buyer incurs and doesn’t ask you to share any information with the government and the bank regarding your deals. All your transactions are secured using NSA-created cryptography. Moreover, information is exchanged on a ‘push basis’ i.e. you decide the information to be sent to the recipient unlike the traditional ‘pull basis’. The chances of fraud are reduced by the fact that once the payment is made, you can’t chargeback. Psychology also plays an important role in increasing the span of acceptance of cryptocurrencies. Those individuals who advocate freedom and despise the role of government and large corporations can find con-

BY NEHA GOYAL

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solation and solace in cryptocurrency. Therefore, this industry is gaining so much attention at the individual level. But no amount of these pros can make cryptocurren-cies immune from the risks inherent to investments. The least of them all being people losing their money due to incomplete knowledge about this relatively new concept. Not many websites and companies accept digital currencies yet, and it will take time to take the idea entirely out of the shadows. The possibility of los-ing your wallet still exists, and you won’t be ableto retrieve it either, even with the help of legal assis-tance. If you mistakenly pay someone by using crypto-currency, all you can do is ask the person for a refund or prepare for the loss. Some new cryptocurrencies are still volatile. But for cryptocurrency, its unprecedented rise has surely been due to its ability to initiate secure and untraceable transactions. Another aspect to be considered while talking about cryptocurrencies is the legal one. There are countries where the use of this currency is unregulated (little or no restrictions) like UK and Singapore; countries where its use is regulated (legal but specifically reg-ulated) like France and Canada; countries where its use is restricted like China; and countries where this currency is outrightly banned like Russia and Bangla-desh. This is due to reasons like chargeback ability, lack of legal protection, hiding assets, taxation, large thefts, loss of private keys and online drugs marketplace (due to the one-way nature of cryptocurrency transactions). If cryptocurrency’s popularity increases further, more countries may regulate it, although it does not seem like many are considering banning it. In India, howev-er, their status is in curious limbo- they’re neither legal nor illegal in India. This inevitably brings us to the Bitcoin bubbleburst. A dramatic, unexplained 1000% boom occurred in April 2013, when BTC peaked at a record $266 per BTC, after surging 10-fold in the preceding 2 months. What followed was a 50% collapse in weeks. This reinforces the point that cryptocurrency remains a very risky bet. What caused the burst? The market was one of speculators looking to get wealthy and not of investors analysing business models or cash flows. It is the fear of missing out that drove the boom, and a rush to cash out that drove the bust. Some believe that if history is a guide, Bitcoin is set to fall further whenever its value is substantially more than its worth in the real world.

But the urge to gamble in the great cyber casino with untraceable digital cash is hard to kill. After a wild 2017, the cryptocurrency market looked more stable at the beginning of this year. The first major reason for this is that China’s social media and search engines were cleansed of any mention of cryp-tocurrencies when it banned all the cryptocurrencytrading services in the country. Second was Google’s ban on its advertising following the lead of Facebook. Then came South Korea (its currency was the second most used to trade major cryptocurrencies) confirmed crackdown on anonymous crypto trading which brought the market down like a house of cards. Still, new countries like Venezuela are venturing into crypto trade for profits, so the situation isn’t all that bad. This sparks a major debate about the future of cryp-tocurrency in general, and Bitcoin, in particular. Will these alternative currencies eventually supplement conventional currencies? Will they become as ubiqui-tous as dollars and euros someday? Or are they just a passing fad that will flame out before long? In countries like Zimbabwe and Venezuela, Bitcoin is widely being used as a medium of exchange. This is because government-issued currencies have fallen prey to hyperinflation whereas Bitcoin transactions can simply be performed on cell phones and are relatively more stable. Other countries share a different view. They believe that Bitcoin can’t be used on a nation-al scale because of how few transactions per second it supports. Moreover, its value (which is driven by speculation about its worth) fluctuates too much for it to be a stable, functional currency. It could be worth a candy bar one day, a car the other, and nothing the day after that. It’s very good as a medium of exchange but not that good as a store of value. But saying that the future will not be based on bitcoins does not really mean it can’t be based on cryptocurrencies. One possibility is blockchain making its way into the mainstream which is being tried by some institu-tions. Estonia’s e-residency plan includes launching the world’s first national cryptocurrency: estcoin. The

“But the urge to gamble

in the great cyber casino with untrace-

able digital cash is hard

to kill.”

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Bank of England has created RScoin (an experimentalcryptocurrency framework) that would use a cen-tralized system. To go crypto, it would create digital money as if it were printing physical notes. National cryptocurrencies would make conducting illegal activ-ities more difficult. Some of the limitations that cryptocurrencies cur-rently face like the fact that one’s digital fortune can be erased by a computer crash, or hacking of wallets, may be overcome in due time through technological advancements. But what will be harder to surmount is the basic paradox that the more popular they be-come, the more government scrutiny they are likely to attract, and this erodes the fundamental principle of their existence. For cryptocurrencies to become more widely used, they must first gain widespread acceptance among consumers. Agreed, the number of merchants who ac-cept cryptocurrencies have steadily increased. But they are still very much in minority. And the relativecomplexity of this currency is likely to deter most peo-ple (except for the technologically adept). A cryptocurrency that aspires to become a part of the mainstream financial system may have to satisfy some widely divergent criteria. It would need to be mathe-matically complex but easy for consumers to under-stand, decentralized but with adequate consumersafeguards and protection, it would need to preserve user anonymity without being a conduit for tax eva-sion and so on. To conclude, one can only hope for the cryptocurren-cy of the future in few years’ time to have attributes falling in between heavily regulated fiat currencies and totally decentralized cryptocurrency of today because solutions in life are often not white or black, but some shade of grey. Yes, Bitcoin is having a moment and whether you think it’s a bubble about to burst or hope your investments will pay back big in the long run, there is one clear takeaway: cryptocurrency is (chang-ing, at least) the future of finance.

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The Cost of Global Financial Stability

BY SHEREEIN SARAF It was July 1944.

The world was still recovering from the Great Depression and World War II was at its conclusion when the United Nations Mon-etary and Financial Conference

gathered at Bretton Woods, New Hampshire. With the aim to financially rebuild the global economy and to prevent any more prolonged economic downturns, Bretton Woods institutions- the International Mone-tary Fund (IMF) and the World Bank were established. However, even with the concerted efforts of both these institutions, no significant economic growth was seen in countries which borrowed from these institutions and recessions persisted.

Despite their intentions, the IMF and World Bank do not contribute to global financial stability though they were formed with this very object in mind. These insti-tutions acted like banks which pooled money from the developed countries and lent to the poor and develop-ing countries. This concept of redistribution of wealth was not one-sided. The institutions in turn imposed certain conditionalities onto them after negotiations (such as opening up the economy globally to trade, removing tariffs etc.) However, it is quite obvious a fact that crisis-hit economies which borrowed from the IMF are not in a position to negotiate the terms and end up acquiescing to the terms laid down. This raises an important question on the sovereignty of the state. The government lacks the power of financial control as they bend their knees to these institutions. Although they claim it to be good for the countries, the truth re-mains that these institutions have all the power in their hands. Their functioning, hence, seems to contradict their purpose.

This imposition of conditionalities has had an adverse effects on the recipient countries, which eventually led to instability in the form of a crisis. The East Asian

crisis was one such case which was caused by the IMF promoting open-capital flow around the world. This majorly affected East Asia and Latin America, which were underdeveloped market economies having weakly regulated financial markets. On the other hand, closed capital markets such as China and developed open-market economies such as Australia and New Zealand were not at all affected.

The World Bank is also criticized for lending programs being deceptive to the poor. Although loans are in-tended to help a country develop, to fulfill the condi-tions imposed on them, they need to take on debt on which higher interest needs to be paid. This amounts to a “perpetual debt” forcing countries to spend on clearing their debt obligations rather than on social and infrastructure development projects. Consider the Indian scenario where the World Bank funded the construction of a dam on the Narmada. This displaced the people of the valley and the World Bank was blamed for causing social turmoil as the territories that had been inhabited since centuries were lost to man-made reservoirs. With its primary focus being poverty alleviation, the World Bank needs to have a keen eye on GDP growth, unemployment, fiscal deficits and debt sustainability of its member countries. Also, such projects should be undertaken only if there is consen-sus amongst all the stakeholders involved and not just the officials.

Another major criticism of these institutions is their dubious and intransparent forecasting mechanism. The IMF and World Bank publish many forecasts of economic data every year. But it has been noticed that many a time these predictions are not just inaccurate, they are misleading to the point of being fraudulent.

For example, the growth forecasts for India had an error varying from 10.5 per cent to as much as 46.8 per cent in a span of 7 years, that is, from 2006 to 2013.

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

It has been argued that the IMF is biased towards Euro-pean countries as it lends to them more money relative to their economic power. The reason is the voting power of each country, which is de-cided by the share of funds

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

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

provide a global perspective to issues which can be combated only when the all the states are in concur-rence with each other.

This, if it happens, would lead to global stability, not only financially but otherwise.

“Reform, and not elimina-tion, of these institutions, is the need of the hour.”

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Microfinance: Revolutionary or Not?

BY ARNAB DUTTA Muhammad Yunus, the acclaimed Nobel Peace Prize recipient, in his autobiography, ‘Banker to the Poor’, provides a heart wrenching account of the poorest of poor and makes a compelling and inspiring case for Grameen, the revolution-

ary microfinance bank from Bangladesh. Income and wealth inequality have become ubiquitous but what is more alarming is the inequality in the distribution and access to the agencies for income and wealth creation. If a destitute woman is at the brink of starving to death due to her inability to access any form of employment, then the only means she is left with is self-employ-ment. Yet, severe paucity of capital impedes her from relying on this alternative and compels her to choose the easier option of committing suicide. On the flip side of the coin, the banking system is more comfort-able in doling out a hefty loan (often running into hundreds of millions) to an industrialist who may not have the ability to repay even half the loan amount. Yet, he is deemed to be safer, on account of his so-cio-economic condition.

The United Network for Organ Sharing (UNOS) manages the list of all the people across the US waiting for an organ transplant. UNOS ensures that deceased donor organs are distributed fairly using a transparent system. For kidneys, this is a combination of blood-type and antibody matching, time with kidney failure, and a few other factors that give people priority on the list (including being a child or being a past live kidney donor). Hence, the most needy people re-ceive an organ transplant first. The system, unlike the banking system, does not discriminate or show bias on the basis of an individual’s existing socio-economic condition. Muhammud Yunus posits in his book that the system we’ve built refuses to recognise people. Only credit cards are recognised. Driver’s licenses are recognised. People don’t have use for faces anymore, it seems. They are busy looking at your credit card,

driver’s license, your social security number. Yunus goes on to argue that , it is not cash capital but human capital that matters and that money is only a tool that helps even the most unfortunate people on this planet achieve dignity, respect and meaning in their lives.

Hence, there certainly exists a dire need for institu-tions which tend to these financial ‘untouchables’. Mi-crofinance institutions like Grameen and Sanasa have done some splendid work over the years and serve as an alternative source of capital to the poor at interest rates which are starkly lower than those charged by usurious money lenders. But the question is, do the altruistic principles and motives of microfinance hold in the long run? What are the casualties that emerge upon relinquishing these altruistic principles?

Microfinance has been heralded by many as that one noble concept which will eradicate poverty from the face of the Earth. Hundreds of millions of dollars are flowing into microfinance from international finan-cial institutions, foundations, governments, and, most importantly, private investors—-who increasingly see microfinance as a potentially profitable business venture. Yet, poverty still continues to haunt the Earth the same way that it did a few decades back before movements such as Grameen and Sanasa came about. Microloans make poor borrowers better off. But, on their own, they often don’t do much to make poor countries richer. This isn’t because microloans don’t work; it’s because of how they work.

It is often claimed that microcredit doesn’t involve col-lateral, but that isn’t quite true, as pointed out by Tyler Cowen and Karol Boudreaux in their paper titled, ‘The Micromagic of Microcredit’. The borrowing is done in small groups, and if one doesn’t pay their share the neighbours come and take away, say, their TV set. In reality, microcredit takes the collateral-seizing func-tion away from the bank and puts it in the hands of their neighbours, thereby increasing loan repayment

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rates. Cowen and Boudreaux further state that mi-cro-loans are utilised for what they term as ‘smoothen-ing consumption’, rather than for financing business or for income-generating activities. They describe micro-borrowing as an exercise entailing a kind of ‘bait and switch’. What they imply is that the borrower claims that the money is for a business, but uses it for other purposes.

The success of an MFI should be measured through its ability to increase its operational, intermediation and dynamic efficiencies (Some Critical Issues Relating to the Commercialisation of Microfinance Institutions in Sri Lanka, S.M.P Senanayake).

The operational efficiency is the minimisation of the real resources used by the financial institutions in the intermediation process. If competition increases, operational efficiency will be enhanced. In a competi-tive market, financial institutions should minimise the costs to become profitable enterprises.

Intermediation efficiency is the efficiency of mobili-sation of savings at a positive real interest rate and the channelization of saved resources through a high pos-itive lending rate. However, the interest rates should not rise above the market-clearing rate.

Under dynamic efficiency, the desired outcome is in-creased savings in the economy and a transfer of these funds at a faster rate to growth-oriented, long-term investment projects. According to the Central Bank of Sri Lanka, most of the rural sector loans (63%) were for consumption purposes, in the year 1999. Con-sumption accounted for 63 % of the total rural sector loans, agriculture accounted for 6.1%, trade and busi-ness 6.6%, housing 9.5%, and settlement of debts 4.7%. The share of total loans obtained for industry account-ed only for 0.1%. Thus, it is apparent that loans going into the real sector is very marginal, implying dynamic inefficiency in the micro-finance system.

Muhammad Yunus in ‘Banker to the Poor’, debunks the trickle down effect and the oft-used analogy of the economy being the locomotive of a train and each so-cio-economic unit representing a carriage. He says that a train is drawn by a locomotive located at the front, or pushed from behind or both. In the case of human society, each economic entity or group has its own engine, thus the combined power of all the engines together pushes and pulls the economy forward. If the society fails to ignite some engines, the combined

power of the economy will be much reduced. Al-though the counter anecdote is compelling and inspir-ing, it is flawed if one delves into the intricacies of how microcredit is being consumed. As mentioned above, microcredit doesn’t do wonders for an economy; it probably makes poor people better off, but very few climb into the middle class. Anecdotal evidence can’t substitute for numerical and historical evidence. A microloan can at best enable a person to earn $2.5 per day, in comparison to his earlier $2 per day income.

What poor countries need most, are not more mi-cro-businesses. They need more small-to-medium-sized enterprises, ones that are bigger than a fruit stand but smaller than a Fortune 1000 corporation. In high-income countries, these companies create more than sixty percent of all jobs, but in the developing world they’re relatively rare, thanks to a lack of institu-tions that provide them with the capital they need. It’s easy for really big companies in poor countries to tap the markets for funding, and now, because of micro-finance, it’s possible for really small enterprises to get money, too. But the companies in between find it hard. It’s a phenomenon that has been dubbed the ‘missing middle.’ This has given rise to the concept of ‘nanofi-nance’ which shall be spoken of in detail later.

Having established the primary purpose of microcred-it, there is a puzzling detail at the heart of the industry: most microcredit banks charge interest rates of 30 to 40 percent on annualised basis (loans, typically, must be paid off within weeks or months). That’s not as scandalous as it sounds—local moneylenders demand much higher rates. The puzzle is amatter of basic economics: How can people in new businesses (if at all) growing at perhaps 20 percent an-nually afford to pay interest at rates as high as 40 to 50 percent? What is more pressing is that if borrowers are using microcredit for consumption primarily and not only to improve a small business, how do they repay?

Most borrowers are self-employed and work in the informal sector of the economy. Their incomes are often erratic; small, unexpected expenses can make repayment impossible in any given week or month. This, in fact, is exactly what fuelled the microcredit collapse in Andhra Pradesh in 2010. Given the wide-spread awe for microcredit, microfinance companies quickly sprung up in the dozens. And soon enough a person had these ‘micro-loans’ drawn from multiple microfinance institutions. Thus it soon evolved into a Ponzi scheme for the purpose of ‘smoothening con-

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sumption’. The imminent collapse of the industry was averted by virtue of stricter regulations by the Gov-ernment through the creation of the Micro Finance Institution Network (MFIN), which put a cap on the highest interest rate that could be levied and super-vised the industry. Most recently, the government has institutionalised the industry further by creating Small Finance Banks (SFBs), which have to abide by the Banking Regulation Act and compulsorily utilise 75 percent of their Adjusted Net Bank Credit (ANBC) for priority sector lending. This addresses the concern of creating an institution for MSMEs.

Thus, for companies to operate in the informal sector, controlling interest rates becomes extremely important in ensuring the sustainability of operations. Howev-er, this is in conflict with the profit motives of these commercialised institutions. Microfinance institutions are required to limit their costs and to cover them from the income they generate to increase their oper-ational efficiency. They have no choice but to take the commercial side of their operations seriously in order to ensure that they can survive economically and are able to offer their small and very small loans on a long-term and sustainable basis.

The banking industry largely propelled the commer-cialisation of MFIs too. The Reserve Bank of India (RBI) requires domestic and foreign banks to ensure that 40% and 32% of their “net bank credit” is directed to the “Priority Sectors”. Domestic banks are required to lend 18% of their portfolio to agriculture, and another 10% to the “weaker sections”, which includes small-scale farmers, artisans, scheduled castes and tribes and other vulnerable groups in Indian society.

While banks can usually find large-scale industrial or contract agricultural borrowers to meet their 18% target on a cost-effective basis, they struggle to lend the required 10% to weaker sections, who are usually only able to absorb small (for banks cost-ineffective) amounts of credit. On the contrary, the core market for MFIs is the very weaker sections as defined by the priority sector lending requirements (PSLR) of theRBI. As such, MFIs offer a tremendous opportunity for the state, (which wants to see these vulnerable groups “financially included” with access to a range of financial services, particularly credit) and to the banks, (which need to achieve their priority sector lending requirements).

Evangelists for commercialisation further argue that to provide safe and secure savings services, commercial banks must be involved. And even in countries where the regulatory regime is more liberal, it is essential that financial institutions accepting deposits from the poor are professionally managed and profitable - and thus financial sound - so that those precious savings are protected and not lost. In recognition of this, the 1990s and 2000s saw a growing emphasis on the “down-scal-ing” of commercial banks to serve the poor, and the “transformation” of NGOs to MFIs to NBFCs and finally into commercial banks.

As soon as an MFI relinquishes the altruistic principle which it had previously set out with it, it becomes an exhibit of the Gresham’s law. Gresham’s law is the the-ory that when two kinds of money of equal denomina-tion but of unequal intrinsic value are in circulation, the one of greater value will tend to be hoarded or exported; in other words, bad money will drive good money out of circulation.

Like the Gresham’s law, in the world of development, if one mixes the poor and the non-poor within a pro-gramme, the non-poor will always drive out the poor-er, and this may continue ad infinitum. And what will happen is that in the name of the poor, the non-poor will reap the benefits. No sooner does an organisation receive a statutory nod to operate as a commercial bank it relinquishes the altruistic motive of alleviating poverty and transforms into a profit-mongering entity.

Initially, some of these MFIs were capitalised by a combination of social investors and (controversially) their clients or “members”. However, soon private eq-uity funds, attracted by the potential for rapid capital returns based on the exponential growth of MFIs, took increasingly large stakes, quickly crowding out the social investors. It is an irony that the socially-focused priority sector lending requirements should have fuelled the commercialisation of microfinance in India –and fundamentally changed the primary objectives of the sector.

The vast majority of private equity investors involved in microfinance have short-term goals. Typically, they are looking for capital returns of around 25-30% per annum within 3-4 years. To ensure that the small loans were profitable for their shareholders, such banks werecompelled to raise interest rates and engage in aggres-sive marketing and loan collection. The kind of empa-

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thy that had once been shown toward borrowers when the lenders were nonprofits disappeared. The people whom microcredit was supposed to help were being harmed. In India, borrowers came to believe lenders were taking advantage of them and stopped repaying their loans.

One might wonder how Grameen and Sanasa have been successful in spite of not morphing into prof-it-hungry entities.

As reflected in the Profit and Loss Account for the last twenty-five years, Grameen has churned out a profit each year. However adhering to its founders’ ideals, Grameen distributes the profit as dividend to its share-holders, i.e., the borrowers of the bank. Sanasa has a similar business model too. It is also interesting to note that the valuation of MFIs are predicated above all on the number of clients they serve, and this has resulted

in an unwavering focus on hori-zontal growth. MicroSave India, a pioneer think tank in this field points out that this type of expansion has often taken MFIs out of their original states or regions into new areas that they understand poorly, and where cultural and language barriers can present very real challeng-es. For example, many of the southern MFIs have struggled to maintain the quality of their

portfolio in the northern states. This raises several concerns pertaining to the sustainability and the core purpose of the industry. It would be impractical to join the likes of Muhammad Yunus and criticise an institution solely on the pretext that it works for profit. However profit should always be a by-product of the social change that the microfinance industry seeks to create.

A microloan, if linked to a specific activity leading to economic or social benefit in the medium to long run, would be a sustainable model. But realising econom-ic and social benefits requires continuous access to a broad range of financial services and not a one-time access to loans. Mere provision of financial services has mixed or a limited short run positive impact.Therefore, introducing the concept of ‘credit plus’ or the development of a financial infrastructure and in-termediaries committed towards growth and viability is crucial for the true success of MFIs.

Smoothening consumption should certainly not be the end goal of microfinance. Instead microfinance should be focussed on providing capital to MSMEs who lack the agencies for the same. As indicated before, smoothening of consumption can be better addressed through nano finance.

With technology such as the Internet of Things (IoT) and greater financial inclusion through the Pradhan Mantri Jan Dhan Yojana, we could hasten the intro-duction of nano finance to address the inability to fulfil certain necessities such as education and energy due to inadequate liquidity in the hands of the poor. One of the reasons behind the high interest rates is the transaction costs, which can make issuing loans for less than $50 prohibitively expensive. This forces larger loans that many families don’t want and can’t handle, and burdens them for months or even years. Larger loans also limit the types of products and product groups accessible with microfinance.

This has paved the way for the advent of nano finance which will leverage technology and instruments like mobile wallets to allow consumers to borrow smaller sums of money. Envirofit is a company which is riding and ushering in the nano finance wave at present. It offers a new “SmartGas” service that lets users prepay for gas with their phone as they cook and enables them to eschew the rigid payment schedules. This product is primarily targeted to those who utilise wood and other archaic methods for cooking because they do not have the capital to buy a LPG cylinder at once or get it replaced.

With nano finance, enterprises which truly care for the poor can reach more underserved markets to help more people live well, while microfinance can ignite the engines and lives of the needy.

“Profit should always be a by-product of the social change that the microfi-nance indus-try seeks to create.”

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Exploring the Ubiquity of Economics

Economics is not just a discipline, it is a way of life.

People often believe that economics is based on human observation, on the aberrations and the paradoxes. They believe that economics enables us to be rational, to make the best use of the resources at hand, to maximise utility and to minimise cost. They believe that economics is a facilitator, one that facilitates our desire for well-being.

They believe that economic principles help us make deci-sions and influence our actions.

Instead, our actions and decisions are what formulate the obscure and elusive subject of economics. Economics is

the way we behave and the rationality we possess.

Economics provides us Artha or meaning in life; it pro-vides us with a purpose to achieve our goals. It shapes

up ones attitude and capability that enables one to make a living, to remain alive, to thrive as a free person. The

ubiquity of economics cannot possibly be defined, quan-tified or measured. It lies within us and around us. It lies somewhere intrinsically buried in our decision to read

this piece or to be economical and move on.

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speaker sessionsPRABHAT PATNAIKThe renowned Marxist economist, Mr. Prabhat Patnaik gave an enthralling speech on welfare economics which sought to examine the interrelationship between welfare and higher growth. He went on to establish that when we talk about having a higher GDP, we are actually talking about increasing potential welfare. He also explained that whenever real income increases, nutritional deprivation also rises, and this why growth does not necessarily eradicate poverty. The audience was very active in asking questions on neolib-eralism, globalisation of capital and the several methods to approach economics.

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

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

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

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

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Economie De La Ville, which literally translat-ed to economy of the city, presents the most fundamental problem of economics – that of resource allocation – in a new light. This year’s EDLV was a race against time. While last year’s edition hurled into a dysto-pian future, this year the participants had to save their sibling, who was trapped in a video game. In order to achieve this objective the participants had

to build an army with limited resources, wage war against each other and make their best moves to outshine each other. The first round was an auction round wherein the particpants could auction off some of their resources in ex-change for power cards. This was followed by the checkpoint round where they could either engage in war or trade with fellow participants to meet their mini-mum requirement for resources. Finally, the

team that could meet their resource require-ments emerged as the winners and tasted success by freeing their sibling from the ene-my!

Econovergence’18 wit-nessed the participants’ donning the hat of wealth fund managers

and investment bank-ers, battling to maxi-mize their returns. De-ploying a perfect blend of strategy and wit, the investors and managers tussled it out on the negotiation table. From mastery in allocation, dexterity in approach to uprightness in negotiation, this event was a boiler room for our participants who juggled between taxes and returns with great elan!

Charlatan’s Chutzpah (CC) tried to break the monotonous nature of fests with a new concept. This year, CC highlighted an im-

portant social cause through its theme: Domestic Violence. It brought to everyone’s attention how everyday events, which at the outset look completely unrelated, affect do-mestic violence against women. The partici-pants’ sole aim was to minimize domestic violence using three variables: conserva-tism, alchohol con-sumption and number of hours worked. They had 5 rounds to go about their task, which included trading, quiz-zing, clue solving, and of course, election cam-

paigning. It was one of the few, if not the only, all-in-one events at SRES.

The most engaging “fun event” of SRES’18, Brand Slam witnessed multiple rounds based on brands of today’s

commercial world, right from Sweden’s Ikea to Japan’s Toyota. With every roll of the die, participants strode down a real-time mo-nopoly board in antic-ipation of expanding their empire of brands. Riddles, pictographs, logo quizzes, dumb charades, crosswords, word puzzles and many more sub-rounds add-

ed to the competitive-ness of the event.

SRES’18 played host to an event entirely dedicated to one of the most gripping theo-ries in economics: the Game Theory. This highly stimulating event required the participants to don their thinking caps as they faced a multitude of challenges. Their end goal was to maximise their utility by making rational choices, all the

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while keeping in mind the trade-offs. These trade-offs got tougher with each successive round and the teams ultimately had to de-cide whether to coop-erate with the other teams or go ahead and take their own shot ar it.

The Young Economist was a one of a kind initiative that exposed school students to nov-el problems that could be solved only through

the application of con-cepts they have learnt in their textbooks. The first round was an investment round in which each team, allotted a civilization, had to bid to invest in resources that would help them grow. This round was designed to impart skills in the field

of resource manage-ment. The second and final rounds involved taking on the roles of firms and countries, solving case studies and negotiating with fellow participants to arrive at a solution that was feasible to both parties. This was followed by a quiz, which decided the winner. The events thus

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

A simulation of mar-kets, stocks, options, mergers and antitrust laws, Share Dare not only tested partici-pants’ capability to execute a trade, but also laid considerable emphasis on analytics, signals of the economy,

risk premium factoring and a lot more. The event was divided into various trading rounds, calling for real-time market trading coupled with circuit trading. The teams, consisting of traders from varied backgrounds had to ex-ecute the biggest trades just in time to reap the benefits. The biggest gains came from the biggest risks, trading against the market. Comprehensive loan mechanisms taught against investing when in debt and mergers between teams suggest-

ed how synergies may not always be reflected in trade.

This edition of the Shri Ram Economics Sum-mit introduced a one-of-a-kind educative exhibition at SRCC.

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This edition of SRES pioneered an edu-cative exhibition at SRCC, which was in-deed a feast to the eyes. It was a huge hit among students, professors and guests, as it was an amalgamation of creativity and knowledge.

Guests were welcomed with “the story of economics”: an exhibit which took them down memory lane and introduced them to the worldly philosophers and explained the evolution of the “dismal science”.

In step with our penchant for decon-structing economics through humour, this exhibit used the famous You Have Two Cows meme series to demonstrate how various economic-political systems work.

The next section put the guests’ gray cells to task. Titled “what if ”, it turned around the major incidents that shook the world and invigorated a discussion on what if they hadn’t occurred.

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Our guest, Prof. Prabhat Patnaik, loved the exhibition! He gave us encouraging feedback and enjoyed participating in our activities- a memory game and an eco-nomics spinning wheel.

The Wall of Memes, attracted a huge crowd as it hit the humour note while illuminating economic issues. Political business cycles, rising income inequalities and populist measures were a few topics covered.

The web of economics brought forward the intertwined nature of the discipline. It contained iconic terms from A to Z that characterise the discipline: B stood for budget deficit, F for fiscal policy and so on.

Good literature ought to be celebrated. This exhibit was a tribute to the authors who changed the way we look at eco-nomics. It potrayed books from Smith’s Wealth of Nations to Levitt’s Freakonom-ics.

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-18 The Economics Society of Shri Ram College of

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

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

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

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

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

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

This year we sought to deconstruct complex economic phenomena as well as to ex-plore the quirky side of the “dismal” science through an online series: Thirty Seconds of Economics. Through our blog Ceteris Paribus (www.ecosocsrcc.com), we char-tered further into the realm of economics.

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

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