Economy
Rating India in India
India's credit-worthiness, poverty level, comparative position in several other indicators and ability to protect against environmental hazards are all decided by outside agencies, which have no independent means to judge us other than data fed by our own agencies within the country. If existing organisations are irreparably incompetent, new ones should replace them fast
 
 
Last week rating agency Moody’s raised India’s outlook to ‘positive’ from ‘stable’ without altering the country’s investment grade, which remains at the last rung at Baa3. The rating agency said that, “India has grown faster than similarly rated peers over the last decade due to favourable demographics, economic diversity, as well as high savings and investment rates. Moody’s expects these structural advantages, supported by relatively benign global commodity prices and liquidity conditions, will keep India’s growth higher than that of its peers over the rating horizon”. This gave comfort to India’s Chief Economic Advisor Arvind Subramanian who said ‘the upgrade validated the direction of Centre’s (Indian government’s) reform programme’ and expressed hope for a bump up in India’s rating. According to him, “It confirms something that we have been saying for some time now that the growth prospects and the macro-economic prospects for the economy are improving.”
 
India is a victim of foreign domination even today when it comes to assessment of the country’s self-esteem. Our credit-worthiness, poverty level, comparative position in several other human development indicators and ability to protect against environmental hazards are all decided by outside agencies, which have no independent means to judge us other than data fed by our own agencies within the country.
 
It is comforting to see that a change in approach in Delhi through various initiatives including the effort to promote slogans like ‘Make in India’ acceptance of the need for infusing professionalism in governance and better financial sector management have started yielding results.
 
Successive governors at the Reserve Bank of India (RBI) have expressed their concern about reliable current data to base their policy decisions. These are areas where perceptible improvements can be made without ‘huge’ financial investment. 
 
Now that National Institution for Transforming India (NITI) Aayog has relatively less responsibilities, it could be entrusted with the task of making existing organisations responsible for compilation of statistics and rating the country in relation to other countries with reference to different parameters factoring in purchase power parity and aggregate resources availability and institutions like banks using internationally acceptable standards. If existing organisations are irreparably incompetent, new ones should replace them fast.
 
Global rating agencies have a habit of running with the hare and chasing with the hound! Moody’s capsuled its own positive note with a warning that India’s rating can be upgraded only if evidence emerge in the coming months that efforts to enhance growth and stabilise economic and institutional reforms are succeeding. There will be a downgrade, if economic, fiscal and institutional strengthening appears unlikely, or banking system metrics remain weak or balance of payments risks rises, it said. Such stances, which are regular ingredients in ‘global’ rating agencies, prompted me to make the following averments a couple of years back:
 
“…Time is opportune for India to think in terms of setting up a rating agency of international standard, which will understand the country and advice stakeholders about the health of domestic financial institutions and provide crucial input to the financial institutions and governments abroad with which India has dealings. Agencies like Standard & Poor’s (S&P) and Moody’s are doing their work within their limitation and even they would be benefited if an internationally acceptable rating agency comes into being in India.”(Page 15, Banking, Reforms & Corruption by MG Warrier).
 

IMF view

In response to a recent observation by the chief of International Monetary Fund (IMF) while in India, to the effect that ‘when adjusting for differences in purchasing prices between economies, India’s GDP will exceed that of Japan and Germany combined. Indian output will also exceed the combined output of the three next largest emerging market economies-Russia, Brazil and Indonesia’, 
 
I had commented that ‘India’s toiling masses, entrepreneurs and the availability of resources within the country have not changed overnight and what forced some ‘celebrities’ and international rating agencies turn positive on India was the prevailing confidence of Indian people, infused by the political and financial sector leadership provided by Prime Minister Narendra Modi and RBI Governor Dr Raghuram Rajan. 
 
In this context, I had recalled the following stanza from Gita:
 
“Uddharedaatmanaatmanam Naatmanamavasaadayet
Aatmaiva hyatmano Bandhuraatmaiva Ripuraatmanah”
 
(One should lift oneself by one’s own efforts and should not degrade oneself; for one’s own self is one’s friend, and one’s own self is one’s enemy.)
(Bhagavadgita, 6.5)
 

Aid and poverty alleviation

Misleading comparisons are not a unique feature of releases from rating agencies. Data usually is doctored, edited, or misquoted while presenting poverty figures or while preparing documents to make presentations on social responsibility initiatives. Just to give one example, the Gates Foundation 2014 Annual Letter mentioned the names of 11 countries, which were former recipients of foreign aid that have grown so much that they receive little aid today. A cross check showed that the 11 countries listed as former recipients of aid together had a population of just 51 crore and about 25% of this population under poverty line.
 
Back in India, (a country with a population of 125 crore of which 30% still remain below the poverty line), NITI Aayog has taken a stand not to estimate its own poverty line. Still, poverty elimination (as has been achieved only in Singapore with a population of 56 lakhs on this part of the globe) there is a need to have a nationally accepted method to arrive at poverty line- even if the line for different geographical regions within India may vary- and that method having the sanction of NITI Aayog and GOI. This is because several government schemes for poverty alleviation (now poverty elimination) relate the eligibility criteria to poverty line.
 
International comparisons, fear of loss of image, if the number of those below poverty line goes up during a particular period, total disconnect of poverty line or comparable indicator for different countries with purchasing power parity and several other constraints make poverty estimation highly subjective and sometimes prejudiced in India. Economists and consultants help policy makers in such situations by creating confusion with figures. There cannot be a better method than the one based on spending capacity and purchasing power of the rupee.
 
Once NITI Aayog decides on the poverty line for the purpose of extending benefits under central schemes, some agency should estimate and publish information about Indians living below poverty line and proportion of the population with (a) capacity to spend double the expenditure ceiling for poverty line (b) capacity to spend four times the ceiling (c) capacity to spend eight times the ceiling and (d) others. Such estimation will help policy makers to revisit some of the concepts on which poverty alleviation and financial inclusion efforts are based.
 

Epilogue

It is agonising to see the dependence of the Indian elite, which waits for a Prime Minister to speak from the ramparts of Red Fort to take cleanliness and toilet facilities for all seriously or to move forward in the direction of indigenous minting of coins or producing quality paper and ink inside India for printing currency notes. Successive RBI Governors have expressed their concern about reliable current data to base their policy decisions. These are areas where perceptible improvements can be made without ‘huge’ financial investment. 
 
Now that NITI Aayog has relatively less responsibilities, this body could be entrusted with the task of making existing organisations responsible for compilation of statistics and rating the country in relation to other countries with reference to different parameters factoring in purchase power parity and aggregate resources availability and institutions like banks using internationally acceptable standards. If existing organisations are irreparably incompetent, new ones should replace them fast.
 
(MG Warrier is former general manager, RBI, Mumbai and author of the 2014 book “Banking, Reforms & Corruption: Development Issues in 21st Century India”.)

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COMMENTS

B. Yerram Raju

2 years ago

Poverty in India is now 25% of the population and in some States like Andhra Pradesh, Telangana and Tamil nadu it is much less - around 15-20%. But the social sector expenditure in the budget and free bytes cross 40% of annual state budget allocations. Can NITI AAOG monitor such allocations and expenditures and bring to bear on the governments the need for rethinking and restructuring their expenditures on providing better infrastructure in education, health, sanitation and safe drinking water? These are the areas requiring rating in India. External rating will automatically improve.

MG Warrier

2 years ago

Raju and Balakrishnan have raised certain very relevant issues in the comments here. This morning a friend was wondering, if the going is good as is being made out, why the Rupee is getting weaker. I think, like media stories can change the public perception about governance, the views being expressed by several bodies and their spokespersons affect the 'rating' of India by investors and other countries. It is in this context, a case for a more factual self-appraisal within India based on more reliable data and assessment of resources availability is being made out.

R Balakrishnan

2 years ago

The current credit rating is FAIR. And it is a relative ranking. With the kind of continuous CAD, dependence on NRI remittances, Oil price vulnerability, extent of external debt, an investment grade rating reflects a positive approach by the agencies. India has been a defaulter in the past and staying in Investment grade is no joke. Imagine if the currency were fully convertible.. Would this rating even hold?

B. Yerram Raju

2 years ago

Indian economy for the moment is cynosure of the global eye. The author has rightly called for clean data to be the focus for policy correction and redefining poverty in the emerging context. Although the architect of the Constitution, Baba Saheb Ambedkar desired that the policy of reservations should be relooked after a decade, we are continuing and enhancing the fold because it is politically convenient. Engineering, Medicine, Teaching are professions that should attract only merit for the economy to generate highly productive future generation promoting technology, good health for all and knowledge. We have created a false sense of security in reservation policy. The economically weaker sections need redefinition to ensure that the benefits of growth result in human development indices. Growth has to pare with human development.

Rating whether internal or external, is a function of data and it is a prospect depending on a series of assumptions and models. The country is at a point of inflexion yearning for stability with positive outlook for future.

Even when the call for cleanliness came from the ramparts of Red Fort, there are a number of panchayats, municipalities and corporations unable to take forward the initiative, and in many places dwarfing the citizen's response to the call.

Information hunger has overtaken the belly hunger. Measure of poverty also needs to undergo change. NITI AAYOG has to redirect its focus on scanning the several economic and physical data and confirming it with sample checks continually. In a country with such vast expanse and diversity, reliable sample check is expensive but has to be taken up seriously.

Cellular operators reaffirm support for net neutrality
The Cellular Operators Association of India (COAI) on Sunday reaffirmed its support to the principle of net neutrality, making a strong pitch for the government's vision of "net equality" that will enable access to the internet for a billion Indians.
 
"We support an open internet and believe that consumers should decide what to do online. Our job is to enable consumers to benefit from that freedom," COAI said in a statement here.
 
"We offer choice and do not block or provide any preferential access to any website or app," it added.
 
Network neutrality, or open inter-working, means that in accessing the World Wide Web one is in full control over how to go online, where to go and what to do, as long as these are lawful. So firms that provide internet services should treat all lawful internet content in a neutral manner.
 
It also required such companies not to charge users, content, platform, site, application or mode of communication differentially. 
 
These are also the founding principles of the internet and what has made it the largest and most diverse platform for expression in recent history.
 
Urging all stakeholders to have a comprehensive and informed debate on the subject, the industry association said India's telecom revolution has empowered over 950 million citizens through affordable services "and the internet revolution must now touch every citizen of the country".
 
"The operators have invested billions of dollars in licence fees, spectrum fees and network roll-outs. Yet the industry still makes negative return on the capital employed," COAI said.
 
It estimated that India would need an additional capital outlay of Rs.300,000 to Rs.500,000 crore over the next 10 years in spectrum, new technology, equipment, towers, and optical fibre backbone, among others, "to meet the PM's vision of Digital India".
 
Facebook chief Mark Zuckerberg of Internet.org -- a platform with Reliance Communications as its India partner and which offers free access to data -- and Bharti Airtel, whose Airtel Zero venture was also drawn into the debate, have both said they are completely committed to net neutrality.

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Avantha Group executive held for extortion call to director
 An official of the $4-billion Avantha Group and his accomplice have been arrested for making extortion calls to the tune of Rs.25 crore to the company's director while the latter was travelling with Prime Minister Narendra Modi on his recent three-nation tour.
 
The calls were made by a 47-year-old Jaspal Singh, a senior executive, when the company's director Anil Bhargava was travelling with the prime minister as part of the corporate delegation. 
 
Jaspal Singh, a general manager of corporate affairs of the group's Ballarpur Industries unit, was arrested on Friday, three days after the filing of complaint about the extortion calls.
 
"Both the accused are in police custody till April 20," Deputy Commissioner of Police (Special Cell) Sanjeev Yadav told IANS.
 
Singh's associate, Deepak Kishore, 43, who travelled to Mumbai to make the calls on April 11 and 13, was also arrested.
 
On Bhargava's behalf, a complaint was received by the Delhi Police's Special Cell on Tuesday (April 14).
 
"Threatening calls were being made to Bhargava and SMSes containing details of family members of the victim were sent on the cell phone number of Gautam Thapar (the chairman of Avantha Group) as well as on the number of the personal secretary of the victim demanding an amount of Rs.25 crore as protection money from the recently concluded sale of a power project of the company in Chhattisgarh to the Adani Group," Yadav said.
 
The caller had also threatened to eliminate the victim and harm his children who are studying abroad in case the demands were not fulfilled.
 
"Massive human efforts coupled with deft technological penetration paid fruit when it was revealed that the person after making the threat calls from Mumbai, arrived in Delhi on April 13," said the official.
 
The police laid a trap and arrested the person, later identified as Kishore, from his residence at Lal Kuan area in south Delhi's Badarpur locality, the official said.
 
"Kishore later disclosed the role of Jaspal Singh, the mastermind behind the conspiracy, who was also subsequently arrested. The mobile phone and the SIM used in the crime were seized from them," said Yadav.
 
Police said Singh, being among the senior officials in the Thapar Group, was privy to a corporate deal of Rs.4,200 crore made by the Avantha Group, a conglomerate Indian company led by Thapar Group.
 
"Investigation has revealed that Singh knew details of the company's management including their children and hatched a conspiracy to extort money from them to the tune of Rs.25 crore. 
 
"He also knew about a recently concluded business deal and believed he could blackmail them. We are also looking at Jaspal Singh's financials to determine the motive," the official said.
 
Police said Singh hired Kishore and made a plan to execute the extortion threats using his intimate knowledge of the affairs of the conglomerate as well as his proximity to the corporate bosses.
 
Kishore, a bus driver in Delhi Transport Corporation (DTC) on a contract basis, was lured by Singh on the pretext of a handsome amount of money.
 
Police said Singh hired Kishore to blackmail Bhargava and gave him money to procure a SIM card and a cell phone to make the threat calls.
 
"Kishore arranged a SIM card from Manipur and made calls from Mumbai," police said.
 
"Singh was confident that the management would never report the extortion attempt without involving him. However, his luck ran out when Anil Bhargava went directly to the police," said another police official.
 
Singh, born in 1969 in Mohali in Punjab, had joined Ballarpur Industries Limited as manager in 2005 and has been a regular Thapar employee for 10 years.
 
Gradually, Singh gained the trust and confidence of his bosses and became their valued liaison man for all corporate affairs and was made the head of corporate affairs of Ballarpur Industries, India's largest paper manufacturing company.

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