Financial major Santander has announced that it is closing its call centres in India and bringing it back to the UK since it was the main demand of its customers.It is the second British company to bring back its call centre work from India this month.New Call Telecom, which competes with BT and Sky to offer home telephone services, broadband and low-cost international calls, earlier said it was bringing back its outsourced work from India because operating there was no longer cheap.Santander chief executive Ana Botin told the BBC: "This is what our customers have told us is the most important factor in terms of the satisfaction with the bank, and we have listened to them and decided to bring all of our retail call centres back from India."Many British companies outsourced work to India where costs were low.But in recent years, increasing prices in India have made it a less attractive option than retaining the work in the UK, according to reports.New Call Telecom is opening a call centre in Lancashire after being attracted by low commercial rents and cheap labour costs.New Call's chief executive, Nigel Eastwood, said: "We did a cost and service analysis of returning home and there was an absolute parity between what we are paying for a third-party call centre in India and here in the UK." Eastwood said that using British staff will also cut costs in the average amount of time taken to deal with customer inquiries."The average handling time in the UK is three minutes.But if you go out to India, you need to add another minute unless it's a very efficient operation, so that means we can actually reduce the head count with the saving," he said.He added that in India in the past decade, as call centres have grown, real-estate prices have gone up massively, while salaries have also crept up.New Call will pay 4 pounds a square foot for space in Burnley, which Eastwood says is similar to that in Mumbai and New Delhi."Salaries in India aren't that cheap any more. Add to that the costs of us flying out there, hotels and software, and the costs are at an absolute parity. In the UK we will pay workers the minimum wage," Eastwood said."Given the current economic environment, we will get good sticky employees who will also receive bonuses linked to performance," he added.The use of foreign call centres has proved unpopular with many customers, who say they prefer to deal with British staff, the report said.(PTI)
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Suddenly, there is a lot of negative news about the economy. Industrial production numbers are not very good. Interest rates are climbing. Fresh investments are down to a trickle. Meanwhile, food inflation has started climbing again. Is this a short-term blip or are we looking at a serious problem that will dog us for a few years? We asked six eminent economic thinkers to debate on it. And in case the conclusion was that we were looking at a medium-term problem, to suggest solutions to get out of it as soon as possible. Businessworld editor Prosenjit Datta moderated the discussion.Excerpts:Prosenjit Datta: Thank you for joining the Businessworld Roundtable. The topic for today's discussion, as you know, is: "Are we entering a prolonged period of high inflation and slowing growth?" At the beginning of the year the government was quite certain that it would see a GDP growth rate of 9 per cent plus this year - though quite a few private economists had already started saying that the figure was too optimistic. Now, both the government and the RBI are projecting 8.5 per cent GDP growth this year. But there are plenty of signs that even this might be a tall task. The global economy doesn't seem particularly encouraging. In India, manufacturing is showing signs of a slowdown. Business confidence is down. Investments are being put on hold. The overall atmosphere seems quite gloomy. Meanwhile, on the inflation front too, both the central bank and the government are struggling. Both food and non-food inflation has been consistently high for the past year. A few times, either the food inflation or the overall inflation has dipped a bit, only to start going up once again. My query therefore was that if we were looking at a period of high inflation, slowing growth in the next two or three years or is this a short term - say six month - issue that will soon reverse.Laveesh Bhandari: I was one of the private economists predicting that we can well achieve a growth of over 9 per cent this year. The evidence I was citing was from data we tend to look at in Indicus and many, many field visits across the country. Things appear to have changed quite a bit since.No one should negate the huge growth momentum we are seeing. But it is also true that - generally a sense of concern has set in not just in industry - large and small - but across the economic spectrum.I suspect if these interest rate hikes continue, we will see quite a serious hit on growth not just this year but next year as well.Samiran Chakravarthy: I think there is now generally a consensus that we are entering a period of relatively slower growth and elevated inflation over the next six month horizon if not the next one year.The key issue is that on the growth side you have lots of tailwinds for consumption, you had pretty good year of FY 11 for corporate India so profit growth has been strong and wages have risen. Credit off take is high. There's been a very significant growth in growth in personal loans. Confidence has been shaken because of the front page headlines we are seeing but still I would the consumer is doing ok.The worry is on the investment side. Between the first half of FY 11 and second half of FY 11, the collapse in investment growth rate is worrying. There are two issues here : one of course is the interest rate cycle and the second is the policy paralysis we are witnessing, which in my mind, is even more important. If the latter is tackled, second half growth can be higher than the first half.TCA Anant: There is a very strong underlying dynamism which we tend to lose sight of in our short to medium term assessments of growth and inflation. Look at the period of the recession 2008-2010. We hit the depth of the recession and still managed to pull out with a growth of over 6 per cent. This was an extraordinary achievement. You saw one of the worst global recessions - and it's not even clear the world has as yet pulled out of it especially if you look at the situation in the US and Europe. But even then, we pulled out a growth rate that was higher than the famous Hindu rate of growth. This makes you feel that something has happened. There is a change. Having said that, I think our expectation when we came out of the recession was that we thought the pre-recession days were back again. But it did not hold. From beginning of 2010-11, you can see the growth effort tapering off. In part, the pessimism we see now is partly due to the fact that expectations for the export market continues to be weak and one of our big drivers is services exports to North America and Europe, which are still not out of the woods. Pronab Sen ‘Demand is artificially propped up by fiscal stimulus, but capacity creation has halted. There are two problems — industrial growth tapering off and non-food inflation taking off' (BW pic by Sanjay Sakaria) What is a huge source of support for India is that we are not really dependent on the export market for our growth. But internal sources of growth do face constraints. It is possible that we can do this and some of our policies of redistribution are having a Keynesian effect at promoting demand - if you are going to distribute incomes to people who have a high propensity to consume, you will see growth in consumer goods. That's probably what is picking up. But industry and services sector are yet to fully understand this. This growth in demand is probably different from the earlier high growth phases , which is why we are yet to see investment pick up. But if this Keynesian demand driven growth is created, you may need to see more investment in different areas like consumables, items of mass production, textiles and so on which have traditionally been slow. We may see a revival based on a different industry mix.Inflation to me is packaged with this. If you are going to go in for a Keynesian demand led model of growth drivers, a side effect of that will be towards inflated price expectations and higher levels of inflation. I don't think inflation rates at this point are at levels that will cause a serious threat of systemic stability.Shashank Bhide: I think it is inflation which has been more important in 2010-11 and going forward also. If we are facing a growth slowdown, it is probably due to the policy response to inflation. In 2010-11, inflation has been led primarily by food and then the fuel price hike in 2011. This happened despite a very good monsoon. The commodities which led to the high prices were livestock products, fruits and vegetables, sugar. Has anything changed in the course of the year? I don't think it has and I think it will take time to see a supply response. The cause of inflation on the supply side still remains. Infrastructure also continues to be a weak spot which exacerbate the supply side constraints.The pass through of these commodity prices increases to the rest of the other sectors of the economy has taken place in the last six months. For this year, we were predicting a WPI based inflation of close to 7 per cent. Even a good monsoon may not be enough to bring that down. Also, oil prices are unlikely to go down.On growth, it's a more mixed picture. I was surprised by the growth in consumer durables goods in 2010-11. The only reason seems to be the fiscal incentives which were part of the stimulus package. T.C.A. Anant ‘There is underlying dynamism in the economy, which we lose sight of in short- to mid-term assessments. We hit the depth of the recession and still managed growth of over 6 per cent' (BW pic by Sanjay Sakaria) The divergence between durables and non durables was stark. Durables were growing at 20 per cent and non durables at less than 5 per cent. So inflation probably had a much greater impact on consumption of non durables than on durables.Similar divergence can be seen between basic and capital goods. The performance of steel sector was much better than what would have been suggested by the performance of the capital goods sector.Our quarterly business expectation survey showed that the capacity utilization index remained high - so it's not as if all this talk of decline in growth is showing up as excess capacities. What happened was that perceptions of investment climate declined perceptibly for whatever reasons.If you are taking the medium term view, what happened between 2005-06 to 2007-08 when we had better than 9 per cent growth and less than 5 per cent inflation. And what has changed now is that we will have maybe 8 per cent growth and maybe 6-8 per cent inflation? I think a lot of it is to do with the policies whether of fiscal incentives or monetary accommodations.I think the policy responses we should be looking for is easing of supply constraints rather than anything else.Rajiv Kumar: I don't think in this country we can live with high inflation so one way or the other this will be brought down. We have got a huge inflation sensitivity in our society and enough monetary hawks in policy making to ensure that any signs of inflation are squeezed out. So I think we will see persistent hiking of interest rates. I think we'd had a consumption led growth for the last 4-5 years (rural incomes have been going up with NREGA and so on) and that phase is now coming to an end. Now you need an investment cycle to kick in and we are at the wrong timing because just the time you need new investment, we also have high interest rates.break-page-breakAlso, the climate has got nastier. I think these count for a lot with new investment decisions. The uncertainty in the system is higher and that holds back investment. Unfortunately, the India story has taken some beating abroad which is reflected in the decline in FDI and FII. So the recourse to Indian businessman to raise funds from overseas is not available to the same extent.As a result, investment growth has slowed down to 3 per cent. That's what is very troubling.You could have made this up by the government hiking its spending in things like infrastructure but that too cannot be done due to the fiscal deficit. Fiscal deficit situation is actually very precarious. The target for the fisc this year is 4.7 per cent but people are saying this could be breached by up to 3 per cent. Revenue growth will be lower due to lower growth and if you are stuck with transfer payments and all your subsidies, which is why you are hearing all these noises about diesel decontrol and so on. But with the next general elections coming up I don't see that happening.So, if transfer payments don't come down and you don't have the fiscal space to make the compensatory public investment, the investment cycle will not pick up. This is quite acceptable to the monetary hawks - in the late 1990s, you remember inflation was high and interest rates were hiked up and growth fell to some 1.8 per cent. But to them it doesn't matter since inflation has a political price. Rajiv Kumar ‘In this country, we cannot live with high inflation. So one way or the other, it will be brought down. Any signs of inflation will be squeezed out even if growth takes a hit' Here I worry that if growth rates start declining then employment opportunities start disappearing. I've just heard that these business schools have seen a sharp fall in intake this year as people don't see the potential in terms of returns that they will get. That's a declining cycle which I had hoped in India we had got out of.So I will not be surprised if growth rate falls to even 7 per cent. The good part is that even 7 per cent is very good - we grew up at a time when growth rates were 3-4 per cent. Unless the government starts to tackle supply side constraints through structural reforms which it may well start to do. I have never heard any government official talk so loudly in favour of multi brand retail FDI (as the chief economic advisor is doing currently).I think all of this will come to pass unless the government now - beleaguered as it may be - has the courage to carry out the reforms in the financial sector reforms, the retail sector, the agriculture sector, education sector. I understand all of these are top on the PM's agenda now. Otherwise, we may be in for some nasty surprises.Pronab Sen: I think we have got caught up in our own little euphoria arising out of the way the economy behaved during the crisis.The fact of the matter is that when we were working on the 11th plan we had predicted at that time on 2008-09 being the peak of the business cycle and then declining thereafter. As a country, we've had en endogenous business cycle only once and a long one with a peak to peak of 10 years). We were expecting a shorter cycle with a peak in 2008 and then the next peak would be eight years after that, in 2016 maybe. We'd been talking about it at a mean growth rate of around 8%.The global crisis more or less put paid to that cycle. And when we started coming out of the crisis, we forgot about the cycle. We thought we were starting from a clean slate but we were not. If you look at 2004-05 to 2008-09, we had phenomenal growth rate in investment by any standards and sooner or later that cycle would come to an end and it did. It came to an abrupt end.If you look at 2009-10, overall the investment rate fell by about 4 per cent of GDP but corporate investment fell even more. Now if demand is artificially propped up because of fiscal stimulus and so on, but capacity creation has come to a sudden halt. We had excess capacities but by the time we hit December last year, we had pretty much used up our capacity. We started running into twin problems - industrial growth started tapering off and non food inflation started taking off. Shashanka Bhide ‘It is not as if all this talk of decline in growth is showing up as excess capacities. What happened was that perceptions of investment climate declined perceptibly' (BW pic by Tribhuwan Sharma) So in a sense what Rajiv said is absolutely right. But with a little bit of caveat. We also experienced something very unusual between December 2009 and October 2010 - which was very high investment growth. So the corporate investment which had almost died during the previous 11month period came storming back. This capacity is going to come on stream. So I actually think we will see a much higher growth in first half of this year and a decline in inflation but the sustainability of that is really the question.Also, I completely agree with Rajiv that there is no indication that a new investment cycle is going to begin anytime soon. To sum up, if the crisis hadn't happened we would have been quite happy with 7.3 per cent and it would just be a normal business cycle.Inflation - my suspicion is that non food inflation will come down. Food inflation is a different problem - I don't see it coming down to below 8 per cent since there is a serious structural problem.So to conclude I think there will be strong growth in the first half with weakening thereafter.Samiran Chakravarthy: Very interesting. What Dr Sen says is actually contrary to what the market thinks - which is that the first half will be weaker and second half can be stronger if the government takes certain actions.What is critical is inflationary expectations. I think inflation is underestimated in the country. If you speak to anyone on the ground, inflation expectations are actually much higher. And then there is the case of money illusion. People do not calculate the percentage rise in most cases. Two favourite examples of mine. The person who manages parking below our office used to charge Rs 1,000. Now he has increased it to Rs 1,200. For most people working in a bank, Rs 200 is not that much. But it is a 20 per cent increase.The dhobi who irons clothes at our house has started charging Rs 3 per garment instead of Rs 2. It is a 50 per cent increase. And these things are trickling down at the ground level and keeping inflation high.It's interesting that we are debating this first half growth versus second half growth. With the kind of slowdown in investment in the last five months, it is difficult for me to imagine that we will see investment growth in the range of 8-10 per cent. The way our GDP is you will have to get an 8 per cent in investment and consumption to get an overall 8 per cent GDP growth. So I would put myself a little below 8 per cent for the first half.I also think that there is one factor which we are underestimating and that is rural demand. This is largely due to better connectivity, both roads and telecommunications. It's not a fiscal stimulus led demand. It is a more endogenous rural demand. The quality of rural roads has improved significantly and that has an enormous impact on consumption and all sorts of things.I don't think 7 per cent is a natural growth for us. 8 per cent is what I think is more realistic. 9 per cent is aspirational.break-page-breakTCA Anant : What we are probably seeing is a change in the composition of what is driving growth. We've seen a high growth phase from 2001-02 till the crisis. Almost up to the crisis (the Keynesian redistribution effects didn't kick in until 2007-08 since NREGA etc started reaching the ground only then) was driven by the more traditional drivers of growth and to some extent international dynamism. Services sector played a big role. It was a different composition of growth.What we are heading for now is a very different kind of growth. It is being driven from redistribution. You can't pump in so much money without it showing up somewhere. For instance where NREGA is effective, the demand for two wheelers is up. The poorest will not hold onto the money, they will pass it on to the grocer who will then buy durables. So it will create demand for durables.By trying to look at growth in the manner in which it took place earlier, we may be missing the structural change and by not seeing its signs we may be over pessimistic. To me a Keynesian type of growth will always have inflation as a side effect since you are pushing up consumptionIs that worth worrying about? I don't think so.Laveesh Bhandari: I am very uncomfortable about this Keynesian led growth that Dr Anant has been talking about. It is very scary. We all know we cannot spend our way into sustainable high growth levels. It's just not done. It happened once and I hope it will not happen again.Also, there are many other things that have happened - roads, telecommunications and connectivity. We don't tend to give too much credit to the construction activity that has happened in massive manner in rural areas. There are transfers, there are repatriations. It's not only government transfers that are pushing growth.If you look at the growth figures for UP, Bihar, Jharkhand, Chhattisgarh and to a lesser degree West Bengal, a large part of the growth is being driven by huge construction activity. Laveesh Bhandari ‘There is phenomenal surge in rural India. You can touch a sustainable 10 per cent growth. Agriculture is a small percentage of the whole growth, so it does not bring us down so much' (BW pic by Tribhuwan Sharma) I don't disagree with most of the diagnosis but I also don't agree that our natural growth would be just 7-8 per cent. There is no reason why we cannot have more than 8 per cent growth. The last 2-3 years we have had these opportunity - corporate and household savings have been up, investment has been up - it's not as if the government has been totally paralysed. Many reforms have taken place although some of the most critical parts have not been done - in financial sector and telecommunications changes have taken place which have benefitted growth.We are currently at a place where I would not be surprised if growth does go below 7 per cent. It is quite possible. Corporate profits are down, corporate profits lead household savings because bulk of the savings are proprietorships, so those are likely to be lower. FDI is a mess, investment is a problem so if the government doesn't do something of all the major reforms then we are definitely talking about a complete policy failure - it could be a growth of just 6-7 per cent. You can call it a cycle but I would call it a total policy failure.But whatever one may say there is a phenomenal surge in rural India and you can touch 10 per cent growth in a sustainable basis. Agriculture which is lagging is a very small percentage of the whole growth story so it does not bring us down so much. So there is nothing to stop us from aiming for 10 per cent.Shashank Bhide: Between 2005-06 and 2007-08, the positive global environment also helped in the high growth. Going forward, I think the global conditions will be very critical for us to reach high levels of growth. And either way we see hikes in commodity prices - I don't know whether it is entirely due to tensions in the Middle East or is it because of just the fact that India and China are growing at over 8 per cent and consuming a lot. I think that worries me. I also don't think that the fiscal situation will be so worrisome. If there is growth, there will be revenue increase as well for the government. In terms of fiscal balancing, there are no more assets to sell - so we are going to see a pursuit of fiscal balance going forward.Rajiv Kumar: I quite like what TCA said that there is perhaps a structural change in our growth story. And maybe the export growth of 34 per cent is another pointer to that. I don't know why that is happening in a pretty sluggish global market.On Pronab's point on large corporate investment last year, according to state bank data, almost 70-80 per cent of the non food credit off take was for the infrastructure sector. No corporate in manufacturing sector was borrowing money at all. This kind of lending for infrastructure does not add to capacity,So I don't think we will see extra capacities coming on stream and a surge in the IIP. I am in fact quite worried about the IIP. I fear the growth rate coming below 7 per cent is a good probability for 2011-12. Samiran Chakraborty ‘The whole (investment) mood has changed in the past five months. That no significant policy reform has been done or highlighted to foreign investors is adding to this feeling' (BW pic by Tribhuwan Sharma) You had a 6 per cent jump in agriculture this year (from a 0 per cent last year) so the base has gone up. So next year will see at most a 3 per cent growth in agriculture even with a normal monsoon. There may not be huge productivity improvements even if there are some.So, with agriculture growth of around 2.5-3 per cent, industrial growth of sub 8 per cent, you cannot get a services sector growth to pull up growth to over 8per cent.I agree with Laveesh completely - 7-8 per cent of growth is not acceptable anymore in this country. And with the regional variations, it will be socially, politically unacceptable because the slower growing states will grow at 4-5 per cent. With population growth of 1.5 per cent, per capita incomes will not rise enough to absorb the labour force. It will lead to social and political stresses.That is where my real appeal to all of us is let's shift the discussion to employment generation. If you don't generate enough employment in this country that will undo it all. Inclusion through transfers is not really inclusion. Unless you get employment, there will be no inclusive growth. For a country that is getting 12 million new entrants to the work force every year, this will create real problems.Pronab Sen: The fact is that we didn't have the kind of monetary stimulus that other countries have had. The excess money supply that was generated in the economy over that period has long been absorbed. So, this whole thing of looking at monetary policy to address the inflation that is building up is not on at all in my view.I think the key is the fiscal policy. If you have a credible fiscal policy, I think it will have a far more salutary effect on inflationary expectations.The real question is do we have a real credible fiscal stance. Shashank clearly believes that the government can and will exercise fiscal restraint. Rajiv clearly believes they cannot and will not. I am part of the government so I have to believe (laughs) but that is at the heart of it.Even with growth, there is a critical point at which the government has to make space. Last year was not the time to do it but the time has come now. We tend to forget what happened in 2002-03 and 2003-04 - at that time the government had gone in for a pretty heavy fiscal stimulus and then unwound that very quickly. And government savings which were running at -3 and -4 per cent in fact turned positive. And that was the turn around that spurred the growth story after that.There is one thing I don't understand. Just because agriculture is only 14 per cent of your GDP does not mean you can stop looking at it very very closely. If you are talking of Laveesh's 10 per cent growth for instance believe me non grain agricultural production will have to grow by at least 6.5 per cent a year - you are doing 4 per cent at the moment. You can't get that 6 per cent you will have inflation and you will have that growth coming down like you won't believe it.I agree we can aim for 10 per cent but that has certain pre-conditions and to my mind the single most important pre condition is to get agriculture to move much faster than it has.Prosenjit: Everyone is agreed that investment - especially corporate investment - has come to a standstill. So, what can be done to spur investment growth.Second is the employment problem that Rajiv raised.Third, we are still discussing agriculture with the monsoon in mind. What happens if we don't get a good monsoon ?Pronob Sen: As far as investments are concerned, I think it's wrong to imagine that investments can be artificially boosted. The more important question we need to ask is why is investment low today ?break-page-breakThe popular take in the media is the high interest rates. I think that's incorrect. I think there is a huge amount of uncertainty. Last year's investment boom was a whole bunch of stalled projects that were restarted. Which answers why manufacturing is not there. None of these are new projects. Most of them are old projects which have attained financial closures but were put on hold due to the uncertainties of what was going to happen. There is no new investment in the manufacturing sector. Everybody is on a wait and see mode. Sooner or later they will come on stream. But the question is when and can we do anything to accelerate it? Will dropping interest rates help? I would not believe so. I think the first thing that leads such decisions is the perception of where the market is headed and the cost of funds and so on are secondary. The main thing is how we can increase the certainty in the system.As far as employment is concerned, what we do know is that organized sector employment is a small percentage of total employment in the country. The growth rate of corporate employment is slower than the growth rate of overall employment in the country. However, what you do see is that over the boom period we haven't had an employment problem as such. In the rural areas, there is a huge shift away from agriculture to other activities. So things are happening out there but all of that is happening under our normal radar screen. I think we are too focused on the corporates. TCA's economic census of 2005 tells us that there are 42 million non farm enterprises in the country of which less than 300,000 are corporates. What do we know about these ? Except purely in an anecdotal sense. We know very little.So whatever the kind of prescriptions you come out with will either be very macro or very corporate. The rest of the system we are all delightfully clueless about but it is the rest of the system that is bearing up quite well. Finally, agriculture. We still think of agriculture as if it is foodgrains. But the kind of agriculture we are now talking about is horticulture and animal husbandry which are not completely immune to the monsoons but far less susceptible. How do you get horticulture and animal husbandry to be far more dynamic now ? The answers are not to be found in the monsoons. The answers are in the systems we have in place to deal with these commodities. We have practically non existent systems.So we really need to get away from this fixation with foodgrains. Today foodgrains consumption in the total foods basket has already dropped to around 38 per cent. Indians are consuming 62 per cent of non food grain foods and this does not seem to enter our stream of consciousness.Samiran Chakravarthy: As far as investment is concerned, it is quite accepted that whatever investment is coming in is in infrastructure and not in manufacturing.I agree with Dr Sen that Interest rate effect is not the primary thing. I think investment in India is more driven by animal spirits rather than anything else. I cannot tell you how the whole mood has changed in the last five months. The same people I meet - both domestic and foreign investors - are speaking a different language today.One concern is a pure macro concern. You are a country with a troika of problems : fiscal deficit, current account deficit and inflation and you seem to be having no solution to this troika of problems so I don't care whether you are growing at 8 per cent or 9 per cent, in six month or 12 months time, you will be the next South East Asia and will collapse.Then, there is a more micro concern which is even more worrying. This is well I thought India was the best destination to go to but how do I get in ? There seem to be insurmountable walls. There's a gamut of rules and regulations which not even those in charge of them fully understand.The third concern they have is that the economy has outgrown the institutions and policy reforms. We did well. One of the reasons we got high growth rates was that we had pretty good institutions to handle growth of that nature and extent. But now, statistics like it will take 320 years to clear the number of court cases pending at the rate we are clearing them, things like infrastructure constrains in all possible fashion, the corruption issues. The fact that no significant policy reform has been done or highlighted to foreign investors is adding to this feeling.Employment - it is interesting to look at the data of the 2009-10 survey. We did a report in which we looked at India over the next 20 years, One out of every 3 working age population in the world is going to come out of India. So if you say around 5 per cent of unemployment is acceptable and if you say labour force participation will go up from 36 per cent to around 50 per cent (as with most upper middle income countries), India will have to create 13-15 million jobs every year for the next 20 years. We have in the best of years we have done only about 10 million. And that too with 84 per cent jobs in 2009-10 survey being created in the informal sector. So I think this is the most important challenge for us. We are going to see huge educated population. We don't want to become the next Egypt or Spain.Agriculture - the problems are well known. If one looks at projections, it looks like by the end of this decade we will be importing most of our food grains which should worry us to some extent from a foreign exchange perspective and not just food security. A third issue we need to look at is land - how much we need to keep for agriculture and how much for industry. China has done it in a very innovative way. We as yet have no plan. TCA Anant:I agree with Pronab that the story in agriculture is not the one we studied. An enormous change has happened. The key infrastructure needed for this new agriculture is roads, storage systems, rural markets. Some of this is happening.Employment in the organized sector in India is around 16 per cent. In most other developing countries, it is 45-50 per cent. Our economy is different. There is very little you can do to promote private investment. You can offer all the incentives you like and lower interest rates to zero and nothing will happen to investment. You show them that domestic demand is rising and investment will flow in regardless of what monetary policy has done to interest rates. I remember a time when interest rates had been hiked to 12-13 per cent and it had virtually no impact on corporate investment which continued to flow in and the wisdom I remember reading then was that is yes, corporate investment is actually not dependent on banks - they can raise money even outside the banking system or overseas.The fact is that corporates react to a very different set of stimulus and if that stimulus is provided, the corporates will react regardless of anything else. But you cannot target corporate investment - you will not get anywhere.I am optimistic about the growth scenario because of the underlying dynamism. As long as there is basic buoyancy in demand, the pressure on prices is not going to go away. You can dampen it by effective policy - increase competition in commodity prices, improve supplies. Policy response is needed and government has to take steps to implement them and there are signs it will do so.Rajiv Kumar: What you need is agriculture growth of 3.5-4 per cent, you need more credit to move into non crop, non cereal and this is where you need the entry of modern players. I personally feel entry of modern retail will help. Agriculture needs to be modernized.Also, APMC has to go. The central government can do a lot. I know it's a state subject but many levers are in the center's hands. Agriculture remains a hugely government intervened sector and we may need to relook at that. Every price in agriculture is government controlled.Second, on employment we have to bite the labour reform bullet. This dualism in the labour market will not go away. It's not just the hire and fire issue.On investments, I think animal spirits have taken a huge beating and these need to be revived. And in my view this can be done by fiscal policy improvements and the reforms that you have to carry out. People are waiting for the signals.At the moment you are regressing on the reforms side. If this catches on that you are going back to license raj in one way or the other - whether its with environment, land issues - then it's all over. Here the national manufacturing policy attempt that you need reduce the 70 clearances and 100 returns that corporates need to file- if you can simplify that I think the non reform margin for investment of pretty much exhausted.Shashank Bhide: I think it is the manufacturing sector which has the key to many of the issues raised. I don't think we can produce in agriculture everything that we need. And if we need to import I don't think we should see this as the end of the world. In fact if our per capita incomes grow, we can import whatever we need. A lot of this has to do with trade policy.The pessimism on the growth front is short-term concerns. There is probably no feasible way forward other than having high growth rates. If we are pessimistic on growth, it is only in the short termPronab Sen: Think about 2008-09. Animal spirits were booming and our institutional framework was roughly what it is now. What has happened in these two years which is so significant?Rajiv Kumar: I think it is the predominance of the NAC. There is a fear at the moment we are going back in time. Even 1991 doesn't seem sacred anymore. The kind of things that are coming out of the NAC. The kind of policy influence it seems to exercise. Until NREGA etc everyone agreed but now some of the stuff that is happening is scary like the land acquisition bill. The climate for economic growth and the support for it seems to have weakened.bweditor(at)abp(dot)in(This story was published in Businessworld Issue Dated 20-06-2011)
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In the Budget 2011-12, the government had announced a gross borrowing of Rs 4.17 lakh crore from the market, lower than Rs 4.47 lakh crore during last fiscal.Finance Minister Pranab Mukherjee on Friday assured the private sector of enough liquidity in the market saying the government, which has Rs 4.17 lakh crore borrowing plans in 2011-12, does not intend to elbow them out."So far the borrowing programme is concerned, always we match it in such a way that the others in the market of borrowing are not elbowed out," Mukherjee told reporters after meeting chief executives of public sector banks and financial institutions here.In the Budget 2011-12, the government had announced a gross borrowing of Rs 4.17 lakh crore from the market, lower than Rs 4.47 lakh crore during last fiscal.Of this, the government has announced to borrow 60 per cent or Rs 2.5 lakh crore in the first half of the fiscal, leaving enough credit in the market for the private players in October-March period to borrow.The net market borrowings, after making re-payments, would total Rs 3.43 lakh crore in the current fiscal.Besides, the government's plan to raise a massive Rs 40,000 crore from disinvestment of PSUs could squeeze liquidity from the capital market.In addition, the Government would be losing Rs 49,000 crore due to cut in customs and excise duties on petroleum products.Cost of credit has increased significantly in the past 16 months because of the tight monetary policy regime followed by RBI since March 2010.(PTI)
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Ugandan businessman Hardip Singh's father did the sensible thing. He had four sons, but just one great asset: a luxury bungalow in south Delhi's posh Friends Colony. He sold it a few years ago to the Jhunjhunwalla family and bought four large 1,000 square-yard plots for each of his sons in Noida's in-demand Sector 15. All the four now own modern, resplendent homes with well-manicured lawns and thank their father for his foresight. Hardip and his brothers are not the only ones wanting to escape the crowded core of India's big cities. The country was initially slow to urbanise, but the early trot is now turning into a gallop. In 1951, there were only five metropolitan cities with a population of over one million. By 2001, there were 35, and their share in the urban population increased from just 19 per cent to 38 per cent. Today, there are 50 big cities with more than a million people, and there will be 87 by 2031. The urban-rural ratio is also changing rapidly with 35 per cent of the country now living in urban sprawls, and the figure is expected to touch 45 per cent by 2031.More importantly, cities will propel the country's future growth. As the 2010 McKinsey's report on India's urbanisation says, over 2010-30, Indian cities will create 70 per cent of all new jobs, and these jobs will be twice as productive as those in the rural sector. But urban governance and infrastructure development in the form of housing, water supply and roads do not match the big demographic shift towards cities. On an average, more than 25 per cent of most Indian cities live in slums. In Mumbai, the latest National Sample Survey data suggest 60 per cent of its populace live in slums. To give a better quality of life and to develop planned 'counter magnets' to over-crowding cities, the concept of satellite towns came into the planning lexicon in the 1970s. Today, there are hundreds of satellite towns that dot the hinterland around big metropolises. Some of them are old transport nodes and habitations that have naturally grown, like Faridabad near Delhi or the Virar-Vasai belt in Mumbai. Others have been specifically planned, such as Noida, Navi Mumbai and Rajarhat in Kolkata. Have they worked? Have they given new inhabitants a better life?Counter MagnetsThe natural sequel to the growth of capitalism and concentration of manufacturing and services in central hubs is the concentration of people in towns and cities. Urban expansion takes the form of radial growth in concentric rings around existing cities when there is a hinterland available to 'colonise'. Simultaneously, too, small towns and large villages bloom. They abut metropolises as centres of industry or 'dormitory' adjuncts to the mother city. Faridabad and Ghaziabad, once sleepy villages, became important 'satellites' to Delhi as they rapidly expanded as industrial centres. So were Pimpri and Chinchwad to Pune. For Mumbai, the expansion was initially northwards. Villages such as Kashi Mira and Virar became satellite towns as expanding families left their one-room tenements in Dadar and Central Mumbai to relocate to larger flats 60 km away.But this was a town planner's nightmare, as satellite towns sprouted without infrastructure and layouts. "This has been the predominant form of expansion. First build, and then retrofit the town with roads and civic facilities," says Pankaj Joshi, executive director of the Urban Design Research Institute (UDRI) in Mumbai.To introduce some method to the madness, planners began pushing for planned satellites around big metropolises in the 1970s. The fourth and fifth Five-Year Plans (1969-79) first envisaged planned smaller towns to prevent growth of population of large cities. The concept of 'New Bombay' - now Navi Mumbai - was born in 1964 with architects and planners Charles Correa, Sirish Patel and Pravina Mehta proposing the 'twin city on water' on the eastern mainland as a counter-magnet to the rash and unplanned growth towards the north. More recently, in 2007, the Hyderabad Urban Development Authority (HUDA) put plans in motion to create 22 satellite townships along the proposed 162-km Outer Ring Road. Work on two - Tellapur in Medak district, and Srinagar in Ranga Reddy district - has kicked off. The Karnataka government, in 2006, announced five satellite towns to decongest Bangalore. Spread across 5,000-15,000 acres, these are located at Nandagudi in Hoskote taluka, Kasaba and Bidadi in Ramanagaram and Solapur and Sathnur in Kanakpura. They will be connected with an Outer Ring Road beyond the Peripheral Ring Road. "It is perpetually the never-ending last mile," urban planner Keller Easterling once said on the radial expansion of satellite cities as nodes on a multiplying number of ring roads. Satellite Wars As satellite cities proliferate and become unmanageable, there is a raging debate on whether planned 'satellites' should be the way forward or should development take the 'natural' course of nudging along developing villages and towns on metropolises' periphery with plans and funds. Joshi says Navi Mumbai was a set of dead enclaves in the early 1990s, and grew only after the railway corridor came into existence. "The planning perspective should have been to develop old towns such as Bassein and Virar. It is an inversion of values. You should conceive a planning environment for these areas, which have a marked potential for growth," says Joshi. Echoing him is P.K. Das, an architect who is planning the Adani Port City near Jamnagar. He says planned satellite cities such as Navi Mumbai have taken away funds and planning focus from 'natural' nodes such as Panvel and Pen. "Rather than the mother city engulfing the outer hinterland, you should allow existing nodes around the metropolis to grow with decentralised plans, and the state providing transport links and budgetary support."Satellite towns are successful if they provide quality services that equal the mother city and have good transport corridors. Gurgaon was 30 years in the making, notes Anshuman Magazine, CMD of property consultant CB Richard Ellis. It has been seen as a success only in the past six years as it offered the middle class everything from malls to massages, he says. "It started with the DLF Corporate Park promoting the concept of 'walking to work'." But then, Maraimalai Nagar near Chennai lay dormant for decades as it had no schools or hospitals of high standards, while Kalyani, the last stop on Kolkata's Sealdah corridor, did not succeed as it had no quality schools though it boasts a university.Planned townships often have not been able to take off as they have run into farmers' agitations against acquiring cultivable land. Like the protests on the Agra Expressway, Chennai too faced protests against its 'Thunai Nagaram' (satellite city), and the DMK government had to drop its 'de-congestion plans in 2006. Three satellite towns reappeared in Chennai's second draft master plan along the Old Mahabalipuram Road (OMR), currently a thriving commercial and residential hub, the Outer Ring Road and the Poonamallee Road. But the Chennai Metropolitan Development Authority made it clear it would only be providing the infrastructure, and it left the land acquisition to the private sector. break-page-breakKolkata's Rajarhat, too, had its share of controversies as it was also built on farm lands. The media was splashed with charges that CPI (M) operatives in the know of the acquisition bought land from unsuspecting farmers at Rs 1.2-1.8 lakh an acre, and sold it at a five-fold profit for Rs 6 to 7.2 lakh an acre. "The problem is satellite development is seen as a real estate opportunity. Planning becomes a tool for that, and not as a matrix for human development," notes Das.From NoidaVillage To NoidaVilleMost urban think tanks are cool to the idea of satellite cities. Chetan Vaidya, director of the National Institute of Urban Affairs (NIUA), says they have not been successful as demographic tools. They have not been able to stop migration into mother cities. But Vaidya admits "Gurgaon, Noida and Navi Mumbai are partially successful as real estate developers of Delhi and Mumbai did not allow access to affordable housing." He, however, says that PPP models such as the town planning scheme in Gujarat are more successful than the model of large-scale land acquisition and development in Navi Mumbai or Noida. In Ahmedabad and Surat, landowners became willing partners in town-planning as they knew land prices would shoot up the moment an urban layout was notified. Government investment has been, therefore, limited to roads and infrastructure development. Vaidya also says that instead of looking for counter magnets, governments should promote medium-sized cities and focus on governance in metropolises.But Magazine says satellites such as Gurgaon and Navi Mumbai have stemmed migration, kept real estate prices in check in metropolitan centres and reshaped the lives of the urban middle class for the better. "A couple in Gurgaon can go to work together, and in the evening enjoy a round at the bowling alley. You might see a cow on the road, or a few potholes, but the lifestyle is no different from Dubai or London." This excerpt from a post by 'Aparna' on noidascoop.com sums up the middle class sentiment: "When I dated my husband, I liked everything about him except that he lived in Noida. In 1994, when I came to Noida nothing was available. We had to go cross the Nizamuddin bridge and shop at South Ex (in Delhi). I felt isolated, lonely. But slowly I started going for Atta (market) and (Sector) 18. Every week, there was a new shop, an eatery, hospitals, movie halls, hotels… Now, the latest malls are just icing on the cake. Life has become so comfortable that I don't want to move out. Our lovely city is converting from NoidaVillage to NoidaVille!"On the real estate front, property pundits point out that had satellite town, not been there to ease the pressure of short supply, prices in the inner core of the city would have risen astronomically. According to CB Richard Ellis, Gurgaon and Noida in 2010 contributed 9 million units to the housing market while Navi Mumbai, Thane and Mumbai's northern satellites supplied an additional 9-10 million units. In Bangalore's Whitefield and Electronic City, new supply was about 7 million homes.Again, relative prices in satellite towns are cheaper than in similarly positioned locations in the mother city, giving consumers a viable budgetary option. For instance, in Navi Mumbai's Panvel or Khargar, prices average around Rs 4,500-6,000 a sq. ft. In comparison, at crowded Borivali and Kandivili in north Mumbai, new bookings cost Rs 8,000-12,000 per sq. ft when the rail travel time is about the same. But that is just the problem some planners are critical about. Successful satellites have become plush suburbia for the middle class with little space or affordability for the poor. Pointing to gated communities such as the NRI Complex in Navi Mumbai and ATS village, Parsvnath and Eldeco colonies in Greater Noida, Das says: "Leave it to the market, and the builders will only build gated communities for the rich." Engines Of GrowthDespite these doubts, satellite development has become an integral part of urban planning. HDFC chairman Deepak Parekh in his 2009-10 company report said: "Satellite cities have to be built as connected cities, having sophisticated transport networks like trans-harbour links, bridges and underground links." Guidelines by the Union Ministry of Urban Development for urban infrastructure development in satellite towns note: "There is an imperative to plan for development of new townships/satellite towns around million-plus large cities. The satellite towns/ counter magnets should be spatially separated from the mother city." The guidelines name 35 key cities for 'satellite development' and propose initial funding from the Jawaharlal Nehru National Urban Renewal Mission (JNNURM) for creating 300,000-500,000 (populace) towns as satellites for million-plus cities and towns in case of mega cities with population exceeding 4 million.As part of the planning for the Mumbai Metropolitan Region (MMR) that encompasses a humongous 4,355 sq. km. of hinterland around the island city spread over four districts, nine municipalities and over 900 villages, a crucial project on the anvil is the Virar-Alibaug transport corridor. Proposed by Surbana Consultants, who have anchored Singapore's urban planning, the corridor will run 140 km and will aim to develop 5-6 satellite towns as nodes along the corridor. The new towns proposed are around the existing towns of Bhiwandi, Kalyan, north and south of Panvel.India is better positioned than other developing economies with much of its urbanisation still to come in the future. Just 30 per cent of Indians are living in towns and cities, compared to China (45 per cent), Indonesia (54 per cent), Mexico (78 per cent), and Brazil (87 per cent). But time is obviously catching up. By 2031, the urban population will be touching 40 per cent or around 600 million. The United Nations projects that urban India will be larger than its rural cousin by 2045. Talking of creating economically vibrant, inclusive and efficient cities, Union Urban Development Minister Kamal Nath said he saw them as "engines of economic growth". Hopefully, this will not remain just another pithy statement for intellectual gatherings.gurbir(dot)singh(at)abp(dot)in(This story was published in Businessworld Issue Dated 20-06-2011)
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Home, auto and other loans are set to become costlier with the Reserve Bank on Tuesday hiking key short-term rates to contain inflation, while giving relief to small savers by increasing the savings bank rate to 4 per cent from 3.5 per cent now.The signal was given by the RBI in its annual policy review meeting for 2011-12, where it hiked the repo rate (the rate at which banks borrow from the RBI) by 50 basis points to 7.25 per cent, the ninth increase since March, 2010.RBI Governor D Subbarao made it clear that containing inflation would take precedence over growth, which has been pegged at a lower level of 8 per cent for 2011-12 as against the government's projection of 9 per cent.The move to hike the rates has been necessitated as the RBI feels inflation would remain at an "elevated level" of 9 per cent in the first half of the current financial year before moderating to 6 per cent by March, 2012.Subbarao's hawkish stance was supported by Finance Minister Pranab Mukherjee, who said, "This (hike in rates) was necessary to contain inflation. Inflationary pressure in the economy is still very high."Planning Commission Deputy Chairman Montek Singh Ahluwalia also endorsed the RBI stance and welcomed the hike in both the lending rate as well as the savings rate."Personally, I am very glad that the RBI has given a clear signal going beyond the usual 25 basis points (revision)," he added.The RBI Chief said over the long run, high inflation is inimical to growth, as it harms investment by creating uncertainty."Current elevated rates of inflation pose significant risks to future growth. Bringing them down, therefore, even at the cost of some growth in the short run, should take precedence," he added.Most bankers felt there was no option but to increase interest rates as the cost of borrowing funds has also gone up, with the RBI hiking the short-term lending rates.However, the industry is disappointed. "This is certainly a very hawkish monetary stand, which would make the investment environment even more difficult... We are afraid that with growth slowing down, employment targets will not be achieved and this could generate greater social pressures," Ficci Director General Rajiv Kumar said.The RBI, however, kept the Cash Reserve Ratio (the portion of cash banks are required to keep with the RBI) at 6 per cent, ensuring sufficient liquidity in the system.The central bank also introduced a new mechanism -- Marginal Standing Facility -- under which banks would be permitted to borrow short-term funds (overnight) up to 1 per cent of their deposits at 8.25 per cent.(PTI)
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Rejecting completely my recent writings arguing that corruption in India had a systemic basis (Systemic Scamming), the expat CEO of a Fortune 500 company let me know the other day that we had amongst us a large population of people who were in principle perverse about ALL laws! "Everybody knows that you are expected to drive on the left but any number of citizens will drive on the right. You will throw rubbish on the road when the bin is ten feet away. Standing in a line takes a few minutes more and you have all the time but you just won't. I can't persuade my employees to follow the simplest of company rules. Why can't people just comply?" I could feel his pain for sure but I could not sympathise with his condemnation. There is an entirely rational basis why Indians have so much trouble following laws in India. Let's start with the rather narrower subject of corporate compliance. The fact of the matter is that most global corporations set up their compliance laws in the obscure belief that there is something universal about compliance generally, a bit like the law: "Thou shall not kill". This is bunkum of course. There is no such thing as universal law or compliance because there is no such thing as universal history. At the end of the day, all laws are historically contextualized.As a general proposition, the laws we make, the rules we frame and the compliance we expect all flow from three interconnected factors. First, there is the state of the economy and the economic institutions that power it. Somalia doesn't need an insider trading law just as Norway doesn't need a law on inheritance of ancestral property in a joint family. Second, compliance rules flow from the objectives of the compliance regime. Trust me, Saudi Arabia doesn't want a competition law and Germany doesn't want agricultural land ceiling law. So far, all of this is fairly obvious: where our understanding of the problem hits a wall is when we fail to appreciate how the history of a people impacts their attitude to law and compliance. Indulge me in explaining what I mean.What does the briefest understanding of medieval Indian history tell us? Right to the British period, competing feudal states dominated south and central India. North India first experienced Afghan rule as early as 1206 and for the next 750 years, Persians, Turks, Mongols and Huns - all foreigners - rampages all over the northern plains. What makes this period interesting from our view point is that every dynasty, indeed every king of every dynasty, set up his own laws that lasted as long as his life, or more frequently, his mood. In this unstable world of ever changing opaque laws and rule by executive fiat, what do you expect will accumulate in the collective subconscious of the ruled? Can anyone argue that medieval Indian kingdoms were anything but predatory? Do we expect prey to sympathize with the predators, or their laws?Okay, all this is medieval alien stuff you may argue: modern Indian law started in the British period and we have had 250 years to get used to it. Not so. It's not as if the British empire in India did any better than the Mughals or their predecessors. There are studies aplenty to show that the East India Company maximized profit and inflicting misery. The Great Bengal Famine of 1770 was no natural disaster. Peasants were forced to grow "cash crops" to feed British industry rather than food. As a result, 10 million people - that is one in three - died of hunger. Large areas were depopulated and returned to the jungles for decades. Direct British rule since 1858 did not create utopia. India exported primary goods and imported manufactured goods. Domestic industry was decimated and this too is well documented. Why would Indians trust British laws, given who they benefited? Many of those same laws are still on the statute books, or hasn't anyone noticed?Just so you don't think I am xenophobic or anti British, it's not as if we did any better after 1947. Independent India inherited British institutions, governance structures and bureaucratic attitudes. Socialism sought to control the commercial impulse of its people, creating the quota-license-permit Raj. In the context only of the attitude to governance, how were the British fundamentally different from central Asian warlords and how is post-independence India different from the Government of the British Indian dominions? Why would we expect Indians to identify with their current colonizers or the laws they create? The essential upshot of 800 years of Indian history shows us that Rousseau's social contract theory has no application in India because there is no "consent of the governed". The Government and its laws continue to be viewed as predatory. A good example why would be the absence of any relationship between tax and service. Just to make a point, I live in Gurgaon and all around me are people who pay some very serious taxes - each enough to pay the salaries of more than a few senior civil servants - but they don't get health care, pension, social security, police security or infrastructure in return. Indeed, they are excluded from the very Government clubs, quotas and facilities that their tax payments fund. There is no concept of "tax payer's money". No one will ask them how their money gets spent. While we are on the subject, don't tell me that they can vote in their representative because we all know how parliament functions too, or doesn't. I may understand why this must be so, but a great many Indians do not. I don't blame them.It's no different for business. I fall about helplessly holding my belly and laughing till I cry as I watch corporate honchos mouth platitudes about compliance and probity when everyone knows that if you don't pay large sums of money to the provident fund inspectors and the state electricity boards and the multitude of tax guys and who else besides, you are going to get hit so bad you'll have to fund an institute to train top flight shrinks just to treat your post-traumatic stress. For the average Indian, the government is a school yard bully who steals your tiffin every other day. In this country, the worst thing that can happen to you is not the mafia; it is a government on your case. Stick around and see what a rabble rouser can do to someone like the Tatas in Bengal.That is not the worst of it. What does compliance get you? Businesses in India seem to thrive where there are no laws, of which cross border outsourcing is just one example. When the government smells money, it comes over and says "okay, just to make sure you behave as a responsible member of society, we are going to set up a regulatory structure which we expect you to comply with". Lofty isn't it, but what does it mean in practice? It means crazy rules that get interpreted according to the mood of the interpreter, and it means inspectors, lots of them, with all kind of pre-emptory powers to harass and condemn, accuse and prosecute. This monkey circus is backed up by an ascorbic media which feeds on churning out contrived Infotainment that can destroy your reputation, and your business. Out here in the badlands, regulation is extortion by a fancy name. The wise man would say that the best thing you can do in India is live well below the radar screen. Lots of people could own Audis and BMW's in India but it's in less than twenty towns that they can be sure that they won't be subject to extortion demands by their very protectors for their lack of modesty. So to summarize, the Government and its laws are controllers, not enablers. Compliance is in a sense a question of succumbing, not cooperating, leave alone pursuing one's civic duty. Many laws have no general application public purpose to them at all. Following the law is sometimes the worst option because it can quickly erode value in your business, or your life. Every compliance invites additional scrutiny, every compliance return is an invitation to an additional show cause notice. If you want to survive, your best bet is to not be noticed at all and if you are, to try to stay one step ahead. It is a jungle out there…and the lion king is contemptuous of you. Doing things the way the lion king says you should is unlikely to do anything for you. It works for the lion though!The author is managing partner of the Gurgaon-based corporate law firm N South and author of the pioneering business book Winning Legal Wars. He can be contacted at rcd (at) nsouthlaw (dot) com
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Isher Judge Ahluwalia, chairperson of the Think Tank Icrier, chaired the High Powered Expert Committee on urban infrastructure. After labouring for nearly two years, the panel has submitted its recommendations to urban development minister Kamal Nath. Ahluwalia talks to BW's Gurbir Singh about the problems of satellite towns, and how to make our cities more liveable. Excerpts:In the future, do satellite cities still have a place in urban planning?It depends on various factors, especially transport and housing. If these are provided in metropolitan planning in satellite cities, they become feasible. On the other hand, you can have independent, regional hubs, like what Dewas is to Indore. How do you evaluate key satellite cities such as Navi Mumbai and Gurgaon? Navi Mumbai had got quite a few things right. We were impressed by the quality of governance, and the waste-water treatment system. Gurgaon, on the other hand, is more haphazard where basic tenets have not been met. For satellite cities, pubic-private partne-rship works if risks are assigned. But there are problems if the government does not know the risks they are transferring to the private sector. Most whine about the rash growth of cities. But your report sees them as founts of energy. Generation of wealth is increasingly dependent on the knowledge industry, and more and more cities have become reposi-tories of knowledge and technology. Without cities, growth will not happen. But we should think of cities and their hinterland as one continuum. It is a mistake to highlight the rural-urban divide, as it is an artificial divide. You see governance as a core issue. How can this be addressed?We need municipalities and corporations with secure sources of revenue, local bodies that can guarantee money is well spent, and that are accountable to the people. They must become market-worthy, be able to raise money through market bonds. Then they will have money to spend on, say, an efficient water delivery mechanism, and not depend on some state government Jal Board. Autonomy is a big problem dogging the governance of cities. Central and state governments don't allow decentralisation of local bodies as they think "where will they get their capital from?" But without reforming city government, how will we build cities? It is not a problem of money, but of systems and governance.Did you come across municipalities that have performed exceptionally well?Yes, we found Hubli, Dharwar and Gulbarga in Karnataka handling their drinking water supply networks very well. The experiment of Gorai, a suburb of Mumbai, turned out to be extremely successful. Gorai spent Rs 50 crore in putting its waste disposal system in place, and in turn earned Rs 70 crore in carbon credits.You have proposed an investment of Rs 39.2 lakh crore for urban infra-structure development over the next 20 years. Where will the money come from? From devolution of taxes, from state government allocation, from property tax reforms. We have also proposed a reformed JNNURM or New Improved (NI) JNNURM. We want it to be inclusive of all cities, not just the current 65. And it should be programme-oriented and not project-based as it is now.(This story was published in Businessworld Issue Dated 20-06-2011)
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Rejecting charges of favouring Reliance Communications, Telecom Minister Kapil Sibal on Friday insisted that the penalty of Rs 5 crore imposed on it for interrupting services briefly was as per the agreement between USO Fund and the private operator.He dismissed as "malicious, motivated and defamatory" the charges levelled against him by an NGO in a PIL filed in the Supreme Court that the company was imposed the penalty of Rs 5 crore against the Rs 650 crore as a favour.Addressing a press conference here a day after the petition was filed, Sibal questioned the basis for computing the penalty as Rs 650 crore whereas the USO Fund itself had recommended a penalty of up to Rs 50 crore only."I am deeply grieved by what is happening by the PIL filed by an NGO in the Supreme Court stating that Telecom Minister has abused his power to reduce penalty on Reliance Telecom to Rs 5 crore," an agitated minister said, adding that PILs should not be "used to settle personal score".Giving details of the issue, he said Reliance Telecom services were switched off for "whatever reasons" in November 2010 and on December 21, a show cause notice was issued to the company threatening imposition of "lumpsum" amount of Rs 50 crore as penalty for the same."The notice for Rs 50 crore was to pressurise the Reliance Telecom.... They got worried," Sibal said, adding finally the services were restored on February 16, this year and the company paid a penalty of Rs 5.5 crore.He maintained that the penalty was calculated on the basis of duration of disruption of services (7-45 days) as provided in the agreement between USO Fund and RCom. Sibal also termed as "unfortunate" the allegations that he had over-ruled officials of his ministry, saying the government could not function this way that a minister cannot take a decision because he would be labelled as "dishonest and wanting to favour private parties".Sibal suggested that the PILs were being misused as they were meant only for serving public interest and "not to settle personal score". He, however, did not elaborate even when asked whether he felt he was deliberately being targeted.An application was filed in the Supreme Court by Centre for Public Interest Litigation (CPIL) alleging that Sibal reduced the penalty from Rs 650 crore to Rs five crore against Anil Ambani-headed RCom for violations in the UASL agreement.The NGO alleged that a penalty of Rs 50 crore per circle should have been imposed for "violation of the terms and conditions of Universal Service Obligation Fund (USOF) agreement and UASL agreement by voluntary, unilateral and unauthorized switching-off/closure of services to subscribers from USOF sites without any notice.""The Rs 5 crore penalty on the ADAG firm was as per the agreement between the USOF and Reliance Telecom. The DoT was nothing to do with the penalty as the company had not violated the rules of license conditions," Sibal said.He said when the file reached him on February 18, this year, RCom had already restored the services two days prior to that. He said he gave instructions to impose penalty as per the provisions of the agreement and did not himself decide the amount of Rs 5 crore as penalty.He, however, was evasive when asked on what basis Rs 50 crore was decided as penalty.(PTI)
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In a bid to tackle tax evasion and check generation of illicit money, the government is considering classifying earnings from illegitimate sources like bribery and corruption as criminal offences under the income tax laws."The income earned from illegitimate means could be classified as a criminal offence in the Income Tax Act", said a senior Finance Ministry official.The official said the issue of tightening the tax laws is being considered by a committee set up by the government to suggest measures to check the menace of black money and prevent its generation.Generally tax avoidance on income earned through legitimate sources is treated as a civil offence under the Income Tax Act.Elaborating on the possible illegitimate sources, the earnings from which could be classified as a criminal offence, the official said, "these could include income from bribe, corruption, terrorism, narcotics, money laundering etc".Once such deeds are classified as "criminal offences" under the Income Tax laws, it would become easier for the tax authorities to "quickly book" such culprits and recover the income from illegitimate means, sources said.The issue of making tax evasion a criminal offence is being considered by a high-powered committee headed by the chairman of the Central Board of Direct Taxes (CBDT).The mandate of the panel is to suggest within six months changes in laws to curb generation and recover black money and prevent its illegal transfer abroad.Besides, the government has also set up a Directorate of Income Tax (Criminal Investigation) to deal with grave tax-related offences.The government has adopted a five-fold strategy to tackle the menace of illicit funds which include joining global crusade against black money and creating appropriate legislative framework.Although the current Income Tax provides for rigorous imprisonment up to seven years for wilful tax default, the provision has not been used effectively to unearth black money.Under section 276C of the Income Tax Act, 1961, persons wilfully attempting to evade taxes, penalty or interest can be punished with rigorous imprisonment ranging from three months to seven years with fine.(PTI)
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India's upstream regulator said on Monday it had asked Reliance Industries to drill 11 new wells by April 1, 2012, in a key block off the country's east coast where the private firm has failed to meet its gas production target.Reliance is pumping less gas than it should from the key D6 block of Krishna-Godavari basin, the second biggest gas producer in India after Mumbai High. Reliance was supposed to drill nine wells in this fiscal year. It will now have to drill two extra wells that it had failed to drill in FY11.Upstream Regulator S.K. Srivastava said Reliance was currently producing 48 Mmscmd gas from the D6 block, adding it would meet Reliance officials "in a week or two" to discuss the fall in gas output. On April 21, Srivastava said Reliance was producing 50 Mmscmd from the block.The company, which has agreed a broad parternship with multinational BP on field development, said in March it wanted to work to overcome "the technical challenge involved in these complex reservoirs."Srivastava said last month Reliance had not given a satisfactory reason for the shortfall.(Reuters)
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