Is WTO Relevant Today

     Business Economics & Services Team                                              

                                  Is WTO Relevant Today?

Everyone is celebrating the clearing of roadblocks in the WTO negotiations because of the ironing out of differences between India and the US in the food security deal. Coming close to the G20 meeting in Australia, the development assumed importance and is likely to fuel hopes of WTO playing an important role in trade facilitation measures.

But the pertinent point is whether the hallowed trade facilitation body has lost its sheen? Many thinks so and an equal number of people believe otherwise. But one the thing is certain that the conduct of this body, which was earlier known as GATT, will undergo a change: for good or bad I cannot predict.

If it has to emerge as a respectable and credible body, it should not only become a rule-based trade facilitation body by also has to reverberate that it has a human side also, when it comes to dealing with developing and least developed countries. It is a known fact that not many country representatives taking part in trade negotiations are either aware of the rules, impact or their negotiating powers. They go with the tide and vote for resolutions when they come up for passage. Can you believe that  some of the least developed countries have endorsed in the past most stringent rules relating to  hygiene, health standards, granting of subsidies, child labor etc. India was not an exception till a few years ago. In the ILO forum, we were signatory to some of the ardent resolutions, which could not be implemented at that point of time. Child and bonded labor were some among them. But still such bad practices continued till a strong political will emerged.

WTO has to go for an image makeover and has to adapt to the situation that are unfolding. Hegemonic character it wielded in the earlier days riding on the back of powerful US and the EU economies had dented its image to a large extent. That is also true in the case of other multilateral organizations like World Bank, IMF etc. There are now new players like China, India, Brazil, and Russia., which can tilt the levers of power. Already, we have seen the emergence of BRICS, which will make heavy inroads into the effectiveness of WTO. Also, it has to work with a human face. Trade and capital flows hardly know that attributes. Trade and compassion or empathy are believed to be poles apart. That doctrine has to change for the better. Poverty in Africa, Asia or Latin America should make the WTO think whether a trade aggrandizement policy will hold good. A new orientation should be given to trade without losing the steam attached to the terminology. That unfortunately is not taught in Wharton, Harvard or Princeton.  

About India’s theatrics on India-US Food security portends that WTO is still going to be a hotbed of politics. Why India objected to that some four months back and now agreed to that? Has it buckled under pressure from  the powers that matter or it wanted to up its stake among the comity of  nations that the new dispensation has its own thinking and can harp polices different from the earlier regimes. The nation wants to know about it.

What are the takeaways for India from the new dispensation? I do not think that it is going to benefit much from the merchandize trade since a lot of spade work has to be done to make our manufacturing sector competitive. I can see a double whammy prospects in the case of services sector exports. Relaxed visa regimes under mode 2 & 3 can enable the movement of natural persons across geographies. On the positive side that will help our engineers and doctors, management consultants, financial experts etc. to move to other countries. That also means that there will be a skill drain from India. Then the question is who will power the Make in India program. Do we have to import such people from abroad? That is the flip side!!!

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Euphoric Illusion

                              

Has the editorial policy of Indian newspapers changed overnight. From a pessimistic cast, they have moved to an optimistic mould. They find good in everything. Economy is expcted to grow over 6 % next year and even peak at 7% or so by the end of the next year. Interest rate is likely to come down. Fiscal deficit  is likely to touch the lowest ebb. Inflation will be contained. Both wholesale and consumer index are going south, which will be an enabler for cutting the rate of interest by the RBI. Stock market is at an all time high etc. etc.

That evokes in me some kind of nostalgia. During the last NDA regime, some uncommon  terminologies have cropped up such as " India Shining", "Feel Good Factor" and now it is more Indianized "Acha Din" (Good Day). The well being of a nation is counted in terms of the state of living of the men who have the least income. What they can afford? Whether, they can buy the basic necessities with the money they have in their pocket? A visit to the market will give one more insights into the conditions there. Onions are priced close to Rs 20 ( for ordinary variety) for kilogram and for good variety, the prices still hover around Rs 35. For tomatoes, it could vary between Rs 25 to 40 depending on the variety. For the common man's subzi  -aloo- cost is  between Rs 25 to Rs 50 per kilogram, depending on the quality and from where one is buying. Is it heralding of Acha Din. We have to reckon that during this season last year, all these vegetables were sold at much a cheaper price. For instance, for Rs 15, one could get two kilograms of aloo and so on.

What made the journos change the track? If it is a break from the past and to shower some cheer into an otherwise morbid situation, it is okay. But that is not the dharma of the journalists. They have to place the facts before the public and for that they have to move from their seats. In stead of getting a quote from a well known economists or a political commentator, they should listen to a homemaker from a poorer set up to know how she is finding difficult to make both ends meet. Her husband who is working as a plumber, daily wager, loader etc may be earning a few hundred rupees whenever they get the work. It is absolutely dificlt for them to feed the family apart from educating their younger ones. On the top of it, there are the expenses towards medicine, transport etc, which make him or her broke in the first half of the month itself.

During the peak of wiki leaks, The Hindu newspaper serialized the exposes and some of them were realting to India. I distinctly remember that there was a dispatch sent from India by a US diplomat, which clearly tells that to create a public opinion in favor of any issue or against , it is prudent to invest in the growing tribe of economists in the country. They can calibrate their comments in whichever way that one wants.

The bottom line is that when the stock market zooms high, it is not acha din, when the estimates for growth is pegged up, it will not change the life of an ordinary citizen qualitatively. They  feel good only when things are good. They also know that illusions are man made to mislead people.

  Business Economics & Services Team

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Cabinet Expansion-Gainers vs Losers

                     

In any reshuffle of the ministry, there will be some who will cheer, some suffer heartburn (they are not losers in the real sense). some who despise their fate being unlucky and a whole lot of people who are indifferent. I belong to the last category. I am indifferent for I feel that it will not make any difference to my existence. That is ture for all those in the last category.

A lot has been written in the media about  the cabinet expansion. Media also gave their own rating, good, bad, ugly and so on. I remember that once a seasoned journalist told me that Indian public is very emotional, sensitive and more importantly, has a short memory. Journalists  take advantage of these attributes in one way or the other. They criticize a person to the hilt, bring all his negative side before the public glare and all on a sudden, when he or she makes a grade, media laps it up. There are people in the expanded ministry, who have been pulled up by media for his vituperative utterances which created a lot of commotion and finally accommodated in the ministry. The only reason that I can figure out is that the state he represents will be going to polls next year and he can be a potential vote catcher.

I often wonder why our ministers are allowed to babble everything when it comes election. Should we have a law  that prevents any individual who takes oath in the name of the constitution from taking partisan stand? During the time he or she holds the constitutional power, that person should be debarred from electoral politics.  This will mean that the prime ministers, chief ministers, other ministers in the Center and states should not go for election campaign, during the incumbency of his or her office. It is a different matter they go for the campaign when the elections are announced. Such a time span between the announcement of election and the time the elections get over,he or she at best will be a part of the caretaker government. That way, they will not be able to take any decisions in the intervening time. Undoubtedly, such a measure will shore up the credibility of the government and the public will repose faith in them.

 The newly expanded the ministry, according to media reports, is slim, mean, experienced, has set to the caste equations and so on. I really do not understand the nuances of these adjectives. But one thing is very clear, as it was the case earlier, each aspirant was planting the stories in media  in ones  favorite newspaper to enhance his or her chances. Some of them have succeeded in their effort and good luck to those who could not succeed for next time.

 Coming to the kick start of the economy. Now that the finance minister can focus only on his portfolio. He need not have to oversee the complex ministry of defense, where there are myriad of challenges and issues. If hands on experience  is the criteria, General VK Singh would have fit the bill as defense minister. But he seems to be sidelined to an innocuous ministry of program implementation and statistics and the earlier portfolio of DONER has been taken out of him. Does it have anything to do with his performance?   

Now the ministers  holding the economic portfolios are the finance minister Arun Jaitley , Commerce & Industry Minister Nirmala Sitaraman, Railway Minister Suresh Prabhu, Aviation Minister Gajapati Raju and others holding chemicals, fertilizers, power, portfolios etc. Can they put together their act well. Only time will tell that. But one can forewarn them that not many months they will have the luxury of a favorable media. They have to establish themselves through their hard work, integrity and peoples' connect. otherwise, there will be many like Gowda's, VK Singh's and Javedkar's in the next reshuffle.

Business Economics & Services Team (BEST)

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Labor Reforms in India - What They Portend?

There is a lot of talk about labor reforms in India.  Many reports have come that it will be unveiled soon. But still it is not clear what will be those reforms. There are conjunctures and predilections. But on one knows exactly what these reforms are. Will the government openly discuss these reforms with the stakeholders and  political parties? Today, there is a news in Times of India that the President has approved the amendments to the labor laws  passed by the Rajas than Government. The report quoting the government officials, says that the move will open up  for deeper  changes in the archaic labor laws.

First of  all, let us face the fact that labor is a state subject  and one state passing it will not lead to its adoption in other states. Every state will have to move a similar legislation and get it approved by the state assembly.  Clearly, there is no consensus among the states to move towards such a legislation. Even if they go for it, there will be stiff resistance. And in some states like Kerala, West Bengal, etc it will be near impossible to have such a legislation. Even the BJP affiliated BMS, a trade union outfit has not made  its  mind clear in this regard nor the all powerful RSS, who have a sizable number of followers among the working class

In Indian situation, there are two types of labor laws operating. One for the IT companies, which almost all states having IT industry, have complied with. There is no restriction on night shifts for ladies, working hours, and almost all of them follow a policy of hire and fire. There is no union and therefore no resistance. In certain companies, there are advance warning systems to the under performers. In certain other companies, lay off and retrenchment of the efficient employees are resorted to as a policy of downsizing the labor force linked to general performance of the company. In some other companies, mostly, the multinational ones there are instances when the companies are closed down. And yet, there are no protests or resistance. It is because the people who are working in these companies are different from the people in factories or work sheds. When a worker in a knowledge company is fired or laid off, he or she gets another placement almost immediately or can hope to get a suitable position sooner or later. That is not  the case with the factory workers, whose skill sets are limited and scope for undoing whatever they had learned is very limited. He or she is going to join the backlog of millions of unemployed people  in  case of  unemployment.They will not have any safey net unlike in the developed countries.

I had extensive discussions with many owners of factories regarding the labor reforms. Significantly,   most of them are not looking for a hire and fire policy. They want less number of paper works and compliance. Presently,  I am told that  a company has to maintain close to 25 records about the employees. Some of them are trivial and unproductive exercises but non compliance attracts penal action.They want such silly restrictions and unnecessary paper works to go.

Admittedly, the number of strikes, go slows and things of that ilk have come down substantially. The employers' organizations are not talking about the man days lost on account of the strikes and go slows. They   want to have the rights to  rationalize the labor as and when they  require. It is a fact that the government could get rid of  millions of workers who were working with National Textile Corporation  without giving them any compensation or minimal packages, despite having the same rigid and archaic laws.

There are many private sector units which had pulled down their shutters without giving any notice to the workers. Their salaries are struck for a long time. Despite the promises, no government had come forward to help them.

Then why the talk about the great labor reforms? Let not the government be over enthusiastic about it since it will have a huge backlash. 

Business Economics & Services Team

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Circus of Retrospective Tax

The latest political controversy in the public domain is about the retrospective tax: to be precise whether the then fiance minister and the present President of India Pranab Mukherjee did consult the former Prime Minister Dr Manmohan Singh when the government wanted to go ahead withthe tax even after Supreme Court decision on Vofofone . The issue came up at a function: a book launch.  The finance minister of immediate past Mr. Chidambram, that, " .... I think, I think the matter was discussed at some level when the decision was taken...." When further probed, the canny lawyer turned politician ducked the question by telling  that he would reveal more when he writes his book. That wry humor is characteristic   of  Mr.Chidambram. 

The public wants to know more about the thinking of the government and it is their right. Why the government wanted to go beyond the apex court's decision? Why the then opposition party and now the ruling party, which criticized the government's decision at that time telling that it would affect the  flow of FDI  into the country , is now going soft on retrospective tax regime. The Budget proposal has mentioned only that the present administration will not go for any retrospective tax regime. What about the tax regime that existed before? What about the state and findings, if any  of the proposed empowered committee which would go into the whole issue and come out with their suggestions?  Will a decision come out soon or we have to wait until the presentation of the next budget?

There are myriad issues surrounding the retrospective tax regime and specifically on Vodafone case. If two parties buy and sell an underlying asset in a third country, the home country (third country) does not have any jurisdiction over it? What is the settled international law? Is it the  first case ever happened  in the world? If it is not happened for the first time, what  are  the procedures / decisions taken in other countries?

I would not have asked this question, if the last three successive finance ministers were not lawyers. The last two are eminent lawyers and the third is considered as a person having wide administrative experience (He also has a law degree).

Linking Vodofone case with flow of FDI, I think is stretching things too far. FDI is not an end in itself. It can at best supplement and complement the investment. I do not know precisely the ratio of  FDI to the total investment in the country for the 15 years or. My hunch is that it pales to insignificance as compared to the ratio to domestic investment. My last question: Is it fair to give that much importance to FDI at the  cost of  general public, who get enriched by more revenue realization by the governemnt?

 Business Economics and services Team (BEST)

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Will the Hunt for Black Money Fall Flat?

Reports are emanating from different quarters about the seriousness of the government to curb the black money. We hear about close monitoring of the tax havens. Consultations with countries like Cyprus, Switzerland, Mauritius  etc are in progress. The latest is the proposed team from external affairs ministry  to visit Cyprus, which is reckoned as one of the top tax havens and a destination used for round tripping money through the foreign institutional investors. There are indications that the government may drop some of the provisions that abet round tripping. That will attract the provision of withholding tax once the abetting provisions are removed.

We have been hearing about these serious talks and contemplative steps for a long time. The previous NDA government  also talked about it. There were evidences of high trafficking of round tripping of money through Mauritius route. But precious little was done to curb them. The systems that enable the flow are opaque. Added to this, there are vested interests who lobby for the continuance of it. Whatever  steps  were taken  in curbing the source of black money had happened only after 26/11 when the US went all on a hog to find out the source of terror  money. The recent breakthroughs in unearthing  black money and corruption in high places had happened only with the tip off from other countries or thanks to revelations of the wiki leaks.   

Let us take the present case of list of deposit holders in foreign banks, which was handed over to the apex court in ndia in a sealed envelope. Now reports are coming from the SIT that the money in these accounts are pittance. The public do not know whether they are planted stories or not. Also, there are  numerous stories and lists in social media floating around, each different from the other. New names are added both from the ruling party and opposition, who have allegedly stashed away billions of money. Public is at a loss to reckon which is the fact and which is the fiction.

Now no one is talking about the black money, which was the hottest subject and headline story in rint and electronic media. Anchors who used to shout at the panelists who give a different view points were conspicuously silent. Have they got instructions from the top or being silenced by their benefactors by one way or the other?

Many  in the knowledge of things vouch that not much can be done by the government in this regard. Then why not do the possible thing. Give amnesty to the black money holders and charge from them  30 percent of their booty, which is the highest tax slab applicable to a person.

Business Economics & Services Team

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US Techie Companies Romance with India

                     

 Chetan Bhagat has batted for Microsoft and particularly for Bill Gate Foundation in his latest novel " Half Girl Friend." The popular Indian writer in English had narrated with a story line how the aid  from  the Foundation has transformed a village school in the remotest part of Bihar  run by his hero in the novel and his mother. Not only that the  Foundation has come to his rescue in his hunt for his estranged half girl friend and finally in tying the nuptial  knot on her. I am told that the  book will be translated into vernacular languages and will be serialized in a popular Malayalam weekly.

Microsoft is also gearing itself for helping India in the financial inclusion program of the  prime minister in tracking the bank account holders in villages in the far-flung areas. According to some paper reports, it will communicate to the government the villages that are saturated in terms of coverage of bank accounts, so that the authorities can concentrate on other villages where the coverage is lagging behind.

Not to be left as a laggard in the race, Google has unveiled recently a plan to bring Indian languages under its ambit to give the non-English speaking people  an easy access to the internet. It  has drawn up a plan to increase the number of Indian  net users to 500 million by 2017. Besides setting up an Indian  language alliance to facilitate the process, the world's largest search engine company is holding parleys with smart phone manufacturing companies to have inbuilt key boards in Hindi in the mobile phones. It is believed that from the Hindi belt, it will move to other parts of the country to bring all other important languages under its ambit.

The e-commerce companies from the US have already made their presence in India, through fully owned subsidiaries or through the joint venture route. Hectic lobbying is on  for allowing direct participation of FDI in e-commerce. Sooner or later, the government will have to open up the segment for accelerated flow of FDI.

The romance of the techie companies with India has clear commercial motives. India's internet penetration and tele-density are set to increase manifold. Along with that business transacted through the net will increase manifold in the coming years. That sounds music to the techie companies since they can rake up revenues. For search engine companies, that will a boost to their ad income. Telephone manufacturing companies , it will be a bonanza for selling their products and for the content and other back-room operators, it will mean more business.    

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