All posts in the Politics category

The Israeli Relationship – Moralistic, Geopolitical & Palestine Considerations Analysed

Published July 5, 2017 by vishalvkale

This week, just yesterday as a matter of fact, our Prime Minister landed in Israel  – the first ever Prime Ministerial visit to that nation from our side. This is a seminal event; yet, it was saddening to see some voices being guarded, as opposed to openly welcoming this move. In a democracy, it is perfectly fine if you don’t support the ruling party, having voted for the other side; it is accepted as well as expected that you criticize – but when the Government does something laudable – you should welcome it.
This move by the NaMo Government stands in that list; a fully laudable move, one that we would do well to welcome, leaving our apprehensions aside for the time being. On that other hand – this is not a time for chest-thumping either; let us reflect what this move means for us as a nation, and analyse the pluses and the minuses of this new equation. Whatever else we look at, this is not the time for misguided moralistic analyses – Geopolitics is not a field that lends itself to excessive moralization, to be honest. You have to be extremely hard-nosed and practical in Geopolitics.
These stem from the Israel-Palestine issue; and the hard-nosed Israeli response. I feel for the problem, to be honest; but I have to admit with deep regret that they aren’t Indians – and Indian interests have to be placed first. I don’t say I like the way it is being handled – but there is little we can do, beyond a point. We aren’t the world police – and neither do we want to be the world policeman either. The onlyway to look at this problem is from a Geopolitical angle; not a right-and-wrong angle.
Further, it is surprising to note objections being raised basis Palestine, and in some cases China: I do not recall many voices questioning our relationship with the USA, which actively sends arms and aid to Pakistan, and which was the original provider of weapons to our enemy, leading from the Afghan conflict. The continuing support from the USA to Pakistan is a matter of documented record – and yet  few people raised a question as we went closer to the USA. Where were these moralizing objections then?
Not only that, Is the USA’s record crystal clear? Want that we should go into its highly chequered and ugly history? Or perhaps the innumerable times it stopped India, or tried to, from achieving its justified goals? I respectfully submit that The USA has a far uglier record than the Israelis who actually are saints by comparison. Remember the Iraq Fiasco? Where are those WMDs? And yet, we welcome closer ties – because it is the primary world power, and a much-sought after relationship?
I don’t recall as many questions being raised on the impact of our relationship with the Russians as we came closer to The USA. Why is that? So, it is OK if you go after an aspirational relationship with the premier world power, forgetting our long standing support from Russia? That is something that has required far more serious thought, and has been handled very adroitly by all Central Governments we have had; let us give them credit for that. Thus, cant we cut slack for our Government and our Diplomatic forces that they can handle Israel and Palestine with equal aplomb?
Yet, when we come to Israel, we get instant moralization. Where was this moralization when The USA is involved? Its human rights record is ugly beyond mention – yet, no controversy. Where was this moralistic stance when we moved USA-wards, forgetting that it was Russia who has always stood by us? When has the USA ever stood for us in Geopolitics? Almost never historically! What’s good for the geese is good for the gander – you cannot ignore moralistic issues in one relationship, and apply them in another. You have to apply the precise same standards in each case.
More serious are the Geopolitical objections, which to be perfectly frank – deserve a serious reading, and merit a reasoned response from us. To summarise, these are India-Iran; Arabs; NRIs in the Middle East; and the Israeli-Chinese relationship. We need to look at all of these in an informed debate : a dispassionate analysis of these is required, shorn of ideological baggage. Some of these frankly are fantastic, like the NRI problem or how our NRIs will be treated due to a relationship with Israel – that is just stretching things too far. The Arab world also has relations with Israel!
First, India is seeking alternatives to OPEC actively, trying to reduce the dependence on it for Oil. Second, some Arab nations are anyway fedup with Pakistan due to terrorism, and that is a huge point in our favour. Third, The Arab World is itself giving overtures to Israel – Egypt, Jordan and Saudi Arabia to be specific. We are also building relationships with The Arab World, who can also see our impact in Afghanistan. So, why on earth shouldn’t we build a relationship with Israel?  Fourth, Iran has seen our support to them in the face of The USA – and our diplomatic forces can be expected to handle the delicate relationship balance. That leads to Fifth – the Israel visit comes after a visit to the Arab world!Thus,  If we can balance USA and Russia, we can certainly be expected to balance Iran and Israel, that much seems to be certain. Let us not sell ourselves short.
Now, the Israeli Chinese Relationship. Why on earth should this make us uneasy? First of all, Israel is but of three major defense partners of ours, alongside the USA and Russia. We have hedged our bets, not being dependent on any one partner. Sure, a lot more needs to be done, but the direction is right. Second, Israel had supported us in 1962 against China. While that is no guarantee of the future, it is nevertheless a significant factor. It actively supported our Armed  Forces as well as our anti-terror efforts many times after that as well, including as recently as in 1999 during the Kargil conflict. Third – we are perfectly fine with having a relationship with USA, which is supporting Pakistan openly – but use a different yardstick to judge the India and Israel relationship! That is amazing!
Finally, on Palestine, I accept that we have been a long-standing supporter of the cause.  But we need to understand that we need to look out for ourselves first. We are in a world with rapidly re-aligning geopolitical relationships. In such changing times, we need to change with the times, and respond to the challenges being raised. A strategic alignment with Israel is a given, as we have many common points and mutual areas of interest. This is not present in the Palestine relationship.  Furthermore, there is no other reason to be reticent; we will have to trust our diplomatic corps to play the balancing role, That is the need of the hour. There is no such thing as a perfect strategy – it is always give and take.
This does not include the many areas of trade and scientific commonality that we enjoy with Israel – which is only just one more added incentive for closer and more open relations with Israel. From my opinion, my point of view, it sounds slightly hypocritical to talk of our relations with The USA is one voice, and analyse the Israeli relationship along diametrically opposite tones. In this, I stand solidly with the Government praisers – well done, NaMo Government. You have taken a splendid step for the reasons outined above. That said, it has been a collective effort- it has to be said that all political parties have stood by this relationship for years and nurtured it actively.

Selected References : 

The Indian Economy – Detailed MacroAnalysis, Supply Side

Published June 3, 2017 by vishalvkale

As we move towards the GST implementation, the prospect of an economic distress is becoming increasingly evident, at least from a variety of economic indicators. The extreme-right wing is quick to point out the GDP Growth which is still among the better rates in the world & the numbers from Agriculture as proof that all is well; and add to this potpourri the rising stock market, laying claim that all is well with the Indian Economy. The other side is equally quick to point out the slowing GDP numbers from Q4-17 as proof that all is not well.
As a middle-roader, it seems evident to me that despite all the good that has taken place, as well as the systemic changes implemented aka the GST, The reality is quite different, and calls for some deep soul-searching. A look at the complete picture, far from inspiring confidence in the state of the Indian Economy, actually raises a series of questions, and some serious doubts over the near to mid term. Over the long term, a positive outlook is pretty much a guarantee; the trick is getting to the long term, which poses some serious and deep questions.
Gross Fixed Capital Formation
First, the investment numbers. Gross Fixed Capital Formation is at a slow point, which is a cause for serious concern. Not only is it slow, but it has been slowing for 4 years now – 2013 {Refer the chart below for details}. This is a vital point, for this means that the issue isn’t bad policies by the current Government; but rather the issue actually is an economic slowdown that s responsible. Other charts we look at will no doubt establish this general slow-down in the Economy, which has generally gone under-reported.

What is GFCF? As per Economics Help, Gross fixed capital formation is essentially net investment. It is a component of the Expenditure method of calculating GDP. To be more precise Gross fixed capital formation measures the net increase in fixed capital. Gross fixed capital formation includes spending on land improvements (fences, ditches, drains, and so on); plant, machinery, and equipment purchases; the construction of roads, railways, private residential dwellings, and commercial and industrial buildings. Disposal of fixed assets is taken away from the total. Thus, a slowdown in this is a cause for concern!
The Index of Industrial Production (IIP)
Next, let us look at the IIP : The Index of Industrial Production (IIP) is an index for India which details out the growth of various sectors in an economy such as mining, electricity and manufacturing. Here again, the Graph shows a worrying trendline, as can be clearly seen in the chart given below. This is notwithstanding the change in the baseline that effected; the higher numbers of the new series would automatically be higher for the older numbers as well.

The Purchasing Manager’s Index
Add to this the PMI – The Purchasing Manager’s Index, which is The Purchasing Managers’ Index (PMI) is an indicator of the economic health of the manufacturing sector. The PMI is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment. Here again, the trendline can be seen since 2013 or thereabouts, showing increasing stress in the manufacturing sectors of India. Note that a figure below 50 can be interpreted as less than half the purchasers are not too gung-ho about economic prospects.

Credit Growth
Add to this the figures for Credit Growth, and things get really serious : this is the rate at which the bank lending to business grows vis-à-vis the same period last year. This rate is at its lowest in the past several the interested to check for themselves. It can be seen that there has been a long-term degrowing trend starting 4 years ago – again, as in all charts above, making this article a simple economic analysis, and not a comment on this Government.

Gross NPAs
Lastly, let us take a look at the graph of NPA of Indian Banks. This once again shows a rising trendline, extending back 2-3 years and more. While this deserves a more detailed look, to be taken up later, again the overall picture this trendline poses does not inspire confidence.

Putting it all together
Put it all together – IIP, PMI, GFCF, NPAs, Credit Growth – all are showing a decreasing trendline. In almost all, the trendline extends beyond 2014; in almost all, the trendline in the tenure of the current government clearly shows little impact as of now, as can be seen from the graphs quite clearly. These are key economic indices – Industrial Production, Purchasing Managers, Gross Investment in Fixed Capital, Non-Performing Loans, Credit offtake from banks all are signs of healthy economic activity. And in each and every case, the trendline is not one that inspires confidence. This is just the supply side of the equation – the demand side has an equal number of stunning surprises, as I look at PCFE, GCFE and consumer sides in the next article!
Thus, as of now, there is little to celebrate for the extreme-right, right, left or centre wings. The ground reality is that the situation is worrisome, and the interventions of the current government is not yet giving results. With the GST now coming in, the hope is that this will turn things around – but will it solve the core issues that has led to these graphs above? Why has this happened? For that, a deeper analysis is required. But, for now, let us keep in mind that, notwithstanding the GDP growth rate we are all crowing about – the situation a dicey, requiring hard work, and some serious intellectual thinking for solutions!

References: Trading Economics, and Capitalminds for graphs, charts and numbers

Trump & India : A Reality Check

Published May 6, 2017 by vishalvkale

The election of Trump as POTUS had got the right wing in India in a celebratory mode; there were hopes of this event having a positive impetus on the Indo-US relationship. This hope was, at the outset, a wildly optimistic hope, given that Trump was elected on a protectionist rhetoric, a message of bringing jobs back to The USA; this was, however, ignored in the larger light of his views on terrorism as well as other factors, which seemed to indicate good tidings.
In the approximately 100-odd days since his taking over as POTUS, however, early indicators have given enough reason for the more optimistic among us Indians to become far more realistic; Trump as a President has done exactly as he has promised – which is admittedly a surprise even to me. Frankly, on one side, it is good to see a politician walking the talk in the USA. That said, the other side of the equation has given rise to many, many deep rooted questions which need answering for us.
His focus on creating Jobs in the USA are beginning to give results for the Americans; good for them. But, it has come at a cost. In a connected world, any movement either side in any place will have an attendant cost side on some other side. And in this, we are on the other side, as more Jobs in America mean lesser Jobs in India, as visa rules tighten up, and Indian companies are forced to invest in the USA not just in infrastructure but in hiring as well. This means, as per at least one article, loss of jobs in India, to the ratio of 4:1. This makes perfect sense, given the per capita difference and wage rules difference.
From this one example alone, it can be seen that the coming of Trump is nowhere near being exactly a great thing for us Indians, at least not in the business atmosphere. Now whether it is a bad thing remains to be seen; just cause it isn’t good doesn’t automatically mean it is bad. It depends on a variety of sectors {I have taken but one example} as well as on our response on the diplomatic and business fronts. That is something that we shall see in the fullness of time. But for now, there is enough reason for us to become realistic, stop eulogizing Trump and the USA, and analyse dispassionately.
Having said that, there are early indicators of rising stress in some other areas as well, where either disputes are pending, or where the Trump administration is showing signs of toughness. Taxation in startups and corporates is one such area that comes to mind; the USA reviewing nations with which it has a trade deficit is another area of potentially rising stress. Note that early last month, The Trump administration launched  a 90-day investigation of countries, including India, against which the US runs a bilateral trade deficit – just another example.
Just think of this for a moment; a rich country, doing its best to profit for itself, at the cost of a poor country. Think of the amorality of this hard move. You can call it business all you want – but if you knowthat your move will harm a country with which you are trying to be friends, I am pretty sure that a middle path can be found, so long as there is genuine desire on both sides of the equation. India has shown its desire to be friendly; now the ball is in the the US court to respond. I am not hopeful! Not only is this amoral, it does not sound a very friendly move on the part of the USA!
If that isn’t all, this – aah – trend of moves that have the potential to disturb India doesn’t stop at trade. It extends to the Geopolitical and Strategic levels as well, where there is a lot more clarity needed on direction as on date. So far, the USA has not only shown no indication of acting against Pakistan, it has in fact done the reverse,  trying to re-hyphenate India-Pakistan, offering to intervene in our bilateral matters. More recently, it gave indications of cutting aid to India, while keeping Pakistan untouched!
Put it all together – and the reality stares at you. India-USA are as far apart as they were before; yes-  there are possibilities of great relations, a potential which was absent earlier. Agreed, and granted. But the very real differences in world view, economic realities and priorities, internal realities, and geopolitical differences mean that we need to keep our eyes peeled, and our options open; we need to ensure our interests are protected. And this is where the right-wing can help by stopping the rhetoric!


  1. Delhi Solar Policy plans to solve energy crisis; here’s how solar panels will power your homes     
  2. Trump card: Delhi to get tough if US blocks Indian exports
  3. Solar energy subsidy: After attempts for amicable solution fail, India drags US to WTO dispute settlement body
  4. India rejects US offer to mediate with Pakistan
  5. US plans to gut aid to India but continue with $200mn to Pakistan
  6. Every American Infosys hires in US will lead to loss of 4 jobs in India

Book Review – Emerging India : Economics, Politics & Reforms

Published April 1, 2017 by vishalvkale

Emerging India – Economics, Politics & Reform is a book penned by the Former RBI Governor & Rajya Sabha member, Bimal Jalan. This is a slightly dated book, in that although it was compiled in 2012, it actually consists of a compilation of a series of lectures from the past 3-4 decades. These lectures and/or articles are those that were penned or delivered by the author at various fora. These include both top national institutions, ministry notes as well as international lectures as far apart as London and Sri Lanka. It is these two factors – the time period, snd the original source of the lecture, that makes this such a fascinating book, one well worth reading for everyone interested in the Indian Economy!

Emerging India : Economics, Politics &Reforms

The book gives a deep and rather detailed look at the Indian Economy through the 70s especially, with much shorter glances at the 80s, before moving on to the 90s. This does leave one wanting for more, especially on the 80s period, which is the period when the first burst of Economic reforms took place in India. The lectures are all either of 70s vintage, or 90s onwards. There isn’t even a single lecture from the 80s so far as I can recall.

SEGMENT ONE – The Political Context

The entire book is organized into 4 sections. The highpoint of this book is the focus on Politics, Administration and Governance; thus making clear that these are central to Economics on a Macro scale. The first section of the book is devoted entirely to the problems & successes of Politics and Governance in India – The Political Context. This section scores for its blunt and factual analyses of the pluses and minuses that we have achieved so far – a searing examination of all aspects, including separation of Powers, Judiciary, Coalitions and Parliament… topped off with a superb speech given in the Rajya Sabha, looking at the implementation of various Government Schemes at local levels.

SEGMENT TWO – India’s Economy, Policy & Prospects

The next section deals with India’s Economy, Policy & Prospects. This starts with a ground-breaking examination of the period from the 1950s – 1990s, which will, for the uninformed, truly break new ground and destroy various incorrect impressions. {The logic for this has been connected up in the 4th segment, so hold onto any thoughts}.  This section also has a detailed explanation of the 1991 crisis and its genesis in economic terms; and the various policy measures / requirements on the Fiscal, Finance, Infrastructure & Public Sector areas, as well as a short Macro-Economic analysis.
But the key chapters here deal with The Social Sector, & Finance and Technology. It was heartening as well as educational, reading a top economists’ take on these two sectors. The short and sharp section on Total Factor Productivity {TFPG} and Incremental Output Ratio {ICOR} of India vs The Developed World leaves a deep learning and impact. This two-page section alone justifies reading this book! For India, there was a positive turnaround on the TFPG as well as the ICOR- TFPG since the early 1980s, and ICOR since the early 1990s, which is again a good sign, as well as putting paid to many a wrong impression that quite a few people have!

SEGMENT THREE – Money, Finance & Banking

The third section, and the one after that, are slightly technical, but engaging nonetheless. The 3rd Section deals with Money, Finance & Banking. The highlights in this section are the base-level explanation of a functioning Finance System, Management of Risk {We shall connect up later in the conclusion}, a detailed look at the International Financial Architecture, and the current and future status of the Indian Financial System. Of special note here are a superb analysis of the East Asian Crisis, and the segment on The Way Forward, which looks at Prudential, Provisioning & Capitalisation Norms,  Legal Reforms, Rural Banking, Credit, Liberalisation of Financial Markets and Institutional Reform and the interest rate structre… we shall look at this a bit more in the conclusion

SEGMENT FOUR : India’s Economic Reforms – A Perspective

The last segment is India’s Economic Reforms – A Perspective. This is a detailed, educational and very revealing look at the history of the Indian Economy, almost – it looks at the various stages of reform and self-examination in especially the mid-70s onwards. This includes 3 unpublished notes from the Ministry of Industry in these years. The papers do highlight the problems we all know were endemic in the system – telling us that by the mid-80s, it was recognized internally by at least some intellectuals that reform was needed. This tallies perfectly with the story that played out – with initial hesitant reform starting in the mid-80s by the Rajiv Gandhi Government, as I recall.

Interestingly, the attached short economic analysis of this period does suggest that the 70s was not conducive to undertaking reform, or rather, there was no choice but do what the Government did in the 50s, 60s and 70s, as the Indian Economic Situation or HDI situation did not permit or give the leeway for any other mode of operation. That said, the licencing and other changes of the late-60s were uncalled for is what I think as of now. But one thing is clear – there is no basis for blaming what happened; the economic performance of the 50s and 60s places that pretty much beyond argument, especially coming on top of zero or negative growth during the colonial period!


In Conclusion, I can state that this is a complete resource on understanding the Marco aspects of the Indian Economy; it looks at structural, international as well as policy issues; it gives facts throughout, and it gives a complete understanding of the History of the Indian Economy as well. It breaks new ground in several matters, makes a thoughtful and deep examination of various issues and the economic status, and is thus a valuable resource.
That said, there is one observation that hit me hard in two places in the book – one is documented above in the 3rd Segment – The management of risk. The second place was in the 4th segment, which had a look at the Basel Committee and its scheduled new norms of 2005 implementation. {There was a third version post the latest crisis – 2010, the Basel 3}. We also have various credit rating agencies, and what-have-yous; yet no one that I know of is talking of the implementation aspects like fake or inadequate documentation, special approvals and so on; and not enough focus is being given on securities and especially derivates, – which were among the key contributory factors to 2007!  

Book Review – Tales From Shining And Sinking India

Published March 15, 2017 by vishalvkale

Image result for tales from shining and sinking india amaryllisTales from Shining and Sinking India is a series of deep fascinating and interesting stories covered by a journalist during the course of his career. The selection is stupendous, meaningful, and a great value add, besides being interesting and largely of current interest. The eclectic selection includes stories on the Naxal problem, massive floods in Bihar, the 26/11 attack and its Media coverage, Air Accidents – YSR Helicopter accident & Mangalore, Chandrayaan, Tibet, A visit to Pakistan as a Media professional, West Bengal and the fall of the Left, and the two best ones – Anna, and a lovely article on Festivals of India
Tales from Shining and Sinking India is a book by a Media Personality – Akash Banerjee; it has its many good points; but let me depart from my convention, and first point out what I felt were its negatives. I want the readers to leave with a positive impression of this excellent work, so for once let me get into the negatives of the book before I delve into the positives. There aren’t very many, to be honest.
Image result for tales from shining and sinking india amaryllis

First and foremost, this is an out and out defense of the Media, start to finish. That is the impression I got from it. Now, that is not necessarily a bad thing – the other side of the story does need to be told, especially in an atmosphere wherein the Media is often called up for its ways. The US example is present in front of all of us – and that is why, despite me calling this a negative point, this book needs to be read by all. Credit where credit it due. That said, the points raised in at least one article, maybe two or more, failed to impress me, especially the article on 26/11 Media Coverage. I didn’t buy the arguments put forward, sorry. But as this is a book review, I leave it at that. Read it yourself to form your own opinion. Suffice it to say that I remain singularly unimpressed by the defense stated.
Furthermore, the second negative – the point in the Epilogue on Paid Media, well – let me just say that I don’t buy it as an individual. The points raised by the author, while pertinent, do not tally with what I have experienced. I have read one-sided views on at least two scientific topics, with the brunt of the articles being on one side of the argument only. The other side – well covered in more than several researches – didn’t see the light as often as the other side. Now this may be due to opinion as well – not paid news; but unless these and such instances are analysed and explained, I just don’t buy the entire segment in the Epilogue, as it seems to me one-sided. I can also spot many other examples from memory, but science is fact-based, so I choose only science.
Moving on to the positives, let me start be saying that there are so many that it will be difficult to list in a small Blog Article. The subject matter this book contains is so pertinent and varied that listing all pluses is not feasible. So let me just focus on the main points I noted. First and foremost, the depth of coverage of each article, and the entire presentation is excellent. This makes for riveting reading. Since these are personal experiences, depth refers to the complete experience of the Author, and the attention to detail. That is remarkable.
Next, the choice of articles and the subject covered deserves a special mention. You get a view of the on-ground scenario in a variety of contemporary and vital aspects of public importance or interest, ranging from Pakistan,  Natural disasters, Accidents, Terror aspects, Media, Politics, Science – topped off with a delectable number on India’s Religious Festivals. It is this top-notch mix of articles that make for a fascinating, riveting read; giving the book a lovely flavor – this is a very highly balanced book indeed!
Third, the articles, or rather memories, are so well presented in the book, that you get a birds-eye view of the entire scenario as it plays out. The follies as well as the good points have been fairly narrated, with a full coverage; this tends to lend authenticity to the work. The coverage is fairly in-depth, and it gives us an idea of the entire scenario. The articles on the Tibet situation, India’s Festivals, Bihar Floods, Naxal Menace, Anna – and The West Bengal Left’s collapse are the best of the lot.
Fourth, and perhaps the most significant, it gives us, the audience, an inside look at the career of a Journalist in the modern high-pressure world of constant 24*7 news, the pressures they work under, and extent of the hard work, trouble and hardships they have to go through to get us that vital news-bite. This is, in my opinion, vital – as the 24*7 atmosphere is here to stay; and rather than blandly criticize the Media, or take it for granted, we should all be aware of what they go through. This book is a significant contribution in that realm. All in all, a class book truly worth reading for all bilbiophiles, indophiles, current affairs followers and Media persons… 

Punjab – AAP Debacle, Or Just The Start?

Published March 14, 2017 by vishalvkale

The recently concluded Elections in Punjab, in particular, returned a surprising result; few people had foreseen such a massive victory for the INC. While even the UP elections were rather of a surprise, the difference was that the UP results were not as suprising, given that on-ground reports from my friends in UP were very gung-ho about the BJPs prospects. But there was nothing in the air regarding Punjab that at least I read, with the result that I got a complete surprise.

In my opinion, after studying the entire results data constituency-wise, as well as the history of elections in terms of results, the question that comes to my mind is this : were we guilty of expecting too much? Historically, Punjab has always been a two-way fight between Congress and SAD; and the AAP was a rank newcomer to the scene. This reality has to be kept in the backdrop. Second, the win in New Delhi for AAP was in a different political and ground reality, and the realities in Punjab were slightly different. Third, as others writers have also noted, there were mistakes committed in the run-up. Fourth, there was also the scepter of internal issues in the AAP. All of these were known to us.
Expecting too much is not the same as accepting defeat after a loss. By expecting too much, you let your ambitions and desires soar; the resulting crash leads you to ignore the benefits that have accrued, as you go into the mode of post-mortem. And the reality is that a new party has exploded onto the scene in the state with a significant vote-share; never in the history of Punjab has any party apart from these two won 20 assembly seats. Only the Janta Party in 1977 won 25 seats; even the BJP got 18 and 19 seats twice. Thus, this is a very respectable opening for a new party. Note that 77 was a different pollical atmosphere and 97/07 BJP numbers were from an established party. The AAP is a rank newcomer.
Looking further into the numbers, the AAP garnered a vote-share of 23.7%. Dig deeper, and both issues, as well as areas to focus on, start becoming apparent. In the seats which AAP won, it got an average margin of 9.58% over the 2nd candidate; this number is 19.79% for the INC and 18.99% for the SAD-BJP combine. The AAPs margin of victory is far slimmer, meaning that the other parties are deeply entrenched into the local people. This also goes to prove the splendid job that the AAP did achieve, given the circumstances and all that happened in the campaign.
It is noteworthy that they managed inroads in a state which has had only two major players since independence. The slimmer victory margin underscores the strong support for the existing parties, as well as shows AAP the way forward – Consolidate on the gains acquired, and grow from here. The Janata Party in 77 could not consolidate, neither did the BJP having acquired a similar level of strength. But what is truly in AAPs favour is its newness to the political scene. Far from being a problem, this newness is actually a great big advantage in its favour-  provided they develop their policies and their core base properly. Another data point also supports this contention – the SAD-BJP, despite having only 18 seats, had a vote share of 30.9%, again showing deeply entrenched followership.
What is more, when you go deeper into the data, what transpires is even more heartening. Of the 10 seats where the INC had the slimmest margins {upto 5.25%} over the next best, 9 were AAP candidates, who lost by a few thousand votes only. This indicates that it is feasible that the AAP is eating into the INC vote share and support base {though this cannot be a definitive conclusion, need more data and facts}. Again, this gives the AAP a strong starting support base which it can develop into a core base, from which it can grow in the years to come.
There can be no doubt that the AAP did not do as well as expected; in our first past the post system, yes – the AAP lost. But it wasn’t a comprehensive loss by any definition of the word. There are enough indicators of the way forward present, and it is now upto the AAP to pick up steam and develop their core base from here onwards. Given their overall strategic approach, I for one have no doubts. The AAP while it has committed errors, has also shown the ability to learn fast. In 2014, it tried for 432 seats pan-India. Since that experience, they have now altered approach in favour of a steady growth state-wise. The ball is now firmly in AAPs court.
The last point that I make here- these elections have been very heartening indeed, in that in three cases, the results was a clear one. That is what we need – two or three main parties in contest, which ensures stability of policies and governance. It was heartening to see the BJP emerge as the single party in charge; as also the INC in Punjab. We also need to keep track of NOTA… in Punjab, NOTA managed a share of 0.69% overall, emerging as the 4th or the 5th choice in 60 of the 117 seats. This again proves the contention above-  the emergence of two or three strong choices. This bodes well for our Demoracy!

1) assembly elections 2017 results – HT  2) Punjab Assembly Election 2017 Results – Elections.in    3) Raisina Series – AAP’s Punjab post-mortem…    4) Firstpost – Punjab Election Results 2017: Congress wins 77 seats; Amarinder Singh to be next CM

Budget 17 – Main Analysis of Proposals

Published February 5, 2017 by vishalvkale

So far, I have looked at what could have been in terms of the budget; and the overall Macro-Economic Scenario and the Budget assumptions, and asked myself three questions : namely, in short. Will the budget give a boost to investment, demand and boost agriculture? But, before we move to looking at answering these questions, let me first of all appreciate and point out the most significant changes made from this year onwards :
1.    Merging Railway and Union Budgets
2.    Plan and Non Plan heads done away with, replaced by Capital and Revenue heads
3.    Moving forward of the date of budget presentation and unveiling
4.    This has gone unnoticed : rationalization of schemes, and focus on the key schemes
I would also like to point out that, at least in those articles I read, there was not a sufficient presentation of the viewpoints of both sides, that is, for and against these changes given above. A detailed study of the accompanying budget documents brings out the Government’s viewpoint fully; my article is not meant to analyse these moves – except the 4th. This has been clearly stated in the Fiscal Policy Strategy Statement, pg 18 pt 10 and pg 26 pt 56; and in the Budget Speech Point 18; this rationalization, first begun last year, is being carried forward this year. In my opinion, this deserves a deeper study. That said, off the cuff it can be seen that a more directed and rationalized scheme structure will aid their implementation. This is a truly laudable effort that has been started, and needs to be highlighted. Granted that key will be the selection of schemes but that someone is thinking along a defined implementation ease is laudable.
This year, the budget in the first part focuses on Farmers, Rural Population, Youth, The Poor, Infra, Financial Sector, Digital Economy, Public Service and Prudent Fiscal Management.
1.    Farmers: In my analysis of June 2015 {https://reflectionsvvk.blogspot.in/2015/06/farmer-distress-in-india. html}, I had identified the major ills of this sector – please visit link.
a.     PLUSES :  Increase in Ag Credit to 10 Lakh Crore,  up from 9 Lakh Crore : Pg 9 Pt 22; interest waiver 60 days; PACS Computerisation in 3 yrs Pg 9 Pt 23; Focus on Soil Health Pt 25; Long term and Micro Irrigation Funds Pts 26 & 27; Dairy Fund is a good start, though needs more focus Pg 10 Pt 31
b.    COULD HAVE BEEN BETTER : Farmer Realised Price improvement requires a far more focused approach, and tackling Mandis and their power, which has not been done. A start has been made, let us see how this is carried forward {Pts 28-29}. On Insurance, a reduction in provision from RE 16-17 is, in my opinion, hasty a good monsoon notwithstanding – Pt 24
c.     MISSES : The factor of rationalization of Fertilizer Subsidy, and link it to NPK ratio has been totally passed over;  as are the other inputs like seeds etc.
2.    Rural Sector :
a.    MNREGA : {Pg 11 Pts 34-36}  Restrained yet again; kept at nearly the same level as RE 16-17!
b.    For the rest, from Pts 38-45 on Pgs 11-12, the budget speech Rural roads, skill development, electrification, and most critically clean drinking water to 2800 arsenic and fluoride affected habitations. These are all good intentions, and, when implemented will decidedly have a positive impact. But it needs to be noted that the impact will be in the Medium to Long Term!
3.    YouthPgs 12-14 Pts 46-58  : Theonly creditable and far-reaching point I found in this section dealt with focusing on secondary education for 3479 backward blocks; question is the implementation. Do we have requisite funds? And the direction? Still, good that someone has thought of this. For the rest, while the intentions are good – skilling initiatives, online courses – how practical are these? Online courses certainly aren’t the solution; and skill initiatives in both Farming and Rural sector – well, let me just say they cant replace a proper education! Yes, the Incredible India Campaign 2 is a good thought – let us see its implementation
4.    The Poor : Pg 14-16,  Pt 59-70 : Increased allocation by nearly 28,000 Crore for women and children, but this is in comparison with BE, not RE. Another great point – affordable housing, which I analyse separately as it features in several sectors. Action plans for major diseases is also appreciable, as is mention of tertiary health care and specialized doctors, and drug pricing. Excellent!  But the best is the reforms contemplated in labour laws …
5.    INFRASTRUCTURE : The Big One, Pg 16-20, Pts 71- 94 :
a.     This includes the Railway budget, which is pretty standard, though with a welcome focus on clean trains &  solar stations. The part I like the best was the end-to-end solution for some commodities in partnership with logistics players.
b.    While 2.41 Lakh Crore has been allocated as a whole to Rails + Roads + Shipping, I could not find any comparison with RE 16-17 in the budget documents. Allocation for Transport is higher than RE quite significantly, almost 15%, up from 1.07 Lakh Cr to the current 1.24 Lakh Cr.
c.     For Telecom, while allocation is increased, {up 2200 Cr for IT & Telecom}, the plan for the OFC will, when complete, bring rich dividends.
d.    Our effort to develop IT, Telecom and Electronics as a competitive advantage on a national scale continues, with focus again. That said, it is high time we as a nation started thinking of growing up the value chain – from assembly lines to original equipment, own brands and innovation in technology.
6.    FINANCIAL SECTOR : Pg 20-22, Pts 95-110 :
a.    Banking Reforms given a near-total miss
b.    Again, the focus is on elex platforms for commodities – this is good, clearly so. But it requires ground-level reforms, which are still awaited!
c.     Special mention for the Stand Up India scheme in point 110 – a laudable scheme, please see references section of this article for details
d.    Another good thought here is the resolution mechanism for financial firms & the dispute resolution mechanism for infra contracts
7.    DIGITAL ECONOMY : Pgs 22-24, Pts 111-120 : This is the weakest section of the budget; I could not relate to it. While the points are all good, with great intentions, the on-ground reality in terms of connectivity, options and cost has a long way to go. Already, there is indication of a fall in online transactions post remonetisation. Neither is there anything specific in this section…
8.    PUBLIC SERVICE : Pg 24-25 Pts 121-130 : There is nothing specific here; these are all laudable words, but once again, like above, I could not relate. What is this section doing in a budget is beyond my understanding is all I can say here.
9.    PRUDENT FISCAL MANAGEMENT : Pg 25-27, Pts 131-138 : The best part of this section is the increase in capital expenditure by 25.4%, and the increase in capital expenditure to 14.43% of total expenditure. It needs to be noted that this percentage is the highest ever in the past 10 years at least; it was 13.89% in RE 16-17, 14.13% in 15-16, and 13.08% in 10-11.  A standing ovation for managing the CE  @ nearly 14% for two years running, and planning for it for a 3rd straight year! Further, as things are shaping up, we could actually see the Govt Debt at sub-60% of GDP in the next few years!
PART-B – Tax Proposals
For this, before we proceed, The FM’s budget speech pt 140, Pg 28 needs to be highlighted for all of us to read. Of 4.2 Cr organized sector employees, 1.74 Cr file returns. For informal sector, the numbers are 5.6 Cr and 1.81 Cr. Out of the 13.94 lakh companies registered in India upto 31st March, 2014, 5.97 lakh companies have filed their returns for Assessment Year 2016-17. Of the 5.97 lakh companies which have filed their returns for Assessment Year 2016-17 so far, as many as 2.76 lakh companies have shown losses or zero income. 2.85 lakh companies have shown profit before tax of less than ` 1 crore. 28,667 companies have shown profit between ` 1 crore to ` 10 crore, and only 7781 companies have profit before tax of more than ` 10 crores. These are shocking numbers, and full marks for highlighting!

The best part about this section is the treatment to the MSME, which starts by highlighting that 2.85 Lakh companies making profit of less than 1 Cr pay tax @ 30.26%, while the 298 companies making profit of more than 500 Cr pay @ 25.90% {effective rate}. The section then goes on to give a series of measures including reducing income tax to 25% for companies with turnovers upto 50 Cr.
The next good point is the attempt at transparency in electoral funding; while this has been panned by some – at least this is a start. The declaration of Rs. 2000 per person is actually a reduction from the current level of Rs. 20,000. That said, there is some logic in the criticism as well – as stated on BS, Page 10, article “FM Acts Tough on Political Funding” dated 2ndFeb that as long as there is no limit on the number of such transactions,  the impact might just be meaningless!
On personal taxes, I am not in agreement; this could have been done next year, or even in 2019; that would have freed 15500 Cr for other avenues – my personal favourite would be defense.  This is frankly a move I do not support, though it benefits me personally.
This deserves a special mention, since my initial call on it was wrong by a degree of just about 100%! I was initially surprised, a thought that we need other measures to stimulate demand other than housing. Then, I researched the economics behind the housing aspects, going first to a book by Bimal Jalan, and then further studying the examples of Singapore, Turkey and some other places with respect to housing. The research establishes the ability of affordable housing to stimulate demand both up-stream and down-stream, a factor noted in at least two previous examples. And this budget not only focuses on housing, it also focuses on rural housing. The copies of the sources I studied are attached with this article
We started with questions – will it stimulate investment, demand and agriculture? The focus on MSME – which are 40% plus contributors to GDP, is a definite plus, as is the focus on housing, which I have supported with empirical evidence from 2-3 nations. Then you have the increased allocations for Transport, Telecom, increased Agricultural Credit as well as a focus on the Poor and the Farmers. Add to this the fact that the Agricultural plus Unorganised sectors contribute well over 70% to the economy, and we can arrive at a conclusion that there is a definite stimulus to investments as well as demand
But, at the same time, there are misses that we have to account for, some of which I have alluded to above. Fact of the matter is that we are still not focusing on Health Education and Defense as much as we should; this needs to be done. However, given the current macroeconomic challenges that we analysed earlier, this budget does a pretty decent job. That said, my initial views stand vindicated – a bland and safe budget which could have done far more, given that general elections are still 2 plus year away. The biggest challenge is that the measures will take time to stimulate, and in the meantime we have the slowdown and the macroeconomic factors to contend with.
The reason is that the basic assumption that the economy will get better from Q1 2017-18 after a slowing Q3-Q4 of the current fiscal is an assumption. Then you also have the basic challenges mentioned in Pt 6 on Pg 4 of the Budget Speech. Thus, the basic criticism of some people also stands – that the revenue side challenges might remain, and that the fiscal target  undertaken might prove to be a challenge if the assumptions do not pan out as planned. I sincerely hope, for all our sakes, that it does work out, that the stimulus given will be enough… that remains to be seen.



2) An Analysis of the Relationship between Housing and Economic Development

3) Union Budget 2017 is a total miss on banking reforms, economy will pay a price for it

4) Budget 2017 opinion round-up: Scathing criticism and praise for Arun Jaitley

5) Farmer Distress in India – {Self Article}

6) Stand Up India Scheme

7) Pradhan Mantri Mudra Yojana

8) Budget 2017: Can lower cash limit make political funding transparent? Critics divided INDIA Updated: Feb 02, 2017 00:55 IST

9) FM acts tough on political funding