Why did Farmers Agitation Disintegrate all of a sudden?

[Authored by: Mandar Garge, Apr 09, 2021]

A brief about why the Farmers' agitation lost its fizz. 

The 26-Jan incidents exposed the reality of the farmers' agitation, and the agitation started losing its force. But the protests were still on for a month or so. But now the agitation seems to have lost its momentum altogether. Why?

The protestors who carried out agitation did not represent even 1% of India's farmers community. Moreover, these  protesters were not really farmers, they were either the middlemen or rich-farmers-turned-middlemen.

Reading up the new Farm laws, one can easily realize that the laws stand to liberate farmers economically from the shackles of restrictions that current laws impose. Farmers today can sell only to one "state-designated"  APMC (Agricultural Produce Market Committee, or 'Mandi' in simple terms) associated with their geographical region. This has managed to create APMC monopoly over last several decades. The middlemen who run these APMCs have severely exploited the farmers and become super rich, while the farmers have continued to remain poor for decades.

The farmer's income has remained very low when the incomes from other jobs have increased multifold in past 4-5 decades. The current, restrictive and monopolistic APMC system is the reason for this situation more than anything else. Farmers have not been allowed to sell outside the APMC, and the APMCs have exploited them. 

The new laws allow mainly three things:

1. Farmers can sell their produce anywhere in the country, and to any APMC or private buyers.

2. Farmers and private companies/buyers and make direct trade, make long-term contracts with them. This stands to bring in competition and break the APMCs'-monopoly in the buyer market.

3. Private entities can setup their own storage facilities and stock up farm produce (private players can now bring in investment in the farm produce supply-chain).

Going back to the current system, here is how it has worked so far:

• For an MSP (Minimum Support Price) of ₹ 100 that the FCI (Food Corporation of India) agrees to pay to the farmers for a unit of farm produce, the APMCs hold back around 7%-10% as commission. 
• The farmer officially receives around ₹ 90-93. Unofficially the mandis force the farmer to sell at a much lower rates and the farmer is forced to accept it for the fear of wastage of his produce stuck outside the mandis until he agrees. 
• The farmers often get their payments very late too.

These mandis also buy from farmers to sell to private players (as farmers are not allowed to directly sell to private buyers). There is big problem there too. E.g., the potato which the consumer buys at ₹ 30-60 a kg is bought at ₹ 1 or ₹ 2 a kg by these mandis from the farmers. Sad story. If you let private players enter the supply chain, the consumers could buy at ₹15 a kg and the farmer could still earn ₹ 10 a kg.

And that's exactly what the middlemen don't want to happen, because their monopoly and arm-twisting would be destroyed. And hence the protests. 

The government met the agitators 12 times in last 4 months showing readiness to discuss each and every point of contention in the new laws. But each time the protestors' demand was only one - "Role back all three laws". Now that's a bizarre ask.

Govt did not budge. The agitation went from Punjab & Haryana to Delhi and now to western UP and then it started fizzling out. The newly 'self-appointed' leader of the agitation - Rakesh Tikait is making claims of taking the agitation to other parts of the country. Oh sure Mr. Tikait - please do. Check out what response you get.

But here is the turning point that took the fizz out of these protests. A master-stroke of sorts. The change is pertaining to how MSP payment fulfilment would work. With the proposed change, the FCI would deposit the MSP money directly into the bank accounts of the farmers, and the middlemen/mandis will then have to take their commission from the farmers. 

This has left the middlemen faceless and not knowing how to react or how to oppose. They can't oppose because a) there is nothing wrong in this rule; and b) any attempt to oppose will clearly highlight their ill intentions. This simple operational change in the fulfilment of payments has taken the air out of their the agitation. The Punjab government and middlemen were the only ones who still continued to be illogical and oppose this change. The reasons are obvious. The politicians there own a lot of companies which play the role of middlemen. But if recent news are to be believed, if anyone is budging its the Punjab government and their middlemen, and not the center. 

Well done Central Government. No media (which went overboard in covering the andolan) is seen keen to broadcast this particular news (because it shows how Modi government score a point over it's opposition). Who cares about the media though. The farmers are ready to embrace this change with open arms and that's what matters. .

The big push the central government gave to jana-dhan bank accounts for the poor and their linking to Aadhaar in its first term is going to make this change fairly easy to roll out. 

[Authored by: Mandar Garge, Apr 09, 2021]

Read my other articles here.

COVID-19 Vaccine may come soon: Why and How Serum Institute plans to make this happen.

[Authored by: Mandar Garge, Apr 30, 2020]

Pune based Serum Institute of India (SII), world's largest vaccine producer, recently announced that it is preparing a setup to mass manufacture COVID-19 vaccines as early as Sept-end/mid-October.

There is lot of confusion and questions about how a new vaccine which usually takes between 6-12 years (or even more), can be made so quickly by any company? Moreover, SII plans to start manufacturing vaccines in millions within 2-3 weeks from it's final approval. 

This write-up tries to explain how.

The news is True. Serum Institute has jump-started its production process to be ready to produce COVID-19 vaccine in May 2020 and bring it to the market by Sept (in anticipation that the vaccine will get its final approval by mid-to-end of Sept 2020)

Serum has tied up Jenner Institute of UK's Oxford University to give themselves a jump start. If all goes well, we are likely to see a COVID-19 vaccine hit the market in Sept or Oct of 2020. Wonderful, isn’t it?

How is such an early production of Vaccine possible? Let me try to explain the how and why of this story.

What is a vaccine?

In simple words vaccine is a dose of mutated form of a virus (similar to the harmful virus for which the vaccine is being created) injected into the human body to make human body produce anti-bodies to build immunity against the real virus.  (Important: The real virus is not injected into the patient as it would lead to infection in that patient. So a harmless variant has to injected)

What could be a COVID-19 Vaccine?

One that would inject a virus like the COVID-19 virus (from Corona-virus family) into the human body. The key point is that the injected virus is a one of the closest matching virus tweaked to neutralize it enough to render it harmless to the humans. It is mutated further to make it look like the real Corona virus (the ‘villain’ virus). When this genetically modified corona virus is injected into the human body, the body assumes it is the real Corona (villain) Virus and prepares anti-bodies to fight that virus and build complete immunity against it. When the real villain virus attacks such a body, the body has built a long-term fortification against it already. 

Why does a vaccine take that long (6-10 years or even more)?

A vaccine development has the following steps:

1. Exploratory stage
2. Pre-Clinical stage
3. Clinical trials
4. Regulatory approvals
5. Manufacturing

Stages #1 and #2:

• The lab creating the vaccine needs to create the correct genetically modified version of a suitable virus.
• Then it needs to do some tests in the lab, by mimicking a human-body like setup.
• Multiple such tests (each running for multiple weeks) lead to the most promising one over the rest.

Stages #3 – Clinical trials:

This is the longest stage usually spanning across 3 to 4 phases

• Phase – 0: Trial on animals (rats, monkeys) for safety before trying on humans.
• Phase – 1: Trial is run on small number of *healthy* volunteers (up to few 100s) and the vaccine is tested for *safety* (that’s why healthy volunteers because they stand minimum risk to its possible side effects). They are observed and monitored for up to 6 months.
• Phase –2: Vaccination to a larger group of people (including those with some pre-medical conditions (tests last up to 12 months). Volunteers are monitored for development of immunity.
• Phase –3: Vaccination expanded to thousands of people. This is the longest period (2-3 years) where the community infection is monitored (whether the injected people have developed an immunity strong enough to not infect others. Hence the longer period).

Stage #4 – Regulatory approvals

• The Food and Drug Administration (FDA) or equivalent authority of that country needs to approve the results of the trial.
• The vaccines must be monitored in all phases for side effects (it can cause other ailments).
• This is a multi-stage process involving granting of multiple licenses to the vaccine-making firm.
• Inspection of manufacturing facility before giving a consent to mass production.

Stage #5 – Manufacturing

• A multi-month process where manufacturing lines are setup to create the vaccine in mass production. (this is a large and complex setup).
• Ensuring enough quality measures.

Stage #6 – Distribution

• Although this is not part of the core vaccine-development process, it still takes a measurable time to transport vaccines to hospital and clinics through a proper supply chain.

Now you see why things add up to 10-12 years or even more.

Why is Jenner Institute at Oxford University is ahead of others?

The researchers at Jenner Institute have managed to extract a strain of corona virus from chimpanzees many years ago and modify it genetically to neutralize it and then variants of it have been tried on MERS patients (MERS is also caused due to a corona Virus and is much more lethal than COVID-19).

• Various variants of it have been tested several times on different diseases (caused by variants of corona virus).
• It has proven to be safe for humans.
• It has been tried on monkeys which then were exposed to COVID-19 virus. The tests were successful. Monkeys could resist COVID-19.
• Proven Safety would mean faster clinical trials.
• Already tried on 1000+ volunteers.
• Plan to try on around 5000 more patients (phase 2) in June of 2020.

One US-based vaccine lab modeled their candidate virus on the one used for Influenza and Zika vaccines.

FDA would also bend its regulations (an exception):

• FDA is ready to waive animal testing phase (round of testing on animals is not always mandatory for every vaccine, but recommended).
• FDA has accepted the safety aspect (Phase-1) already will not need to wait for 6 months. Phase-2 will start within a month FDA has agreed to allow combining Phase-2 and Phase-3 of clinical trials.
• FDA has agreed to grant licenses faster.
• FDA would also fast track its Manufacturing Inspection process to give a go-ahead for manufacturing by mid to end of Sept 2020.

Serum Institute's Jump-start:

• Serum institute is preparing the manufacturing setup to start mass manufacturing as soon as FDA gives a go-ahead to this vaccine, anticipating that the approval will indeed happen.
• Serum is watching the Oxford progress very closely to ensure that they tweak their production processes to enable mass production ready within 2-3 weeks of the final go-ahead.
• Serum Institute is willing to take the risk of the vaccine *not* getting approved, an admirable decision.

Moreover Serum plans to sell it at Rs. 1000 a piece. A very reasonable price indeed. 

A vaccine development drastically reduced from From 6-12 years to 6 months. That is simply amazing. This is an excellent initiative by Serum Institute worthy of serious admiration. This is also an excellent progress by Jenner Institute of Oxford University.

[Authored by: Mandar Garge, Apr 30, 2020]

Credits:

• The Jenner Instiute (https://www.jenner.ac.uk/)
• COVID-19 Vaccine Trails (https://covid19vaccinetrial.co.uk/ )
• Shekhar Gupta, Chief Editor, The Print (Cut the Clutter Episode #456)
• MedicineNet (https://www.medicinenet.com/)

** Please also read my other blogs at this link.

COVID Crisis: Could India impose Financial Emergency?

[Authored by: Mandar Garge, Apr 28, 2020]

The Indian Union government can, but in all probability, won't impose a Financial Emergency. Never in the history of India has a Financial Emergency (वित्तीय आपातकाल) been declared. 

What is a Financial Emergency? And what are its effects?

First a look at the different types of emergencies the Indian Constitution allows. There are basically three types of emergencies:

1. National Emergency (Article 352)
    - Imposed at: National level
    - By: The President of India
    - On recommendation of: The Union Government of India
    - Has been Imposed: 3 times (1962 China war | 1971 Pakistan war | 1975 Internal disturbance)

2. State Emergency (Article 354) (a.k.a: President's Rule)
    - Imposed at: State level
    - By: The President of India
    - On recommendation of: The Union Government of India
    - Has been Imposed: More than 120 times so far

3. Financial Emergency (Article 360)
    - Imposed at: National level
    - By: The President of India
    - On recommendation of: The Union Government of India
    - Has been Imposed: Never. But we had come very close to imposing it (1991 when India went bankrupt)

Article #360 of the Indian constitution allows the Central Govt. to recommend a Financial Emergency to the President to in case the country is facing an unprecedented financial crisis. The COVID-19 crisis indeed is a grave financial crisis. 

The Mechanics:

• The Central Govt. provides a recommendation to the President. The President issues an order to impose the emergency. 
• The Lok Sabha (LS) and Rajya Sabha (RS) have to pass this order within two months of its issuance (else it becomes void). 
• Once imposed, only the President can lift it. No approval is needed from LS or RS while lifting it. 
• There is no time limit on when President is supposed to lift it. He does so on the recommendation of the Central govt.

The Implications:

• Financial decisions of the entire country become unitary. This means the central government gets complete hold of the Financial budgeting, spending and approval of State level financial bills and decisions.
• The state financial decision making powers render ineffective for the duration of emergency.
• State governments can keep working on financial bills, but their approval can be done only by the President (upon recommendation from the central govt.)
• The President gets complete control over central and state government employees' salaries and allowances (including the Judiciary) during the period of emergency. The President can also reduce their salaries and allowance if deemed necessary.

Does current situation warrant a Financial Emergency?

Probably yes. The country's financial condition is extremely bad. Revenues have diminished significantly, almost stopped. Government is running out of money. The country needs continuous (monthly) revenue to run itself. 

• States revenues have completely halted because the industry is shut, transportation is shut, farming is ON, but the produce is going waste, consumer spending has come to a grinding halt. 
• E.g. Maharashtra's 2019 revenues were around 3.15 Lakh Crores. It has a deficit of 90,000 Cr already. 2020's estimates are yet to come in, but the impact is going to be severe. The state had allocated a 4% expenditure of its revenue for Health care for 2020. COVID has already consumed that spending.
• Lockdown: A report by HDFC bank stated that the lockdown is likely to shave off INR 10 L Cr in the first half of 2020 (That's a whopping 4% of India's GDP)
• Moreover the slump in economic activity is projected to affect India's "forecasted" GDP by another 3%.
• GST collection for March 2020 has dipped by 11% (Rs 97,597 Cr as against 1.07 L Cr in March 2019). April 2020 GST collection can dip further to Rs 80,000 Cr. May 2020 collections are likely to be Rs. 60,000 Cr.
• The COVID crisis has sucked significant and unexpectedly higher amount of Govt's money on medical treatment. Just the money spent by states on testing the their population is more than Rs 100 Cr. The Central government has released Rs 17,000 Cr to states for spending on PPE, Ventilators, kits etc.
• Additionally the Central government is releasing multiple relief packages (a recent one was Rs. 1.7 L Cr - to benefit the poor directly via Direct Cash Transfer to their Jan-dhan accounts).

In such a scenario, its absolutely necessary that the state governments completely stop unwanted and low-priority expenses immediately. There is a possibility that state governments that are politically misaligned with the central govt may not follow Center's directives and guidelines. 

In such a scenario the Central govt. may see wisdom in taking full charge of country's every single financial expenditure.

Can Current Central govt. impose a financial emergency?

Theoretically yes. In fact rather easily. The current, PM Modi-led NDA government has the numbers in LS. It can manage number in the RS. And it can make the President sign an order for rolling out the emergency. 

Would Central Govt. impose a financial emergency?

Very unlikely. Although current situation favors a financial emergency, the current Modi-led Union government will not impose it for the following reasons:

• It would not want to be seen as predatory and would prefer achieving fiscal prudence collaboratively.
• It seems that there is a good amount of coordination and harmony between the Central and State government's in prioritizing the spend on fighting COVID.
• The Central government's approach seems to be that of issuing formal guidelines, make the states tow the line. If they don't, the Home ministry seems to get into a a mode of persuasion. It has been seen that Union government has brought the most misaligned state of WB in line.
• In the video-conf meeting between the PM and the CMs held on 27th April, PM Modi stated that he would like states to decide how to handle extended lock-downs or its lifting up. Modi has expressed complete solidarity with states with high COVID numbers and extended Center's support. 
• Imposing an emergency would send a very negative signal to the already shaken foreign investors.

All in all, the Central government seems to be getting States to fall in line, and work cohesively to ensure that the spending is wise and only where necessary. It seems to be able to impose the same discipline as expected in a Financial Emergency, without actually imposing it. 

What we see currently is an excellent example of how unitedly and cohesively the Center and State governments are working to fight the virus, keeping politics aside at least for some time. Hopefully we never reach the stage of Financial Emergency.

[Authored by: Mandar Garge, Apr 28, 2020]

Why Dr. Harsh Vardhan's plan to handle COVID seems to be working

[Authored by: Mandar Garge, Apr 14, 2020]

This is an apolitical account of how Dr. Harsh Vardhan, the Union Health Minister is steadfastly steering India through the COVID19 crisis. 

I have quoted studies and articles from external (non-governmental) private health agencies to highlight the fact that India's strategy of handling COVID seems to be working under Harsh Vardhan's leadership.

While we all guess, contemplate, admire or criticize the government's handling of the crisis, it is important to bring to everyone's notice how this farsighted leader is working relentlessly to keep India two steps ahead of the COVID’s proliferation.


While PM Modi and his other ministers may be making economic, financial and administrative decisions during this crisis, they have left the medical and health related decisions to this one man who carries immense grasp of India's public health, its handling of mass immunization programs as well as the administrative challenges associated with such mass immunization activities.

National and State level health ministries work collectively, but the union health minister drives the overall plan and strategy to fight the virus.

I must mention that at this juncture the health ministers and departments of all state governments are working closely with the Union health minister and health officers. However Dr. Harsh Vardhan is in the driver's seat in the war against Corona. All key decisions at the national level, that you have been reading about India's rapid response to COVID, the passengers screening and quarantine in the very early stages followed by the lockdown are all his decisions, all coming out of his wisdom, farsightedness and vision combined with experience. His team then issues directives to state level health machinery to follow certain norms, be it about COVID reporting, medical preparations, testing the masses, identifying clusters and deciding the high level approach of weeding out the disease.

Evaluation the impact of the India lock-down:

Look at the following graph, published & updated daily by Shamika Ravi, a Sr. Fellow of the Governance Studies Program at the Brookings Institution Washington D.C:

Ref: Shamika Ravi’s tweet of April 14, 2020

This study measures the spread of Corona in terms of its rate of doubling rather than the absolute number of cases found. Going by this count, it seems that "the curve has started flattening".

• March 12, India's count of COVID-19 cases was doubling every 3 days.
• March 23, the count of COVID-19s was doubling every 5 days (flattening had started). This was before the lockdown.
• March 29 -- doubling every 4 days -- a setback that can be attributed to Tablighi conclave aftereffects.
• April 06 -- doubling every 6 days. The lockdown had started showing a positive impact.
• April 13, the numbers were doubling every 7 days -- flattening had picked up further.

The research estimates that without the lockdown the positives would have been more than 67,052, as against the real count of April 13th of 10,453 (a 541% higher rate). Institute of Mathematical Studies (IMS) in Chennai had also estimated that without the lockdown, by the COVID count by mid-April would be have been 35,000 at a minimum.

The lockdown has surely worked. Of course, the testing levels in India are around 190,000, but one can assume, based on the sampling, the trend (proportion) will be consistent across a larger population.

Ref: India Today

Yes, indeed 10,815 (India count as of 14^th April 2020, with 353 deaths) is a large number, but in an enormously populated country like India with enormous population density, this is really a small number, thanks to the strategy and approach taken by Dr. Harsh Vardhan. 10,000 as against 60,000 is a Great news. Compare this with 5.3 Lakh positives in the US with > 20,500 deaths.

The Basic Reproduction Number (R0)

The R0 (R-naught) number (Reproduction Number) is a mathematical term that indicates how contagious an infectious disease is. It’s a number that indicates how many people can an infected person infect. E.g., R0 number of 10 means one infected person can infect 10 other persons. An R0 of below 1, renders the spread of infection ineffective.

The R0 number of COVID-19 in India is improving.

• Mid-March: 1.7
• March 23: ICMR had estimated it to be 4. This is where the farsightedness of Harsh Vardhan must have prompted him to go into an immediate 21-day lockdown starting 25th March.
• 6th April: 1.83
• 11th April: 1.55
• 18th April -- awaited. 

The central Govt. will then decide whether to relax the lockdown beyond 20^th April or not (that's why PM Modi's staggered approach - which may ease the lockdown in low or zero impact areas but continue to keep the hotspot areas sealed. It would be mix of lockdown and limited economic activities.

The Health Ministry’s Approach:

The approach his ministry has taken is to stay two steps ahead of the coronavirus growth curve. The ministry feels that they have put in place a good amount of measures to be ready to tackle the rising cases of COVID.

The first goal of the Lockdown was not to contain and end COVID altogether, but to "Flatten the curve" by breaking the chain of transmission. The goal was to severely suppress the spread of the disease by as much as possible avoiding the outbreak of Community transmission (that is when Virus is all over, on surfaces in public places). Well such a suppression refrains the population from developing herd immunity to the virus, but the transmission rate is expected to be much lower after the lockdown is removed.

The second goal is to meticulously study daily growth, extrapolate the number of positives at the end of lockdown and aggressively prepare for handing the outbreak based on the estimates. Buy time to prepare and setup the medical facilities, spaces, beds, trained staff to handle that anticipated outbreak. The immunity of people will grow as well, but at its own pace.

An interesting report in New York Times by Dr. Faheem Younus, MD at University College Hospital of Maryland, USA outlined the “hospitalization rate” and “fatalities rate” in New York, the new epicentre of COVID-19 across different age groups. See a graphic from his tweet below:

So, the trend in the worst impacted place in the world shows that average hospitalization rate is less than 8 per 100,000 people up to age of 65, with the highest at 17 per 100,000 for ages above 80.

Today India has 10,815 positives. So, going by NYC estimates, very small number needs hospitalization. Even if India were to hospitalize all 10,000, the health ministry has announced that it is ready with 25,000 beds. And they are constantly increasing the following every day:

• Number of beds
• Quarantine facilities
• Trained medical staff
• Testing Kits & medical equipment
• Medical supplies

And this is what it means by staying two steps ahead of the coronavirus growth curve.

One important decision that Dr. Harsh Vardhan took is that he followed the ICMR when most world leaders were looking at WHO. His team is also constantly following important medical and health bodies countries with infections and observing what has worked and what hasn't in those countries.

A little bit about Dr. Harsh Vardhan:

Harsh Vardhan, born in Delhi, graduated with a Bachelor of Medicine, Bachelor of Surgery in 1979. He did his Master of Surgery in 1983. He won an election in Delhi in 1994 and became the State Minister of Health the Delhi government, during which he oversaw successful implementation of the pilot project of the Pulse Polio Program which mass immunized 1 million children in Delhi. Then In 1995 he led a similar program of similar nature immunizing 88 million children, but across the entire Nation. WHO declared India polio-free in 2014.

His understanding of Public Health in India is impeccable. He flawlessly planned the state-wide and then nationwide immunization programs very successfully and hence has a fantastic grasp of the meticulous administrative outlining and planning involved in such mass immunization programs.

There is no doubt that India will defeat Coronavirus soon, but the measures by Dr. Harsh Vardhan, his ministry officers will go a long way in improving the Healthcare and Medical treatment readiness of the nation in an irreversible manner.

[Authored by: Mandar Garge, Apr 14, 2020]

Credits:

• Shekhar Gupta, Chief Editor, The Print (Cut the Clutter Episode #443)
• Shamika Ravi, Economist, Brookings (Twitter)
• Dr. Faheem Younus, MD, Maryland UCH (Twitter)
• Wikipedia (Dr. Harsh Vardhan’s page)
• India Today

Government vs RBI - Demystifying the tussle

In the spate of resignations in the recent times at RBI, one may wonder if there is a crisis lurking around in RBI. No there isn't. Let me try to explain what this tussle is about:

The RBI and Government are at odds on three key issues:

1. Govt wants to use surplus reserves of RBI and infuse money into the struggling banks so that banks can start lending more and this would in return trigger investment and spending. 
2. Govt wants RBI to dilute to some extent the currently stringent Prompt Corrective Action framework (PAC) for stressed banks (via this framework, RBI issues strict measures which are restricting stressed banks from circulating capital).
3. Govt wants RBI to reduce the ratio of the capital that banks maintain against its assets. This is called CAR (Capital Adequacy Ratio). This basically means making it easier for the banks to lend money even when they have lower assets.

Now RBI, which has been typically a financially conservative institution, is dead against diluting these norms or giving away the surplus capital to the banks. 

Is govt doing anything unconstitutional in issuing these directives ? Absolutely not. Section #7 of the RBI act allows government to issue directives in public interest. But RBI is not liking the fact that government is issuing directives and happens to think that government is interfering with its autonomy. Rather, this is the first time in the history of RBI, that Govt ​is invoking section 7 which has not been invoked even in more severe times ​like wars and even demonetization. So RBI feels that its Autonomy is being threatened. 

​Is this tussle a good or bad thing? It is very easy to conclude (given the three resignations at Governor/Dpt. Governor levels in RBI), that the government is being non-accommodating and hurting RBI's autonomy. But it would be wrong to jump to that conclusion in a haste. Its true that Govt has been a bit pushy especially on point #1 as it seems desperate to infuse capital into the economy to trigger investments, demand and consumption. Usually previous governments have also pumped money into the economy but they have most of the time resorted to the option of external ​borrowing (World bank, IMF etc.) for these infusions. Modi Govt is strictly against borrowing money from international agencies (and that's a good thing). RBI or the Government cannot frivolously print money (and that's an excellent thing as well). So money has to be arranged from somewhere. The NDA government wants to do so by using the capital ​that has been lying locked ​within the country​ - a way never tried before and that's really ​​​​​making the RBI nervous.

The other important point coming out in this tussle is that this govt is challenging the status-quo-ist ways of operation of the RBI. But a good thing that should be noticed is that the Govt has shown openness in appointing and accepting people who have challenged it openly (even though some have left following disagreements with the Govt.). That shows that the government is at least not hiring '​yes ​men'. Its possible that during previous governments, we hardly heard about any conflicts because a) those govt appointed yes men ​who nodded to FinMin's demands; or b) they ​never thought that RBI could be forced to take such an unconventional step; or both (a) and (b). Modi is known to try out unconventional things by staying within the boundaries of constitutional framework (e.g. Demonetization).

Is there a crisis because of this disagreement? Doesn't look like. On one hand Govt looks a bit desperate, but on the other it seems that RBI is more concerned about losing its autonomy than realizing the real reason behind government wanting it to relax some of its stringent norms. RBI is of the opinion that stressed banks should fend for themselves. But in a country as huge as India, where, because of its sheer size, the population is highly dependent on Public Sector Banks (PSBs), letting those banks go dysfunctional could invoke severe hick-ups in the economy and even recessions. Its not a good idea to let such institutions sink. It becomes necessary once in a while to bail them out. The previous governments have did so too, but this government wants to do it a bit differently -

a) use the excess surplus stashed with RBI to trigger investment and consumption;

b) allow weak banks to lend even if they have capital lesser than the mandatory threshold (else it will hamper disbursements of loans to micro and small businesses); and 

c) keep some PSBs out of the the stringent prompt corrective action (PAC) framework as this is restricting credit flows from PSBs into the economy.

There is some merit in Government's argument and RBI must pay heed to it. Even the developed countries have resorted to bailing out weak banks and it is extremely necessary to do so to avoid collapses and recessions. Recessions have a domino effect on investments, and it may freeze the economy for months.

So in good faith, RBI should accept some demands of the government. Using the analogy by Raghuram Rajan where he stated that the RBI is like a the seat belt, it would be disastrous to remove that belt altogether. So why not loosen it a bit so that it gives government some space to adjust too? Especially release some capital to bail out NBFCs (Non-Banking Financial companies) if not the PSBs. In return Government should give up any effort to remove the belt and let RBI keep its autonomy. This is a non-crisis situation and a solvable one. It would be unwise to panic because of the recent resignation of Dy. Governor Viral Acharya.

Authored by: Mandar Garge (June 25th, 2019)

7 factors that led to Modi's much expected victory in LS 2019

A majority of economic experts political analysts got the LS 2019 election wrong. They either predicted a hung parliament or just-enough-majority to NDA. Modi-led BJP earned 303 seats alone. 

Contrary to most of the analyses which site factors like Nationalism, action against Pakistan, weak Mahagatbandhan, Rahul Gandhi as a week leader etc., as the key reasons of team Modi's victory, the core reason why Modi win was his government's inclusive growth and socio-economic policies which significantly changed things on the ground for the lower 65% (especially the lowermost 35%) of India's population.

I have tried to analyze this win via 7 key factors described further in this article.

Strategy to impact the lower 65% of economic spectrum:
The Indian Demographic can be split in the following economic classes: 
- 35% Poor (maximum participation in voting. Always hopeful of change)
- 30% Lower-Middle-Class (high participation in voting. very hopeful of change)
- 30% Middle-class (average voting participation)
- 2 to 3% Upper-Middle-class (minimum voting participation)
- 1 to 2% Rich (minimum voting participation) 

Most of the analysis of Indian economics and politics and its impact on the population comes from people form the top 5%, who are often disconnected with ground reality. Half of this population doesn't even vote during elections. Modi made his calculations based on economic situation and steered clear of cast-based politics, and that strategy not only paid off but was also the right one for India ( that has conventionally relied on caste-based politics. Modi was absolutely clear in his mind that if he had to win larger voter-bases, he has to impact the lower two buckets that made 65% of the population. He ensured policies and efficient execution of schemes that impacted these groups. This bracket traditionally has been a voter base of either Congress or regional parties. Modi crafted a strategy to positively impact this bracket, even at the cost of his strong support base which got alienated with Demonetization and GST. But Modi took this chance because he wanted to bring in structural changes that were necessary to bring about broader impact. While those impacted by Demonetization and GST kept on whining and portraying how these policies were damaging economy, Modi focused on bringing significant impact to the lives of this lower 65% spectrum. 

No matter what most of the mainstream media reported, there was a substantial and positive impact of Modi's first term on poor (most media deliberately did not report this. On the contrary it reported policy failures, farmers' distress, economic slow-down etc. Especially farmers' distress had been very wrongly reported).

Seven factors highlighting how Modi's approach of inclusive growth impacted this lower 65% spectrum leading to his unprecedented victory in LS 2019.

1. Carefully crafted and Economically viable Socioeconomic policies:
Modi has always been a staunch critic of wealth-redistribution, but not necessarily social spending. He took systematic efforts to move from the Nehruvian-Socialism-based spending (subsidies, freebies, wealth-redistribution - which almost each time, turned out to be financially nonviable) - to financially viable social-welfare schemes setup. Modi believes in social spending that is economically supported by wealth creation schemes. By fixing the public distribution and delivery systems, he made money available to be spent on social schemes. Contrary to his pre-2014 image of a reformist, he balanced backed social spending by wealth and asset creation. The results were seen clearly by the lower 65% and this is what most analyses ignored. 

An account of impact on poor:
Jana-Dhana Yojana: More than 2L bank accounts are being opened everyday
DBT (Direct Benefit Transfer): 400Cr rupees are being directly deposited in jana-dhana accounts via DBT every day (Linking of Jana-dhana accounts with Aadhar ensured no leakages).
SAUBHAGYA: 50K rural houses being provided electricity daily.
Swachh Bharat Abhiyan: 60K toilets being built daily.
Awas Yojana: more than 1000 houses being built and handed over daily.
MUDRA (Micro Units Development and Refinance Agency): 4.25 Cr first time loans have been availed by small entrepreneurs. 
Ujjwala: 70K gas connections are being opened every day for women of BPL.
Ayushman Bharat Yojana: Offers ₹ 5 Lakh coverage to 10.8 crore poor families (approximately 500 million beneficiaries). 

Soil Health Card: 1.3L farmers have benefited 

eNAM (National Agriculture Market): Created for farmers and traders to trade online cutting the corrupt system of middle-men agencies which were indirectly run by corrupt politicians. 

How many main stream news channels were reporting this impressive social progress? Almost none. News agencies were busy creating a picture of how Modi Govt was a failure.

Going beyond castes and religions: The impact of these schemes touched people of all castes, and all religions, everyone who came in its way. No surprise that the Muslim vote share almost doubled from 2014. The anti Tripple-Talaq move played a significant role and indicated to the women of the community that this govt is keen to cause their social upliftment.

2. Inclusive Development, Infrastructure, Employment Creation:
Modi Government made it a point to ensure that all parts of country are covered by the much-needed infrastructure - toilets, water, roads, electricity, phone connectivity, gas connections. These are fairly basic facilities and people should have had them decades ago. Once people have them, they do not wait for government to create employment for them, but rather create jobs for themselves. Modi made people 'enabled' to make a living for themselves and broke them away from the decades of upbringing where Government was responsible for providing them jobs. Modi concentrated on creating an environment that would facilitate employment creation rather than providing employment directly. Additionally the infrastructure projects (roads, electrification, toilets, railways, houses etc.) themselves created significant employment for the locals despite the picture created by analysts that unemployment in India had risen. MUDRA yojana has seen more than 4 Cr people seeking loans. They have created employment. 
Typical indicators of Job creation concentrate on salaried jobs and that too in urban and semi-urban regions. For poor and rural, 'employment' means wages and continuity of ability to earn wages. 

The infrastructure development impacted the lower 65% significantly (especially the lower 35%). For the first time in there lives hey saw toilets being built, water being available, roads being built, electricity and gas connections in their houses. They obviously realized that the Congress or Regional parties could have done easily in 60 years what Modi Government did in just 60 months, but didn't. "Can we risk losing Modi government in LS 2019 elections and dash our hopes of enhancing our lives and the continuity of the infrastructural changes that should have ideally commenced 60 ago? " - is the questions they asked themselves and the answer was clear: "I must make sure Modi returns".

3. Clean Governance, Fight against corruption and black money:
Modi's government ensured that leakages in the public distribution systems were plugged. Pre-2014 era suggests that around 65% of the money marked for poor were  siphoned off by corrupt elements in the distribution system. Modi cracked down on this broken system and put in place a mechanism of Jana-Dhana yojana, Aadhar and Direct Benefit Transfer to kill the middlemen and inefficiency in delivery. He also brought in tremendous efficiencies and restored lost trust of the poor in government institutions making them feel that this government is "actually" caring for them. They saw subsidies actually reaching them. Even in urban areas the citizens witnessed that Government offices have become more efficient, faster, digitized and the work is actually getting done seamlessly. Common man witnessed drastic drop in corruption at government offices. This created a deep impact on minds of poor and middle-class that "this government was serious about making life easier for us". 

Additionally, in his 5-year term, citizens did not witness a single case of corruption at central level. They made up their minds that "Modi was Mr. Clean and the kind of top-most leader I would want to lead my country". Hence any attempt from opposition (e.g. Rafael allegations by Rahul G) on this clean image failed miserably and moreover hurt the vote share of the opposition.

Modi was also very careful not to react to personal attacks made on him. He kept his composure and came out as a balanced and elegant leader caring only about development. That elevated his image to a point that people were not ready to accept any negative allegations against him.

4. Accountability, Continuous measurement of performance, Continuous Feedback:
Modi brought in tremendous accountability in his government's work, set tough and aggressive performance goals for his ministers and officers, and did not hesitate to fire non-performers. He disbanded the GoM (Group of ministers) concept and restricted decision making for projects to three bodies: 1) Owning Ministry - that owned the project, 2) Finance Ministry which usually allocates budget; and 3) The PMO (Prime Minister's Office). The Environment Ministry was plugged in wherever needed. He made decision-making faster, cut the red tape and reduced the multi-step approvals to just 4-levels. He also made his ministers make their work's progress known to public via mobile apps, sought continuous feedback from people and acknowledged, and wherever possible, acted on the feedback. For the first time in Indian history people witnessed a government that was actually seeking citizens' feedback on its performance. Modi really connected with people.

5. Direct Connect with people. No reliance on mainstream media:
Modi's one noticeably different strategy from all previous government was that he did not depend on the conventional media which has traditionally been pro-Congress or pro-Left. He was aware that the media would not cover his good work. He instead chose to connect with people directly via programs like "Mann ki baat". The media downplayed its impact, but the actual impact on the poor was tremendous. They loved the fact that the PM is directly explaining to them his policies, his approach toward eradicating poverty.
Second he made extensive use of Social media and made all his leaders also do the same. He connected deeply with urban and semi-urban and even rural voter through social media.
Third, he made sure BJP and RSS karyakartas stayed connected with the citizens and explained government's work and benefits to the poor.

6. Capturing the emerging and young voter base:
The new voter of today wants to be heard and is very keen on voting. The young voters, usually tech-savvy, social-media-savvy got impressed by the fact that the PM is connecting with them on Social media. They also saw that his entire team is connecting and listening to them via social media. Modi significantly impacted the voter base between 18 and 30 years of age. They saw that "Modi is very development focused, progressive, can represent India brilliantly to external world, is elevating our global image, can protect India from external as well as internal threats. If there is anyone who can take India ahead, its him. I would vote for him". 

Moreover the young India had developed a dislike for dynasty-based, entitlement-based elitist behavior exhibited by the Congress and most regional parties. They saw Modi successfully driving a merit-based organization.

An interesting statistic indicates that the new voter base from 2014 increased by 8.5 Cr (85 M) and NDA won 5 Cr (50 M) new voters. Significant portion of the 50M came from the new voter group.

7. Strategy, Excellent Planning, Continuous voter pulse:
Strategy & Alliances: Modi and Amit Shah executed a brilliant strategy. They started working for LS 2019 from May of 2014 itself. Amit Shah was not handed any portfolio in 2014, but allocated for strengthening the organization, increasing BJP voter base and especially penetrate those regions where BJP hadn't been. And Amit shah executed this strategy brilliantly.

BJP also worked out alliances much efficiently and generously this time, giving regional parties a larger portion in the seat-sharing calculations. E.g.: Bihar - In 2014 BJP contested 30 seats and won 22 out of 40 seats. In 2019, BJP contested only 17 seats. letting JDU contest 17 and LJP 6. The results were outstanding - a win on 39 seats for NDA out of 40. The same approach worked in Maharashtra too

Planning: BJP executed extensive and minute level of planning covering all poll-booths in all constituencies. They leveraged the enormous workforce of RSS karyakartas to reach out to every household and educate the uneducated. These "invisible hands" worked relentlessly to cause a massive shift in the voter base.

Continuous pulse of the voter: Modi made sure he did not commit the same mistake that Vajpayee govt. committed in 2004 (NDA remained oblivious to ground reality and wrongly assumed a definite comeback). From day one Modi mobilized the grand workforce of BJP and RSS karyakartas to continuously provide him parameters from ground zero, thus watching the pulse of the voter. He and top brass of BJP were absolutely sure of a resounding victory in lS 2019. But they chose to not talk about it.

I believe these 7 factors were the key reasons why Modi swept LS 2019. Factors associated with Nationalism (URI surgical strike in 2016, Air Strike in 2019) did play a role but the impact was marginal. The impact was more because of opposition's questioning of the authenticity of these acts. The other factor that is often indicated by the analysts is the absence of a strong alternative and weak alliance of opposition parties. But I seriously think that the impact of this factor was very limited. I do not think people voted for Modi because there was no other alternative. People voted for Modi, because they wanted him to continue the progress that India is witnessing under his leadership.


Mandar Garge