PM must ensure demonetisation does not increase government’s role in citizens’ lives

Samir Saran|Vivan Sharan

By demonetisation move, PM has enacted strong policy that has removed nearly all currency from circulation, without an immediate recourse to replenishment.

 Cashless, Denomination Notes, Surveillance

The Cashless society

By the demonetisation move, Prime Minister Narendra Modi has enacted a strong policy that has removed nearly all currency from circulation, without an immediate recourse to its replenishment.

This move again positions him as a disrupter of the status quo, an attribute increasingly being endorsed by voters across the globe. If he has to carry this disruption to its logical political outcome, significant support will need to come from the ‘JAM ecosystem’ (Jan Dhan, Aadhaar and Mobile).

This political gambit puts into sharp relief the importance of what the government does next. Its job has just begun and uncertainty about long-term outcomes will persist until complementary steps are taken. Since the central proposition put on the table is that business as usual is no longer acceptable, the important question is: what next? To answer this, it is useful to first benchmark India’s cash economy against ‘emerging market’ peers.

In terms of ‘narrow money’, which includes coins and notes in circulation and other currency equivalents easily convertible to cash, India has a higher cash-to-GDP ratio (11.77%) than all its Brics counterparts. There are also extreme benchmarks set by advanced countries such as Sweden, which aims to go completely cashless (something that may be neither desirable nor doable in India’s case), and has a cash-to-GDP ratio of close to 2%.

Within Brics, South Africa is a standout performer with a cash-to-GDP ratio of under 5%. Like India, South Africa has well-developed telecom networks, large and rising number of internet users and a thriving innovation culture in digital payments. The additional South African ingredient that seems to be missing in India is a supportive institutional environment. Modi’s litmus test will be whether he can overcome legacy issues that plague India’s institutional ecosystem that inhibit the evolution to a cash-light economy.

One such issue is the over-reliance and unhealthy prioritisation of the government-run digital payments solution to the detriment of private service providers. Modi’s promise of ‘less government, more governance’ should certainly not include the perpetuation of a digital payments ecosystem dominated by government-backed entities. Instead, it must focus on building partnerships that leverage entrepreneurial energies outside of the government. Digital payments currently constitute only around 5% of all consumer transactions and need a dramatic and exponential ramp-up.

While the RBI has adopted a digitalfocused ‘Payments and Settlement Systems Vision’ in June, there is no mention of any competition issues that should ordinarily be considered when safety, efficiency and universal access are stated goals of this vision. Further, there exists a conflict when the government-sponsored digital infrastructure backbone, the National Payments Corporation of India (NPCI), also establishes the terms of engagement of the emergent digital payments ecosystem. The NPCI promotes the RuPay card, which has been pushed out to most citizens who have opened Jan Dhan accounts.

After demonetisation, the NPCI has waived switching fees paid for all RuPay issuing and acquiring member banks for points of sale and e-commerce transactions (till the year-end), ostensibly to promote its own product. Here, the licenser, regulator and the business entity are one, and are perversely gaming politics and policy. This is not avirtue for any market seeking to promote itself as business-friendly.

But it’s more than just the ‘ease of doing business’ that is at stake. It would be clear to incumbent card networks that they may have lost the opportunity to service the 800 million who make up the bottom of the economic pyramid to the supply-led RuPay proposition. But the government must also recognise that an army of stakeholders will be required to increase both the volume and value of digital transactions. For instance, there is negligible payment acceptance infrastructure in rural areas, despite RuPay’s dominant presence over the last few years.

The immense task of ensuring ubiquitous acceptance infrastructure is not something government can achieve alone. RuPay will need to work with its counterparts. Risks that come from having created a single point of infrastructural failure through the NPCI are immense and real. One such threat materialised when cyber attacks were witnessed over the last few months that affected 3.2 million debit cards.

GoI must ensure that demonetisation is not seen as a time for increasing the role of government in the lives of citizens, rather as a moment to rationalise it. The government has the responsibility to balance security, access and competition as the digital economy evolves. This has to be done through sensible policies and regulations, not through predatory business interventions.

This commentary originally appeared in The Economic Times.


Muddling through Marrakech

Samir Saran

To those gathered in Marrakech to respond to what is inarguably one of the most important political and economic challenges of our times—climate change

 Earth, Water, Climate Change

As the UN climate conference got underway on 7 November, fate and the US electorate delivered a body blow to the ambitions of many gathered in Marrakech to respond to what is inarguably one of the most important political and economic challenges of our times—climate change. Voters in the US exhibited their disdain for a globalisation that was perceived to have favoured only a few. They rejected the internationalist proposition of the Hillary Clinton campaign. They vented their frustration at the notion of global governance that took away the rights of communities to decide their own future by placing political agency within a complex architecture that was distant and cold.

And they rejected the solutions offered by liberal elites on various issues, including trade, employment, growth and sustainability, by casting their votes in favour of Donald Trump. In the end, he had the more appealing manifesto, rejecting facets of US policies that had sustained over two decades of unfettered globalisation.

Marrakech’s outcome was sealed on 8 November. It was only the evangelical obstinacy of those present that allowed the forum to continue to plod along a path that arguably had been rejected by world’s most influential and oldest democracy.

Perceptions and assessments of climate-change action, climate governance and response to global warming mirrored a growing secular view on the negative experiences of globalisation itself.

These experiences can be clubbed in three broad sets of issues.

First, global action diluted democratic agency as a result of the processes of global governance. These processes had allowed themselves to be captured by a small group of ideologues spanning the globe and proliferating different sectors. Their world view inhabited a narrow spectrum of thought with no room for dissent and only contempt for those who did not conform. Global governance worked for those who could reach the forums where debates unfolded. Contrarians, even if they did reach the gates of such forums, found their ability to weigh in and be heard meeting insurmountable barriers.

The second grievance stemmed from a sense of injustice, where at least the popular perception was that globalisation favoured a select elite. Rules were made to perpetuate the hegemony of some and while all may have benefitted from it a little, transformational change continued to be available to only a few. Globalisation and its agents and institutions lacked legitimacy, and they did not even care to rectify this impression.

The third issue was the inherent hypocrisy in the communications and intent of those defending and promoting the ideal of one planet and one humanity. Rich countries, communities and individuals had done little to demonstrate their intention to share their prosperity with those left behind. Their manipulative attempts to evade tax, dilute their commitment to global development aid, and profit under the garb of “innovation rewards” of what were described as “global challenges” and “public bads” had diminished an internationalism that sought to create trade, economic and social interconnectedness.

Climate Change, Morocco, Marrakech
COP22 in Marrakech, Morocco, 2016 | Source: Climate Change Org

For many who had spent a better part of the decade achieving the gains (modest) that were signed into an agreement in Paris, the 2016 US election appeared as a mandate against climate action. Rejection of Barack Obama and Clinton-style globalism does implicate the future of climate action as a collective. But exactly how?

Climate debates suffered from all the failings of “Project Globalisation”. They were designed in a manner that any climate action would benefit the few winners and burden the many. Some new winners would be admitted if they signed up to the “new deal”. Climate action reeked of hypocrisy, with rich countries unable and unwilling to commit any significant amounts to support the “loss and damage” and adaptation challenges of the poor. Even on mitigation, the global commitment of a $100 billion remains implausible.

Finally, national actions are defined through a club of woolly eyed “multilateral elites”—all belonging to a Hegelian land. And all reaching the same policy prescriptions irrespective of context, capacity, capability and reality. In the age of hypermedia and an intensely participative public sphere, climate politics appeared distant, cold and undemocratic.

Marrakech points to three much needed next steps.

Climate Change, Morocco
Opening Ceremony of the Marrakech Climate Change Conference | Source: UN Climate Change

First, nations matter, and any effective climate response will be national and regional. Allow them agency and choice, and do not impose solutions and alien pathways. The “rule book” to monitor national actions should be thrown out lest it be seen as another elite attempt to undermine popular will.

Second, do not allow hypocrisy to destroy the planet. If the rich are concerned for their grandchildren, they must at least guarantee decent living for the current generation of the poor. Put the $100 billion on the table. Then allow your funds and banks to invest in emerging and developing countries and begin to price innovation for the bottom of the pyramid.

Third, climate change as we conceive it, is already upon us and will not suddenly manifest itself in 2020. The rich must underwrite and take responsibility for the devastation that many confront today, and only then will they be able to enlist and seek action from others. Else, climate is a great leveller. We will all boil together, and the poor may have less to leave behind.

This commentary originally appeared in The Mint.

Columns/Op-Eds, Water / Climate

India’s perspective on post-Paris climate negotiations

ORF, Expert Speak, Nov 8, 2016

Original link is here

Fletcher Forum: How do you propose an amenable bridge between global responsibilities of combatting the legacy of historic emissions from OECD countries versus controlling increases in current (and future) emissions of BRICS nations?

Samir Saran: The pre-Paris paradigm of “strict” differentiation with regards to mitigation responsibilities has now evolved into that of “universal action.”

However, the induction of the term “climate justice” still attempts to ensure the existence of a bridge between global historical responsibilities and the future emissions of developing and emerging economies. Climate justice, defined as the recognition of equitable rights to use the atmospheric global commons, is weighed in terms of mitigation and adaptation costs. Any effort to redistribute the emissions between the OECD and the global south will need to account for the cost of differential impacts caused by reduction or avoidance of emissions. In many ways, climate justice takes forward the moral arguments of the CBDR (Common But Differentiated Responsibility) and Equity debate while discarding the rigid politics that have evolved around these concepts and made agreements impossible.

That being said, there are four distinct yet overlapping future potentials of “just” climate action:

One, developed countries will have to achieve their self-designed pledges on climate finance and support for technology transfer. Greater political leadership and action from the global north will encourage developing countries to walk an extra mile in meeting their Nationally Determined Contributions (NDCs). For instance, Indian and Brazilian NDCs have mentioned additional commitment to climate action provisional to availability of finance and technologies from the industrialised economies.

Second, a global set of rules could be developed to tax or regulate the higher emissions by corporations, institutions, and other parties across the globe, irrespective of their country’s development status. This type of normative framework must be universally agreed upon. All corporations above a certain size in certain sectors and irrespective of their geographical location must adhere to a framework of efficiency and climate awareness.

Thirdly, technology transfer from the west won’t be enough to strengthen climate action to the level that is required to limit global temperatures at two degrees or below two degrees Celsius. Indigenisation of technology innovation — both products and processes — will be critical to resolving the climate-development nexus. A more transparent knowledge sharing approach along with technology transfer will have to be put in place to support long-term climate resilience.

Fourth, “loss and damage” in the longer term must be operationalised. The Paris Agreement’s weak language regarding loss and damage, mainly the exclusion of a non-liability clause, was perhaps part of an effort to generate consensus on minimum level of commitment. Going forward, we can’t escape from setting an institutional apparatus to compensate for climate related losses that especially affect Small Island States, Least Developed Nations, and developing countries.

Global per capita emissions are negligible for India, but 13 of the 20 most polluted cities in the world are in India. What is your take on the environmental policies undertaken by some of the state governments? Do you feel there is sufficient political intent to address environmental concerns at the central level, particularly on issues like forest cover?

SS: Environmental policies alone cannot resolve India’s urbanisation challenge. There is an underlying structural and political issue, which gets veiled under the supposed “techno-managerial” clarification. A case in reference is the odd-even license plate scheme in Delhi aimed to decongest traffic and reduce air pollution. In the absence of robust infrastructure and comprehensive regulatory measures, the odd-even scheme hit a dead end. Lack of an efficient public transport system, misdirected notions of how the mega-city’s transport system should work, and the conception of the scheme itself, wherein the focus was on the number of vehicles on the road rather than the time they spent, are a few shortfalls that failed the broader intended impact of the odd-even scheme. But as I have written elsewhere, this scheme needs to be re-introduced accompanied by a slew of other measures including ‘congestion charge’, ban on diesel vehicles, rationing of vehicles per household and relooking at the notion of ‘home office’ which becomes increasingly an attractive option with communication technology and digital connectivity.

Such structural problems are mirrored by the water and waste management sector. Yamuna Action Plan I, II, and III, and the latest “Maili se Nirmal Yamuna Revitalisation” Project 2017 have endeavoured to clean one of India’s most polluted rivers. None so far have produced the desired results. This is a result of infrastructural shortcomings for waste disposal, derisory and fraudulent penalties and punishment for polluting, and growing waste generation. So we now have a situation where judicial and socio-environmental activism has maintained the pitch of the debate, but political deafness to the challenge is palpable.

How would you suggest enacting reforms in India’s overburdened and inefficient utilities or the coal sector?

SS: The Indian coal power sector is growing. In 2015–2016, coal production rose to 638 million tons (from 70 million tons in 1970s), and imports dropped by 43 percent from the previous year. The current government’s thrust on modern technologies combined with reforms in coal imports, auction, mining, extraction, and evacuation have started showing signs of sectoral improvement. However, an ambition to double coal production to 100 crores tons by 2020 will require massive improvement in the efficiency of both the product and process. Investments in research and development for clean coal technologies, improvements in boiler efficiency, and super critical technology are the lowest hanging fruits. Two aspects are critical in this sector from a climate perspective.

First, since OECD countries are neither investing in nor are mandated to develop coal technologies, the emerging economies will have to pick up the baton on research on mining technologies and boiler efficiencies. Second, every percentage gain in coal energy across the mine to power plant value chain will reduce Indian annual emissions equivalent to the entire annual emissions of some countries in Europe and elsewhere. This is a low hanging fruit that is not being bagged due to the evangelical anti-coal sentiment that is blind to its inevitable use in OECD countries and developing world.

There is much enthusiasm surrounding India’s focus on renewable energy — what lessons can India provide to other countries to develop their renewable energy sector?

SS: India’s renewable energy development trajectory presents a unique case. The country is endowed with an estimated 896 GW of renewable energy potential in the form of biomass, solar, wind, small hydro, and tidal. Besides this, the energy deficit in rural areas, increasing energy demands, and climate concerns have been the key drivers of renewable energy development in India.

To exploit this potential, India created a separate Ministry of New and Renewable Development, set national goals for biomass and solar generation, and made ambitious targets to increase the share of renewables in the total energy mix from 32 GW (2014) to 175 GW by 2022.

To provide further thrust to the sector, Prime Minister Modi along with France launched the International Solar Alliance in Paris in 2015. This group of 121 countries aim to mobilise one trillion dollars for solar investments by 2030 and improve access to solar technologies.

While it too early to present India as a successful case to learn lessons from, its vision to balance green growth along with the sovereign obligation to meet at least the lifeline energy needs of its population is an endeavour with no precedence. In a country of 400 million energy poor people, renewables offer only a fraction of a solution for energy security and economic growth. Yet, an impressive 175 GW target from renewables demonstrates the new ambition of India’s political leadership and the sense of responsibility towards global climate action. To put this ambition in perspective, India is seeking to install more renewable capacity in the next decade than the total capacity installed in Germany over multiple decades of industrialisation.

If India can pull this off, its model will be unique. India would be the first country in the world to move from a low-income society to a middle-income economy, driven significantly by renewable energy and climate conscious infrastructure. It would also be a model that is exportable to other countries similarly placed on growth ambitions and development priorities.

This interview originally appeared in The Fletcher Forum of International Affairs.


Prospects for EU–India Security Cooperation

Samir Saran|Gareth Price| John Joseph Wilkins|Kanchi Gupta

There is a clear imperative for greater understanding between the EU and India on a range of security concerns. Until recently, this imperative has not been obvious. India’s focus has been inward-looking, predicated on the need for rapid economic growth. However, since 2014, the BJP–led government in Delhi has demonstrated a much greater emphasis on foreign policy; in 2015 the foreign secretary, Dr. S. Jaishankar, argued that ”India wants to be a leading Power rather than just a balancing Power.” And while the EU has faced a range of difficulties in recent years — among them, economic challenges since the 2008 financial crisis, terror incidents across Europe, and a surge in refugee inflows — these have increased its focus on constructing both an outward and forward–looking foreign policy.

The European Union and India have been engaged in a strategic partnership since 2004. The 13th Summit, held in March 2016, directly advocated advancing cooperation in the field of security. Counter-terrorism had been an element of EU-India engagement since the strategic partnership was agreed. Other thematic issues raised at the 2016 Summit as subjects for dialogue and engagement included cybersecurity, counter-piracy and non-proliferation. In terms of regional concerns,the EU and India stressed their shared concerns or interests regarding a number of countries or regions, including Afghanistan, Pakistan, Nepal, North Korea, Iran and West Asia/the Middle East — in particular Syria.

Chatham House, the EU Institute for Security Studies, and Observer Research Foundation held a closed–door workshop and a public conference on ‘Prospects for EU–India Security Cooperation’ in September 2016 exploring the scope for engagement on three of these issues:West Asia, maritime security, and counter-terrorism and radicalisation. The workshop discussed the potential contours of EU–India collaboration, as well as the hurdles to their enhanced engagement. Each of the issues is of paramount concern both to India and the EU, but each of these differ in terms of existing cooperation and the underlying interests. The degree of cooperation feasible will be contingent both on political will and capacity, but for each issue ORF established a range of potential options for collaboration, ranging from specific and granular opportunities for shared learning, to more aspirational dialogues seeking to establish shared frameworks for collaboration in dealing with such challenges.

West Asia has historically been a bridge connecting Europe with Asia. As their shared periphery, developments in the region — including conflict — have a severe effect on both the EU and India.Both rely on petrochemical imports from the region; the EU is suffering from inflows of refugees escaping conflict; millions of Indians work in West Asia. The current economic downturn is affecting the livelihood of many Indians. And India has had to evacuate its own (and other South Asian) nationals from, inter alia, Yemen, Lebanon and Libya in recent years.

India’s engagement with West Asia is self-evidently on an upward trend highlighted, for instance, by the recent decision to make the Crown Prince of Abu Dhabi the guest of honour at India’s 2017 Republic Day celebration. Yet neither the EU nor India conceive of each other as primary interlocutors in relation to West Asia. This may reflect both the geopolitical reality and the staid policy approaches on both sides. The interests of the EU and India are more likely to be converging than currently framed and understood. Initiating dialogue now, to understand better the two sides’ interests in West Asia, will pay dividends in the years to come when close collaboration will be inevitable.

There is significant scope for better cooperation on the issue of maritime security. The Indian Ocean is the venue for the EU’s most successful military mission to date — EU NAVFOR or Operation Atalanta, coordinating anti–piracy operations off Somalia with a host of countries including India. EU engagement in the Indian Ocean also includes EUCAP Nestor, the financing of the Indian Ocean Commission and the EU–CRIMARIO project intended to improve maritime security in the entire region. At the very least, maritime security offers scope for enhanced dialogue; at the more aspirational level, the EU and India — sharing interests in maintaining open sea lanes of cooperation — could work together promoting the UN Convention on the Law of the Sea as the basis of maritime governance. Further, while Operation Atalanta has proved successful thus far, piracy will remain a threat until the root causes — on land rather than at sea — have been tackled. Both sides have a palpable interest in stabilising Somalia and other fragile coastal geographies.

The emergence of piracy in the Western Indian Ocean has provided a unique opportunity for navies from within and outside the region to join forces in addressing a concrete security threat. There is a need to seize the momentum and build upon this positive experience to foster operational cooperation also in other maritime security domains or in combatting sea-borne crime such as smuggling and IUU fishing. The Indian Ocean Rim Association (IORA) is the primary multilateral forum promoting stability and rules-based conduct in the Indian Ocean. The experience, interests and presence of the EU in the Indian Ocean could make the EU a valuable dialogue partner of IORA.

Counter–terrorism has been a subject for EU–India discussion since the strategic partnership was forged. The joint declaration at the 2016 summit highlighted the determination of the EU and India to work together to tackle terrorism. Cooperation is extant in areas such as financing terrorism, designating groups as terrorist and working together in the UN system.

Yet there is scope to deepen cooperation. The EU is committed to helping India’s Smart Cities initiative. This offers great scope to focus on resilience building — whether in relation to disasters or terrorist attacks. Radicalisation is another area in which the EU and India could work together. For the EU, domestic Islamic militancy is a relatively new phenomenon — until the attacks in Europe of 2004 and 2005, it had been seen as a foreign policy concern rather than an internal European problem. Despite having a Muslim population of more than 180 million, Indian Muslims have been relatively immune from radicalisation, certainly in contrast to European Muslim populations. Understanding the causes of this could offer insights to the EU. At the same time, there are growing incidents of radicalisation in India, though from a low base. Are there lessons from European understanding of the process of radicalisation — notably online radicalisation — for India? Existing cooperation on cybersecurity could feed into this shared understanding. Countering Violent Extremism online will remain a common challenge for all liberal societies and working together to share, learn, and discover technologies and methods to respond to this contemporary threat must be part of the agenda.

EU and India are only now beginning to appreciate the importance of the other,when engaging with global security challenges. The EU brings a range of experiences to the table that are relevant for India. The EU recognises that today’s security challenges require a full spectrum approach — pure military solutions rarely work. The EU played a pivotal role in resolving the Iranian nuclear issue. And while India and the EU may approach issues — such as the challenges facing West Asia — from different perspectives, initiating dialogues and conversations to better understand these different perspectives now will prove beneficial, as India’s global role becomes more apparent.


West Asia

  • The EU and India have clear-cut complementarities in regard to peacekeeping operations, under the auspices of the United Nations. There is scope for engagement both at a Track 1.5 and a Track II level, to explore concrete options for collaboration.
  • India has proven highly competent in evacuating its own and third–country nationals from West Asia. The EU and India should establish an official level working group to share best practises on evacuation and explore avenues for a cohesive approach.
  • The EU and India should initiate an annual Track II dialogue to deepen understanding of synergies and divergences in their interests and approaches, and suggest common solutions to mitigate and manage the conflicts in West Asia.
  • Other potential areas for greater collaboration would be the development of energy infrastructure projects, greater coordination with the respect to the developments in Afghanistan (where both the EU and India have similar objectives), and third–party mediation, for instance between Saudi Arabia and Iran.

Maritime security

  • The EU and India should establish a regular high–level, official dialogue on maritime security within the strategic partnership to build trust and explore avenues for further cooperation. This could include SAR/HADR operations, tackling sea-borne crime such as smuggling or IUU fishing, and potentially joint maritime or evacuation exercises.
  • To improve maritime security in the Indian Ocean, the EU and India should cooperate on promoting Maritime Situational Awareness — building human and technological capacity on information sharing, maritime surveillance, search and rescue missions, and data collection — bilaterally, as well as with other countries of the Indian Ocean rim.
  • There is a need for a comprehensive, multilateral maritime security and governance regime for the Indian Ocean. Existing regional organisation, with IORA at the forefront, should include discussions on maritime security in view of building such a regime in the future. Given its experience, sustained interest, presence, and involvement in the Indian Ocean, the EU could become a valuable dialogue partner of IORA.
  • There is scope for enhanced joint scientific research on maritime issues, potentially under the remit of the EU’s Blue Growth initiative; a long–term strategy to support sustainable growth in the marine and maritime sectors.

Counter-terrorism and radicalisation

  • The EU and India have agreed to share experiences of their response to terrorist attacks. Under its support for India’s ‘Smart Cities’ initiative, building urban resilience to terrorist attacks and other disasters, should be a primary objective within the initiative.
  • There is scope for enhanced understanding of why India has proven to be relatively immune from radicalisation. In addition, there is scope for the EU to engage with India on its learnings regarding the causes of radicalisation. In particular, online radicalisation is a growing challenge, and India’s fast–growing number of smart phone users provides cause for concern; India has the third highest number of Internet users in the world. Similarly, there is scope for greater understanding and collaboration between the EU and Indian approach towards countering violent extremism.
  • The EU and India should launch a dialogue to discuss approaches to rogue states, and terrorist groups and individuals. EU and India must develop shared understanding and basis for identifying such ‘states’, the process and basis for sanctioning them and thereafter measuring the effectiveness of targeted sanctions.
  • There is scope for greater functional cooperation: this could involve developing common situational awareness and identification of terrorist groups and coordinating measures aimed at preventing terror financing and the movement of terrorists. Furthermore, there is at the minimum, potential for the exchange of best practices including those pertaining to deployment of new technology and tools.

Read the full issue here.