Kidding along in Karnataka

THE state syllabus in India’s Silicon Valley of Karnataka will, from now on, strive to develop more thoughtful children in school. Kids from class one to class nine will be asked to make daily entries in their diaries, and will even be given marks for doing so, says a newspaper report. Whether institutionalising as personal a habit as maintaining a diary is the right way to go about it is a moot point. Asking children to make daily entries in their diaries and then scrutinising them could encourage not so much freedom of expression as pontification as kids are encouraged by their parents to say the right things, especially when marks are to be had! Instead of entries where the children write about how much fun it is to play in the rain, they could be encouraged by their parents to say positive things about their school and class teachers! Diary writing is, to quote the educational authorities, “a cultural practice, involving reflection and expression and is yet a peculiarly hybrid act of communication”. But that presupposes that there is no one peering over the child’s shoulder to make the diary entry yet another assignment to be completed before the kids can do what they really want to, even if it is just watching monsoon clouds drift in a darkening Karnataka June sky.
As if to leave the kids with even less leisure to let their minds roam free, the authorities have also programmed the group-singing of inspirational works like Kodagana Kodi Nungitta by Santa Shishunala Sharif and poems like Manku Thimmanna Kagga by D V Gundappa. That is to be followed by visits to local hospitals and old-age homes to make the students understand physical and emotional pain so that they can become more responsive and humane. All of which could be Karnataka’s way of ensuring that the kids achieve enlightenment even before they leave the creche!

-- The Economic Times Editorial

Genuine DTH demands

TRAI’S consultation paper on issues relating to Directto-Home (DTH) TV illustrates why any policy relating to technology should not attempt to micro-manage the industry. Technical parameters specified minutely in such policies always run the risk of being challenged by newer innovations. This seems to be happening in the case of DTH. Tata Sky, a DTH service provider, has approached the information and broadcasting (I&B) ministry regarding modification of some conditions in the DTH licence agreement. Trai has put out a consultation paper on the issues. The paper seeks opinion essentially on three issues — whether licence conditions should be amended to exclude high-end digital video recorders (DVR), which DTH operators may wish to launch, whether guidelines relating to uplinking from India should be amended to exclude services meant to help consumers use the platform efficiently (read interactive features) and whether multiple dwelling unit technology (MDUT), which enables consumers in one building to share one big dish even while using separate set-top boxes (STBs) should be introduced.
Inter-operability is at the heart of the STB issue. Licence conditions specify that an STB should be inter-operable, i.e., consumers should be able to use the same STB even when they switch service providers. High-end DVRs will have some additional features that will not be inter-operable. Considering that value-added services and technology will be the key differentiator between different DTH service providers, licence conditions should provide enough flexibility. The principle of inter-operability should only extend to basic television viewing and simple broadband. Simultaneously, policy needs to encourage renting of STBs so that consumers can upgrade their boxes more easily. Also, consumers need to be informed that a particular STB provided by an operator cannot be used in case he switches operators. MDUT, for its part, is a cost-effective way to deliver service to closely located multiple subscribers. Policy should not stand in the way.

-- The Economic Times Editorial

Encash telecom story

THE announcement by the global telecom major Nokia that it would be shifting its global network management business to India clearly illustrates the opportunity that the Indian telecom sector presents. This opportunity needs to be encashed and built upon. This will mean bringing to an end the continuous vacillation and indecisiveness over the role of foreign investment in telecom and its perceived impact on national security. It will also involve working out concrete ways in which manufacturing of high-end telecom equipment can be done indigenously. It is well known that India is one of the fastest-growing telecom markets in the world and that the low prevailing teledensity means that there still is plenty of growth to come in every segment, whether mobile, fixed or broadband. This is an attractive opportunity for global service providers and equipment vendors who want to benefit from the Indian story.
In this context, it is short-sighted on the government’s part to frame regulations that impose restrictions on foreign investment — whether FDI or FII, remote access of networks and top executive appointments. National security concerns are better addressed through a special government agency, and not through restrictions on ownership. Part of this concern can be addressed through encouraging local manufacture of equipment. This is something China has done successfully, some of its equipment makers are globally competitive. Local manufacture can set off the virtuous cycle of lower equipment cost, lower cost of service and increase in subscriber base. Nokia’s decision also illustrates that it is quite probable that work relating to network maintenance or any other job outsourced by Indian service providers to global players is likely to be outsourced back to India. Most significant is the need to keep the growth momentum going in the telecom industry. Indecisiveness over critical issues such as spectrum allocation and the ushering in of a truly unified licensing regime can arrest growth.


-- The Economic Times Editorial

Political Affairs

IT NEED not just be in affairs of the heart but also in political matters that opposites attract and likes repel. Take Karnataka where the avowedly non-communal Janata Dal (Secular) or JD(S) and the Hindutva-toeing Bharatiya Janata Party (BJP) have come together to give the state a coalition government. That the BJP has spoken out against dynastic politics while the JD(S) is increasingly becoming a Karnata family affair only makes the whole thing more piquant. Or take Uttar Pradesh where the parody of Indian politics is underlined by the fact that the Samajwadi Party (SP) and the Congress are going hammer and tongs at each other despite both claiming to be secular, socialist and progressive. It’s almost as if the Congress, the SP and the JD(S) have to fight for the same secular space while the BJP is on the other side of the fence and now having to contend with splinter groups led by Uma Bharati and Madan Lal Khurana, each claiming to be the real Bhajpa.
And it’s not as if the Congress party is always secular and the BJP totally against dynastic politics. In the wake of the riots in the communally-surcharged Gujarat of 2002, the state’s Congress leadership tried to play a soft Hindutva card but only to be trumped by the hard line adopted by the BJP’s incumbent chief minister Narendra Modi. And, more recently, the BJP leader of the Opposition L K Advani tried to cash in on the Gandhi brand name by projecting Indira’s grandson Varun as the face of the future. That Varun does poetry and not cocaine makes the task easier in the wake of the ongoing trial under the Narcotics Act of the BJP’s Rahul! The late economist John Kenneth Galbraith, who was Kennedy’s envoy to India in the early 1960s, may have anticipated the shape of things to come when he wrote in his Ambassador’s Journal that “politics is not the art of the possible. It consists in choosing between the disastrous and the unpalatable.”


-- The Economic Times Editorial

Lessons in diplomacy

DESPITE events in Nepal and Sri Lanka moving in two very different directions, the situations in India’s two neighbours may serve to reinforce a common lesson for New Delhi. Nepal is finally showing signs of getting out of the morass it had slipped into. The decision of the Maoists to play an active role in the creation and functioning of a constituent assembly is undoubtedly a major step forward. It throws up the very distinct possibility of democracy in Nepal finally representing all sections of the population. And if the influence of the Nepalese Maoists on the Naxalites in India is as significant as it is sometimes made out to be, it could even help bring this group closer to the mainstream of Indian democracy. In sharp contrast, the signs from our southern neighbour are far more disheartening. The massive scale of individual incidents of armed conflict between the Sri Lankan army and the Tamil Tigers raises the prospects of the island nation slipping back into a fullblown civil war. And India can hardly afford to ignore the consequences of such conflict. Even if the political support for the Tigers in Tamil Nadu is now less vocal than it has been in the past, there remains the very real challenge of coping with the refugees who are pushed into the southern state with every increase in the intensity of the conflict in Sri Lanka.
The differences between the two situations do, of course, go beyond their current fortunes to their very nature. The crisis in Sri Lanka has a bitter ethnic dimension, which, fortunately, is not an issue in Nepal. And yet what the two countries do share is wariness about their big neighbour. It is not entirely accidental that the events in Nepal took a turn for the better only after the proposed solution the Indian representative brokered with the King was allowed to fall by the wayside. The costs of direct intervention in Sri Lanka, too, are still fresh in Indian memory. The recent developments are then yet another reminder that India’s interests are served not so much by direct intervention in the neighbourhood as by using New Delhi’s diplomatic and other skills to help events move in a direction that do not hurt this country.


-- The Economic Times Editorial

A strong market structure

THE one conclusion that can be drawn from the various reports and mood surveys on the stock markets is that there is no replacement for strong, deep and participative markets. This will enable the stock markets to realise India’s potential fully and guard the markets against panicky over-reactions. It is true that fundamentals are the foundation on which any bull or bear run is built. However, it is also important to reconcile oneself to the fact that stock markets are also influenced by intangible factors such as sentiment and emotions such as greed and fear. These factors can, to borrow a phrase from former Fed chief Greenspan, cause irrational exuberance. They can also cause unreasonable despondence. It is then that deep and wide markets come in handy. A large number of players, with different investment horizons, objectives and opinions can play a role in tempering unreasonable exuberance and despondence.
It is in this context that the reported measures relating to participatory notes (PNs) and monitoring systems to keep an eye on volatile scrips need to be seen. While the more transparent norms relating to PNs need to be welcomed, it would be unreasonable to expect that this by itself would curtail market volatility. Global liquidity continuously evaluates opportunities and flows to the relatively more attractive destination. Therefore, even thoroughly regulated PN money can quickly flow in and move out causing the market to spike or trough. Surveillance measures will detect abnormal movement but will be of little comfort to investors watching liquidity evaporate rapidly in a market downturn. Increasing supply of good quality scrips — say through PSU disinvestments — is one way to attract long-term money and to absorb excess liquidity. Getting more pension fund and domestic institutional money will widen and deepen the markets. India’s stock markets need not be just another typical emerging market.


-- The Economic Times Editorial

Ships of the old block

THE recent appointment of Roshan Goonatilleke as Sri Lanka’s airforce chief is the first instance in world aviation history of a son following in his father’s career flight path, even though it has been a while since Harry Goonatilleke commanded the skies over Ceylon. If Harry had commanded the Sri Lankan navy and Roshan had followed suit, the latter could even have been called not just a chip but a ship of the old block! Since Roshan is flying as high as his dad did, they could more logically be termed as birds of a feather. Given south Asia’s degree of dynastic politics, sons and daughters taking over the mantle of national leadership from their parents is far more common. Sirimavo Bandaranaike, the world’s first woman PM, was followed a few decades later, as Sri Lanka’s leader by her daughter Chandrika. India not only had a father-daughter national leadership combo in Jawaharlal and Indira but even a grandson PM in Rajiv.
Not too many eyebrows are raised when such things happen in sports where it’s assumed that the player has not just the skills but the character for the role. The Nawab of Pataudi donned India’s cricket captaincy on the 1946 tour of England and was followed 16 years later by son Mansur Ali Khan. All-rounder Mohinder Amarnath never captained India like father Lala but shared with him a contempt for those who chose the national cricket team without quite having the required experience. Mohinder even gave an interview, calling the selectors “a bunch of jokers”, something Lala never did, though, he would have had quite a few things to say after being sent back from the 1936 tour of England! Getting back to politics, if Karnataka CM H D Kumaraswamy emulates his father by going on to become the PM, it would be the first instance of the self-perceived humble son of a farmer being followed by the son and grandson of a farmer into No 7, Race Course Road!

Functional markets in grain

THE government’s proposal to buy food grain at market rates for its PDS when the procurement is low, as with wheat this year, is welcome. That would delink procurement from the PDS. The drop in wheat procurement indicates that farmers have been able to sell their produce at above government prices to private purchasers. The government would do well not to press the panic button and, instead, strengthen the institutional framework to allow even larger private purchases. Besides increasing the options for farmers, a greater play to market forces would help limit the government’s role in the food grain economy to that of a distress buyer at the minimum support price (MSP). Despite a marginally higher expected production this year, wheat procurement has fallen sharply to 9.2 million tonnes by June 2 — about half the procurement for the corresponding period last year. This is largely because the open market price of wheat is higher than the government’s Rs 700/quintal. That major producers such as Punjab and UP have allowed large corporates to procure wheat directly may have also undermined government’s procurement. Besides sourcing grain for various social schemes, government procurement at the MSP provides farmers an assured price for their produce. But the need for government procurement is obviated if farmers get higher prices. The government could, however, source the PDS shortfall directly from the market, without hiking the MSP. Although this would increase the PDS subsidy, it would establish MSP as a distress price. This calls for a re-look at the buffer norms.
The reduced government procurement and the resultant low stocks could encourage private parties or traders to hoard wheat to obtain higher prices. That apart, in the event of mostly private purchases, there’s the possibility of large purchasers forcing down prices. Speculation in wheat can be pre-empted through quick import of wheat or the mere threat of imports. On the other hand, the threat of private players beating down prices can be countered through allowing sufficient and diverse set of buyers to purchase grain directly.


-- The Economic Times Editorial

More than a trade pact

IF commerce minister Kamal Nath’s statements in Tokyo are any indication, the proposed trade agreement with Japan will mark a distinct shift from the freetrade agreements India has favoured with other countries. Instead of being preoccupied merely with the number of commodities for which trade barriers will be lifted, the minister has focused on specific areas where there’s scope for mutual benefit. In sensitive areas like Japan’s agriculture this may mean no more than allowing import of mangoes from India. But India does also offer opportunities to overcome some of the emerging constraints on Japan’s growth. Japan’s problem of an ageing workforce can be addressed by tapping the younger workforce India has to offer. Kamal Nath has indicated that townships could be set up to create the economic and social environment that Japanese industry is comfortable with. And there would be further benefits to be had if small and medium Japanese enterprises are encouraged to invest in them. These enterprises are more likely to bring official Japanese financial support, and the greater the number of investors the less will be the dependence on a few large players.
This strategy is not without its risks. On the financial side, it’s likely that at least some of the projects would involve Indian public investment as well as conditional aid from Japan. It would then become imperative to initially evaluate and later monitor whether the benefits justify the costs. We cannot also ignore the potential social strains of creating isolated pockets of industrial development in the midst of a relatively less developed rural economy. Can we assume that the original owners of the land, taken over for a township, will remain silent spectators when its value multiplies? Clearly, not. So, while Kamal Nath’s initiatives do reflect a long overdue recognition that benefiting from globalisation is not simply a matter of lowering trade barriers, they raise a number of issues that the government will need to address.


-- The Economic Times Editorial

The perfect excuse

TIME was when boys turning up late for school would blame it on something called a traffic jam. On the evening of Monday, June 12, President Bush told his advisers that he was going to bed and slipped out to Iraq. The hoi polloi might wonder why the most powerful man in what the Americans see as a unipolar would at all need an excuse to slip off from a meeting with his own advisers and visit Baghdad, considering that the Bush administration occupied Iraq under the pretext of preempting the use of weapons of mass destruction (WMD) which did not exist! However, the Bush visit has given an opportunity for this weekend’s BBC News online quiz to pose the question as to what excuse Bush had made when he slipped out of the Monday evening White House meeting. The other two options given in the quiz were that he had said he wanted to go biking or that he had to visit a book club with wife Laura. It’s not too difficult to get the right option. Despite what has been said by the likes of Fahrenheit 9/11 director Michael Moore in his book Stupid White Men And Other Excuses for the Sorry State of the Nation, not even Bush would bike in the dark. And the President who prefers watching ESPN Sports is not exactly the kind to spend his evenings at a book club, with or without his better half who used to be a librarian!
Some might say that 7.45 pm is a bit too early for Bush to be going to bed, considering that the unilateral decision to occupy Iraq with a little bit of help from friends like Blair has given sleepless nights to many, not just in the US but Iraq! However, even Bush’s worst critics cannot accuse him of pulling a fast one, at least on this occasion. All he said was that he was going to bed. He did not specify that he was going to bed either in the White House or on Air Force One or Baghdad. Maybe Karl Rove, whom authors James Moore and Wayne Slater profiled in a book titled Bush’s Brain, also thought up the latest excuse to go to Iraq!


-- The Economic Times Editorial

Wrong prescription

THE government’s proposal to extend price control from the present 74 bulk drugs and formulations to 354 drugs under the National List of Essential Medicines (NLEM) is among the several bad dirigiste ideas, like price control on steel and reservation, the UPA government has flirted with. According to a Cabinet note on the new drug policy, price ceilings will be imposed on the NLEM drugs resulting in a 30-70% fall in their final retail prices. While the provision of essential, life-saving drugs at affordable prices needs to be ensured, price control is certainly not the way to do this. This will discourage R&D investment in drug development — already abysmally low at 5% of turnover. As with any sort of price control, companies would cut down production of the regulated drugs and shift to the unregulated ones. The availability of several essential drugs could get hampered resulting in a further deterioration of the health care system. Scaling up public health spending, a niggardly 0.9% of GDP at present, devising innovative public-private partnerships to deliver drugs to the poor at low prices and strengthening health insurance schemes will facilitate the provision of essential drugs.
To some extent, industry has only itself to blame. There is a proclivity among several drug companies to manipulate their accounts by showing high R&D costs. This needs to be checked. There is also a tendency to charge enormous margins — in a few cases, 1,000% of production cost — for the category of drugs known as ‘generic generics’, generally sold over the counter. The government has proposed capping the trade margins of generics at 50% and that of branded ones at 30% to end this. Yet as long as the absolute price of the drugs are low the margin charged by the trade should not matter. If the government wants to lower treatment cost it should do so through bulk buying and subsidising poorer patients, not by imposing caps and controls of various kinds.


-- The Economic Times Editorial