The building of the BRICS bank

Sanjay Vijayakumar has more about BRICS bank in this explainer

Last week, India named veteran banker K.V. Kamath to be the first President of the New Development Bank, popular as the BRICS bank. The focus of this bank will be to invest in infrastructure. Mr. Kamath, 67, is a veteran banker, who was credited with developing ICICI Bank into India’s second-largest lender. He headed the bank for 13 years until 2009 and is now its Non-Executive Chairman. He is also Non-Executive Chairman of India’s second-biggest software services exporter Infosys.

What is BRICS?

In 2001, the then Goldman Sachs Group economist Jim O’Neill coined the term BRIC to describe the growing prominence of Brazil, Russia, India and China in the global economy. Not yet considered developed countries, the four were grouped together for being at the same stage of economic development.

BRIC country leaders started meeting as a bloc in 2009. South Africa joined them later, though there was some scepticism that as a country of less than 50 million people it is too small to join the group. So, BRIC is now BRICS.

What is BRICS bank?

It is how the New Development Bank is better known as. Last July, the BRICS countries agreed to set up a development bank, whose purpose, according to its articles, is to “mobilise resources for infrastructure and sustainable development projects” not just in BRICS countries but also in other emerging economies. It seeks to do so by supporting public and private projects through loans, guarantees and equity.

But doesn’t the world already have enough institutions to do that — the IMF/World Bank, for instance?

True. It’s clear their presence hasn’t been ignored in the creation of the New Development Bank. The articles of the bank do say that its creation is to complement “the existing efforts or multilateral and regional financial institutions.” But, in a sense, the BRICS bank was born because the countries that represent this have long realised they need an alternative system to IMF/World Bank, one in which they have greater say.

How will the New Development Bank be different?

So, BRICS account for about 40 per cent of the world’s population and a combined economy of about $16 trillion. Although they account for over one-fifth of the global economy, together they garner only 11 per cent of votes at IMF. On the other hand, developed countries such as the U.S., Japan, Germany, the U.K. and France hold 40 per cent of the voting power. In the BRICS bank, the founding members have equal voting rights.

Is there more to its founding?

Definitely! Hongying Wang, senior fellow at global think-tank Centre for International Governance Innovation, reckons dissatisfaction toward traditional multilateral financial institutions to be just one of the three reasons.

One of the other reasons is that the creation of a joint development bank is a milestone in the evolution of the BRICS. That is, it turns the informal co-operation among those countries into a concrete institution. Finally, the bank seeks to fill the enormous hole that exists in infrastructure financing in many developing countries.

The last point assumes significance because the traditional development banks have reduced funding for infrastructure in recent decades while private investors have been reluctant to take on long-term projects of this kind. The infrastructure financing deficit in developing countries is estimated to be $1 trillion annually. BRICS countries, especially China, have accumulated financial resources that enable them to fill the gap to some degree.

How will the bank be structured and run?

The bank will begin with a subscribed capital of $50 billion, divided equally between its five founders, with an initial total of $10 billion put in cash over the next seven years and $40 billion in guarantees.

The group has also agreed to a $100 billion currency exchange reserve, which member-countries can tap during balance of payment problems. China, the biggest foreign exchange reserve-holder amongst them, will contribute the major portion of the currency pool. Brazil, India and Russia will contribute $18 billion each while South Africa will chip in with $5 billion.

In a crisis, China will be eligible to ask for half its contribution, South Africa for double its contribution while the others can get back what they put in.

The bank will be based in Shanghai. After a five-year term at the helm by an Indian, the President’s post would by turn go to a Brazilian and then to a Russian.

The bank can add more members. Media reports suggest Russia has invited Greece, which has a huge economic battle on its hands, to be a member. Even if more members are added, the capital share of BRICS can’t drop below 55 per cent.

How does the bank’s creation play out for each of its member-countries?

Hongying Wang says, for China, this is an opportunity to export its infrastructure over-capacity. China can reduce its mammoth reserves and improve financial returns on its external assets while at the same time learn to play a leading role among the developing countries. For India and South Africa, this promises to be a welcome source of much-needed infrastructure financing. For Russia, the benefit at the moment is largely seen to be political, given that the country has been isolated in the international arena over the Ukraine issue. For Brazil, the new development bank could bring financing for its oil exploration projects.

What would be the challenges?

Raj M. Desai, Non-resident Senior Fellow, Global Economy and Development, Brookings, says the main challenges will be in setting up and operating a bank in which shares are equally divided among countries that do not have much in common, apart from their distrust of the current global governance system.

Hongying Wang has a similar view. The differences are many, as amplified by their political systems (example: China and Russia v. India, Brazil and South Africa), economic interests (example: commodity exporters v. importers), and enormous power discrepancies (China’s economy, trade, and foreign reserves being much larger than the rest combined).

Dr. Pallavi Roy, who teaches at the University of London, points out that one of the threats could, interestingly, be another development bank incubated by China. The Asian Infrastructure Investment Bank (AIIB), backed by China, has more capital and members than the BRICS Bank.

Can the BRICS bank take on IMF, World Bank?

Brookings’ Desai points out that the capital base of the World Bank and the ADB combined is about $400 billion, so it would take the participation of several other middle-income countries for the BRICS bank to be able to compete with those institutions.

But the contingency reserve account also proposed as part of the BRICS effort may provide an alternative source of stabilisation support. In this, it could potentially compete with the IMF, which has had very few takers from BRICS economies on this front in recent years.

Investment via P-Notes shrinks

Experts feel that fears and uncertainty over the levy of minimum alternate tax may have a negative impact on investment sentiment in India

Investments into Indian markets through participatory notes (P-Notes) have dropped to Rs.2.68 lakh crore ($42 billion) at the end of April, after hitting over 7-year high in the preceding month.

P-Notes, mostly used by overseas HNIs (high net worth individuals), hedge funds and other foreign institutions, allow such investors to invest in Indian markets through registered foreign institutional investors (FIIs).

This saves time and costs for them, but the flip side is the route can also be used for round-tripping of black money.

According to data released by Securities and Exchange Board of India (SEBI), total value of P-Notes investment in Indian markets (equity, debt and derivatives) declined to Rs.2.68 lakh crore at the end of April, from Rs. 2.72 lakh crore at the preceding month-end.

What are Participatory Notes?

Participatory Notes or P-Notes are financial instruments issued by foreign institutional investors to investors and hedge funds who wish to invest in Indian stock markets. These are also called offshore derivative instruments

Who gets P-Notes?

P-Notes are issued to real investors on the basis of stocks purchased by the FII. The registered FII looks after all the transactions, which appear as proprietary trades in its books.

— S. Varadharajan

Market experts are of the view that fears and uncertainty over the levy of minimum alternate tax (MAT) may have a negative impact on investment sentiment in India.

In March this year, investment through P-Notes surged to the highest level since February 2008, when the cumulative value of such investments stood at Rs 3.23 lakh crore.

However, the quantum (percentage) of FII investments through P-Notes rose to 11.4 per cent last month from 11.3 per cent in March.

Till a few years ago, P-Notes used to account for more than 50 per cent of the total FII investments, but their share has fallen after SEBI tightened the disclosure norms and other regulations for such investments.

P-Notes have been accounting for mostly 15-20 per cent of the total FII holdings in India since 2009 while it used to be much higher — in the range of 25-40 per cent — in 2008.

It was as high as over 50 per cent at the peak of Indian stock market bull-run in 2007.

Capital account convertibility: an inescapable choice?

Keeping any restriction for too long could prove self-defeating, says RBI Executive Director

G Padmanabhan, Executive Director of the Reserve Bank of India (RBI), has suggested that India should move towards making the rupee more convertible for capital transactions by foreign investors.

Addressing a meeting at MSNM Besant Institute of PG Management Studies in Mangaluru recently, he said that `` greater opening of capital account is inescapable as the Indian economy grows further and becomes global in dimension.’’

The text of his speech has since been put up on the website of the RBI.

Stating that India would become a truly globalised economy in the not-too-distant a future, he felt that the country could not afford to remain isolated for a very long period of time. ``Sooner than later, it will need to get closely integrated with the rest of the world,’’ he pointed out.

Significantly enough, Mr. Padmanabhan’s observation comes in the wake of the RBI allowing Indian companies to raise rupee debt offshore. Also, this has to be read in the context of Governor Raghuram Rajan’s recent call for full convertibility of the rupee in a "short number of years.’’

Mr. Padmanabhan conceded that there were risks associated with full capital account convertibility. Yet, he felt that resisting liberalization over an extended period could prove futile and counter-productive. As the economy got more globalised, it would become harder to maintain closed capital accounts, Mr. Padmanabhan said. "Increasing openness to international trade may create opportunities for circumvention of capital account restrictions through under- and over-invoicing of trade transactions, and the increasing sophistication of investors and global financial markets makes it much easier to do so,’’ he conceded. Corporates could use transfer pricing to get around capital account restrictions, he said. However, keeping any restriction for too long could prove self-defeating as people ended up finding new methods of bypassing that restriction, he added. Ipso facto, he felt, India should move towards full capital account convertibility. "There is simply no escape from it,’’ Mr. Padmanabhan asserted.

How fast that movement should be would, however, depend on how fast the country could meet the pre-conditions such as fiscal consolidation, inflation control, low level of NPAs (non-performing assets), low and sustainable current account deficit, strengthening of financial markets, prudential supervision of financial institutions etc. ``India has already made visible progress on these fronts. There are, of course, risks, but we need to accept these risks and move forward boldly while controlling the risks as far as practicable,’’ he said. Sound policies, robust regulatory framework promoting a strong and efficient financial sector, and effective systems and procedures for controlling capital flows greatly enhanced the chances of ensuring that such flows fostered sustainable growth and did not lead to disruption and crisis, he said. "India has all these in place, and we need to keep on strengthening them,’’ he pointed out.

What does capital account convertibility mean?

Essentially, it means freedom to convert local financial assets into foreign ones at market-determined exchange rates.

What can it do?

It can lead to free exchange of currency at lower rates. Also, it can result in unrestricted mobility of capital.

How does it benefit a nation?

It can trigger stepped up inflow of foreign investment. Transactions also can become much easier, and occur at a faster pace.

What are the negatives?

It could destabilise an economy especially if there is massive capital flows in and out of the country. Currency appreciation/depreciation could affect the balance of trade.

Where does India stand now?

India currently has full convertibility of the rupee in current accounts such as for exports and imports. However, India’s capital account convertibility is not full. There are ceilings on government and corporate debt, external commercial borrowings and equity.

Camphor-scented leaves found in Western Ghats

The species, which is endemic to the Ghats region of Kerala, was named as Cinnamomum agasthyamalayanum.

A new tree species that gives out strong smell of camphor when its leaves and stem are crushed has been reported from southern Western Ghats.

The species, which is endemic to the Ghats region of Kerala, was named as Cinnamomum agasthyamalayanum after the type locality, Agasthyamala hills, from where it was reported. The find attains significance as this is considered the only endemic species that gives out the smell of camphor. Now, the challenge is to find out whether camphor can be distilled from the plant at commercially viable level. While natural camphor is extracted by distilling the leaves and bark of Cinnamomum camphora, a native to China, Taiwan, southern parts of Japan, Korea, and Vietnam, it is also synthetically produced. Camphor oil is extracted by steam from the chipped wood, root stumps and branches of the camphor tree. It is then rectified under vacuum and filter pressed, explained scientists.

Camphor has a wide range of medicinal applications especially in Ayurveda. Camphor has pain-relieving effect. It is an ingredient in a few externally applied oils to relieve muscle spasm. It also has mild mucolitic property and can reduce bronchospasm. It is also used in mild dosage in internal medicines. Cinnamomum agasthyamalayanum was identified by A.J. Robi, P. Sujanapal and P.S. Udayan of the Kerala Forest Research Institute, Thrissur.

It was found distributed between Attayar and Chemungi of Agasthyamala in Thiruvananthapuram. Isolated populations were also recorded from Rosemala in Kollam district of Kerala. The finding was recently published in the International Journal of Advanced Research.

Though Cinnamomum camphora would grow in Indian climatic conditions, it need not yield camphor at commercially viable levels. The new species can grow up to 8 metres in the dense wet evergreen forests of the Ghats at an altitude between 500m and 1400m, said scientists.

It was found “distributed in the windward evergreen forests of Agasthyamalai phyto-geographical region of southern Western Ghats. The population was found to be very low in all regions which were surveyed.

The leaves and stems of the new species have the smell of camphor probably due to the high content of volatile oil,” said Mr. Sujanapal of the Kerala Forest Research Institute, Thrissur, Kerala.

The court is still in session

Judicial delay must be discussed in the public sphere and not just as an internal, administrative matter to get a methodical solution

In 1984, Saeed Mirza made a movie called Mohan Joshi Haazir Ho about an elderly gentleman who spends many years and all his savings in a court battle against a better-funded, better-connected landlord. Look into India’s database and, 31 years later, you may find Mohan Joshi's case still going on. Recent Bollywood movies about the courts blithely ignore the one thing that progress has not changed: judicial delay.

In the ordinariness of courtrooms, there seems to be only the drama of patience. Litigants wait for months or years to be heard. Alleged criminals spend more time awaiting trial than their crimes would mandate, unscrupulous participants leverage a system designed to be fair and transparent to delay their cases and defer punishment. People with little or no means have to spend lifetimes and small fortunes to see their legal battles through in court. The courtroom as maidan-e-jung is a relevant metaphor, but in real life, it is an ultra slow motion battlefield.

Statistics show that there is a staggering number of cases being heard across the judiciary, and it is now cliché that justice, in being delayed, is denied. Even Article 21 of the Constitution has been read to include the right to a speedy trial, and quick justice is now considered indispensable. However, as a common aphorism goes, the course of justice often prevents it.

Why the delay?

The truly unfortunate issue of the problem is that nobody really knows why there is so much delay. Why does the legal process take so much time? Why does a petitioner need to appear in front of a judge for all of 10 seconds, only to be recalled a few months later?

There have been a number of informed, even scholarly initiatives, to identify the factors for delay. Most of them have been focussed studies using a small set of cases and data from the courts themselves.

Even the report by the 245th Law Commission states that there is no scientific data available to analyse the problem meaningfully.

This non-availability of a large enough set of data has hampered wide-ranging and meaningful analysis. As a response to the problem of lack of data, The Rule of Law Project at Daksh, an initiative that works with quantitative research to map the administration of justice in India, is putting together a database of all pending cases in a searchable, reportable online format. All the data is already available in the public domain, but Daksh is collating the data to make it easily accessible to interested parties who can use it to address and perhaps solve the problem.

Currently, our data for 10 High Courts includes 5,66,000 cases and 26,87,362 hearings. Each court has an average of 22,000 hearings a day. Every judge hears roughly 70 cases a day, which would be about 350 a week. This means that a judge gets about six minutes to hear each case.

On an average, it takes between 1,000 and 1,600 days for a case (in our database) to be disposed of — not court days but calendar days. That is roughly three to five years per case. However, for cases pending in the system, Daksh is unable to ascertain whether this trend will continue or whether the average figure will increase. And we are only beginning to collect the data.

From our database, we see that the oldest case in the system has been in the High Court of Jharkhand since January 1, 1958. At 57 years, this case appears to be nearly as long as the average life expectancy of an Indian. It has been around for so long that the High Court of Jharkhand, whose jurisdiction the case is currently under, was 32 years away from coming into existence when this case was filed in 1958. Of course, this may be an outlier case, but it is symptomatic of the deep malaise in the system.

Looking at ratios

One of the more worrying inferences from our recent work has been the ratio of case admissions to disposals. In some courts, nearly 2,000 new cases are admitted every day for every one case disposed. In the High Court of Gujarat, on a particularly challenging day, we saw 2,670 hearings, of which 1,827 were admissions of new cases. And that day, only two cases were resolved. Again, like the case from 1958, this may be an extreme example, but with an average Disposed-to-Admitted ratio of 1:50, we are most certainly not going to resolve the issue of pendency via small, incremental steps.

Need for a database

One of the secondary inferences that we have made is that an understanding of pendency and delay needs a coherent database that is standardised across the board. At the moment, each court is an island in the way it organises its information.

For example, take these simple questions: ‘What kinds of cases take three to five years to be disposed of?’ Or ‘Can public interest litigation be compared with company appeals?’ It is currently impossible to make this kind of analysis across courts. The types of cases across 24 High Courts are categorised in 2,553 different ways — which, if standardised, would be only 300 types of cases. A writ petition (which characterises cases dealing with citizen grievances with the state) is labelled in 120 different ways. Only if this information is standardised will we be able to meaningfully speak about the average number of days a particular type of case takes in court.

Judicial delay is not a problem solely for the state or for the judiciary. What matters is that cases be heard and dealt with in a timely manner, for the sake of the litigant. The issue needs to be discussed in the public sphere and not just as an administrative issue. So far, the litigant has mostly been excluded from the analysis.

What we hope is that our database will assist a wide-ranging analysis of the problem of pendency, and that this can include the social, political and economic fallouts of delayed justice. Judicial reform can be more effective if it is methodical and does not rely on random, on-the-fly solutions.

Equality, dignity and justice

Ambedkar did not set such concepts as democracy and modernity in opposition to each other but bound them together symbiotically so that they could grow together. By GOPAL GURU

ARGUABLY, Babasaheb Ambedkar is one of the few thinkers who continue to influence and shape people’s democratic aspirations such as freedom, equality, justice and dignity, all of which form the normative basis of modern India. It is quite interesting to note that there are more claimants than ever before to the legacy of Ambedkar. The competitive claims for the cultural and political ownership of Ambedkar, however, seem to be more rhetorical in nature than substantive in their thrust. In the context of the rituals of rhetoric, it becomes necessary to understand the more substantive nature of his legacy. As a part of this exercise, let me take on board certain concepts such as democracy and modernity that are crucial to understanding the relevance of Ambedkar’s legacy in contemporary India.

Before we actually deal with the conception of democracy and modernity in Ambedkar, it is necessary on our part to offer much-needed methodological clarification. One is theoretically aware about a certain kind of pragmatism that is associated with Ambedkar’s use of democracy and modernity. However, reducing Ambedkar’s thinking to pragmatism would amount to doing injustice to his transformative legacy, especially since the entire corpus of his writing is built around a set of normative principles. Hence, it would be grossly incorrect to read him only through the prism of pragmatisms. And yet we need to accept that Ambedkar does seem to use democracy and modernity in a pragmatic manner.

For Ambedkar, being pragmatic is not an arbitrary choice; in fact, it is conditioned by the cumulated disadvantages that he and the entire untouchable community suffered historically. The need to get the broken men (emphasis in original) out from the Bahishkrut Bharat (India of the ostracised) and include them into seamless (puruskrut) India without losing any further time and energy compelled Ambedkar to resort to the strategic use of these concepts. In order to achieve the objective of getting untouchables into the life of a nation, Ambedkar seemed to prioritise democracy over modernity. This sequence could also be defended on the ground that the horizontal or universal conception of equality that is internal to an egalitarian form of democracy would not entangle Dalits into questions such as “do Dalits need to first acquire merit in order to participate in democracy?” In fact, “nationalist elites” such as Bal Gangadhar (Lokamanya) Tilak did put merit on modernity as the compulsory condition for participation in democracy. Ambedkar, for the right reason, was apprehensive about prioritising modernity as a common criterion of participation. He rightly thought putting modernity before democracy would inordinately delay Dalit arrival to the democratic process. Hence, he summons not modernity but democracy on priority. To put it differently, he favours equality over merit.

However, in the post-Independence period, one finds Ambedkar changing the sequence, that is, putting modernity before democracy. In this essay, I seek to argue that Ambedkar does not raise a watertight binary opposition between democracy and modernity. On the contrary, he binds them together symbiotically so that such concepts grow together and not at the cost of each other. To put it differently, democracy as the sphere of equality converts opportunity into an asset or a merit. This particular essay, thus, seeks to address three important questions.

First, why does Ambedkar privilege democracy over modernity, particularly during the pre-Independence period? Secondly, why does he reverse this order in post-Independence India? Finally, does he find democracy and modernity inadequate in approximating to the reasonable aspirations of the underprivileged of India? If yes, then what are the grounds on which he finds limits in democracy as a governing principle of social and political relationships and in modernity as an organising framework of political institutions whose job it is to articulate the democratic principle?

Egalitarian democracy & constraining modernity

There are at least two core reasons that can help us understand why Ambedkar privileges democracy over modernity or equality over merit. First, his strategic move to summon democracy on priority has to be understood in terms of the genuine absence of any radical Left alternative in the early 20th century or the improbability of a communist revolution becoming a realisable goal in the immediate future. Arguably, in a communist revolution, it is people’s democracy that forces dialogue on modernity. To put it differently, such a revolutionary change seeks to eliminate the necessity of modernity as a gatekeeping device to defer the participation of those who are not as yet technically ready for participation. Communism does not keep the common masses waiting at the gate of democratic institutions just because they lack modern techniques to handle the business of democracy. In the context of Ambedkar’s thinking, one, therefore, is tempted to ask members of the present-day Indian Left whether they follow this enabling sequence when they form the politburos of their respective parties?

Secondly, Ambedkar would invoke an egalitarian form of democracy on priority simply because he thought it would be extremely difficult for the downtrodden, deprived, discriminated and decimated masses to enter the decision-making institutions should they be put to the modernity test. Thus, sociological reasons which are historically available prompted him to mount a critique of the “nationalist elite” who, according to Ambedkar, sought to privilege modernity or the language of merit over egalitarian democracy or the language of equality. In this regard, he points to the politics of modernity as a gatekeeping device as deployed by Lokamanya Tilak, who said: “If the lower castes manage to go to the legislature, what would they do in such places?” It is in this exclusionary sense that modernity becomes an ideology through which the socially dominant and politically privileged elite seeks to limit the gains of democracy to them.

However, it is interesting to note that in contemporary times, the “Mandalised” governing class at the level of the Central legislature seems to have obliquely followed Ambedkar and not Tilak. This allegiance to Ambedkar’s legacy is evident in the 73rd/74th Amendments to the Constitution. These twin amendments do not seem to insist on modernity as the precondition for women’s participation in democratic processes. If we followed Ambedkar’s principled pragmatism then, we would find the decision of certain State governments, such as the government of Rajasthan which is believed to have made certain education qualifications a precondition for political participation, highly objectionable. One finds in such decisions the intention to follow Tilak rather than Ambedkar.

Finally, in Ambedkar’s understanding, the principle of equality which is embodied in democracy is necessary because it enthuses the downtrodden about the need for the political activism that is necessary to interrogate the local configuration of power that entails Brahmanism and capitalism. Ambedkar considers Brahmanism and capitalism the two leeches that suck the blood of the common masses at the local level. To put it differently, Ambedkar suggests that nationalist attempts to prioritise modernity over democracy have a function to avoid interrogating both Brahmanism and capitalism. After creating a secure space for democracy or equality in the Constitution, thus making it at least formally safe for Dalits, Ambedkar then goes on to defend democracy though taking modernity seriously. As we shall see in the next section, Ambedkar treats egalitarian democracy as an enabling principle and makes it imperative on the part of the beneficiaries of such a principle to take modernity seriously. Ambedkar adds this caveat only to assign a certain degree of robustness to democracy itself.

Modernity precedes democracy

Ambedkar does not draw satisfaction from the democratic equality that makes its guest appearance only in a formal sense. In fact, he is committed to making democracy and the principle of equality more meritorious through the gains that serve as a benchmark, thus expanding equality into an attractive public good. Ambedkar believes that equality could be made meritorious only through continuous evaluation of institutions that assign concrete meaning to abstract principles of democracy. Evaluative practices are modern because they are aimed at making institutions stand tall with the help of merit. It is in this sense that Ambedkar overcomes the binary between democracy and modernity. Let us see in the following section how Ambedkar achieves this.

Ambedkar puts an additional premium on modernity with the sole intention of assigning merit to democratic institutions. In this regard, let me give just one example that will affirm that Ambedkar actually succeeded in overcoming the binary between democracy and modernity. He started educational institutions in Mumbai and Aurangabad in Maharashtra and recruited teachers on the basis of merit whenever they were available. Thus, he ended up recruiting teachers both from the upper castes and from his own caste. Ambedkar has become relevant especially in the context in which the modern educational institutions he established in Mumbai and Aurangabad are reported to have declined in terms of their merit. For those Dalits who are responsible for such a decline, it is a double loss. It is loss in modernity and also loss in democracy. The case of non-Dalits is different from that of Dalits. For Dalits, it is a comprehensive loss, but for non-Dalits, what is lost in modernity is gained in tradition—a single loss.

The upper-caste loss in modernity and subsequent gain through tradition tend to deny the principle of equality the advantage of merit. To put it differently, the failure in modernity creates resentment that in effect denies equality the advantage of merit as value addition. Let us look at this predicament of the Indian twice-born by citing Ambedkar’s own experience, which can be very well explained in terms of equality in search of merit.

Equality in search

of merit

Equality, on its way to becoming a concrete reality, creates many unreasonable adversaries. Claims to equality need to be acknowledged by its adversaries. In the Indian context, adversaries do not seem to offer recognition to claims of equality unless the latter acquires added value through the production of merit.

In this regard, Ambedkar himself has offered a couple of instances from his own experience relating to the opponents of the Hindu Code Bill (HCB) of which he was the main architect. It is argued that some scholars of the Vedas who claimed to themselves hermeneutic authority saw his efforts to draft the HCB as a kind of epistemological transgression. Such epistemic voices, which were quite vocal in 1951, opposed Ambedkar, not on the grounds of modernity (that he was not intellectually competent to interpret the Vedas) but on the grounds that he was an untouchable who had no right to either interpret the Vedas or listen to them. However, this trend seeks to disregard Ambedkar’s modernist calibre to intellectually fashion out an emancipatory agenda for women through the act of drafting the HCB. Misrecognition of Ambedkar’s claim to merit by the scholars concerned suggests that what is lost in modernity is a gain for tradition. To put it differently, such opponents of the HCB discounted Ambedkar’s claim with the intention of just retaining their social power not in the sphere of modernity; they invoked hermeneutic and epistemological rights that were made ritually available by tradition. In Ambedkar’s legacy, the HCB is a great step towards social reform; to bypass it is to make a farce of the Constitution and to build a palace on a dungheap. However, what we need to take into account is the fact that the judiciary does follow Ambedkar rather than the other lot while dealing with the feminist question of legal entitlement. This was evident in a recent judgment of the Supreme Court that accepted women’s right to a share in the property of the family. As Ambedkar’s drafting of the HCB suggests, the ideological content of the state must be anti-patriarchal. He wanted to rule out from the structure of the state the possibility of sedimented Brahmanism. Without this radically egalitarian core of ideology of the state, he argued, democracy in India would only be a top dressing on Indian soil.

The HCB is one instance that shows us equality is in search of merit. Ambedkar’s frustrating experience involving his failure to realise equality with the added value of merit continues to tragically resonate with modern-day Dalits, who fail to grow in the eyes of the Indian twice-born, howsoever meritorious they may be.

The unwillingness on the part of the other to appreciate Ambedkar’s efforts to combine equality with merit is also evident in his experience with a most modern personality, Jawaharlal Nehru. Ambedkar’s experience with the modernist claim of both Nehru and the Congress party led him to lament that he was not able to gain recognition for his calibre that sought to combine equality with merit. The Congress party no doubt solicited his support but this, on Ambedkar’s admission, was only the rhetorical accommodation into the opportunity structures that he considered peripheral. The most authentic biographer of Ambedkar, Changdeo B. Khairmode, has expressed Nehru’s lack of commitment to modernity. He says: “The Central government led by Pandit Nehru did not offer him opportunities that had more potential to convert them into an asset. He was capable and confident of handling not just law but other important portfolios such as finance, home and foreign.” It is in this context that Ambedkar observes that emotive criteria such as trust, friendship and capacity to please the party bosses do not add merit to the principle of equality. It is in this regard that one has to acknowledge the relevance of Ambedkar. The general picture one gets is that most parties seem to follow not the modernity or merit criterion but criteria that are parochially emotive and hence not modern.

Ambedkar’s egalitarian legacy would make a normative demand on those political parties which fail to take modernity seriously. Parties that fail to cultivate among its cadre a favourable disposition towards modernity as a criterion to brighten the future of democratic principle, therefore, need to be morally motivated to mobilise resources wherever such resources are available. Parties can show such cognitive generosity only on conditions that are genuinely liberal in their political practice. Taking such a moral lead requires putting aside narrow party ideological interests. After all, orienting oneself as Ambedkar did in favour of normative values such as equality, dignity and justice ultimately contributes to the well-being of both institutions and the nation.

Ambedkar’s legacy offers us the choice of an egalitarian state ideology and not the parochial ideology of some political parties. It is the ideology of the state, and not narrow, regressive party ideology, that should govern society and the nation. In fact, in his conception, party and its ideology and state ideology need to immerse in each other. Parties attempting to stamp out the egalitarian core will definitely undermine the radical legacy of Ambedkar.

For Ambedkar, democracy with the horizontal form of equality is the final vocabulary with egalitarianism as the interim ideal. Of course, for him, neo-Buddhism is the ultimate ideal.

Kick-starting an economic revival

When Narendra Modi took oath as Prime Minister on May 26, 2014, there were great expectations from him making decisive moves to put the economy back in recovery mode and on to a high growth trajectory of a ‘10+’ per cent per year growth rate. It is ‘10+’ because the Finance Ministry had chosen to use Paasche’s Index instead of Laspeyres Index to calculate growth rate, which, under present inflationary conditions, will artificially raise growth rate figures (see Paul Samuelson and Subramanian Swamy, “Invariant Economic Index numbers and Canonical Duality”,American Economic Review , 1974, and alsoEconomic Journal , 1984 for the reasons.)

Hence, what I have been stating in the past, of a 10 per cent growth rate target as being desirable is now, by the Finance Ministry’s revaluation of index numbers, more than a 10 per cent target now, perhaps even 12 per cent.

The blueprint for such a recovery, to a ‘10+’ growth rate, had already been prepared before the general election, and the steps to be taken were documented by a committee of the Bharatiya Janata Party. Nitin Gadkari, now Union Minister for Road Transport, Highways and Shipping, had been entrusted with task. On his suggestion, I had collaborated with a number of committed intellectuals to produce a ‘Vision Document 2020’, a road map for Mr. Modi to implement as soon as he became the Prime Minister. These steps have still to be taken.

• Regressive markers

The regressive markers in the projected path of the economy today make it worrisome as these indicate that if not rectified soon, the Indian economy can go into a tailspin. Though these markers are a consequence of the disastrous tenure of the previous government, now nearly a year on, they cease to be a credible excuse.

Some of these markers are: the Basel III norms for banks (effective from 2018) which require Rs.2,40,000 crore for capitalisation. Moreover, to retain 51 per cent of the equity of public sector banks by the government, it will need, this financial year, Rs.1,21,000 crore. The 2015-16 Budget has provided for only Rs.11,200 crore, which is not even a tenth of this. With rising non-performing assets of banks, there is a risk of a banking crash much like the 1997-98 East Asian crash.

This year, the rainfall deficit affecting 67 per cent of the single crop farmers, will cause inflationary pressures and a substantial shortfall in production, thus causing more misery to the farmer. While rainfall is in nobody’s control, the economy, even today, lacks the necessary financial cushion to absorb the liabilities arising from crop failure and farmer destitution.

The rupee is on the edge of a fall as it happened in 2012-13. This is because there has been a large-scale sell-off or dumping of shares of Indian companies purchased by foreign investors earlier last year. Some foreign direct investment (FDI) companies have also pulled out. The fall in the rupee was a little moderated three months ago, but for the wrong reason: the increased inflow of funds from the subversive, corroding, money-laundering Participatory Notes (PN) derivative. But PNs are hot money derivatives and so can be pulled out anytime to cause a further devaluation of the rupee.

All these destabilising trends have had a profound impact on the stock market. One of these is in the form of market valuations now being well below the long-term average and even below the level in 2013. Therefore, it is no surprise that the top 10 corporate entities have reached a stage where their annual profits do not cover even their yearly debt repayments.

• Negative factors

While India has demonstrated impressive prowess in IT, biotechnology, automobile ancillaries and pharmaceuticals, and has also accelerated its growth rate to become the third largest nation in terms of GDP at PPP rates, nevertheless, it still has a backward, agricultural sector employing 62 per cent of the labour force and where farmers are ending their lives unable to repay their loans.

The Indian economy is also saddled with a national unemployment rate that is over 15 per cent of the adult labour force, and a prevalence of child labour arising out of nearly 50 per cent of children not making it to school beyond standard five, a deeply malfunctioning primary and secondary educational system, 300 million illiterates and 250 million people in a dire state of poverty.

Moreover, India’s educated youth is skill deficient, risk averse in attitude and largely unemployable in the cutting-edge manufacturing sector. According to Macaulay’s Minute on Education, our universities still produce clerks for government administration and not innovators of the future.

Besides these, India’s infrastructure is in a pathetic state, with frequent power breakdowns even in metropolitan cities, a dangerously unhealthy water supply system in urban areas, and a very poor road network where there are gaping holes even on the National Highways.

India’s infrastructure requires about $150 billion to make it world class, while the education system needs six per cent of GDP instead of 2.8 per cent today.

• Need for reform

These problems can be addressed only by comprehensive, second generation, systemic reform that makes the economy an efficient, competitive market oriented one that leverages our potentialities (such as our civilizational heritage of innovative intellect), and which minimises the inefficiency, squandering and corruption in the deployment of our vast resources.

India has much potential today to become a booming economy; it has a demographic dividend of a young population of average age of 28 years compared to China’s 35 years, the U.S.’s 38 years, Europe’s 46 years and Japan’s 49 years.

Internationally, Indian agriculture has the lowest yield in land and livestock-based milk products whose yield can easily be raised judging by the performance in experimental agricultural plots of the Indian Agricultural Research Institute (IARI) and the Indian Council of Agricultural Research (ICAR) and by also borrowing agricultural techniques from Israel. Indian agriculture and milk products are also internationally at a low cost of production. With proper infrastructure and packaging, India can certainly become a global player in agricultural exports.

Even though India is also gifted with a full 12 months a year of farm-friendly weather, it grows just one crop a year in over 75 per cent of arable land when it can grow three crops a year. It also has the advantage of a highly competitive, skilled labour force and low wage rates at the national level, the advantages of which have been already proved to the world by the outsourcing phenomenon. What is needed is a bold commitment of sufficient resources to harvest this potential.

An open competitive market system can find these resources as has been demonstrated in the auction of the 2G Spectrum licences if the quality of governance and accountability is improved.

A transparent policy regime, auctioning of natural resources (if it is used for commercial private enterprise), and the unearthing of the vast $1.5 trillion in black money stashed abroad will enable the government to marshal sufficient resources for a massive investment in a second generation economic reform while reducing the tax burden on people.

As an economist, the only advice I can give the Modi government is to take some steps that will raise the morale of the consumer and investor. That means income tax abolition and reducing the annual interest rate to nine per cent.

The good news is that the built-in potential in the economy is easy to tap for revival, as is the basic resilience of the Indian people to face any situation as demonstrated from past crises.

Only one year of the mandate has elapsed, so there is still time to make the necessary course correction and put India on a fast, 12 per cent growth trajectory.