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1.Adding Momentum to Sound Urbanisation

It is welcome that the micro foundations for competitiveness in urban centres across India and attendant rankings are now a regular feature in policy circles. The Ease of Living Index (EoLI) 2020, which ranks 111 cities on 13 parameters, has placed Bengaluru and Pune as the top performers in the million-plus population category; while Shimla and Bhubaneswar are like-wise in the less-than-a-million list (as per 2011 census).

Our urban areas do provide the bulk of economic growth, by far, and cities matter. The EoLI is an assessment tool to evaluate the quality of living and economic ability of a city, together with its sustainability and resilience.

It has a citizen perception survey component with 30% weightage in the index, with the rest 70% weightage distributed across categories such as education, health, economic opportunity, green spaces and city resilience.

The index can well provide guidance for evidence-based policymaking and peer learning. In tandem, the Municipal Performance Index (MPI) 2020, which has been undertaken for the first time, places Indore and NDMC as the top performers. The MPI seeks to measure governance, including of the digital variety, in areas such as municipal services, fiscal responsibility and expenditure management, so as to shore up transparency and accountability in urban local government.

The index provides a ranking, but a relative ranking is no guarantee of adequacy. India must plan for the huge influx of rural folk to urban areas that is bound to follow in the wake of, and drive, prosperity. Policies on releasing land for urbanisation without conflict, making land losers stakeholders in the prosperity that is built on their erstwhile land and sound urban planning to optimise energy consumption are key

2.Breaking Impasse Over Perpetual Bonds

Sebi, the government and the silent participant in the tussle, the RBI, are mum on how to come out of the stand-off over how to value the perpetual bonds that banks issue to beef up their loss absorbing capacity, and are held as quasi-equity in what is called Additional Tier 1 (AT1). The solution must neither damage the prospects of bonds with special features nor leave the prestige of the parties in tatters, although some bruises seem inevitable. Happily, a solution does exist.

Sebi’s concern is entirely legitimate. A call option on these perpetual bonds is no guarantee that the issuer would actually buy them back. Their value should ideally be the net present value of their interest flows for a finite period, which Sebi says should be 100 years, plus the current traded value. Their redemption value should be zero, as they are not redeemable, and replaced with current market value. And Sebi and the finance ministry are on the same page when it comes to assigning caps for how much a mutual fund can allocate to perpetual bonds. Where Sebi has erred is on not grandfathering its valuation norm: it should apply to fresh issues, not to bonds that have traditionally been valued assigning a redemption value centred on the call option these bonds normally come with. Sebi can modify its guidelines to say that the existing stock of such bonds can be valued as they currently are but new issuances would need to be valued as per its norm.

Banks could consider some fresh options, if they fear bonds with zero redemption value would find few takers. It could offer put options to buyers or a larger coupon. It could experiment with replacing a portion of perpetual bonds with five- or ten-year bonds that are periodically redeemed and reissued, after obtaining regulatory clearance for counting such bonds as quasi-equity. The RBI, the regulator of banks with a huge stake in how AT1 bonds are priced and received by the market should intervene to break the impasse created by the government’s public contradiction of the markets regulator in, perhaps, an emergency meeting of the Financial Stability and Development Council.

3.Beyond populism: Freebies have worked for Dravidian parties. But their real success was pulling TN out of the socialist rut

Tamil Nadu assembly election manifestos always attract national attention with the two main Dravidian parties promising generous freebies like mixers, grinders, television sets, cellphones and largely delivering them. Rapid industrialisation from the 1990s has allowed TN some cushion to finance the lavish electoral promises. The battle of manifestos is no different this time too; both AIADMK and DMK have gone overboard. With free consumer goods, cash transfers, nativist appeals, and outreach to specific groups like youth and women, their manifestos span the entire spectrum of electoral populism.

DMK’s sops include reserving 75% industrial jobs for locals, one-year maternity leave for women government employees, banning the NEET medical entrance exam, subsidised food, fuel, milk and transport. AIADMK has promised free houses, washing machines and cable TV service, Rs 1,500 monthly for housewives, government jobs and prohibition in stages. The offerings clearly leave voters spoilt for choice but the fiscal calculations shouldn’t be going awry either: TN’s outstanding liabilities have grown from Rs 1.85 lakh crore in 2015 to Rs 4.05 lakh crore in 2020. A promise like prohibition, ostensibly targeting women, shrinks revenues which are otherwise needed to finance the freebies on offer.

With each election, the freebie basket gets more expensive: washing machines and free cable TV services are replacing cellphones and set top boxes from 2016. The washing machine, like the mixer-grinder, speaks to women voters and their productive hours lost to domestic labour. Yet, by specifically targeting women with such sops, politics also reinforces gendered roles in households. Monthly allowances to housewives risk feeding into the low women workforce participation rate.

Ultimately, politics must focus on improving education outcomes for greater qualitative outreach to women and youth. Promises like reserving jobs for locals and banning NEET militate against national interest and may not weather judicial scrutiny. Since 1991, TN has made giant strides in creating industrial corridors and liberalising professional education. Neither policy can be termed populist in the sense of finding a pride of place in election manifestos. But it’s precisely such policies which have had huge spillover effects in fostering employment, trained manpower and TN’s prosperity. Both Dravidian parties, which have admirably pursued continuity of industrial and education policies, must avoid the rising nativist tendencies in Indian politics and stay on top of the game of wooing global industrial majors to their state.

4.Back to the past: In Assam polls identity and citizenship are in front, development themes fall behind

After the lockdown, BJP looked well-placed to return to power in Assam. The state government there was seen to have done a decent job of administering welfare schemes, building new roads and even tackling the Covid pandemic. However, in the run-up to the assembly polls, the old identity issues are centrestage as exemplified by BJP attacking Congress for its tie-up with Badruddin Ajmal’s AIUDF in the state. There are two main reasons for this. First, Congress has made opposition to the CAA its main campaign plank. In fact, as part of its five guarantees, it has vowed to bring a law that nullifies CAA if elected to power.

This has prompted BJP to rethrow the illegal infiltration charge at Congress. Interestingly, BJP has even pitched for redoing the NRC exercise if large-scale anomalies are found on re-verification. BJP’s strategy still rests on retaining its hold over Ahoms, caste Hindu Assamese and Bengali Hindus who voted for it in large numbers in both the 2016 assembly elections and the 2019 Lok Sabha polls. In that sense, the CAA-NRC combo was meant to take advantage of the Assamese identity issue and simultaneously win over Bengali Hindus.

However, fissures started emerging in the strategy as CAA and NRC were viewed as contradictory in their aims, exemplified by the rift between BJP ally AGP and All Assam Students’ Union. With Congress highlighting these contradictions, sticking to the Assam Accord to determine citizenship in Assam and stitching together a grand alliance of eight parties – including former BJP ally Bodoland People’s Front – BJP too has been forced to play the nativist card. All of this is making the assembly election feel like one from the 1950s. With unresolved citizenship and identity issues, the quest for economic growth and jobs remains neglected in Assam.

5. Manage privatisation, with political finesse | HT Editorial

A key government initiative this year will be the proposed privatisation of public sector enterprises, while the State will confine itself to the bare minimum presence in strategic sectors. Coupled with the monetisation of assets, as proposed in the budget, this will herald a major change in India’s political economy, where, over time, the State will retreat from directly managing companies and assets and confine itself to a broader regulatory and oversight rule. This newspaper supports the privatisation drive and believes that it is not the State’s business to be in business. There was a historical context for the government to invest in public sector enterprises in the initial decades after Independence, but that era is long over.

But it is important to recognise that privatisation is not merely an economic decision — it is squarely within the realm of politics. It is tied to questions about the nature and responsibility of the State, the future of employees in units which are meant to be privatised, and the future economic implications in sectors which move into private hands. And that is why it is crucial to manage this much-needed process of privatisation with political finesse.

This includes reaching out to all political and economic stakeholders — from Opposition parties to trade unions. It includes building a strong intellectual case for privatisation — while reassuring those who fear that they will bear the brunt of the consequences of reforms. And it includes keeping a flexible outlook and be willing to engage in negotiations rather than adopt an absolutist attitude. As the controversy over farm laws shows, economic reforms are deeply contentious now and the role of the private sector continues to be viewed with suspicion. The government must be transparent and consultative, while the Opposition must be responsible and not engage in mindless obstructionism of sound policy initiatives.