Public Affairs Round-up by @MSL_GROUP in India - Dec 2013

MSLGROUP IN INDIA

Public Affairs Round-up

December 2013 | Vol 1 | Issue 4

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Content Lead: Elections 2014: Light at the end of the tunnel for reforms?

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Policy round-up: Land Acquisition Bill 2013: Electoral gambit or long overdue change?

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Number view

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In the next few months, India will undertake what is perhaps the largest democratic exercise in the world – its next general election.

With an estimated 72.5 crore (725 million) voters, of which almost 15 crore (150 million) * are expected to vote for the first time , it’s a mammoth undertaking that will make a nation of 120 crore (1.2 billion) stop in its tracks. The impending election has already consumed the national debate; there seems to be little else people are talking about.

Every election has a profound economic and social impact. Elections 2014 will be no different for India. On its result will depend the bold economic reforms and ambitious development programmes India needs.

Over the next few months, as election fever intensifies and the next government takes oath, MSLGROUP will roll out a content and insights programme based on the elections and titled ‘Voice Of India 2014’. It will include infographics, blogs, editions of this newsletter, and much more. * As per Election Commission of India sources

Stay tuned.

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Elections 2014: Light at the end of the tunnel for reforms?

Bipul Kiran Singh is a public affairs and strategic communications adviser Prime Minister Manmohan Singh often cites the compulsions of coalition politics to ward off criticisms of his government, especially those related to slow decision-making and policy paralysis. The United Progressive Alliance’s (UPA’s) second innings is fast approaching its end; the Winter Session of Parliament is the last window for legislative work. India has already shifted gear to poll mode, and businesses and investors seem to be waiting for the 2014 elections to impart a fresh push to further open up the economy. With yet another coalition expected to come to power, what are the prospects for reforms?

photo by firstsikh.com on pinterest

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It is interesting that Prime Minister Manmohan Singh holds coalitions responsible for the gridlock in the reforms process. That coalition governments need not necessarily resist reforms is borne out by experience. It was as finance minister in PV Narasimha Rao’s minority government in 1991 that Singh introduced reforms in India, gradually integrating it with the global economy.

Apprehensions on the fate of reforms after Rao demitted office in 1996 were belied. Later regimes, all coalitions, continued with liberalisation despite the fact that the Communist Party of India was part of two governments during 1996-1998 and supported the UPA (2004-2009). The Bharatiya Janata Party (BJP), which ruled for six years (1998-2004) as leader of the National Democratic Alliance (NDA), carried forward the reforms agenda, notwithstanding its Swadeshi rhetoric.

Even after India’s fragmented polity has sustained reforms for more than two decades, if Singh believes coalition politics is a key roadblock, then it is necessary to examine what – if anything – has changed to merit this observation.

Was this unique to the UPA or will it impact the next government too?

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Regional politics The rise of strong regional parties and the fragmentation of Indian polity in the 1980s are well recognised. Regional parties have eroded the electoral base of national parties to the extent that a Central Government without them is improbable. Together, they have accounted for more than 40% of the seats in the Lok Sabha (the lower house of Parliament) since 1998.

Further, as national parties ceded ground in larger states to regional parties, the latter acquired greater strength in the Rajya Sabha (the upper house of Parliament) to which members are chosen by an electoral college comprising state legislatures. At present, the Congress and the BJP have only 71 and 48 seats respectively in the 245-member Rajya Sabha, and the UPA does not enjoy a majority in the House.

While the march of regional parties has been impressive, their vote share may already have plateaued after peaking in the mid-1990s. “India’s regional parties have indeed already risen; whether they can rise further is unclear,” writes Milan Vaishnav, an associate with the South Asia Program at the Carnegie Endowment and a post-doctoral research fellow at the Center for Global Development, in ‘The Complicated Rise of India’s Regional Parties’.

REGIONAL POLITICS

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Crux of the matter The prime reason for resistance to reforms appears to lie in the changing nature of reforms itself. The focus initially was on promoting competition, enabling big business to thrive, removing controls, allowing greater foreign direct investment (FDI), opening up sectors – telecom, aviation, insurance, highways, ports – and providing a predictable environment through regulators like the Telecom Regulatory Authority of India and the Insurance Regulatory and Development Authority.

Even the early reforms faced opposition. Indian businesses, used to a protected environment, were apprehensive. It was argued that multinational corporations were ages ahead in terms of efficiencies, technology, marketing and financial muscle. However, these concerns did not significantly move the regional parties to oppose reforms as big businesses were not electorally important. Further, the government was savvy enough to steer the changes through a give-and-take approach with Indian businesses.

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In contrast, many of the reforms now needed impact a wider set of electorally important and well-entrenched interests.They strike at established systems of patronage and rent-seeking that sustains the bond between political leaders and their followers. Take for example the Foreign Universities Bill that would bring world-class educational institutions to India and shrink the $10 billion (Rs 61,000 crore) foreign exchange outflow every year. But the Bill has been vociferously opposed as ‘privatisation of higher education’, even though there are many engineering, medicine and business schools already in the private sector. The fact is that private educational institutions with capitation fees are a major source of patronage.

Similarly, public sector enterprises continue to drain public resources. Efforts to transform them into efficient autonomous organisations continue to be checkmated by a strange collusion of left-leaning parties, public sector staff and vested interests.

Another set of reforms that threatens the established patterns of a large section relates to subsidised products such as petroleum, fertilisers and electricity.

It’s not that all policy changes faced resistance or that the UPA did not reform the system at all. The Companies Bill, Pension Fund Regulatory and Development Bill, and the Banking (Amendment) Bill have been passed. New banking licences are being issued and even FDI in retail has been permitted after a year-long face-off. Most recently, the government is reported to be working on a proposal to permit foreign universities to open their campuses in India using the powers vested with it under the University Grants Commission Act. However, when faced with strong resistance, Singh’s government has only sporadically shown the tenacity or the dexterity to negotiate through it, as in the case of FDI in retail.

Reforms were a result of crisis, not consensus. So, even after the successes in the form of higher growth and poverty alleviation, their acceptance is not a given. Witness the defeat of the BJP-led NDA in 2004.

The economy’s performance and the corruption scandals related to allocation of resources such as coal and spectrum have not helped. They have bolstered the perception that reforms are merely efforts to promote the interests of powerful businesses, and they have slowed decision-making.

The next government will face similar challenges: the arraying of electorally-significant constituencies threatened by reforms and erosion in the support for them. Will it be able to overcome them?

A few factors could help. One, at the start of its tenure, the government does not have to worry about the electoral fallout of unpopular decisions. Two, as the UPA has started doing, it could use administrative mechanisms to introduce reforms. Third, allies would be wary of precipitating a mid-term election and that could give the new government some elbow room.

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Fourth, though it depends upon the political configuration that comes to power after the elections, leaders more adept at negotiations may be at the helm.

The new government would be in a good position to push reforms, but whether it will have the decisiveness to do so will depend upon the results. A coalition where one of the national parties has more than 200 seats – a very unlikely outcome as per current assessments - will bypass coalition arithmetic and have the elbow room to steer reforms. It will have the advantage of political dexterity, which will be as critical in expanding that space to steer India towards a new future.

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Policy round-up

Land Acquisition Bill 2013: Electoral gambit or long overdue change?

Land acquisition, a make or break issue for any development activity, was governed by the Land Acquisition Act formulated by the British in 1894. This law, however, was found wanting and led to cases like Singur in West Bengal, where land-owners refused to part with their holding for the Tatas to build their automobile factory.

But Singur was not an isolated case; land acquisition has been a hot-button issue for a decade.

photo by apogeephoto.com on pinterest

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The new Land Acquisition Bill passed by Parliament during the Monsoon Session has received the President’s assent and comes into effect from January 1, 2014. The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Bill (2013) replaces the earlier law by establishing new rules for compensation as well as resettlement and rehabilitation.

This new law, perhaps the government’s most significant legislation after the Food Security Bill in the run-up to the general elections, closely precedes the Assembly elections in Madhya Pradesh, Rajasthan, Chhattisgarh and Delhi.

With this, the process of new legislation is well and truly on the fast track.

The law comes amid a tough political scenario for the United Progressive Alliance (UPA), its image marred by numerous scams and many of its big guns found guilty in corruption cases.

The UPA is also facing stiff competition from the Bharatiya Janata Party, which has found a new posterboy in Narendra Modi.

It’s no wonder that the UPA is leaving no stone unturned to make a strong electoral pitch.

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The concerns There are concerns about the land acquisition law, however. Confederation of Indian Industries President S Gopalakrishnan told the ‘Hindustan Times’: “...the bill compensates different categories of affected families at par, not aligned to their losses.” Private developers too remain unconvinced, saying it will make land acquisition tough and delay projects.

Many fear that the government’s efforts to boost investment and revive the industrial sector by clearing projects worth billions will only dust because of the law.

As per the new law, developers will need the consent of 80% of those whose land is being acquired for private projects and of 70% of landowners in the case of public-private partnerships (PPPs). Besides, it provides for compensation that is four times the level now in rural areas and twice that in urban areas. The new law will guide all land acquisitions by the central or state governments, bringing in stricter norms and increasing landowners’ compensation significantly.

As per the new bill, the market value would be taken as the minimum value of the land, specified as per the Indian Stamp Act of 1899. The government also plans to acquire land on its own only for ‘public purposes’, a definition many private firms say is ambiguous.

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Measuring social impact The bill includes the concept of ‘Social Impact Assessment’, through which the impact of land acquisition on owners will be assessed by states. If the projects fall above the threshold of social impact, consent would be required from 70% of land owners in case of PPPs and 80% of landowners in case of private projects. The clause has two loopholes: it does not specify the parameters of the assessment and does not say what happens if the owners don’t give consent.

Another bone of contention is the applicability of the resettlement and rehabilitation clause to private land acquisition, which makes it mandatory for the acquirer to provide for the resettlement of land owners in case of 50 acres for urban land and 100 acres in the case of rural acquisition. The clause directs the acquirer to provide a compensation of Rs 5 lakh or a job, if available, to the affected family (farm labourers, tenants, sharecroppers); subsistence allowance of Rs 3,000 a month for a year; miscellaneous allowances of up to Rs 1.25 lakh per family.

This will deal developers and, ultimately, customers a major financial hit. It might also increase instances of unskilled or unfit labour being employed just to abide by the law.

Sanjay Dutt, executive managing director of South Asia, Cushman & Wakefield, told the ‘Economic Times’ that “the cost of land acquisition will surely go up for all projects, irrespective of them being government or private or PPP projects as they will have to adhere to the new norms”.

There are areas where clarity is required. While it gives land owners a stronger grip on their holdings, the larger benefit of the law in the case of government acquisition cannot be denied. But its implication on private acquisition is being questioned.

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Number view

72.5 14.93 crore crore Number of voters estimated by the Election Commission of India for the 2014 Lok Sabha elections

First-time voters, according to Census 2011 data, representing 20.6% of total voters. This number will swell to 16 crore by May 2014

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Gender break-up of first-time voters

First-time voters: Rural-urban spilt

Gender

Voters (in crore)

%

Gender

Male

7.88

52.8

Male

5.48

2.39

Female

7.04

47.2

Female

4.90

2.15

Total

10.38

4.54

Sources: Election Commission of India & Census 2011

First-time voters: Top 5 states

Rural Urban (in crore) (in crore)

Sources: Election Commission of India & Census 2011

Cost of conducting polls

State

Voters (in crore)

Year

Cost (in Rs crore)

Uttar Pradesh

2.3

2014*

17,000*

Maharashtra

1.05

2009

10,000

Bihar

0.94

2004

4,500

West Bengal

0.9

1998

3,200

Andhra Pradesh

0.8

1996

2,200

Source: Draft electoral rolls

*Projected. Sources: Centre for Media Studies, http://www.thesundayindian.com/en/story/the-hindsight-of-indianelections/22/36077/

MSLGROUP IN INDIA

Public Affairs Round-up

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