6 THE HIMALAYAN MAIL WEDNESDAY JULY07, 2021

THE EDITORIAL PAGEPeoples’ Democratic Party (PDP)has announced it would boycott theDelimitation Commission currentlyon a visit to J&K as part of its exer-cise. The party didn’t stop at boy-cott but even said everything inJ&K was unconstitutional; the reor-ganization of the erstwhile State;rendering Article 370 null and voidis unconstitutional; even theDelimitation Commission is with-out any constitutional basis. Thisstand is simply unacceptable from aparty whose leader had recentlymet the Prime Minister in Delhialong with other leaders and didn’tutter a single word about the issuesshe has chosen to rake up now.Mehbooba Mufti is almost speakingthe same language that Pakistan’sleaders have been speaking. Theidea that India should talk toPakistan; that August 5, 2019 deci-sions of the Indian Parliament waswrong and that the delimitationcommission was working with pre-mediated conclusion are shockingas these come from a former chiefminister.

BEWARE, VIRUS CAN RETURN!

The virus that shook the world con-tinues to pose a challenge to humanlives. Brazil is fighting the fifthwave of Covicd-19 while hospitalsin Indonesia are battling oxygenshortages as the Covid rages. Thenewest strain of the Covid-19 seemsto be eight-time more troublesomeand contagious than its previousversions. In India, the second waveis surely dying down but remember,it’s not dead as yet. Are we takingenough precautions to never let thethird wave – about which theexperts are warning – visit us?Going by the scenes of overcrowdedmarkets and tourist resorts, itseems the Indians have developedconvenient amnesia. People fromPunjab are thronging Himachal andcreating the scene of a village fair.In Gulmarg, there are traffic jamsregularly. Where are we headed to?Everyone has a responsibility tokeep the virus away for the sake ofthe health of the countrymen.

OBDURACY OF PDP

Shivaji Sarkar

The roller coaster Indian economic jour-ney is likely to continue. It was recoveringat 11.5 per cent in the April-June quarter,says National Council for Applied EconomicResearch (NCAER) but the State Bank of In-dia says the second wave has hit the econ-omy.

The result, however, is mixed becausewhile the SBI knows the reality from upclose, NCAER has taken a negative base of2020-21 to measure activities. In this de-bate, people have overlooked the fact thatamid clashes with China, the country is ced-ing its economic interests in Afghanistan, along-time friend, to China which is trying tomake ingress into Myanmar, Bangladesh,Nepal, and the Indian Ocean region.

Iran is a critical example of how years ofgood work and relations could be lost underwestern sanctions to China. Iran was criticalfor India in terms of petroleum imports atrupee-rial terms. That has come down tozero. India also lost the initiative in theChabahar port project and a trade corridordeal involving India, Iran, and Afghanistan.

Disagreements with Russia are rising andit begins to lean more towards China as theRussia-US confrontation grows. This has animpact on relations in and around the sub-continent. Increasing exports to Bangladeshmay be a silver lining, but much of it is "re-ex-ported" to the North-East. India's $500-bil-lion forex kitty overflow is linked to it. India

is also facing the impact of higher crude oilimport costs leading to a severe inflationarysituation.

In the midst of all this S&P Global saysthat India's economic recovery is expected tobe "less steep" than the bounce-back in2020 and early 2021. The reason is house-holds are having a tough time with the ero-sion of their savings. The rate of householdbank deposits declined to three per cent inthe third quarter of FY 20-21 from 7.7 percent in the second quarter, after economicactivity resumed a bit. The household debt-to-GDP ratio has been increasing since theend-March 2019.

This could hold back expenditure on con-sumption as the economy reopens because ofthe concern of households to rebuild theirsavings in a country where social security isat its lowest and job losses continuous. Thesecond phase lockdown reduced mobility

by 60 per cent and disrupted the servicesthe most (though manufacturing and ex-ports were hit less). The problem is mani-fested in reduced consumption. S&P says agradual revival is underway and the econ-omy may grow at 9.5 per cent which the RBIalso predicts.

The revival may not be that easy, perhaps.The Confederation of Indian Industry (CII)finds 79 per cent of the respondents of a sur-vey expect production, supply, and sales tobe adversely affected and consumption de-mands depressed in the coming period. Itis concerned about people losing jobs andlivelihood, impacting demand and growth. Itsays GDP growth depends on fresh stimu-lus, new reforms, and the state of the globaleconomy. It has asked the government toinject Rs 3 lakh crore spending throughprinting of currency notes and direct cashtransfers, rural job schemes and reducing

GST rates. In other words, CII has suggestedhigher money circulation and cash flow tospeed up the economy.

It is an indirect criticism of the post-de-monetisation fad for the electronic transac-tion that keeps most money locked in banksand increases hunger for cash flow. The CIIview is contrary to its previous opinion thatsupporting the poor with doles increases thecrowding of cities and raises costs of the in-dustry and creates "irresponsible" gover-nance through severe deficits. Its supportfor printing money is to keep the lendingrates low as the government's extra borrow-ing from the market would increase compe-tition between the government and the pri-vate sector will drive up interest rates. Theflip side is that more money circulationwould further increase prices and hit thepoor more. Interest rates would also rise.

The CII prescription is not easy. It isproven by Oberoi group CEO Vikram Vohrawho says that he has been approached byhotel owners who want to sell their proper-ties in the post-Covid-19 scenario. The com-bined debt in the hotel sector is estimatedat Rs 50,000 crore and most owners and in-vestors are in severe stress.

The NCAER says though there could besome moderation in inflation for a monthor so it will rebound beyond August with arise in farm wages, crude oil prices, andother factors adding to the rise in prices.Like the CII, it also calls for an expansion-ary policy.

Economy on roller coaster; Indian losses bolster China

Anil Gupta

Prime Minister Narendra Modiset the roadmap for ‘NayaJammu & Kashmir’ following theJune 24 meeting with the region’spolitical leaders. There was theusual scepticism about theJammu region being under-rep-resented or the Gupkar Alliance’swillingness to talk beyond its de-mand for restoration of Article370. Both sides were surprised atthe end of the meeting. No leaderboycotted it. It had no pre-setagenda and yet it concluded with-out acrimony.

There was no talk at all aboutseparatism or Pakistan. It sentshock waves across the borderand to the pro-Pakistan lobby inthe Valley with both of themnoticing their relevance steadilyerode since August 5, 2019. Such asituation where a majority of thehearts now flutter for India is dif-ficult for Pakistan to digest. If atall there is unanimity in Pakistan,which is usually divided on all is-sues, it is on the issue of keepingJ&K on the boil. Once the Pak-istani establishment realised thatit is not only losing ground inKashmir but also the summer of2021 may see a return to nor-malcy, it activated its “dirtytricks” department headed by ISIto disturb the chances of peaceand tranquility in the Valley.

The ISI has been active in theMuslim-majority districts ofPoonch, Doda, and Kishtwar butwithout much success. However,the probability of sleeper cellscannot be ruled out. Reports sug-gest a network of cells being inplace in the hilly areas of Kathuadistrict adjoining Udhampur.

Desperate attempts have alsobeen made to target Jammu toprovoke communal riots. It goesto the credit of Jammu Police andits intelligence sleuths that noneof the attempts succeeded. Pak-istan’s desperation can be gaugedfrom its attempt to escalate theconflict with the use of armedUAVs to attack the Indian AirForce base at Satwari, Jammu.

This has given a wake-up call tothe Indian security establishmentwith Pakistan using the aerialroute to strike at our assets. Ear-

lier it had adopted suicide attacksand later the sea route for theMumbai attacks. Buoyed by thesuccess of drone attacks duringthe Armenia-Azerbaijan conflict,Pakistan procured them from itsall-weather friend China andnew-found friend Turkey.

The aerial attack exposed gap-ing holes in our air defence sys-tems and ground surveillanceconsidering that the drones infil-trated and exfiltrated without be-ing challenged. The terroristsmay take this route again. Indiawill soon have a counter-strategy

in place to deter the enemy.Economic revival in any form

does not suit Pakistan’s gameplan. Targeted killings of politi-cal workers, policemen, and mi-nority communities will continueto terrorise locals and derail thepolitical process to thwart theemergence of democracy as thepeoples’ favourite choice.

On the political horizon, theGupkar Alliance, cracks in whichare obvious, will continue to ex-ist on paper with each constituentparty pursuing its own agenda tokeep its vote bank happy. The de-

mand for restoration of 370 willcontinue to simmer but remainsubdued. The demand for the re-turn of statehood before the elec-tions will gain ground. However,these parties will keep shiftinggoalposts depending upon whichway wind is blowing in Delhi.

The Centre, while focusing onthe happenings in the Valley, canill-afford to ignore Jammu any-more. The aspirations of the localDogr as coupled with the restora-tion of Dogra identity, culture,and heritage have become a majorbinding force among the localyouth. Jammu is no more willingto suffer Kashmiri hegemony andwill watch every move of theUnion Government closely. Thegovernment will have to do a finebalancing act while taking any de-cision about the political future ofJ&K.

(The writer is a Jammu-basedpolitical commentator and secu-rity and strategic analyst. Theviews expressed are personal.)

Challenges for Naya Jammu & Kashmir

Uttam Gupta

For the last couple of years, the Con-federation of All India Traders (CAIT)was complaining about a blatant viola-tion of the Foreign Direct Investment(FDI) policy and the Foreign Ex-change Management Act (FEMA) byglobal e-commerce players like Ama-zon and Walmart-owned-Flipkart,etc. Addressing their concerns, theMinistry of Commerce and Industriesin December 2020 asked the ReserveBank of India and the EnforcementDirectorate to take action againstthese global giants.

Earlier this year, Commerce Minis-ter Piyush Goyal promised to ensurethat the e-commerce sector works “inthe true spirit of the law”. As a follow-up, the Ministry of Consumer Affairsproposed a set of new rules calledConsumer Protection (e-commerce)Rules, 2020, to be implemented fac-toring in the views of industry (e-com-merce giants included) and otherstakeholders.

Aimed at all e-commerce entitiesthat are not established in India, theserules require every e-commerce out-fit that intends to operate in India to(i) register itself with the Departmentfor Promotion of Industry and InternalTrade (DPIIT) - the nodal authority inthe Commerce Ministry that deals

with trade and commerce-related is-sues including foreign investment; (ii)bar affiliated entities from selling onthe e-commerce platform and restrict-ing ‘flash sales’ (an acronym for onlinesales for a very short period of timethat offers substantial discounts orpromotions); (iii) disallow seller fromusing the name or brand associatedwith that of the marketplace e-com-merce entity for promotion or offer forsale of goods.

To understand the implications ofthe above restrictions as also those al-ready in place (bar on firms controlledby the e-commerce major from sellingon its platform; prohibition on the lat-ter having ‘exclusive arrangement’with preferred sellers, etc.), let us takea look at the extant FDI policy underwhich Amazon and Flipkart havecome to India. As per the guidelinesissued in early 2016, 100 per cent FDIis allowed under the so-called market-place model.

The marketplace is a platformwhere vendors sell their products toconsumers even as its owner merelyacts as a facilitator. The marketplaceowner provides services such as book-ing orders, raising invoices, arrangingthe delivery, accepting payments,handling rejections, warehousing andso on. However, the person cannothold inventory and undertake direct

selling. This is in line with the philoso-phy of the Bharatiya Janata Party todisallow FDI in Indian retail: In 2012-13 when the then UPA - Governmentbrought a proposal for FDI in retail(albeit physical format or the so-called‘brick and mortar’), this was opposedby BJP.

In recent years, however, with aphenomenal growth of online retailsales, even as the incumbent Govern-ment wanted this segment to benefitfrom FDI, associated technologies,and best global practices in all areasof the supply chain in sync with its un-derlying philosophy, it did not want toallow the likes of Amazon and Flipkartto undertake direct sales to Indianconsumers. This posed a seriousdilemma as the real business oppor-tunity being in direct sales, how couldthe latter come under a policy regimethat prohibits it?

The clever bureaucrats gave a wayout of this dilemma to their politicalmasters. They drafted the conditionsfor FDI in the e-commerce market-place in a manner that these multina-tionals got into ‘direct selling’ withoutappearing to be explicitly doing so.Thus, Press Note 3 prescribed twoconditions for their entry into marketplace — (i) “the entity cannot permitmore than 25 per cent of total sales onits platform from one vendor or its

group companies; (ii) it cannot di-rectly or indirectly influence the saleprice.

Without any mention of who thevendor is, a firm linked to the market-place either its subsidiary or a JointVenture with an Indian company is el-igible. As for the second condition, itis not easy to establish that the ownerof the market place has manipulatedthe sale price. In view of the above,contrary to the declared intent of thepolicy, which disallowed the market-place owner from direct selling to indi-vidual consumers, the fine print per-mitted them to do so - albeit by itssubsidiary or JV. This is preciselywhat e-commerce majors such asAmazon and Flipkart have been doingeven though they came in as market-place operators.

A clarification issued on December26, 2018, said: “The owner of the mar-ketplace or its subsidiary or its JV withan Indian company cannot have own-ership of the seller.” Further, “a selleron the platform cannot source morethan 25 per cent of its inventory from afirm connected with the latter”. Theowner can get around both in twoways - one, by having less than 50 percent shareholding in the seller firmand argue that he or she has no con-trol over the latter and two, by itswholesale arm restricting supplies to

the seller within the 25 per centthreshold.

Despite the clarification, the hold ofe-commerce giants over Indian retailcontinues. They are dominant sellersthemselves. Just about three dozenfirms out of a total of 400,000 sellerson the Amazon platform account fortwo-thirds of the sales made on it. Thisis not a bolt from the blue. It is the in-evitable outcome of a policy that al-lowed FDI in online retail albeitthrough the backdoor.

Following mounting pressure fromtraders and small businesses, the Gov-ernment claimed that it will not toler-ate any connection in whatever formbetween the sellers on the one hand,and the platform owner on the other.However, that is plain rhetoric asthere is nothing to back it up. As long asthe core of PN 3 which gives legiti-macy to the presence of e-commercemajors as direct sellers remains, theyhave nothing to worry about unlikethe small traders and businesses.Then, what is the way forward?

A genuine response to their demandwould require the Government todrastically alter PN 3 to say that “theowner of the marketplace or its sub-sidiary or its JV with the Indian com-pany cannot have even one per centshareholding of the seller on the plat-form”. Further, “a seller or firm on the

platform cannot source any supplies(not even one unit) from a firm con-nected with the latter”. This will en-sure that the marketplace owner hasno connection whatsoever with theseller neither by way of shareholdingint he latter’s firm nor making anysupplies to it.

Ensuring compliance with such arigorous stipulation is, however, aHerculean task. It is impossible (thiswould involve a microscopic watch onshares held by e-commerce majors inseller firms as also the stock-flow ofevery seller). Even worse, it is tanta-mount to asking the foreign majors topack up. It will be viewed as a retro-spective change of policy and give awrong signal about India not being anattractive destination. This courseshould be avoided.

A pragmatic approach would be onewherein the Narendra Modi govern-ment legitimizes direct selling by for-eign companies in Indian retail in allforms without any riders. This will en-able all retailers, small or big, onlineor offline, to get access to FDI andcompete with one another on equalterms.

It will be a win-win for all stakehold-ers including millions of small tradersand consumers. This will also be thebest bet for boosting investment,growth, and jobs.

FDI in retail: Remove the smokescreen

Economic revival inany form does not suitPakistan’s game plan.Targeted killings ofpolitical workers, po-licemen, and minoritycommunities will con-tinue to terrorise lo-cals and derail the po-litical process tothwart the emergenceof democracy as thepeoples’ favouritechoice.