Category: Political Economy

In Numbers: The Concerns Behind South Indian Politicians’ Remarks on Having More Children

Declining fertility rates in southern states pose multiple risks: shrinking workforces, slower economic growth and reduced representation in parliament.

As fertility rates in southern India continue to fall below the national average, chief ministers like Andhra Pradesh’s Chandrababu Naidu and Tamil Nadu’s M.K. Stalin are sounding the alarm about an impending demographic crisis. 

Naidu has proposed incentives for larger families, going so far as to suggest a law that would restrict local body election candidacy to those with more than two children. Stalin, concerned about the South’s potential loss of parliamentary seats due to its slower population growth, quipped sardonically, “Why not aim for 16 children?”

Despite their differing political affiliations, both leaders share growing concerns about the long-term economic and political ramifications of these population trends.

Declining fertility rates in southern states pose multiple risks: shrinking workforces, slower economic growth and reduced political representation in parliament. As northern states grow, the South may lose parliamentary seats in the 2026 delimitation exercise. Moreover, an ageing population in states like Tamil Nadu and Andhra Pradesh could strain public finances, with fewer working-age individuals supporting a growing elderly population.

Given that Union tax allocations are heavily influenced by population size, this demographic shift might lead to a redistribution of resources. Ironically, southern states – already net contributors to the central pool – could end up receiving even less in return.

Demographic divergence within India

India’s population is growing rapidly. On April 19, 2023, the United Nations announced that India (142.86 crore) overtook neighbouring China (142.57 crore) to become the world’s most populous nation. However, according to the World Population Review, this milestone was actually reached a few months earlier.

Chart 1

This growth, however, has been significantly skewed across the country. Population census data reveals that north Indian states have experienced a much higher growth rate compared to their southern counterparts.

As can be seen in Chart 1, in between the 1971 and 2011 censuses, the combined population of Rajasthan, Bihar, Uttar Pradesh, Haryana, Madhya Pradesh and Gujarat in the North grew by over 150%. In contrast, the southern states of Kerala, Tamil Nadu, Andhra Pradesh, Telangana and Karnataka saw growth below 100% during the same period.

This southern growth rate fell well below the national average of 121%.

Total fertility rate (TFR) is one metric that helps explain broader population growth dynamics. TFR refers to the average number of children a woman is expected to have over her lifetime. A TFR of 2.1 is considered the replacement level, meaning that a population will remain stable without growing or shrinking if the TFR stays here.

The Report of the Technical Group on Population Projections 2011-2036, prepared under the aegis of the National Commission on Population and the Ministry of Health and Family Welfare, provides insights into the fertility trends across Indian states, particularly highlighting the stark differences between South Indian and North Indian states.

Chart 2

As can be seen in Chart 2, the overall fertility rates in South India have consistently dropped below the replacement level of 2.1 and are projected to remain low through 2035. All southern states show fertility rates below 1.6 by 2031-35.

North Indian states, on the other hand, have significantly higher TFRs than their southern counterparts, though fertility rates are declining over time. States like Bihar and Uttar Pradesh will maintain above-replacement-level fertility for the next decade or more, contributing to continued population growth.

Median age is another metric that provides insight into the demographic ageing trends between South Indian and North Indian states. The median age is the age at which half the population is younger and the other half is older. A higher median age indicates an ageing population, while a lower median age suggests a younger, growing population.

Chart 3

As can be seen from Chart 3, all southern states are projected to have median ages above 37 years by 2036, with some (like Tamil Nadu and Kerala) crossing 40 years. This shows that southern India is ageing rapidly, largely due to lower fertility rates and longer life expectancy.

In contrast, northern Indian states like Uttar Pradesh, Bihar and Madhya Pradesh are projected to have younger populations even by 2036, with median ages between 28 and 32 years.

Economic fallout

What does all this mean?

As Naidu pointed out, there will be severe and immediate economic implications.

Southern states like Tamil Nadu, Kerala and Andhra Pradesh have TFRs well below the replacement level of 2.1, with projections showing TFRs stabilising around 1.5 by 2036. As a result, these states will experience shrinking populations and rapid ageing.

This demographic shift means fewer young people entering the workforce, leading to labour shortages, declining productivity and a higher dependency ratio as the elderly population grows.

The increased burden on social services like healthcare and pensions could strain state finances, while the shrinking consumer base may slow economic growth.

In contrast, northern states like Uttar Pradesh, Bihar and Madhya Pradesh have higher TFRs (ranging from 1.85 to 2.38), indicating continued population growth and younger populations. The projected median ages in these states will provide a potential demographic dividend with a large working-age population.

However, this also presents a challenge: northern states must create sufficient jobs and invest in education and skill development to prevent high unemployment and social unrest.

Chart 4

In fact, high dependency ratios in southern states signal an impending economic strain due to a shrinking workforce and rising social care needs. On the other hand, northern states like Uttar Pradesh and Bihar will need to focus on youth employment as their working-age population grows.

Political fallout

Going beyond the economic concern raised by Naidu, who is part of the NDA, Stalin, who is part of the opposition INDIA bloc, has taken a step further by raising serious political concerns.

The immediate political implication of this demographic challenge is electoral.

Simply put, due to divergent and uneven population growth, South Indian states stand to lose parliamentary seats in the next delimitation exercise. This issue was highlighted in Milan Vaishnav and Jamie Hinston’s 2019 report titled “India’s Emerging Crisis of Representation”.

Chart 5

According to Chart 5, India’s population is projected to grow by 31.1 crore between 2011 and 2036. Six North and West Indian states – Uttar Pradesh, Bihar, Madhya Pradesh, Maharashtra, Rajasthan and Gujarat – will account for a remarkable 63.8% of this growth.

Typically, parliamentary and legislative seats are allocated based on population. States with larger populations receive more seats, ensuring that each representative serves a constituency of roughly equal size.

Delimitation aims to create constituencies with equal or nearly equal populations. This is crucial for fair representation, as population disparities between constituencies would result in unequal voting power among citizens.

Following India’s independence, delimitation exercises were conducted regularly after each decennial census to adjust constituency boundaries according to population changes. The constitution mandates that Lok Sabha seats be allocated to each state based on their population, with these allocations revised after every census.

During the Emergency in 1976, the Indian government froze the number of Lok Sabha seats per state until 2001, based on the 1971 census figures. This freeze was implemented to protect states that had successfully reduced their population growth rates through family planning from losing seats to states with higher population growth.

In 2001, the freeze on seat allocation was extended to 2026. This ensured that no state would gain or lose parliamentary seats based on population growth until after the 2026 census, maintaining stable representation for states that had controlled population growth.

The seat freeze based on the 1971 population count has led to malapportionment in parliament. Some states, particularly in the North, have experienced significant population growth, yet their number of seats remain unchanged. Conversely, southern states, which have controlled their population growth, currently hold a larger share of seats relative to their population size.

After 2026, the seat allocation freeze will be lifted and parliamentary seats will be redistributed based on the most recent population data (likely from the 2011 census, unless the Union government conducts a census in 2025).

States with higher population growth, especially in the North (such as Uttar Pradesh, Bihar and Rajasthan), are expected to gain seats, while Southern states (like Kerala, Tamil Nadu and Andhra Pradesh) may lose seats due to their slower population growth.

The political implications of this redistribution, as raised by Stalin, are significant. The reallocation of seats post-2026 will likely shift political power from southern to northern states, as the latter gain more seats in the Lok Sabha.

The key question remains: how many seats will be affected? According to Vaishnav and Hinston, the five southern states combined stand to lose 26 parliamentary seats in the 2026 delimitation.

Chart 6

As Chart 6 reveals, in contrast, northern states, particularly Uttar Pradesh and Bihar, are projected to gain a combined 21 seats in the Lok Sabha, substantially increasing their influence. Additionally, Madhya Pradesh and Rajasthan are set to gain four and six seats respectively, further tilting the balance towards the North.

Currently, the five South Indian states have a combined total of 134 seats in the Lok Sabha, representing 24.6% of the total 543 seats. This gives these states a substantial voice in legislative matters, including constitutional amendments that require a two-thirds majority.

However, after the 2026 delimitation, their combined total could drop to approximately 108 seats or fewer.

This reduction means that if the southern states’ representation falls to around 108 MPs or less, their ability to influence constitutional amendments will be significantly diminished. Even if all southern MPs vote as a bloc, they would only have about 20% of the total seats, well short of the 33% needed to block a two-thirds majority.

Consequently, if an amendment is strongly supported by northern states – which will have gained political clout due to increased representation – the southern bloc could be overpowered in the Lok Sabha, effectively rendering them politically impotent on crucial constitutional matters.

This shift could lead to federal tensions, as southern states may feel increasingly marginalised and underrepresented in national decision-making processes. Their concerns regarding resource allocation, representation and policy priorities could be sidelined by the more populous northern states.

As Vaishnav and Hinston aptly put it, “If federalism is the glue that has kept the world’s largest democracy together, there are growing signs that this adhesive is becoming unstuck.”

Financial fallout

In India’s current economic structure, population size significantly influences the allocation of central funds, directly impacting states’ financial health. This financial dynamic can be better understood by examining the 15th Finance Commission’s recommendations, the role of cess and surcharges, and the distribution of central transfers among states.

The Finance Commission employs several criteria to allocate central tax revenues to states, with population size being a crucial factor. The 15th Finance Commission has assigned a 15% weightage to the 2011 population and an additional 12.5% to demographic performance, rewarding states that have lowered their fertility rates.

However, southern states with slower population growth receive lower allocations compared to northern states with higher population growth. Consequently, northern states with larger populations are set to receive a greater share of central tax revenues.

Cess and surcharges are Union government levies not shared with states. These levies constitute a growing portion of the government’s tax revenues, reducing the divisible pool of taxes transferable to states. Currently, 18% of all Union government taxes are in the form of cess and surcharges.

Southern states, being more developed and significant contributors to the nation’s tax base, argue that the increasing cess and surcharge collections have diminished their available funds.

Chart 7

Chart 7 reveals a stark contrast between South and North Indian states regarding their returns from the central divisible pool. The five southern states as well as Maharashtra receive significantly less than they contribute. Their returns range from a mere Rs 0.08 (Maharashtra) to Rs 0.62 (Kerala) for every Re 1 contributed.

This disparity underscores that these economically advanced states, while being net contributors to the central pool, receive disproportionately lower returns – a situation that could potentially breed discontent over resource allocation.

On the flip side, northern states like Bihar, Uttar Pradesh, Madhya Pradesh and Rajasthan are net recipients, gaining far more than they contribute. Bihar, for instance, receives a whopping Rs 7.26 for every Re 1 it contributes, while Uttar Pradesh and Madhya Pradesh receive Rs 2.49 and Rs 2.09 respectively.

These states, with their larger populations and greater developmental needs, benefit from the population-based resource allocation, securing much larger shares of central funds.

This glaring contrast highlights the growing fiscal imbalance between North and South India: southern states contribute more but receive far less in return, while northern states heavily rely on central support for their development.

Chart 8

Chart 8 reveals that southern states like Tamil Nadu (18.7%), Karnataka (17.7%) and Telangana (14.1%), and Maharashtra (17.8%) rely far less on central devolution compared to their own tax revenues. These states generate substantial tax revenue independently and receive a smaller proportion of their total tax income from the central pool, demonstrating their relative fiscal self-sufficiency.

Maharashtra, for instance, despite being the largest contributor to the central pool, receives only 17.8% of its total revenue from central funds – underscoring its role as a net contributor rather than a recipient.

In stark contrast, North Indian states such as Bihar, Madhya Pradesh and Uttar Pradesh heavily depend on the Union government’s divisible pool for their revenues. Bihar, in particular, receives a staggering 67.4% of its total revenue from central devolution, highlighting its profound reliance on federal transfers. Similarly, Madhya Pradesh (48.1%) and Uttar Pradesh (42.3%) also depend on central funds to a much greater extent than their southern counterparts.

This disparity illuminates the North-South fiscal divide: southern states exhibit greater self-sufficiency in revenue generation, while northern states significantly rely on Union government funds for their fiscal stability and development needs.

Therefore, southern India faces a multifaceted crisis due to falling fertility rates and an ageing population. Economically, a shrinking workforce may lead to labour shortages and reduced productivity, while a growing elderly population will strain healthcare and pension systems. Politically, southern states risk losing parliamentary influence during the 2026 delimitation as northern states with higher population growth gain seats.

Financially, the South’s contribution to central tax revenues far exceeds its returns – an imbalance that could worsen as resource allocations increasingly favour more populous northern states. If left unchecked, these trends may result in political marginalisation and financial strain for southern states, threatening federal harmony in India.

With PAC Set to Focus on Buch Controversy, a Look at SEBI’s Outdated and Voluntary ‘Conflict Code’

It is still unclear whether Madhabi Puri Buch adhered to the more stringent government regulations or to SEBI’s 2008 Conflict Code.

On October 24, the public accounts committee (PAC) of parliament is scheduled to meet officials of the finance ministry, regulators and tax departments and the Securities and Exchange Board of India (SEBI). The multi-party PAC, headed by Congress leader K.C. Venugopal, is expected to focus on conflict of interest charges levelled against SEBI chairperson Madhabi Puri Buch by both his party and by US-based Hindenburg Research.

The SEBI board and the finance ministry are pretending that no concern exists, while the SEBI chairperson and her husband, Dhaval Buch, have denied any conflict of interest.

The question is: What code of conduct has Buch adhered to? Is it the more stringent government of India regulations that govern her appointment, or the wishy-washy Code to Avoid Conflict (Conflict Code) of 2008, which is of doubtful legal standing, that appears to have deliberately diluted the government rules applicable to SEBI’s senior-most officials.

The Conflict Code, which was voluntarily adopted by the SEBI board in December 2008, has remained unchanged for over 16 years, even as the regulator has continuously introduced stricter compliance rules for investors, traders and market intermediaries. This raises an important question: Why has SEBI, while tightening regulations for all market intermediaries and investors, allowed such an outdated and voluntary code to remain in force?

We attempted to understand the genesis of the Conflict Code, since it is peculiar to the market regulator. The RBI and other regulators, like the insurance and pension authorities, who also have significant fiduciary responsibilities, have not felt the need for a separate Conflict Code. The top brass at these regulators are governed by government service rules which also apply to SEBI’s top officials. Therefore, the introduction of a separate code for SEBI is perplexing and mystifying.

SEBI stonewalled our attempt to obtain information and file notings under the Right to Information (RTI) Act. On October 15, it said in a reply, “The information sought by you pertains to the internal functioning of SEBI and relates to the systems and procedures followed at SEBI. The said information is strategic in nature, disclosure of which may hamper the decision making by SEBI in its supervisory and regulatory role. In view of the same, the information is exempt under Section 8(1)(a) of the RTI Act.”

However, it pointed us to the draft code and minutes of the August 2008 meeting of the SEBI board, which had made a show of great transparency with a decision to disclose the board agenda and discussions. The draft code reveals that G. Mohan Gopal, then a member of SEBI’s board, had suggested the framing of a separate code to address conflict among board members, but does not explain why he felt the need for it.

Gopal, a renowned legal mind and former head of the National Judicial Academy, would have had strong reasons to ask for such a code. Those who follow the capital market would remember that, in 2011, at the end of his SEBI term, Gopal had sent an explosive letter to the then-prime minister on the functioning of the SEBI board.

It is clear that the Conflict Code itself was adopted during Gopal’s stint on the board; hence, it is a mystery why this code would appear to dilute government rules, why it remains a ‘voluntary’ code after 16 years, and why various chairpersons have made no attempt to give it a legal sanctity.

In fact, the Conflict Code for whole-time members (WTMs) and the chairperson is far more lax than the rules that apply to all SEBI officials up to the level of executive director.

Advocate Murali Neelakantan points to a curious detail in the code. It says: “This Code shall be in addition to the provisions of Section 7 A of the SEBI Act, 1992 Rule 3 (1) and 19 A (1) of the SEBI (Terms and Conditions of Service of Chairman and Members) Rules, 1992, and Regulations 9 and 11 of the SEBI (Procedure for Board Meetings) Regulations, 2001.”

He is clear that the Conflict Code, which is a mere voluntary and additional guideline, cannot amend the SEBI Act, and Conditions of Service Rules notified by the Union government. Section 19 of the SEBI Act makes it clear that only the Union government has the power to make regulations for the chairperson and WTMs, or amend them.

Since there is no record of the Conflict Code being notified in the gazette of India, the dilutions permitted by it have no legal validity. Or, as advocate Neelakantan puts it, the Code itself is ‘void for lacking legislative competence’, since the board has no power to make these rules.

Remember, no other regulator has separate guidelines for their top officials, who are appointed and subject to Union government service rules. The same is true of the International Financial Services Centres Authority, 2019 as well as SEBI.

This means that every SEBI chairperson and WTM has to comply with the service rules and there is no room for dilution as envisaged by the Conflict Code.

Now, let us look at the many ways in which the Conflict Code of 2008 dilutes service rules.

First, Rule 3(1) of the SEBI service rules unambiguously says that the chairman/WTM “shall be a person who does not, and will not, have any such financial or other interests as are likely to affect prejudicially his functions as such Chairman or Member.”

There is no scope for the resolution of conflict by disclosure and recusal. Although Section 7(a) of the SEBI Act does refer to ‘disclosure of conflict’ by a member of the board, this can only apply to a part-time member appointed by the government who is a director of a company.

Secondly, ‘family’ means spouse and dependent children below 18 years of age. Why is this such a narrow definition, when directors of listed entities are required to disclose details for a much wider number of relatives (along with PAN details)? SEBI’s recently amended insider trading rules also have a wide range of ‘connected persons’.

If SEBI’s top brass, with far greater fiduciary responsibility and power over markets are permitted to ‘trade’, shouldn’t the rules have been far stricter and definitions more extensive? Why has it failed to include related parties and associates of regulated entities?

Also read: SEBI Chief Madhabi Buch’s Hour of Reckoning Is Fast Approaching

Thirdly, while government service rules do not contemplate any transaction in shares – this is also the norm with most credible overseas regulators – why does SEBI permit its top brass to ‘deal in shares’ so long as ‘substantial transactions’ by them and family are disclosed within 15 days and are not based on unpublished price sensitive information? (6.3 and 6.4 of the code).

A fourth curiosity is the procedure for the public to raise ‘conflict of interest’. Point 13 (1) of the code says, “Any person, who has reasonable ground to believe that a Member has an interest in a particular matter, may bring the same with material evidence to the notice of Secretary to Board.”

What exactly does the code mean by ‘any person’? Would Hindenburg Research have qualified as ‘any person’, if it had written to the secretary of the board, instead of going public? Would Pawan Khera of the Congress party, who has held several press conferences on this matter, qualify as ‘any person who has a reasonable ground to believe’ there was conflict? Would their allegations have to be handled differently if they wrote to SEBI with the evidence that has been provided and demanded action?

A charitable view of SEBI’s dubious Conflict Code remaining untouched for 16 years is that most appointees to the post of WTM and chairman have been government/public sector officials who are already subject to stringent service rules.

Jayant Varma of IIM Ahmedabad was perhaps the first private sector person to be appointed WTM, then there was T.C. Nair who came from Federal Bank – both finished their terms before the Conflict Code was adopted.

Buch, appointed in 2017, is the first private sector person to become WTM after 2008, followed by Ananth Narayan G. in 2022. This makes it the responsibility of secretaries of the finance ministry and the ministry of corporate affairs to have ensured that the legality of SEBI’s Conflict Code was examined and scrapped and that senior appointees complied with appointment and service rules of the government.

Perhaps the PAC headed by Venugopal will now ensure that this happens.

G Mohan Gopal did not reply to a WhatsApp message asking why he felt the need for a Code of Conflict for SEBI board members.

This article first appeared on moneylife.in. It has been lightly edited for style.

Ratan Tata the Visionary: Could he Have Done More?

Ratan Tata no doubt had a vision for the growth of the Tata group. But when it comes to assessing his systemic or national vision, much was lacking.

Ratan Tata has been hailed as a great visionary. Under him, Tata group not only went global but its brand got some global recognition. The group has not only survived the post-1991 opening up of the economy but has grown to become the largest Indian conglomerate.

Pre-1991, the slogan was ‘Tata-Birla ki sarkar’. Birla and many other business houses of the pre-1991 era have been displaced by Adani, Ambani and Tata. Remaining at the top in a changed business environment with global competition mounting required deft handling.

The Tata group’s market capitalization topped Rs 33 lakh crore (over $400 billion) in August 2024. It was Rs.30,000 crore  in 1991 when Mr. Ratan Tata took over the leadership of Tata group from the iconic JRD Tata. This growth by a factor of 110 kept pace with the increase in the BSE index which went up from around 600 in 1991 to about 80,000 now – an increase of 133 times.

Even during Ratan Tata’s tenure, as Chairperson of the group from 1991 to 2012, the market capitalisation had increased to Rs. 5 lakh crore – a factor of 17 – according to an IIM Bangalore Report. Since Mr. Tata continued to provide leadership to the group post-2012, he should be credited for the continued expansion of the Tata group even after 2012.

In a capitalist society, Capitalists are supposed to accumulate capital and that is celebrated. Their success is judged by the amount of Capital their business has accumulated. By this yardstick, Tata was a success.

A personality eulogised in multiple ways

Ratan Tata was a successful capitalist both pre and post retirement as the head of the Tata group. Tributes have poured in from all quarters. His humbleness in spite of the riches have been acclaimed by people, whether ordinary or the who’s who of Indian elite. The philanthropic work of Tata Trusts under his leadership has been applauded. His charity work is quoted as the reason for why he is not in the rich list published by global and Indian agencies. Examples of his humaneness are cited in his relationship with his staff and the love for stray dogs.

In an environment where Indian businesses have been characterised by cronyism, illegality and unethical behaviour, the Tata group is said to be more ethical and moral than others. Its treatment of its workers is said to be better than that of most other businesses.

Ratan Tata has been eulogised in multiple ways. But, in addition to these laudable personal traits, given how large is the empire he ran, his actions had systemic consequences. These need to be assessed to understand his larger contribution to the nation to get a holistic picture of his contributions. This is necessary also because Tata was no ordinary person. This would also help evaluate the situation in the nation and the direction it is headed in.

Systemic Aspects

The larger the amount of capital accumulated, the more the societal linkages the person is likely to have built during the life time. These linkages would be with those in power – locally, nationally and even globally, depending on the scale of operations.

They would be with politicians in power and out of power, businessmen, media persons and broadly in the world of intellectuals, art and culture and entertainment. Witness the invitation list for a wedding of a child of a big businessman.

Capitalism thrives on the drive for higher profits. For this, often corners are cut, policies manipulated to derive advantages, wages squeezed, unethical advertising indulged in to not only promote their product but also promote consumerism (specially targeting children), etc. These generate negativity in society for the capitalists.

This is countered through philanthropy and charity which could be genuine but often motivated by business interests. For instance, Corporate Social Responsibility (CSR) thrust on businesses by the government often turns out to be motivated by business interests.

In the US, in the nineteenth century, Rockefeller and Ford were characterised by Galbraith as ‘robber barons’ because of the sharp practices they indulged in. They used charity to improve their image. Bill Gates, Ted Turner, etc., the present day super rich do philanthropy in a big way. This gives them additional power in society to influence policies and people. They are able to mould research in directions that are beneficial to their businesses and that promote capitalism.

Given Capitalism’s flaws the question arises, did a visionary capitalist work to promote the ideal form of capitalism or did she/he use the existing flawed form to benefit from it? Did the individual work to promote equity that would result in a more civilised society? This is not a yardstick of comparison with a socialist or a Gandhian alternative but of a humane capitalism.

Monopoly and oligopoly under capitalism are detrimental to its functioning. They lead to undue profits and make the entry of new firms difficult. They slow down adoption of new technologies which could increase efficiency.

Competition among many firms is considered to be the ideal form. That eliminates super profits and reduces disparities so as to minimize inequality. The nexus between policy makers and businessmen (cronyism) gets reduced and more rational polices get pursued.

Did Ratan Tata make efforts to promote competitive capitalism to make it more efficient? The Tata group appears to have used all the available devices to build itself up as a huge conglomerate. Even rules regarding Trusts were got changed during the NDA I rule to help Tata gain direct control of the group.

Big business influences policies so as to reduce taxation of their incomes and wealth. This puts the burden of raising resources on indirect taxes which fall proportionately more on the middle classes and the marginalised sections.

Since 2012, many of the rich in the USA have argued that they need to pay more taxes for the survival of capitalism. They repeated this call in 2018 and 2022. Given poverty in India, this should have been supported by the Indian super rich but that did not transpire.

Creation of a Centralised Group

Ratan Tata succeeded JRD Tata as the head of the Tata group in 1991. That was also the year that the New Economic Policies (NEP) were launched. The business environment changed dramatically. Prior to 1991, companies could be held with just a few per cent ownership of the equity of the company.

The public sector financial institutions held large chunks of the equity so without their say so, companies could not be acquired. In 1982, Swaraj Paul’s attempt to take over Escorts and DCM was thwarted. The company owners held less than 1% of the equity in their companies while the public financial institutions held more than 50%. So, without Government’s say so, no takeover was possible.

Post-1991, there was an attempt to takeover ACC, a company then in the Tata stable. Tatas moved to increase their holding in their companies to above 25%. In 1967, the Hazari Committee had pointed to the umbrella pattern of holding of companies by monopoly houses – that is, cross holding from one group-company to the other.

That led to the enactment of MRTP Act. The advantage of such a pattern of holding was to mask the ownership of the companies by monopoly houses.

Under JRD Tata, the Tata group was considerably decentralised with the likes of Russi Modi, Darbari Seth and Ajit Kerkar running big group companies relatively independently. Ratan Tata eased them out quickly and gained total control of the group.

In 2012, under his policy of retirement at 75 he handed over command to Cyrus Mistry, who apparently tried to ‘professionalise’ the management and increase accountability to the shareholders. But, that was not to the liking of Ratan Tata.

Mistry was forced out even though the Pallonji group, to which he belonged, was the largest shareholder in Tata Sons. Ratan Tata deftly maneuvered to checkmate Mistry via his control over Tata Trusts and through that the Tata Sons and the Tata group. Nusli Wadia, a close friend of Ratan Tata till then was also eased out of the Boards of Tata companies since he supported Mistry.

Clearly, right from the start when Ratan Tata took over the group, his governance was a personalised and centralized one. While this enabled him to take many initiatives, it also led to major errors of judgments by the group.

Like, the purchase of Corus at a very high price and its subsequent failure, the failed (though well-meaning) Nano project and entry into Telecom sector. There was the ULFA related case in Assam involving secret payments to it. There was the sudden stoppage of support to hundreds of NGOs doing useful social work, perhaps under government pressure.

National impact

Given the size of Tata group, their impact is national – impacting democracy and nature of politics in the country. They have an impact on the environment, promotion of R&D to meet the challenge of globalization and promotion of inclusive growth.

The monopolies and oligopolies that enabled Tata group to earn high profits adversely impacted the small and micro sectors. This has led to growing unemployment since the Tata group businesses are largely capital intensive.

For instance, Tata steel which employed 88,000 workers in 1991 to produce around 2 million tons of steel now produces 22 million of steel with an employment of less than half of the 1991 level. While this helps productivity and profits it has reduced employment. Tata salt has displaced large number of small local salt producers. Tata consumer products in general follows this pattern.

Tata group has a huge environmental impact. This is due to the nature of goods produced and the promotion of consumerism by Tata brands. They are big in luxury brands – Tanishq, Zoya, CaratLane, Titan, Taj hotels, etc. Promotion of cars as opposed to pushing for a policy of public transportation is consumerist and environmentally damaging. Diesel cars were pushed with negative consequences for the environment.

The impact of the ever expanding iron ore production on indigenous people, support to the SEZ policy which aggravated displacement, the Chilka lake episode, etc., all marginalised the marginals and undermined  inclusive development.

But, can Ratan Tata be faulted for pushing business that generate profit? If so, why technology development which can yield high profits did not become a focus.

Tata group is huge and cash rich, earning good profits but its R&D spend is meagre. It has depended mostly on imported technology. Even TCS has largely been a service provider rather than a developer of globally recognised software.

In house R&D is risky while import of technology is not; but that is a recipe for dependency. This is the ‘disadvantage of a late start’. Due to lack of technology development, India has a trade deficit of $80 billion with China in spite of the border difficulties. R&D imparts dynamism and self-reliance to the nation – something big business needs to promote.

Ratan Tata didn’t take a stand on many critical issues

Finally, democracy is the bedrock of India. Did Ratan Tata strive to strengthen it? One did not hear him take a stand on the many critical issues that have plagued the nation. During the Mumbai riots in 1993, Tata helped out, but during the Gujarat riots in 2002, there was silence. On the decline of the institutions of democracy and the deteriorating communal situation there was no public comment.

The growing use of black money in elections, the decline of standards in legislatures and parliament, the functioning of the judiciary and the attack on autonomy of educational institutions did not impel him to react. The Tata controlled Progressive Electoral Trust was ineffective in checking growing use of black money in elections and the cronyism that follows. Most of the donations from the Trust went to the ruling party, thereby further strengthening it and that led to the persistence of the above problems.

Ratan Tata no doubt had a vision for the growth of the Tata group, even if it had flaws. But when it comes to assessing his systemic or national vision, much was lacking. Under capitalism, a capitalist is to accumulate capital but the manner of doing that is important. Given Ratan Tata’s stature and the size of the Tata group, much more could have been done.

Arun Kumar is retired professor of economics, JNU.

SEBI Contradicts Own Note, Refuses to Disclose Instances When Madhabi Puri Buch Recused Herself

SEBI has said that no such information on the matters in which Madhabi Puri Buch recused herself is “readily available”.”

New Delhi: While the Securities and Exchange Board of India (SEBI) had stated last month that chairperson Madhabi Puri Buch had recused herself from matters of potential conflict of interest, it has now said in response to a Right to Information (RTI) application that the matters in which she had recused herself are “not readily available and collating the same will lead to disproportionately diverting the resources of the public authority”.

On August 10, Hindenburg Research – whose report on the Adani group last year alleged price rigging of company shares – accused Buch and her husband Dhawal Buch of having held “stakes in both the obscure offshore funds used in the Adani money siphoning scandal,” citing “whistleblower documents”.

An application filed under RTI by transparency activist Commodore Lokesh Batra sought to know declarations of complete details of ‘Financial Assets and Equities’ held by Buch and her family members to the SEBI Board and Government of India, and details of all the matters where the chairperson had recused herself involving potential conflict of interest.

Batra’s RTI application cited SEBI’s August 11 unsigned note that said that “relevant disclosures required in terms of holdings of securities and their transfers have been made by the chairperson [Buch] from time to time” and that she “has also recused herself in matters involving potential conflicts of interest”.

‘No such information is readily available’

However, in response to his RTI application, SEBI has said that no such information on the matters in which she recused herself is “readily available” and the information on her assets disclosed to the SEBI and union government amounts to “personal information.”

“Since the information sought do not pertain to you and the same relates to personal information, the disclosure of which has no relationship to any public activity or interest and may cause unwarranted invasion into the privacy of the individual and may also endanger the life or physical safety of the person(s). The same is, therefore exempt in terms of Section 8(1)(g) and 8(1)(j) of the RTI Act, 2005,” it said.

Section 8(1)(e) of the RTI Act exempts information “available to a person in his fiduciary relationship” unless a competent authority decides its disclosure is in the larger public interest.

“Further the information on cases where Madhabi Puri Buch recused herself due to potential conflicts of interest during her tenure is not readily available and collating the same will lead to disproportionately diverting the resources of the public authority in terms of Section 7(9) of the RTI Act,” SEBI said in its RTI response to Batra.

Subsection (1)(j) exempts “personal information” whose disclosure is unrelated to the public interest or whose disclosure “would cause unwarranted invasion of the privacy of the individual”, unless designated officials decide otherwise.

In its August 10 report, Hindenburg also said Buch was a 100% shareholder in a Singapore-based consultancy company called Agora Partners until as recently as March 16, 2022 – two weeks after she became SEBI chair – when she transferred her stake to her husband. Buch set up both Agora Advisory and Agora Partners before she joined SEBI as a whole-time member in 2017.

Switzerland is Taking the Adani Investigation More Seriously Than SEBI or Modi’s Government 

The ruling by the Swiss Criminal Court shows a mirror to the seemingly crumbling Indian legal watchdogs, particularly during the past two years.

The Swiss Attorney General’s office says “it cannot answer questions about persons who may or may not be involved in criminal proceedings.”

On Tuesday (September 17), the OAG – the office of the Swiss attorney general – offered two cryptic responses to several questions posed by this correspondent on the mega money laundering case allegedly involving an unnamed Indian group.

As was reported in India last week, the Swiss Federal Criminal Court delivered a damning ruling on September 12 freezing $310 million belonging to an unnamed ultimate beneficial owner/group. The identity of the group is not revealed but references made to the Securities and Exchange Board of India as well as the Indian Supreme Court suggests the group is the Adanis.

The OAG says: “”Please note that the Office of the Attorney General of Switzerland (OAG) cannot answer questions about persons who may or may not be involved in criminal proceedings. Thank you for your understanding.”

It, however, goes on to say:

“As indicated in the decision of the Federal Criminal Court (FCC) to which you refer (page 2), on 20 July 2023, the Office of the Attorney General of Switzerland (OAG) took over criminal proceedings from the canton of Geneva.

“In the context mentioned in the decision, the OAG is currently conducting investigations into forgery of documents (Art. 251 SCC) and aggravated money laundering (Art. 305bis paras. 1 and 2 SCC). The investigations are ongoing, which is why the OAG cannot give you any further information at this stage. As always, the presumption of innocence applies.”

While Article 251 of the Swiss Criminal Code says “making use of a false or falsified document in order to deceive, shall be liable to a custodial sentence not exceeding five years or to a monetary penalty”, Article 305bis 1.1 says that whoever carries out an act that is aimed at frustrating the identification of the origin, the tracing or the confiscation of assets which he knows or must assume originate from a felony, money laundering is liable to a custodial sentence of up to three years or to a monetary penalty and in serious cases, the penalty is a custodial sentence of up to five years or a monetary penalty.

The charges are “quite serious because this language of course it is their official language, but the charges would be tantamount to forgery of documents and aggravated money laundering,” says a Geneva-based private banker who asked not to be identified.

Who is the ‘brother’?

It is true that nowhere does the Swiss Federal Criminal Court mention the Adanis in its ruling to freeze the US $ 310 million due to the criminal process of money laundering, on September 12. This is precisely the point the Adani Group has made in its response to news reports about the Swiss action.

Yet, the Swiss judicial system appears to be convinced that the needle of suspicion points towards a controlling person/enterprise behind the Ultimate Beneficial Owner (UBO). They seem determined to bring this person or group hiding in the shadows out into the open.

The Swiss determination to act was recently on display when another Indian billionaire was put on trial for ill treating his imported domestic servants from India.

Coming back to the money laundering case, the 10-page abridged version of the ruling in French is full of pointers and revelations. That the criminal activity of money laundering which it alleges pertains to the Adani group may be inferred by its reference to SEBI’s replies to the Supreme Court – which were clearly about the group.

In paragraph 2.6 of the ruling by the Swiss Federal Criminal court, it is clearly stated that “with regard to the Appellant’s argument concerning the causal link between the seized assets and the alleged offenses, the Court recalls that such a link is not required in the context of a sequestration ordered with a view to pronouncement of a compensatory claim (see supra consid. 2.1.2). However, this measure is not excluded in this case, as noted by the MPC (act. 1.1, p. 13 f. of the Federal Public Prosecutor).”

Continuing the ruling, in paragraph 2.7, it mentions that “concerning the show cause notice from the Securities and Exchange Board of India (SEBI; Indian financial regulator) – transmitted to the Court by the Appellant as part of a spontaneous position – in which the latter questions the credibility of Report I., accusing it in particular of misleading and inaccurate declarations in contradiction with the standards of diligence required from entities supposed to be specialized in financial investigation (act. 22), it will have to be analyzed by the MPC (Swiss Federal Public Prosecutor’s Office)  within the framework of its investigation and compared with the other elements which appear in the file. The same applies to the Report of the expert committee of the Supreme Court of India of May 3, 2023 (act. 1.27). As it stands, these documents alone do not refute the suspicions weighing on B.”

Report I is clearly a reference to the January 2023 Hindenburg report.

Further, the ruling draws attention to the links “between B. and J,. the brother of the founder and President of the H. group, and the fraudulent scheme described above (act1.1, p.7 ff). The hypotheses presented there were then compared with the information from different banking establishments.”

It follows that at this stage, “the sequestration (freezing of assets) measures are justified in principle.”

The Swiss legal processes ensure that rule of law institutions must live up to their mandate without any fear and impartiality.

In fact, the ruling by the Swiss Criminal Court shows a mirror to the seemingly crumbling Indian legal watchdogs, particularly during the past two years.

Deafening silence by government?

In the run-up to the elections in 2014, the BJP flagged the issue of illegal wealth held by Indians abroad and the need to repatriate it home as one of its main priorities if elected to office. A BJP leader often mentioned a figure of $1 trillion that he said had been siphoned off from India to Switzerland. Later, this proved to be a charade.

However, the current case against the unnamed “Brother” last week offers solid proof of how money laundering started with the transfer of bankable assets from Virgin Islands, Dubai and Singapore to Swiss banks, and later these funds were used to control shares beyond 75% in a particular company, contrary to rules in India.

Strangely, the ruling by the Swiss Criminal Court coincided with External Affairs minister S Jaishankar’s visit to Geneva. It is not clear whether he is aware of it or was informed by his officials. When asked whether the ruling was brought to his notice, the Indian government’s representative in Geneva said, “I should check with our Embassy in Bern or Ministry in New Delhi.”

Ravi Kanth Devarakonda is a financial journalist based in Switzerland.

This piece was first published on The India Cable – a premium newsletter from The Wire & Galileo Ideas – and has been updated and republished here. To subscribe to The India Cable, click here.

The Silence That Speaks Volumes: Why This Fear of Modi Government in the Business Community

The phrase “doctrine of frightfulness”, often used by Gandhi to explain the basis of British rule following the Jallianwala Bagh massacre resonates in our country today.

The nation was outraged seeing the outlandish spectacle of a video showing a respected entrepreneur, Srinivasan, managing director of Sri Annapurna Restaurant in Coimbatore and the president of the Tamil Nadu Hotel Owners’ Association, tendering an apology to the Union finance minister Nirmala Sitaraman a few hours after he had legitimately raised the issue of differential GST rates on sweets and spicy food items on September 11. 

In a meeting, Srinivasan had flagged the five per cent GST on sweets in contrast to 12% on savouries and 18% on cream-filled buns whereas buns were spared of any tax. When he said that customers preferred tax free bun and separately ordered for jam or cream to put it in bun on their own to avoid the burden of tax, the audience burst into laughter.

When he asked for forgiveness from Sitaraman for no fault of his she displayed no trace of bad feelings on her face for the humiliation faced by a widely admired entrepreneur. Very defensively he said, “I spoke only about those that were discussed in the association I do not belong to any political party. Sorry, if I have said anything wrong.”

Even Prime Minister Narendra Modi who as Gujarat chief minister in February 2014 had once forcefully remarked that the bravery shown by a trader in pursuing business is more than that of a soldier of the army, never uttered a word disapproving his own finance minister keeping quiet when Srinivasan apologised for raising a legitimate issue.

Even earlier in July 2022, Modi had proclaimed that the his government was ready to make necessary policy changes to encourage entrepreneurs in that sector which play a key role in the realisation of the government’s ‘Atmanirbhar Bharat’ (self-reliant India) initiative.

Also read: Tamil Nadu BJP’s Self-Goal: Video of Restaurateur’s Apology to FM Nirmala Sitharaman Sparks Outrage

Therefore, his deafening silence on the humiliation suffered by Srinivasan speaks of his shallow commitment to uphold the dignity of entrepreneurs to boost India’s economy, generate employment and above all serve the cause of customers.

The apology of Srinivasan is a manifestation of the employment of doctrine of frightfulness by Modi regime while exercising power and authority to rule the country. The phrase “doctrine of frightfulness”, often used by Mahatma Gandhi to explain the basis of British rule following the Jallianwala Bagh massacre in 1919 is getting replayed in our country in 2024.

The Electoral Bond Scheme providing for anonymity of donors contributing money to political parties and declared by Supreme Court as unconstitutional horrified the nation when startling revelations were brought to the public domain that several business establishments had donated money to the Bharatiya Janata Party (BJP) after repeated raids conducted against them by the Enforcement Directorate and the Income Tax Department. That unconstitutional legislation struck fear among entrepreneurs that the Modi regime could extract money to the tune of hundreds of crores for BJP’s coffers.

Can business flourish and contribute to take forward the economy with the “doctrine of frightfulness” writ large across the country? Srinivasan’s apology can be attributed to fear gripping his mind that his chain of restaurants might face coercive action from central agencies because he spoke truth to power and asked for streamlining the tax structure which would only provide a fillip to business and customer friendly.

Even earlier in September 2020 when Shekar Viswanathan, vice chairperson of Toyota’s India unit, flagged the punitive tax regime for the automobile industry as a major factor behind the company’s failure to expand operations in India, the then Union minister Prakash Javedkar rebutted those charges. He claimed that the company had since issued a clarification that it would invest more than Rs 2,000 crore in the Indian market in the next 12 months. Such a turn around by Toyota was linked to the pressure exerted on it to make a favourable statement for pleasing the Modi regime.

The scare in the minds of companies caused by pressure exerted by the government in complete disregard of business principles and the fear of raids they harbour make them dread to give any honest feedback to the government about what is wrong with economic policies. Chairman of Rockefeller International, Ruchir Sharma’s coinage of the term ICED (Income tax, CBI, ED) in the context of apprehensions and the horror writ large on Indian businesses over the last 10 years testify to the sad state of affairs plaguing our economy.  

The restaurant owner in Coimbatore is the latest example of an entrepreneur bending backwards to please the Modi regime by reversing his earlier stand that the government of India should pay attention and take corrective measures, with regards to GST rates. It underlines the deep malaise caused by the muscular approach of the Modi regime adopted vis a vis our economy. It should consider abandoning this approach so that it generates a fearless atmosphere in the business community for the growth of the economy. 

S.N. Sahu served as an officer on special duty to former President K.R. Narayanan.

This piece was first published on The India Cable – a premium newsletter from The Wire & Galileo Ideas – and has been updated and republished here. To subscribe to The India Cable, click here.

The RBI’s Move Towards a Principle-Based Approach to Regulating Fintechs is Laudable

Generally, principle-based regulation spurs more innovation in the market and limits ‘clever’ interpretations of regulation, making it harder for businesses to devise workarounds that sometimes deceive or mislead consumers.

There are broadly two ways to frame regulations:

  1. Regulations that tell you ‘what’ to do (technically, these are principle-based regulations); or
  2. Regulations that tell you not just ‘what’ to do, but also ‘how’ to do it (technically, these are rule-based regulations).

Principle-based regulation uses general statements that may apply to a wide range of situations (like ‘lenders must treat customers fairly’). It focuses on ‘what’ to achieve instead of ‘how’ to get there. In contrast, rule-based regulations lay down the specific requirements that market players must meet (like ‘lenders must notify customers 24 hours before an auto-debit for an EMI’).

Regulators across the world have trouble deciding which of these two approaches they must adopt for the regulation of fintechs. So, which approach to regulation has India’s much-feared and little-appreciated banking and payments regulator adopted so far? And how has that impacted India’s fintechs and consumers? Let’s dive in and look at a few examples.

Know your customer (KYC) and anti-money laundering: KYC serves an important function – that of identifying who is actually undertaking a transaction or engaging in a financial activity; and preventing the usage and movement of tainted funds.

In the master directions on KYC (KYC MD), the RBI has followed a rule-based approach. The RBI has prescribed in granular detail how financial institutions (FIs) must perform each mode of KYC, thus offering certainty. For KYC of individuals, the regulator has attempted to ease the KYC process with newer modes like video KYC (where identification happens via a video call) or downloading records from a central KYC registry.

However, the RBI’s decision to follow rule-based regulation mars the scalability and ease of adoption of these KYC modes. For example, the RBI’s KYC MD insists that FI officials must perform video KYC on a live call. This not just adds to the cost of video KYC, but also restricts fintechs from coming up with newer modes of video KYC (like AI-driven video KYC) that eliminate the need for a human presence on call.

So, would a  principle-based (and risk-based) approach  for KYC work better? The industry and India’s finance minister think so.

Elsewhere, KYC regulations are already moving towards a principle-based approach. Like under Bank Negara Malaysia’s (the Malaysian central bank) latest policy document on e-KYC, FIs are not bound to use any specific modes of KYC. They’re free to adopt KYC methods so long as they adopt authentication requirements commensurate with the risks (for instance, high-risk products like savings accounts need higher diligence).

The policy document does lay down the modes through which FIs may authenticate and identify a customer, but these are indicative and not prescriptive.

While this may not exactly be the solution that works for India, both customers and FIs will benefit from a principle-based regulation of KYC.

Peer-to-peer lending (P2P): The RBI introduced the master directions on P2P lending platforms (P2P Directions) to regulate the disbursal of loans through online platforms that connect lenders with borrowers. The RBI proactively notified the P2P Directions when the industry was still developing. Perhaps this was done to avoid the fate incurred by Chinese regulators whose ‘wait-and-see’ approach failed to catch undercover miscreants running Ponzi schemes under the guise of P2P platforms.

In the P2P Directions, the RBI has stipulated certain principles that need to be adopted by P2P players. For instance, P2P platforms can only act as intermediaries connecting lenders and borrowers – they cannot lend on their own, hold any funds received for loan disbursal or repayment on their books or provide assured returns.

However, the RBI has also taken a prescriptive approach by setting out granular requirements on the operation of P2P platforms. Case in point: Under the P2P Directions, an individual lender needs to approve the borrower before the disbursal of each loan.

This is cumbersome. It is unsurprising that contracts executed between lenders and P2P platforms include an auto-invest clause – through which lenders authorise P2P platforms to invest and re-lend their monies as per a lending criteria without any manual intervention. However, the RBI deputy governor recently warned that some creative approaches and interpretations (including the structuring of transactions) adopted by P2P players could be non-compliant.

The Association of P2P Lending Platforms is engaging with the RBI and seeking clarifications on the regulatory viability of key features (like the auto-invest feature) offered by the P2P industry players.

What happens when there is regulatory uncertainty? The increased regulatory scrutiny of P2P players coupled with regulatory uncertainty about certain business practices have slowed down P2P partnerships and growth.

The RBI recently barred P2P platforms from offering investment-like offerings with assured returns and instant withdrawals and from deploying lenders’ funds other than as provided under the P2P Directions. However, the jury is still out on auto-invest features.

We believe that there should also be room for P2P players to innovate and make P2P lending and borrowing flows simple, user-friendly and easy while meeting the principles set out in the P2P Directions.

As we can see, rule-based regulations offer certainty. But the downside is that they can be rigid and are much less adaptable to change. Besides, businesses might push the envelope and find creative ways to get around specific, rule-based regulations.

On the other hand, as the RBI deputy governor put it, the principle-based approach focuses on the desired outcome and gives entities the room to adapt and innovate within the broad contours. Businesses are held responsible for complying with the principles and there is little room for clever workarounds.

For example, it is an established principle that the RBI’s authorisation is needed to operate a payment system, i.e., to enable a payment transaction between a payer and a beneficiary by offering services like clearing or settlement. The RBI recently asked a card network to stop facilitating card-based business payments to businesses that do not accept credit card payments, through certain intermediaries, because this principle was violated.

Let us break this down. There are no roadblocks in making payments via cards to vendors with facilities to accept card-based payments – like to vendors that are onboarded as merchants by payment aggregators (say, payments to software vendors). The difficulty is in making card-based payments to small-scale vendors that do not have such facilities (say, payments to office canteen operators).

To solve this, a few fintech entities stepped in – they collected card-based payments from businesses (on behalf of the vendors), pooled monies in their escrow account and settled it to the vendors subsequently through IMPS/RTGS/NEFT, after deducting a commission.

The RBI flagged this as an unauthorised payment system, stressing on the principle that the pooling and settlement of money is a regulated activity.

Where a layer of third-party unregulated entities exist in the fund flow, there could be KYC lapses and tracking the end-use of funds becomes tougher, thereby exacerbating money laundering risks. Similar payment flows facilitating peer-to-peer credit card payments – like rent and tuition fees – via intermediaries are being scrutinised by the RBI as well.

Broadly, the reasons we’ve discussed above also explain the reasons why principle-based regulation generally works better for consumers. Since it spurs more innovation in the market, it gives consumers more choices. And since it limits ‘clever’ interpretations of regulation, it makes it harder for businesses to devise workarounds that sometimes deceive or mislead consumers.

Given this, it is laudable that the RBI is increasingly moving towards a risk and principle-based approach to regulation. Recently, it issued a draft framework on alternative authentication mechanisms for digital payments; the draft framework gives issuers the discretion to choose the appropriate additional factor of authentication based on their risk assessment of the customer and the transaction.

The RBI is not alone; the growing consensus amongst regulators globally is that principle-based regulation works better.

On the road ahead to regulation, we share the RBI deputy governor’s enthusiasm to take the route of a principle-based regulatory approach.

Priyam Jhudele and Priyanka Sunjay are fintech lawyers.

Gender-Responsive Budgeting: Still a Long Way to Go For India

Can an increase in allocations for spending on women can truly qualify a budget as ‘gender-responsive’?

The Union budget for 2024-25 has been widely reported to advance the cause of gender-responsive budgeting with the highest financial allocation of Rs 3.2 lakh crore as part of the gender budget statement. This is about 6.8% of the total expenditure budget and around 1% of GDP.

However, the question that arises is whether an increase in allocations for spending on women can truly qualify a budget as ‘gender-responsive’. This needs to be looked at considering two factors.

First, whether there has been a real increase in the allocations for women or whether the increased allocations being reported are a result of an accounting exercise, as has been contested by others.

Second and more importantly, in our opinion, does this gender budget address the foundational objectives of a truly gender-responsive budget?

To address this latter concern, let us revisit what is meant by gender-responsive budgets. According to UN Women, “gender-responsive budgets require a whole government approach, robust institutional frameworks, political will, laws in place to support equal distribution of resources, reliable data to fully understand the diverse needs of people, engagement with the private sector and civil society and monitoring and evaluation systems to inform future budget adjustments.”

The gender budget handbook published by the Ministry of Women and Child Development also identifies gender budgeting as a tool for gender mainstreaming. The guidelines suggest that the gender budget is an entry point to applying a gender lens to the entire policy process of the government.

Using these definitions, we examine, by using illustrations from the recently presented budget, whether it really represents a ‘gender-responsive budget’. These illustrations have been chosen based on the priorities listed by the finance minister in her budget speech.

The finance minister identified increasing agricultural productivity as one of the nine priority areas of the budget. The government also identifies women and farmers as two key focus groups for the budget. However, when we apply the gender lens, we find that adequate measures have not been taken to ensure equitable policies and allocations for improving productivity in the agricultural sector.

Oxfam International estimates that about 70% of all agricultural activities in India are executed by women cultivators and agricultural labourers. However, women are hardly recognised as farmers since the identification of a person as a farmer is linked to ownership of land and in India. Only 13.9% of total landowners are women as per the agricultural census, as cited here.

Recognising women as farmers is an essential step towards ensuring access to credit, technology and productive resources such as water and fertilisers. Research shows that the inadequate use of productive resources such as land, water, credit, technology and training has resulted in about an 11% of productivity loss in women-led farms as compared to those led by their male counterparts in India, and improving women farmers’ access to such resources is critical in bridging this productivity gap.

Also read | Union Budget: Is Name-Dropping the Word ‘Crèche’ Enough for Women Empowerment?

International studies also suggest similar results.

Hence, a gender-responsive budget in such a context would have taken initiatives towards the recognition of women as farmers and enabling their access to resources. However, no such initiatives or schemes are announced. Neither is any allocation made towards the empowerment of women farmers.

On the other hand, the budget speech indicates that the major focus in the agricultural sector is on technology-led productivity increases through high-yielding and climate-resilient seed varieties. 

Women are less likely to be able to make the best use of this initiative due to their lack of access to credit and productive resources as mentioned earlier. Hence, the budget fails to be gender-responsive in its truest sense considering the need of women farmers.

Similarly, employment and skilling are other identified priority areas in the budget with multiple new programmes announced. The budget announced programmes aiming at the skilling of the workforce, improving access to educational loans, providing assistance to new entrants to the labour force and incentivising employers for hiring.

It is worth noticing that most of these measures are supply-side measures. The efficacy of adopting only supply-side measures in improving the employment scenario can be questioned. However, even within the supply-side measures, efforts such as the collection and analysis of gender-segregated data and adopting corrective measures to ensure that women benefit equally from these initiatives is missing.

In the budget speech, the finance minister also announced measures for increasing women’s labour force participation, such as women-specific skilling programmes, the building of creches and working women’s hostels, and the promotion of self-employment through self-help groups (SHGs).

The government’s commitment to building more creches and hostels is clearly a step in the right direction. It alleviates the care work responsibilities of women, one of the core reasons for their inability to join the labour force.

On the other hand, the efficacy of initiatives such as women-specific skilling programmes and the promotion of self-employment through SHGs without any measures to address structural barriers is questionable.

Women-specific skilling programmes have been one of the measures adopted for increasing female labour force participation for about a decade since the inception of the Skill India programme. A 2019 National Sample Survey Office survey shows that about 46.9% of women who received formal vocational training were unable to enter the labour force, whereas only 12% of males failed to do so. 

There is also evidence showing that micro, small and medium enterprises as well as large companies showed reluctance to employ women due to security risks and mobility restrictions for women even after their being formally skilled.

Similarly, for the promotion of self-employment for women through SHGs, there is enough literature to suggest that the micro-credit provided through SHGs often goes towards consumption rather than enterprise promotion.

Also read | Contextualising Skill and Work in Budget 2024: Market Solutions or Missed Opportunities?

There are also concerns that micro-credits have increased the debt burden for rural women. The reasons for this can be various, including a lack of any measures towards facilitating forward and backward linkages, access to markets, etc.

Both measures, while aiming to facilitate women’s participation in the labour force, do not address the structural issues involved and hence, their efficacy can be questioned.

Moreover, the government has also failed to address the issue that women are more likely to have underpaid and exploitative jobs. A classic case for the same is the delegation of women professionals such as ASHA and anganwadi workers as volunteer workers, thus resulting in their being massively underpaid and being refused the social security measures available for other government professionals.

On the other hand, programmes such as MGNREGA and urban employment guarantee schemes are proven to have contributed significantly to increasing female labour force participation, increasing demand in the economy and in turn boosting the demand for employees, and bridging the gender pay gap.

However, these see a net zero increase in investment or no investment at all in the recently announced budget.

The objective of gender budgeting is to apply a gender lens throughout the policy process of the government. Revenue generation measures including tax regimes are an integral component of budgets. Therefore, it is critical that we scrutinise the tax-related measures announced in the budget from a gender lens as well.

For example, one of the most talked about components of the budget has been the changes to the tax regime through increasing standard deductions, which provides some relief to salaried employees. However, what will be the gendered benefit incidence of this initiative? Only 15% of tax filers were women as per a report released by the State Bank of India in 2024. Thus, men are more likely to benefit from this measure than women.

Policy measures that focus on increasing the participation of women in the formal workforce as well as those that aim to bring down the gender wage gap and eventually bring more women under the tax-paying bracket will improve the benefit incidence of such measures.

However, as discussed in the previous paragraphs, there are multiple concerns associated with the policy measures announced with the aim of improving female workforce participation.

While at first glance it appears that there is an increase in allocations as part of the gender budget statement as well as in the announcement of policy measures aimed at improving ‘women-led development,’ the analysis of the annual budget statement of 2024-25 from a gender lens shows that the government has a long way to go to truly understand women as contributors to the development of the country and not merely as beneficiaries of development initiatives.

Abida U.C. is research assistant and Archana Purohit senior research adviser at the Centre for Budget and Policy Studies.

Congress Says SEBI Chief Madhabi Puri Buch Traded in Listed Securities, Invested in Chinese Firms

Congress spokesperson Pawan Khera asked whether Modi was aware of Buch investing in Chinese firms amid geopolitical tensions with the country.

New Delhi: The Congress today (September 14) alleged that SEBI (Securities and Exchange Board of India) chairperson Madhabi Puri Buch traded in listed securities worth Rs 36.9 crores between 2017 to 2023, while she was a whole time member and later chairperson of SEBI, in violation of the regulator’s code on conflict of interest, and held foreign assets including investments in Chinese funds.

Addressing a press conference in New Delhi, Congress spokesperson Pawan Khera said that not only has Prime Minister Narendra Modi given a clean chit to China but the SEBI chairperson also invests in Chinese funds.

“Between the years 2017-21 Madhabi Puri Buch had some foreign assets. We want to know when was the first time she declared these foreign assets to which government agency? Is it true that Madhabi Puri Buch associated with Agora Partners PTE in Singapore as she was a signatory to the bank account? The funds that she has invested include-Vanguard Total Stock Market ETF, ARK Innovation ETF, Global X MSCI China Consumer, Invesco China Technology ETF,” he said.

“We are very concerned in India about using Chinese products. Why is PMCARES getting funding from China? And the prime minister keeps lecturing us. But this is really concerning that the SEBI chairperson is investing in China. The prime minister gives a clean chit to China but we now know that the SEBI chairperson is investing in Chinese funds as well.”

The Congress has posed three questions to Modi and demanded to know whether the prime minister is aware that “the SEBI Chairperson has been trading in listed securities while in possession of Unpublished Price Sensitive Information? Is the PM aware that Madhabi P. Buch has made high value investments outside India? If yes, what is the date of this investment and date of disclosure? Is the PM aware that the SEBI chairperson has been investing in Chinese firms at a time when India is facing geopolitical tensions with China?”

The allegation comes just a day after Buch and her husband Dhaval Buch on Friday denied a series of allegations of conflict of interest levelled by the Congress, terming them “incorrect, motivated and defamatory”.

In recent weeks the Congress has made a series of allegations against Buch and her husband, after US short-seller Hindenburg Research – whose report on the Adani group last year alleged price rigging of company shares – accused the SEBI chief and her spouse of having held “stakes in both the obscure offshore funds used in the Adani money siphoning scandal,” citing “whistleblower documents” on August 10.

In its August 10 report, Hindenburg also said Buch was a 100% shareholder in a Singapore-based consultancy company called Agora Partners until as recently as March 16, 2022 – two weeks after she became SEBI chair – when she transferred her stake to her husband. Buch set up both Agora Advisory and Agora Partners before she joined SEBI as a whole-time member in 2017.

Earlier this week, the Congress alleged that she held 99% shares in a consultancy firm, Agora Advisory Private Limited that was “actively providing advisory/consultancy services till date”. In addition, the Congress has also alleged in recent weeks that Buch received income from ICICI Bank post-retirement, earning rental income from Wockhardt Associates.

‘Conflict of Interest’: Congress Alleges SEBI Chief Madhabi Buch Got Crores Via ‘Active’ Agora

In response to Congress’ allegations, Hindenburg Research has questioned Buch’s silence and said that no similar details are available for her Singapore-based consultancy entity.

U.S. short seller firm Hindenburg Research has questioned Securities and Exchange Board of India (SEBI) chairperson Madhabi Puri Buch’s silence after the Congress on Tuesday (September 10) alleged that she held 99 per cent shares in a consultancy firm, Agora Advisory Private Limited that was “actively providing advisory/consultancy services till date”.

The Congress also alleged that her husband Dhaval Buch, received Rs 4.78 crore from Mahindra and Mahindra during 2019-21 while the SEBI was adjudicating a case of the company.

Addressing a press conference in New Delhi, Congress spokesperson Pawan Khera said that the revelations show conflict of interest by Buch in violation of the SEBI code of conduct.

“Section 5 of the SEBI code clearly states that conflict of interest comes up when you earn from a company which is being investigated or under SEBI’s radar. Madhabi Buch earned Rs 2.95 cr through Agora and it is in front of you. Most of the money in this, 88 per cent, came from Mahindra & Mahindra,” said Khera.

“Madhabi Buch has 99 per cent shareholding of Agora and this company is hers and her husband’s. Madhabi Buch’s husband Dhaval Buch got Rs 4.78 crore from Mahindra & Mahindra company between 2019-21. And when is all this time happening? When Madhabi Buch was a whole time member of SEBI. This is a violation of Section 11 of the SEBI code of conduct,” he added.

Khera said that Agora Advisory Private Limited had provided services to five other companies apart from Mahindra and Mahindra, including Dr Reddy’s, Pidilite, ICICI, Sembcorp and Visu Leasing and Finance while Buch was working first as a full-time member of SEBI and later as chairperson.

Three of these entities – Mahindra & Mahindra, Pidilite Industries, Dr Reddy’s Laboratories – disclosed that they had hired Dhaval Buch as consultant or leadership coach during various periods and paid remunerations, reported The Indian Express.

Last month, Reuters cited public documents from India’s Registrar of Companies and reported that Buch’s 99 per cent shareholding in Agora Advisory Private Limited earned Rs 3.71 crore in the seven years since she became a whole-time member of SEBI potentially violates the market regulator’s conflict of interest policy.

On August 10, Hindenburg Research – whose report on the Adani group last year alleged price rigging of company shares – accused Buch and her husband of having held “stakes in both the obscure offshore funds used in the Adani money siphoning scandal,” citing “whistleblower documents”.

In its August 10 report, Hindenburg also said Buch was a 100% shareholder in a Singapore-based consultancy company called Agora Partners until as recently as March 16, 2022 – two weeks after she became SEBI chair – when she transferred her stake to her husband. Buch set up both Agora Advisory and Agora Partners before she joined SEBI as a whole-time member in 2017.

In her response to Hindenburg’s report, Buch and her husband Dhaval said both Agora Advisory and Agora Partners “became immediately dormant on her appointment with SEBI”.

“These companies (and their shareholding in them) were explicitly part of her disclosures to SEBI,” Buch and her husband said on August 11.

Hindenburg says no details available for Singapore-based consulting entity

Following the Congress’ allegations on Tuesday, Hindenburg Research in a statement on X on Wednesday said that while the allegations apply to Buch’s Indian entity, no details are available on her Singapore-based consultancy entity.

“New allegations have emerged that the private consulting entity, 99% owned by SEBI Chair Madhabi Buch, accepted payments from multiple listed companies regulated by SEBI during her time as SEBI Whole-Time Member,” Hindenburg said in its statement.

“The companies include: Mahindra & Mahindra, ICICI Bank, Dr. Reddy’s and Pidilite. These allegations apply to Buch’s Indian consulting entity with no details thus far on Buch’s Singapore-based consulting entity. Buch has maintained her complete silence for weeks on all of the emerging issues,” said the statement.

Meanwhile the Congress has demanded to know whether prime minister Narendra Modi was aware that Buch owns 99 per cent of Agora Advisory Private Limited and is receiving significant fees from listed entities, including Mahindra & Mahindra, and of her ties with a conflicting entity.