India Inc

As ‘Make in India’ Enters 10th Year, What Does the Government’s Silence Mean?

For a government that thrives on events and celebration, the eerie silence during the lead-up to this important anniversary is a possible indication that it has accepted that glitzy PR is no longer sufficient to hide the perilously weakened manufacturing sector.

On September 25, the Narendra Modi government’s flagship programme Make in India entered its tenth year. For a government that thrives on events and celebrating fiction, there was an eerie silence during the lead-up to this important anniversary. It is possible that the government has accepted that glitzy PR is no longer sufficient to hide the perilously weakened manufacturing sector.

Make in India was launched with much fanfare, with the government listing for itself three major targets: a) increasing manufacturing growth by 12-14% per annum b) increasing the share of manufacturing in the GDP to 25% by 2022 c) creating 100 million jobs in the manufacturing sector by 2022.

Perhaps the lack of celebrations is because not a single target has been achieved. The manufacturing growth rate has averaged 5.9% since 2013-14, the share of manufacturing has remained stagnant and was at 16.4% in 2022-23, and manufacturing jobs halved between 2016 and 2021. The decade of Make in India saw the share of manufacturing in the workforce decline from 12.6% in 2011-12 to 11.6% in 2021-22.

The all-around poor performance has not deterred the government from passing off exceptional events as regular affairs. Apple’s iPhone manufacturing is a case in point. Reportedly, Apple has tripled iPhone production in India and almost 7% of devices are now manufactured in the country. The government and its cheerleaders have chosen to propagate this data point as a sign of manufacturing clout. A quick look at the figures is enough to dispel such notions.

The Index of Industrial Production (IIP) tracks growth in different industry groups. India’s IIP has grown from 106.7 in 2013-14 to 138.5 in 2022-23, at a yearly average of 2.9%. A thriving manufacturing industry must showcase annual growth of 7-8%. Since 2014, most sectors have been struggling.

The sobering reality is that growth in the manufacturing of electrical equipment has averaged (-)1.8% since 2013-14. The average growth of the computer, electronic, and optical products sector has been 2%, the transport equipment industry has grown at 2.3%, and motor vehicle production has grown at 1.6%. Textile, apparel, and leather industries have traditionally been job-creating sectors. They have grown at rates of (-)0.5%, 1.2%, and (-)1.8% respectively.

There is massive joblessness – the unemployment rate amongst young graduates is 42.3% – because manufacturing has failed to take off. Apple expanding its production base in India is motivating but not the complete picture.

A factory here and a factory there is not the way to go. India needs hundreds of new factories across states that manufacture products consumed by different classes. The Annual Survey of Industries underscores how the sector has lost all vibrancy.

The number of factories increased by almost a lakh during the Congress-led United Progressive Alliance (UPA) government. Between 2013-14 and 2019-20, the number increased by only 22,000. The manufacturing surge during the UPA led to more employment opportunities. The number of employees in factories grew at 6.2% annually during the UPA regime. This growth fell to 2.8% under the Modi government. Similarly, wages to workers grew at 17.1% annually under the UPA, falling to 8.4% since 2014.

Profits of factories were increasing at 18.9% annually during the UPA’s term and now stand at 0.6%. Before marketing and sloganeering took over sound policymaking, a government worked diligently and the results speak for themselves. More factories were set up, more workers hired, workers paid reasonable amounts, and proprietors made handsome profits. This climate inspired industries to invest heavily in the sector. Gross capital formation under the UPA averaged 21.3% and has since turned negative (-0.7%).

The lack of investments is a telltale sign of loss of confidence in the government’s policies. A year ago, the finance minister admonished industry leaders for not investing in manufacturing. She asked, “I would equally want to know from the Indian industry why they are hesitant (to invest) …We will do everything to get the industry to invest here … (but) I want to hear from India Inc, what’s stopping you?” We don’t know if she received an answer that day but we do know that the economy still suffers from a demand slump. There are no investments in manufacturing because there isn’t enough demand.

The manufacturing sector may have been on a different trajectory without policy missteps like demonetisation and the poorly designed Goods and Services Tax. The latter struck at the low margins of the MSMEs. The little recovery was wiped out with the announcement of an unplanned COVID-19 lockdown in March 2020. The government’s response continues to be insipid. Raising import duties and prescribing licensing requirements does not enthuse businesses or foreign manufacturers looking to diversify operations as part of their ‘China Plus One’ strategy.

Weakened manufacturing has hurt India more than the data reflects. Although unwittingly, the most trenchant criticism of the government’s economic policies came from external affairs minister S. Jaishankar. In an interview earlier this year, Jaishankar candidly confessed that China’s economic might comes in the way of how this government deals with the border transgression issue. The minister’s defeatist attitude does our position and security forces’ morale no good. It does raise questions within the government.

A decade is a long time to judge a policy. If a programme repeatedly fails, it may be evidence that there is time to shelve it for something effective.

Akash Satyawali is a public policy professional and National Coordinator, AICC Research Department.

‘Defund the Spread of Misinformation and Hate Speech’: IIM-B Faculty Members To India Inc

In a letter, nearly 20 current and former faculty members said they wanted to draw Corporate India’s attention to the “fragile state of internal security with an increasing risk of violent conflicts in the country”.

New Delhi: Nearly 20 current and former faculty members of the Indian Institute of Management Bangalore (IIM-B) have asked Indian corporates to defund “the spread of misinformation and hate speech through news channels and social media”, warning that “rapidly increasing levels of radicalization” are “fermenting an atmosphere conducive to large-scale violence “.

In a letter written in their personal capacity, the faculty members said they wanted to draw Corporate India’s attention to the “fragile state of internal security with an increasing risk of violent conflicts in the country”. They said that over the past few years, “an open and public exhibit of hatred towards minorities in public discourse has become common practice” in political discourse, television news and social media

These trends concern corporate India, “as they point towards an increasing risk of violent conflicts in the country. In the worst case, such acts of violence could culminate into a genocide, which would annihilate the social fabric as well as the economy of the country, casting a long dark shadow over India’s future. Corporate India, which hopes to reach new frontiers of international growth and innovation in the 21st century, cannot afford to live with even a small possibility of such a scenario”, the letter says.

The signatories said that because India has a long history of tolerance and peaceful coexistence of different faiths, they would like to believe that the risk of large-scale violent conflicts or genocide in India is still small. “However, this risk is no longer close to zero, as the rapidly increasing levels of radicalization of citizens are fermenting an atmosphere conducive to large-scale violence being triggered due to unexpected disturbances,” they said.

Leaders of corporate India have an important and substantial role to play in curbing the spread of hate and misinformation, the letter said, asking corporates to ‘Stop Funding Hate’; ‘Support Responsible Stakeholders’; ‘Curate a Welcoming Work Culture’; and ‘Use Your Voice for Fraternity’.

Read the full statement, and the list of signatories, below.

We, some of the current and retired faculty members at the Indian Institute of Management Bangalore, in our personal capacity, are writing this open letter to the leaders of corporate India, drawing their attention to the fragile state of internal security with an increasing risk of violent conflicts in the country, and appealing that they de-fund the spread of misinformation and hate speech through news channels and social media.

Over the past few years, an open and public exhibit of hatred towards minorities in public discourse has become common practice in India: in political discourse, television news, as well as on social media. The usage of othering, dehumanizing and demonizing language while referring to minorities has reached alarming levels, and acts of violent hate crimes, often by organized and radicalized groups, against minorities have seen a rise. The inaction of police and security forces during recent communal riots, as well as the acquittal or pardoning of culprits involved in rape and mass murder during previous instances of riots, coupled with the silence of authorities, has signalled a glaring level of complacency in place of urgency by the government.

These trends concern corporate India, as they point towards an increasing risk of violent conflicts in the country. In the worst case, such acts of violence could culminate into a genocide, which would annihilate the social fabric as well as the economy of the country, casting a long dark shadow over India’s future. Corporate India, which hopes to reach new frontiers of international growth and innovation in the 21st century, cannot afford to live with even a small possibility of such a scenario.

India has a long history of tolerance and peaceful coexistence of different faiths, and we would like to believe that the risk of large-scale violent conflicts or genocide in India is still small. However, this risk is no longer close to zero, as the rapidly increasing levels of radicalization of citizens are fermenting an atmosphere conducive to large-scale violence being triggered due to unexpected disturbances. Even if India does evade such a risk, it is certain that the deteriorating social fabric in the country, due to increasing hate and dehumanizing speech and radicalization, shall inevitably lead to escalating violence and socioeconomic uncertainty, permanently paralyzing the future of the country.

We believe that maintaining peace, stability and cohesion in the country is of paramount importance to corporate India without which India cannot become an economic powerhouse. The leaders of corporate India have an important and substantial role to play in curbing the spread of hate and misinformation. We appeal to corporate India to:

1. STOP FUNDING HATE: Stop funding any and all news and social media organizations that publicly air hateful or genocidal content against a community of people.

2. SUPPORT RESPONSIBLE STAKEHOLDERS: Conduct an internal audit to ensure that their funds, in forms like advertising or donations, go to only such stakeholders, like news and social media organizations that conduct themselves responsibly, and not fan the flames of hate and misinformation.

3. CURATE A WELCOMING WORK CULTURE: Mandatorily conduct timely diversity and inclusion sensitization events within their organizations to ensure their work culture remains welcoming to people of a variety of faiths and social backgrounds.

4. USE YOUR VOICE FOR FRATERNITY: Vocally ensure that India’s diverse social fabric, public discourse, and democratic institutions remain strong. Use your voice to rise up against hate!

This letter has been signed by the following faculty in their personal capacity

Anubha Dhasmana
Arpita Chatterjee
B K Chandrashekar (Rtd)
Deepak Malghan
Hema Swaminathan
Krishna T Kumar (Rtd)
Malay Bhattacharyya (Rtd)
Mira Bakhru (Rtd)
P D Jose
Prateek Raj
Raghavan Srinivasan (Rtd)
Rajluxmi V Murthy
Ritwik Banerjee
Shalique M S
Soham Sahoo
Srinivasan Murali
Vinod Vyasulu (Rtd)

Why the Private Sector Is Immune to the Constitutional Goal of Social Justice

There is a growing need to discuss the constitutional immunity that the private sector has enjoyed, even as it has deepened caste cleavages in India.

The judgment offered in the EWS case legitimised a quota-based reservation for the economically backward section of the society who haven’t suffered historical discrimination. The majority bench advocated that other non-targeted affirmative actions, such as programmes intended to uplift the poor, are not sufficient, and hence, the quota-based reservation was considered as a viable interim remedy measure.

However, an observation by Justice Dinesh Maheshwari, who was the only judge in the bench to ask if private educational institutions are mandated to follow the EWS reservation, was, surprisingly, not discussed much.

Justice Maheshwari observed that under Article 15(5) of the Constitution of India, the state has the power to mandate reservation in privately managed institutions. “Unaided private institutions, including those imparting professional education, cannot be seen as standing out of the national mainstream. As held in the aforementioned judgments, reservations in private institutions is not per se violative of the basic structure. Thus, reservations as a concept cannot be ruled out in private institutions where education is imparted,” he said.

In June, the current Chief Justice of India, D.Y. Chandrachud, in a lecture in the UK, had said that the role of the state as the primary employer has transitioned into being a facilitator for the private sector in economic activity over the last three decades. Still, he added, that the constitution’s provisions against discrimination in public employment exist only against the state. This, therefore, leads to the pertinent question if there’s a need for a comprehensive anti-discrimination law that applies to the private sector too.

Immunity to the private sector from the constitutional responsibility of removing discrimination has become the biggest bane in post-liberalisation India, helping the Brahminical hierarchy make deeper inroads than before. The private sector has assumed the primary role of employer without much social responsibility or constitutional mandate. There is a growing need to discuss the constitutional immunity that the private sector has enjoyed, even as it has deepened caste cleavages in India.

The constitutional control over the ‘social’ aspect of the private sector assumes greater importance on two counts. One, the private sector has assumed commanding heights in the economy. Two, the government’s increasing tendency to put out the red carpet to private capital has surpassed even the equality code, the DNA of the constitution.

Such complicity of the private sector in perpetuating caste discrimination was first highlighted during the World Conference Against Racism held in Durban in 2000. By then, the impact of privatisation and globalisation policies in the economy was already showing its devastating effect on distributive justice.

More than 1 lakh jobs, otherwise reserved for the Scheduled Caste and Scheduled Tribe communities, had been lost due to privatisation. But the then Bharatiya Janata Party-led Vajpayee government had refused to admit caste hierarchy as a form of discrimination, and even claimed that in India, caste discrimination was a story of the past.

Nevertheless, the debate and demand for the extension of the reservation or any other form of “affirmative action” to the near monopoly of ‘upper castes’ in the private sector gained momentum. As a result, both the BJP and the Congress-led United Progressive Alliance had to promise some sort of attention to the question of social justice in the private sector in their election promises.

The UPA government, which came to power in 2004, promised in its Common Minimum Programme (CMP) a wider national-level discussion and consultation with business associations, state agencies, and the civil society on the question of affirmative action in the private sector. The immediate reaction from the ‘upper caste’ dominated India Inc betrayed its pretension of civility. The then president of the Confederation Of Indian Industries (CII), Sunil Kumar Munjal had said:

“We cannot be forced to take individuals who don’t have the required skills. We cannot afford to compromise on efficiency. That would affect our competitiveness. We cannot compromise on merit. Corporate sector does not go by colour of skin, caste or the last name.”

But the then chairperson of the University Grants Commission, professor Sukhadeo Thorat, and academician Paul A. Attewell established through their field-level experiment how false these claims were.

Their experiment documented a pattern of decision-making by employers that repeatedly favoured job applicants from the Hindu, higher-caste backgrounds, which was revealed in their ‘last names’, and discriminated against lower caste and Muslim job applicants with equal qualifications.

The field study found that an applicant with a ‘last name’ reflecting a Hindu ‘upper caste’ got more opportunities than an applicant with a Muslim ‘last name’ with similar qualifications.

Also read: Research Finds Stark Discrimination Between Hindu and Muslim Women While Job Hunting

Another study by the economist, Ashwini Deshpande, and by the sociologists, Katherine Newman and Surinder S. Jodhka, has shown that the access to productive employment and well-paying jobs in the private sector remains confined to the privileged sections of society.

Based on a sample of the top 1,000 companies listed on the Indian stock exchange, a 2010 study showed that caste diversity was non-existent in the Indian corporate sector and 65% of the Indian corporate board members were from just one ‘upper caste’ group.

A 2019 study conducted by the Azim Premji University found that the SC/ST communities were “over-represented” in low-paying jobs and “under-represented” in high-paying ones. The study, thus, suggests that this massive under-representation of the marginalised sections in private sector employment couldn’t have been possible without discriminatory and biased corporate HR policies.

When these findings established a strong case for some regulatory actions by the government, India Inc declared that they would adopt a Voluntarily Code of Conduct (VCC), according to which, they would take up measures to ensure social justice in their organisations.

The Apex Industry Associations, namely the CII, Federation of Indian Chamber of Commerce and Industry (FICCI) and Associated Chambers of Commerce and Industry of India (ASSOCHAM), prepared a VCC for their member companies centered around inclusive education, employability, entrepreneurship and employment. A coordination committee for affirmative action for the SC and ST communities in the private sector was set up by the government in 2006.

Poor implementation of ensuring social justice

During the ten-year regime of the UPA government from 2004-14, the coordination committee held only seven meetings. Meanwhile, when the Congress manifestos in 2009 and 2014 general elections mentioned the promise of building consensus over extending reservation to the private sector, the CII declared that it would “discuss with the Congress party because we believe that at this point, reservation in the private sector will impede the competitiveness of our industry”. Thus, the UPA stopped nudging the private sector beyond holding “infrequent” meetings without pursuing any agenda.

The Narendra Modi-led government didn’t hold any meeting with the coordination committee until 2018.

Just a year before the general elections, a nationwide movement against unemployment, agrarian crisis, and the demand for reservation in public employment had started in the country. That’s when the debate on reservation in the private sector gathered momentum again.

Following this, the Modi government held its first-ever coordination meeting with the Indian business houses on affirmative action.

Even then the Modi government just documented the figures provided by the business associations about the affirmative actions that they carried out, without any verification, and expressed satisfaction about it.

During the earlier coordination committee meetings, the Indian corporate houses had promised the government that they would initiate affirmative actions by helping out in education, employability, entrepreneurship and employment.

India Inc shows most of the mandatory corporate social responsibility activities under education, scholarships, skill training leading to employability, and successful entrepreneurship. These activities are not quantifiable and are intangible.

The actual quantifiable criterion to judge the commitment of the private sector is actual employment of the people belonging to the SC/ST communities.

Also read: Why Is There No Upper Caste Outcry When Merit Goes for a Toss In the EWS Quota?

The Modi government has now established a record of being completely in sync with the interests of India Inc. That has reflected in the uncritical defence of the private sector’s poor implementation of ensuring social justice.

Answering a question in the Rajya Sabha on January 2, 2019, junior commerce and industry minister, C.R. Chaudhary, had expressed his satisfaction with the affirmative actions taken by the Indian corporate houses. He had said, “Measures undertaken by the members of Industry Associations, inter-alia, includes scholarships, vocational training, entrepreneurship development programmes and coaching.”

In the same speech, he had presented an annexure detailing the affirmative action undertaken by some corporate associations.

Between 2006-2018, the ASSOCHAM, CII and FICCI claimed to have provided scholarships, free education, and vocational training to 1.73 lakh, 1.36 lakh, and 6.5 lakh students belonging to the SC, ST, and OBC communities, respectively. However, in the same period, only 1.27 lakh students were given employment, which would amount to less than 10,000 jobs per year.

There are other problems as well. As journalist Arun Sinha questions in his recent article in Deccan Herald, neither the companies disclosed nor did the Modi government verify whether these jobs were given to the candidates whose education and training it supported each year. Or if they were hired in the low-paying jobs where SCs and STs were already over-represented, and counted it as affirmative action. Or if contract employees were included in this figure.

Even after 13 years of pompous declaration of “affirmative action” by the Indian corporate houses, only about 19% of the 17,788 member companies of the three trade associations have adopted the VCC.

A 2021 Reserve Bank of India report titled Employment in Public and Organised Private Sectors inadvertently points out the necessity of bringing the private sector under the ambit of quota-based reservation system to ensure social justice.

This report provides the break up for employment in the public and private organised sector from 1980 onwards. However, it does not have that data for the period after 2013. But still, the trend is obvious.

Between 1991-2012, more than 20 lakh jobs were lost in the organised public sector. With 50% reservation in the public sector it would mean that at least 10 lakh families belonging to the SC, ST and OBC community have lost their opportunities. This would have increased by at least twofold since the Modi government, after 2014 and especially after 2019, is on a privatisation spree.

Social justice movements have increasingly feared that increasing privatisation may lead to a complete decline of opportunities for the historically marginalised caste groups. A quota-based reservation system in the private sector in this context becomes not only necessary but also inevitable.

Hanuman Needs Help From Those Who Rule in the Name of Ram

Nirmala Sitharaman’s exhortation to domestic investors only proves that India remains in the private investment famine which began in 2014, when Narendra Modi became prime minister.

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

Finance minister Nirmala Sitharaman last week likened the Indian industry to the mythological Hanuman, who often doesn’t understand his own strength. She asked why Indian industry was hesitant to invest when foreign investors are expressing confidence in India.

“Is it like Hanuman? You don’t believe in your own capacity, in your own strength and there has got to be someone standing next to you and say you are Hanuman, do it? Who is that person to tell Hanuman? It can’t certainly be the government,” Sitharaman said.

Her exhortation only proves that India remains in the private investment famine which began in 2014, when Modi became prime minister. The absence of a pickup in private investment over a decade could be Modinomics’ unenviable legacy. Sitharaman is merely reiterating that long-standing concern. She took over as FM in 2019 and came up with many policy announcements to boost private investment. Massive corporate tax cuts in September 2019, including just 15% for new investments, made India among the lowest taxed economies, but it didn’t attract significant new investments. The production linked investment (PLI) scheme after the pandemic is yet to take off. The Union urged RBI to cut interest rates drastically to help corporate balance sheets, but businesses still failed to make fresh investments out of internal surpluses. The lack of response from domestic businesses is the cause of the FM’s frustration and also reflects the PM’s growing anxiety.

The FM says foreign investors have shown confidence in India but domestic investors are still wary. This is not true. Foreign investors have shown confidence only in the tech, e-commerce and fintech sectors, not in broad-based manufacturing. Traditionally, foreign investors follow domestic investors. Many foreign investors and big brands have exited manufacturing in India in recent years. Prominent examples in the highly viable auto sector have been General Motors, Ford Motors and Harley-Davidson. Holcim Group’s sale of Ambuja Cements and ACC is the single biggest exit in manufacturing in recent times. Bottomline: foreign investors will not enter manufacturing until domestic investors show adequate confidence.

Nirmala Sitharaman’s diagnosis that Indian businesses, like Hanuman, don’t know their own inherent strength is also wrong. Businesses have built capacity but the Indian consumer’s income is not growing, and consumption-led growth is at an all-time low. April-August data shows sales of discretionary consumer items like soaps, toothpaste and shampoo are totally flat. No wonder Sanjiv Mehta, Chairman of Hindustan Unilever, is suggesting an urban employment scheme on the lines of MGNREGA!

Even if Indian businesses invest a lot more in capacity creation and try to discover their full Hanumanhood, it will be of no use until consumers respond. RBI surveys in the last few years have consistently shown low consumer confidence and negative prospects for future employment and income growth. Can industry invoke its Hanuman-like strength and do something about it? No, it can’t.

The real Hanuman with unlimited strength must reside in the 1.3 billion consumers who drive the economy. PM Modi has talked about the potential of 130 crore Indians to pull off miracles. That Hanuman is rather feeble at present, and needs help from those who rule in the name of Ram!

It’s Time for a Little Disclosure on Climate Change in the Corporate World

Much backlash and litigation is expected over the SEC’s recent move. But until then, the move to establish and release the draft rules is in itself a landmark step – not just for the US, but internationally as well.

On March 21, the United States Securities and Exchange Commission made a ground-breaking announcement. It proposed rules to enhance and standardize climate related disclosures for investors. According to their statement, this rule would “require registrants to include certain climate-related disclosures in their registration statements and periodic reports, including information about climate-related risks…”

This means that some of the largest international corporations such as ExxonMobil and Apple would need to release data about their exposure to climate challenges such as sea level rise, and what plans if any, they have to publish information about emissions from the use of their products. This rule is still a draft, and likely to remain that way for some months. Yet, this publishing itself may be a sign of things to come. Here are three reasons why:

One, it begins to address greenwashing. According to the University of Oxford, 21% of the world’s largest public companies have declared “net zero” commitments. Only some of these have established roadmaps for how they will achieve the targets. And there is massive capital looking to finance the net zero transition. According to Bloomberg New Energy Finance, 2020 saw a record $501 billion invested in energy transition sectors and over the last five years, $2 trillion of debt has been issued in the same sector – of which $730 billion was in 2020 alone. What would the GHG basis for such capital allocation be?

Exactly what this net zero means is unknown, or at best, uneven as there is no common definition. Numerous organizations starting with the Climate Disclosure Project, a pioneer and still leader in this space since 2002, have been supporting and advocating for disclosure of emissions. The basis for all such disclosure is the Greenhouse Gas Protocol, a tool built twenty years ago which has now become the rule book for defining “scopes” of emissions.

As a reminder, scope I are emissions from direct combustion of, say, fossil fuels; scope II (indirect) are emissions from the purchase of electricity, steam, heat and cooling; and scope III are emissions from elsewhere in the value chain – such as the traveling of employees. Among the SEC’s key requirements is for companies to disclose their scopes I and II emissions, and those generated by their generators and partners, if material. In my experience, most companies are comfortable reporting emissions of scopes I and II, but become uneasy when it comes to scope III. Here’s why: take for example, a consultant flying to a client meeting. The emissions from burning aircraft fuel would constitute scope I emissions for the airline, and scope III for the producer of the jet fuel. They could also be counted as scope III by the consultant’s client. And/or her travel insurance. And/or the airport. And/or the leasing company that leases the aircraft to the airline. The list can go on and on, because scope III largely means emissions from the value chain not captured in scopes I and II. Where does the reporting end?

For some companies, scope III constitute the largest part of their footprint. For hydrocarbon companies, scope III is especially serious: 90% of Shell’s total emissions fall under scope III. For this very reason, it becomes necessary to find a way to address these emissions – the starting point of which is (managed) disclosure. Many in the international community have been working to find ways to allocate responsibility appropriately – and to that extent, this proposed rule of the SEC is a powerful step in the right direction. The SEC puts the onus on companies to determine what they believe to be “material” scope III emissions.

Two, the rule recognises that the effects of climate change present economy wide risks which need to be disclosed, just like other categories of risks that affect businesses and investments. Climate change presents physical risks such as extreme heat or drought, and non-physical or transition risks that arise from shifts in the economy as a result of transitioning to a low carbon system. Both present risks to the investor, and the only way to require the disclosure of such risks is through the regulator. There has been, and remains, a fair degree of opposition around this – centered around to what extent emissions-related data falls under the jurisdiction of market regulators such as the SEC. This opposition is international – and not limited to the US SEC.

It is, however, changing, perhaps not fast enough. For example, the Network for Greening the Financial System already comprises of 108 members – all central banks and financial supervisors – who have come together voluntarily, and for now, they share best practices for climate risk management in the financial sector.

And three, the rule begins to give investors the leverage to force changes in business practice – a movement that has resulted in the adoption of GHG reduction targets by many companies that may not have done so on their own. The SEC Chair has indeed gone on record saying the regulator is responding to demand from investors who wish to have additional information to make informed decisions on which risks to take.

The American public has sixty days to comment on the proposed. Much backlash and litigation is expected and the adoption of the rules will likely be delayed by several months. But until then, the move to establish and release the draft rules that have been in the making for long, is in itself a landmark step – not just for the US, but internationally. Climate change affects us all – it creates risks and has economic consequences. And it is up to us – and the institutions we make – to decide to recognize them or not.

Mahua Acharya, MD and CEO of state owned Convergence Energy Services Limited, a subsidiary of EESL. Views are personal.

At PTC India Financial, 3 Independent Directors Resign, Throwing a Corporate Governance Grenade

The problems listed by them make for a distressing read and throw a spotlight on how Indian companies routinely fail when it comes to strengthening corporate governance norms.

New Delhi: The disappointing state of corporate governance within India Inc was thrown into sharp relief once again when PTC India Financial Services Limited, an infrastructure financing company, disclosed to the bourses that three of its independent directors had resigned from the company.

Kamlesh Vikamsey, Thomas Mathew T. and Santosh Nayar resigned with immediate effect on Wednesday.

The company is a registered NBFC and falls under the jurisdiction of the RBI as far as the conduct of its business is concerned. PTC India owns a majority 65% stake in the company while the LIC of India holds a 2.13% stake.

The three independent directors highlighted a number of problems faced by them which were “either given a deaf ear to or were rejected time and again” by the management of the company.

The problems listed by them make for a distressing read and throw a spotlight on how Indian companies routinely fail when it comes to strengthening corporate governance norms.

On what grounds did the independent directors resign?

Appointment of Ratnesh as director (finance) and CFO

In his resignation letter to the company, independent director Thomas Mathew T. states that the current managing director of the company did not allow Ratnesh to join as director (finance) and CFO despite him being appointed after following a board mandated process.

“..the current chairman and MD apparently did not take any steps to enable the functioning of Mr Ratnesh as Director (Finance) & CFO and subsequently seems to have taken a unilateral decision to put the joining of Mr.Ratnesh on hold, even without informing the board about such decision or the rationale therefore leave alone taking the prior consent of the Board for such a major decision.”

Bridge loan of Rs 125 crore to NSL Nagapatnam Power and Infratech Private Limited

PFS approved a loan of Rs 125 crore to NSL in a January 2014 meeting which was disbursed two months later and the repayment for which was to commence in four quarterly instalments after a moratorium of 12 months. Subsequently, the company ran into trouble and because of the ongoing stress in the company, insolvency proceedings were launched against it. The promoter company of NSL placed a one-time settlement offer before the business committee of PFS in March 2020. On consideration of the OTS offer, the business committee directed the management of the company to renegotiate the offer.

Also read: Govt Puts Central Electronics Ltd Privatisation on Hold, Says ‘Examining Allegations’

Later in December 2020, a revised agenda was circulated vis-à-vis the NSL loan. The agenda also contained a Forensic Audit Report (FAR) of the loan carried out on instructions of the management of the company. The existence of the FAR raised the Board’s concern given that the board was kept in dark about its existence for more than two years. The board at its meeting dated December 19, 2020, took cognisance of the non-disclosure and constituted a committee of two independent directors to look into the matter. It had to face “inordinate delay in getting required documents and correspondence from the management for its work”.

The company management has been accused of being “non-cooperative” and “evasive”, and effectively thwarting the efforts of the audit committee to bring the NSL loan issue to finality by either not submitting information demanded by the committee or by submitting information with a substantial delay, that was often unsatisfactory.

No action on corporate governance issues

The previous chairman of the company – Deepak Amitabh – had highlighted several corporate governance issues in the company in August 2021. Despite several reminders from the independent directors, these issues have remained unresolved, according to the independent directors.

“The lack of action on the part of the company management is alarming, especially since the company is a listed company and has obligations to not just itself as an entity but also its investors,” one of the letters states.

Unilateral changes in loan conditions without board approval

The board of the company had expressed concern over the unilateral and unauthorised changing of terms and conditions of loan extended to Patel Darah-Jhalawar Highway Private Limited. A report was sought on it by October 2021. The same is yet to be submitted to the board.

Expressing his dismay, Thomas Mathew T. states, “It was a coincidence that such unilateral change came to the notice of the board, and it raises suspicion of many more such instances of similar nature which exist in the company, and the board oblivious on account of non-disclosure by the company. It is also a governance control issue since the management is acting without the approval, authorisation and consultation with the board.”

Communication by independent directors being ignored

The independent directors contend that various emails sent by them have not been acknowledged or responded to by the company management.

“It should be borne in mind that independent directors are the vanguards for a given company and shoulder responsibility not only to the company but also its investors, shareholders and regulators. Such non-cooperation on the part of the management and the company is unfortunate and a deterrent to the spirit of the law…,” the directors argue.

The three directors contend that they are not being provided with the information sought by them. Even when information is indeed provided, it tends to incomplete, misleading or inaccurate.

As India Inc Reels From the Hate It’s Getting, Some Soul-Searching Is in Order

What has been surprising and disturbing is the mute response to issues that businesspersons knew would genuinely harm them and their enterprises.

From time immemorial, a standard trope for all business channels post a Union Budget speech has been to ask their guests to ‘rate the budget’. Unfailingly, finance minister after finance minister never scored anything less than a thumping 8 on 10 – throw in a few sops for the equity market and watch those ratings surge to 9.5.

So it is both facetious and ironic that Corporate India says it is now “scared” and concerned about the backlash many marquee Indian companies are facing, from varied quarters. The fear may be understandable. But what they shouldn’t be is surprised.

There are a few truisms that one must deal with before we go ahead. One, India has seen some incredibly robust and respectable business take seed, grow and flourish. Whether it is the tech industry (where Infosys recently became the fourth Indian company to touch $100 billion in market capitalisation) or stellar pharmaceutical companies like Dr Reddy’s Laboratories, to the dynamic and hungry startup world that has given us names like Paytm and Nykaa. This is a sign of the incredible entrepreneurial spirit and native wisdom that many from the world of Indian business possess.

The other reality is that business as a community will never, ever sit at crossroads with the political establishment. Corporate interests are housed where power is. So, to expect scathing criticism or fiery pushback from business establishments would be facile.

What has been frankly surprising and disturbing is the mute response to issues that they knew would genuinely harm them and their enterprises.

Infosys

Panchjanya (considered a mouthpiece of the RSS) in its September 5 edition carried a four-page cover story on Infosys, with the tech giant’s founder Narayana Murthy’s picture on the cover page. Observations in the piece ranged from wondering whether any “anti-national power is trying to hurt India’s economic interests through it” to lines like “Due to glitches in both GST and Income Tax return portals developed by Infosys, the taxpayers’ trust in the country’s economy has taken a hit”. This piece came on the back of a highly public display of displeasure by the finance ministry, including summoning Infosys CEO Salil Parikh to Delhi so as to explain multiple glitches in the GST and Income Tax portals developed by the IT major.

Also read: The Questionable Patriotism of Indian Industry: They Do Not Invest in Jammu and Kashmir

However, the Panchjanya piece put out against Infosys, the crown jewel of India’s tech landscape, saw no response from any of the industry bodies – CII or FICCI or even NASSCOMM, the apex body for the IT-BPM industry in India. Just weeks before that, it was the Tata group facing the heat – at CII’s annual meet, Union commerce and industry minister Piyush Goyal tore into the company with comments like “Kya aapke jaisi company, ek do aapne shaayad koi videshi company kharid li… Uska importance zyaada ho gaya, desh hith kam ho gaya? (A company like yours, maybe you bought one or two foreign companies, now their importance is greater than national interest?” Goyal said that he had conveyed the same message to “Chandra” (Tata group chairman N. Chandrasekharan).

The video was subsequently taken down. But not because of any pushback from India’s business leaders or their forums.

Let’s leave aside any argument or discussion around issues of hate speech or violence against targeted communities or groups, and how stark the silence from India’s corporate corners has been on that.

Did Corporate India raise their voices in question when the GST was rolled out in a haphazard and completely half-ready manner – even as reports now indicate they are being arm twisted into meeting the Rs 1 lakh crore mark, which the finance ministry must desperately ensure it hits to raise any decent revenues this year? Did they point out the flaws in recent labour law changes that made hiring and firing that much easier for companies?

Or did they instead raise their voices in a crescendo of hurrahs when the finance minister decided to cut corporate tax rates – ostensibly to boost investment by Corporate India, but leading to little other than a stronger bottom-line for these companies?

Has there been any meaningful debate or discussion around the bloodbath that MSMEs in India have seen with the 1-2-3 punch of demonetisation, GST rollout and COVID-induced stress? Or on the raging unemployment numbers, rising like a ticking time bomb across urban India – and rural India too, now?

Donation to electoral funds: money talks

But let’s pause on that argument for a second and explore the money trail instead. Data from the Association for Democratic Reforms (ADR) released in October 2020 shows that the BJP received Rs 698.08 crore from 1,573 corporate donors. Trailing by a mile is the Congress with Rs 122.5 crore from 122 donors while the NCP got Rs 11.34 crore from 17 donors. Voluntary contributions of the BJP and the Congress, above Rs 20,000, from corporate and business houses, were 94% and 82% respectively.

More numbers: political contributions made through electoral trusts rose to a record in 2019-20 with names from India Inc like the JSW Group and Indiabulls Group leading the charts. Contributions disclosed by seven electoral trusts in India rose to Rs 363.5 crore in 2019-20 – a 44% increase over the previous year, an analysis by the ADR showed. That’s the highest amount received by electoral trusts since 2013, when such non-profits were mandated to disclose donor details. Apart from trusts, companies also make direct contributions or route them through the far more opaque electoral bonds.

Also read: What Kind of Capitalism Should India Have?

In terms of trusts, Prudent Electoral Trust continued to corner bulk of the funds, receiving 75% of the total contributions. Formerly known as the Satya Electoral Trust, it has raised more than half of the total contributions made every year since 2013. The Jankalyan Electoral Trust received a total of Rs 72 crore – three-fourths of which came from the JSW Group companies. Large parts of Prudent’s contributions were diverted towards the BJP, which continued to get the most donations from such trusts. The BJP raised Rs 276.45 crore in 2019-20 from electoral trusts, of which Rs 217 crore came from Prudent. The Indian National Congress received a total of Rs 58 crore while the Aam Aadmi Party got Rs 11.2 crore. The BJP has clearly been the biggest beneficiary of donations from electoral trusts since 2013.

For the PM-CARES Fund, data shows that money donated by private companies, industry bodies and social organisations amounted to over Rs 5,300 crore.

Clearly, India Inc has displayed its monetary support and validation for the government. Perhaps that explains why there is now palpable disquiet amongst the financial community on the covert and overt attacks they are facing.

Criticism by business leaders of the Union government has been all but absent in the last few years. While notable exceptions like the very vocal and emphatic Rajiv Bajaj have stood out, industry bodies have often tripped over themselves to ensure any seemingly ‘anti-establishment’ comments are linked to a business leader’s own organisation and not the industry body.

At the peak of COVID’s second wave in April, I recall asking a startup founder whether Corporate India and individual leaders needed to support medical relief measures in a bigger way. His reply laid it out in no uncertain terms – “It is not my job to run around for medical supplies and help find oxygen. My job is to run my company.” True enough. Perhaps it is also time for India’s best and brightest from the world of business to think about whose job it is to defend them, while they duck for cover.

From Job Creation to Credit Schemes, Sitharaman Announces New Stimulus Package

Dubbed the ‘Atmanirbhar Bharat 3.0’ package, the new announcements include a Rs 65,000-crore increase in fertiliser subsidy to farmers and tax relief for home buyers.

New Delhi: The Narendra Modi government on Thursday continued its string of relatively low-key ‘stimulus’ announcements with a new package aimed at boosting formal employment, increasing expenditure in the rural economy and an expansion of the India Inc’s production-linked incentive schemes.

Dubbed as the ‘Atmanirbhar Bharat 3.0’ package by finance minister Nirmala Sitharaman at press conference today evening, the new announcements also include a whopping Rs 65,000-crore increase in fertiliser subsidy to farmers for this financial year, tax relief for home buyers and an expansion of a government-backed credit guarantee scheme for several stressed corporate sectors.

Today’s stimulus measures are worth Rs 2.65 lakh crore, said Sitharaman, adding that the Reserve Bank of India recently predicted a strong likelihood of the Indian economy returning to positive growth in Q3 FY 21 and that recent economic recovery was not due only to pent-up demand.

One of the centrepiece announcements is the setting up of an Atmanirbhar Bharat Rozgar Yojna which incentivises companies in the formal sector to hire new employees and bring them into the EPFO net. The government, in turn, will bear the employee and employer contribution of 12% each.

To avail of benefits under this scheme, organisations with fewer than 50 employees will have to hire at least two employees, and those with more than 50 employees will have to hire 5 or more.

Also read: How India Was Stripped of Its Atmanirbharta in the Edible Oil Industry

Here are the broad highlights from Sitharaman’s press conference:

1) I-T relief for home buyers: For residential units worth up to Rs 2 crore, differential allowed between agreement value and circle rate has been increased from 10% to 20% till June 30, 2021.

2) PM Awas Yojana (Urban): Rs 18,000 crore to be provided over and above the Budget announcement to help 1.2 million houses be grounded and 1.8 million houses be completed

3) Additional Rs 10,000 crore spending to PM Garib Kalyan Yojana, likely to be spent either on MNREGA or Gram Sadak Yojana

4) To give relief to contractors in the construction and infra sectors, performance security deposit reduced to 3% till Dec 31, 2021, for projects without any dispute.

5) Extension of Rs 3 trillion Emergency Credit Line Guarantee Scheme till March 31, 2020. Announcement of ECLGS 2.0 for 26 stressed sectors identified by Kamath Committee

6) Rs 1.46 trillion boost for manufacturing Production Linked Incentives (PLI) for 10 champion sectors

7) Govt to provide Rs 65,000-crore fertiliser subsidy to farmers, move to benefit 14 million farmers

8) Rs 10,200-cr additional Budget outlay to promote industries and create industrial infra under Aatmanirbhar Bharat

India Plans Higher Trade Barriers, Raised Import Duties on 300 Foreign Products: Report

The plan, in like with Modi’s ‘Atmanirbhar Bharat’ campaign, has been under review since at least April, according to a government document seen by Reuters.

New Delhi: India plans to impose higher trade barriers and raise import duties on around 300 products from China and elsewhere, two government officials said, as part of an effort to protect domestic businesses.

The plan has been under review since at least April, according to a government document seen by Reuters, and is in line with Prime Minister Narendra Modi’s recently announced self-reliance campaign to promote local products.

The new duty structures are likely to be gradually outlined over the next three months, said the sources, who asked not to be named as the plan is still being finalised.

Also read: To Rebuild the Economy, India Needs to Be Atmanirbhar in Ideas

India’s finance ministry and trade ministry, which is involved in the discussions, did not respond to requests for comment.

The government is considering raising import duties on 160-200 products and imposing non-tariff barriers – such as licensing requirements or stricter quality checks – on another 100, according to the officials.

The decision will target imports worth $8-10 billion with the aim of deterring non-essential lower quality imports which render Indian products uncompetitive, said the first official, who has direct knowledge of the plans.

“We are not targeting any country, but this is one of the ways to reduce a trade deficit that is lopsided with countries like China,” the second official said.

Bilateral trade between China and India was worth $88 billion in the fiscal year ending March 2019, with a trade deficit of $53.5 billion in China’s favour, the widest India has with any country.

Between April 2019 and February 2020, the latest data available, India’s trade deficit with China was $46.8 billion.

A separate industry source familiar with the matter said engineering goods, electronics and some medical equipment were among items being considered under the plan. A third government source said non-tariff barriers, such as more stringent quality control certification, could apply to imported products such as air conditioners.

Modi has vowed to promote and protect local manufacturing since he swept to power in 2014. He has promoted a “Make in India” programme in recent years, and last month announced an “Atmanirbhar Bharat”, or a self-reliant India, campaign.

India already raised taxes on imports of goods such as electronic items, toys and furniture in February, drawing criticism that it was a protectionist move against foreign businesses. Sweden’s IKEA, for example, said at the time it was disappointed with the higher tariffs.

The government document showed feedback had been sought from various Indian ministries to arrive at the list of around 300 products, which has not been seen by Reuters.

India has increased duties on more than 3,600 tariff lines covering products from sectors such as textiles and electronics since 2014, the document added.

“We’re pushing for a policy to strengthen Indian manufacturing keeping in view its strengthens and weaknesses,” a fourth government official said.

Additional reporting by Manoj Kumar.

(Reuters)