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10 ISSUES AND INSIGHTS

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MUMBAI | MONDAY, 14 MAY 2018

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Healing the doctor The NCLT’s capacity needs to be increased with more benches and judges to speed up resolution of insolvency cases

RAISINA HILL A K BHATTACHARYA

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he adjudicating authority for insolvency resolution under the Insolvency and Bankruptcy Code is the National Company Law Tribunal or NCLT. Since the Code’s enactment in 2016, not a day passes without a piece of news pertaining to what the NCLT has been doing about insolvency resolution or liquidation of an unviable asset. The obvious question, therefore, is how adequate is the capacity of the NCLT in dealing with the biggest challenge the Indian economy faces on account of its twin balance sheet prob-

lem. Both in terms of resolving the banks’ problem of stressed assets and helping India Inc clean up its balance sheet, the effectiveness and efficiency of the NCLT are going to play a crucial role. As of now, the NCLT has 11 benches that operate from different cities across the country — New Delhi, which has two benches, Mumbai, Bengaluru, Chennai, Hyderabad, Kolkata, Ahmedabad, Chandigarh, Allahabad and Guwahati. The NCLT website says there are just 17 judicial persons and nine technical members available at its disposal to conduct the various benches. It, therefore, should surprise nobody if these benches with only a handful of judicial and technical members at their disposal are inundated with work. Industry representatives have of late complained that the NCLT’s attention is focused so much on insolvency resolution that other equally important cases pertaining to mergers and acquisitions are suffering on account of delays.

Ironically, the NCLT, set up under the Companies Act, was expected to reduce delays in adjudicating on company law cases, which earlier used to remain pending with various high courts. And now with the mounting pressure of a time-bound clearance of insolvency resolution petitions, a host of other legal company matters are getting delayed. Consider why the work pressure on the NCLT has risen. At the end of March 2018, the number of active companies registered in the country was 1.17 million. Maharashtra accounted for the largest of them at 0.23 million and the NCLT’s bench in Mumbai has to handle cases pertaining to not only these companies but also about 11,000 companies registered in Goa and Chhattisgarh. The two benches in Delhi, which has the second largest concentration of active registered companies at 0.21 million, consider cases pertaining to companies registered in the union territory of Delhi and also the state of Rajasthan (about 37,000 companies). The Kolkata bench appears to be

even more burdened with its jurisdiction covering the states of West Bengal, Bihar, Jharkhand and Odisha, in addition to the union territory of Andaman & Nicobar Islands. Remember that West Bengal has the third largest concentration of active companies in the country, estimated at 0.13 million. The three other states under Kolkata have an estimated registered company strength of over 45,000. The plight of other benches is not as bad as those in Mumbai, New Delhi and Kolkata, because the number of companies registered in the states covered by the other benches are only in thousands, hovering at around the 7080,000 mark only for those in Ahmedabad, Hyderabad, Allahabad, Chennai and Bengaluru. With such a heavy burden of work for each of these benches, delays and accumulation of pending cases are only to be expected. The rise in the number of insolvency resolution applications and the priority accorded to them have only aggravated the problem. Starting with an estimated 38 petitions for insolvency resolution admitted in the January-March quarter of 2017, the NCLT admitted a much higher number of such applications in the following two quarters — 128 in the April-June quarter and 234 in the July-

September quarter of 2017. The pace slowed down a bit at 140 applications in the October-December quarter. But considering that in the whole of 2017, 540 petitions for corporate insolvency resolution were admitted, the additional load on the NCLT can be easily gauged. As at the end of December 2017, the NCLT has approved 10 resolution plans and initiated commencement of liquidation procedures in 30 other cases. While 39 applications have been subjected to a review, the remaining 461 cases are under various stages of the resolution process. With the Insolvency and Bankruptcy Board of India already focused on training insolvency professionals and the Reserve Bank of India enforcing stricter norms on income recognition and classification of stressed assets, the number of applications before the NCLT for insolvency resolution will only rise in the coming months. It is also becoming clear that the state capacity to complete the resolution process for insolvency cases has to be increased. Just about 11 benches with 26 members to oversee them are not enough. The government needs to set up more benches and hire more judicial and technical members to speed up the process of insolvency resolution.

> CHINESE

Change in Malaysia, opportunity for India

KP NAYAR

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hen Narendra Modi met his Malaysian counterpart Datuk Seri Mohammad Najib Bin Tun Abdul Razak — who has just been ousted from power in an upset election defeat — on April 1 last year, they spent 20 minutes of their one-on-one meeting discussing Goods and Services Tax (GST). The GST has been an albatross around Najib Razak’s neck ever since he introduced it in Malaysia in 2015. That the difficulties the GST posed for Malaysians played a significant part in the historic defeat of the ruling party, the United Malays National Organisation (UMNO) on May 10 was obvious from one of the main campaign promises by the opposition to abolish it if they won the general election. The UMNO has been in power since Malaysia’s first general election in 1959, initially on its own and later, as the main partner in a coalition called the Barisan Nasional (BN). The resurgent, new Prime Minister, Tun Dr Mahathir Mohamad, reiterated on Thursday soon after taking

office, that he would scrap the GST within his first 100 days in office. When Modi and Najib met last April, India was precisely three months away from introducing its own version of the GST. Modi was keenly aware of the political risk in Malaysia’s implementation of the GST and Najib had been forewarned to expect questions on the controversial tax, officials from both sides had then told this writer. Indian officials insist that of all the heads of state and government that Modi has met across the world, Najib is among those whose work he has closely followed and often sought to emulate. When the two men met for the first time in Myanmar in November 2014, Modi surprised Najib by asking about a unit in his office known by its acronym of PEMANDU which stands for Performance Management and Delivery Unit. New in office, familiarly impatient and brimming with new ideas then for the transformation of India, Modi wanted to set up something in the mirror image of PEMANDU in his own Prime Minister’s Office (PMO). The unit in Putrajaya, the administrative capital of Malaysia, is tasked with overseeing the implementation, assessing the progress and facilitating the delivery of government programmes similar to the ones Modi has launched in the last four years. Impressed, Najib immediately deputed Devamany S Krishnasamy, a Malaysian Indian, then speaker of the Perak State Legislative Assembly, who had helped set up PEMANDU in Malaysia’s PMO in September 2009 to

ILLUSTRATION BY BINAY SINHA

Mahathir Mohamad, who has created history in Malaysia, must understand that the India he will be dealing with now is very different from the one he dismissed in the 1980s and the 1990s

work with the Indians. That Modi did not quite have his way in setting up a Malaysian model accountability unit in his office is the story of turf battles and myopia in India’s babudom. Since then, the economic content of Malaysia-India relations has grown exponentially. Malaysia has swiftly moved beyond photo-ops of signing of agreements in New Delhi in the presence of VIPs and has reached out to states to begin business-to-business activity on the ground. During multiple visits, this writer found Andhra Pradesh Chief Minister Chandrababu Naidu to have a highly favourable rating in Malaysia among those who want to collaborate with India. Reflecting that confidence in Andhra Pradesh, a technology park spread over 250 acres in Amaravati, bringing in Malaysian investment of $100 million in the initial phase, is being developed. Malaysian companies are engaged in negotiations for a greenfield airport in Nellore and devel-

opment of an aerotropolis there. Malaysia’s statutory Construction Industry Development Board (CIDB) has been advising the federal and state governments to get involved in water, sewage, monorail and road construction projects in Andhra Pradesh. Rajasthan wants Malaysian companies to build gold courses in the state and CIDB officials have visited Uttar Pradesh to look at irrigation projects. The award of a project to IRCON International to double track a railway line connecting Seremban to Port Klang in Malaysia is in the final stages of negotiation. Another agreement to put up a urea and ammonia manufacturing plant in Malacca for dedicated consumption by India make these deals two-way and mutually beneficial. The two-way tourist flows and consequent business opportunities between India and Malaysia have increased after the two countries renewed their bilateral air service agreement during Najib’s visit to New

Delhi last year. The new agreement allows airlines in Malaysia an additional capacity of 1,861 seats per week to lift passengers to and fro. Because many Malaysians of Indian origin travel to their native Chennai regularly, it is not very well known nation-wide that every week an average of 22,000 people travel between the two countries following the new agreement. That makes for a potential business from tourism for both sides involving 1.1 million people annually. Such a brisk level of bilateral economic activity which has outpaced similar relations with many countries make it imperative that India should immediately reach out to the new government of Dr. M, as the new Prime Minister is popularly referred to in his country. For the better part of Mahathir’s earlier tenure as Prime Minister from 1981 to 2003, he along with Singapore’s Lee Kuan Yew had written off India as a loser on the economic front. Both Mahathir and Lee had lamented often that India’s economic record has been one of wasted opportunities which compared unfavourably with the successes of the South East Asian “Tiger” economies. The new Prime Minister, who has created history in his country must be convinced that the India he will be dealing with now is very different from the one he dismissed in the 1980s and the 1990s. K P Nayar is a frequent visitor to Malaysia and has reported on India-Malaysia relations from Kuala Lumpur since 2015

Inspiring terms are simple. ‘Climate change’ isn’t

Time to introspect

The doubters and believers aren’t even talking about the same thing

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s scientific terms go, “climate change” is failing. Good terms are specific, descriptive and help people to understand complex concepts. Climate change is ambiguous, referring perhaps to the most pressing human-generated environmental problem of the century, or to other kinds of changes that happen through natural forces and have been going on since long before humans arose. Last week I chatted with Columbia University paleontologist Dennis Kent about some new work he and his colleagues published in the Proceedings of the National Academy of Sciences about the surprisingly big influence of Venus and Jupiter on the climate of Earth. The gravitational tug of the second and fifth planets from the sun act to stretch Earth’s annual orbit like a rubber band, pulling it into a more oblong ellipse and then back to something very close to a perfect circle over a cycle of 405,000 years. And that leads to big changes in our climate — or the climate of whatever creatures lived here. The ambiguity of “climate change” plays into the problems that a Wall Street Journal op-ed identified last week in a piece headlined “Climate Activists Are Lousy Salesmen.” This is science, not advertising, and the terms that scientists come up with aren’t decided by public-relations experts using focus groups. Most of the burden of explaining climate changes, past and present, has fallen not to “activists” but to scientists, whether or not they have an interest in or aptitude for persuasion. According to historians, the same people who were fascinated by dramatic natural climate changes were the ones to discover that burning up lots of fossil fuel was likely to cause a short-term

spike in the global temperature. The start of that spike is already measurable. Research on human-generated and natural climate changes are related, and many of the same people still study both kinds in order to get a better handle on where things are headed in the coming decades, centuries and millennia. Back in the 19th century, scientists started to investigate signs in the geologic record that dramatic ice ages had been occurring every 40,000 years or so, during which glaciers crept over

much of the Northern Hemisphere. Eventually, they realised that these are driven by what Kent calls an ice age pacemaker — the interplay between the tilt of the planet’s axis and our planet’s distance from the sun. Those factors change the way sunlight is distributed, concentrating more or less over the Northern Hemisphere, where there’s more land and the potential to build up glaciers. Glaciers reflect sunlight, absorbing less of its heat energy than dark surfaces would, which makes the cold periods colder worldwide. Similarly, warmth releases carbon dioxide, which acts as a greenhouse gas traps solar heat and amplifies warm periods. Adding to all this complexity is the subject of the new paper — a 405,000year-long cycle caused by our fellow planets. Kent said that basic Newtonian physics shows that Venus and Jupiter

Poster creates furore Rashtriya Janata Dal (RJD) Chief Lalu Prasad's 29-year-old son Tej Pratap got married to Aishwarya Rai, granddaughter of former Bihar CM Daroga Prasad Rai, over the weekend. In the run-up to the celebrations, a poster congratulating the two on their wedding, set off a massive war-of-words online. Most were aghast because in the poster — put up outside the residence of the RJD chief — Tej Pratap and Aishwarya were depicted as Lord Shiva and Parvati. While it was not clear who put up the poster, it quickly went viral, kicking up a storm. While some criticised the blind devotion of party workers, others said it offended their religious sensibilities.

Royal boost for Tata Motors?

Shares of Tata Motors have been struggling at the bourses, having lost over a third of their value in the past six months. Some are expecting the upcoming royal wedding in the UK to lift the fortunes of the company, which owns marquee British brands Jaguar and Land Rover. It is no secret that the two are among the mostpreferred car brands for the royals. Prince Harry and American actress Meghan Markle’s wedding next weekend is one of the most anticipated events in Britain, if not the world over. During the wedding, which will be telecast across the world, many Jaguar and Land Rover cars are expected to be pressed into service. “It will be a good advert for the brand and might boost its global sales,” said an investor who holds shares of Tata Motors.

Meet Tilak, the father of terrorism “Tilak demonstrated a path towards national movement, therefore, he is called the father of terrorism,” says a social studies textbook for class 8 being referred to in schools in Rajasthan. The book is published by a Mathura-based printer and is recommended by some private schools affiliated to the Rajasthan Board of Secondary Education. The incident has led to much consternation, both online and offline. Congress Rajya Sabha member Digvijaya Singh tweeted last weekend: “Class 8 book calls Bal Gangadhar Tilak 'father of terrorism'. Would CM Rajasthan please correct it and punish the guilty?”

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BUSINESS LIFE

FAYE FLAM

WHISPERS

actually change Earths’ orbit significantly. At its most oblong, the long axis of the orbit is five percent longer than the shorter one. During that more oblong part of the cycle, the Earth strays farther than normal from the sun (twice a year) and also flirts closer to the sun than usual (twice a year). So other natural changes reach greater extremes — the ice ages colder and the periods in between warmer. What Kent and his colleagues did was expand the record of those cycles by digging out cores of Earth hundreds of feet long from Arizona and Northern New Jersey. They used the natural clocks provided by radioactive materials and signs of reversal of the Earth's magnetic field to figure out when and how the climate changed. The cycles, he said, go back more than 200 million years, to the time when dinosaurs first appeared. People hear “climate change” and think, what’s the big deal? The climate has been changing for millions of years. Or they note that scientists used to think we were headed into another ice age. But the time scales matter. One could distinguish the current, more rapid climate change by calling it “anthropogenic climate change,” but that term makes people trip over their own tongues, so it’s understandable that people shorten it. There’s also the term “global warming,” which is a little more descriptive, but scientists say it fails to capture changes in rainfall patterns, wind and currents that go along with the general trend of warming. It's too late to prevent anthropogenic climate change, or unnatural climate change, or global warming — call it what you will. But it isn't too late to slow the warming, and perhaps even reverse it. If only someone could sell the idea. © 2018 Bloomberg

the highest posts in the party and the government, resulting in rapid decline of the party. Mahendra B Jain Belagavi

Mosquito menace

The question India is asking Congress President Rahul Gandhi (pictured) is why in the world would Prime Minister Narendra Modi see a threat in Rahul Gandhi when Rahul, as president of the once-all-powerful, pan-India umbrella party is gifting away state after state to PM Modi's Bharatiya Janata Party on a platter because of his lacklustre political appeal to the aspirational masses of emerging India. They abhor the outdated, feudal and dynastic politics aggressively followed by the Congress, which lays more emphasis on a family name than on the seniority, ability, credibility and popularity of a person while deciding who heads the party. When Rahul Gandhi talks about the principles of democracy and equality and quotes the 12th-century spiritual master, Basavanna, it sounds like some of the words of William Shakespeare in Merchant of Venice: “The devil can cite Scripture for his purpose/An evil soul producing holy witness/Is like a villain with a smiling cheek/A goodly apple rotten at the heart/Oh, what a goodly outside falsehood hath!” It is time the Congress stops being hypocritical and starts introspection, looking within to cure what ails it — the malady of dynastic politics, which has blocked the emergence of budding leaders from the grassroots and a competitive opportunity to rise from the ranks to

I refer to “Mosquito season is here again” (May 12). It is well accepted that climate change fuels the spread of ailments such as malaria. Mosquitoes infect between 250 million and 500 million people every year. There has been an inspiring range of anti-malarial activities that the world has unleashed on mosquitoes but with modest success. Countries like Sri Lanka have successfully eliminated malaria and the World Health Organisation has declared it malariafree. The success has been due to the close monitoring and improving standards of public hygiene which is a key component of eliminating the disease. In addition to malaria, mosquitoes are also the transmitters of two other debilitating diseases — dengue and chikungunya. Reports suggest about the emergence of the alarming super malaria — or to put it simply, drug-resistant malaria. It bodes ill for our country since it has already spread to Cambodia, Thailand, Laos and parts of Vietnam. The poorly appreciated, but the most significant development to fight malaria outside of drugs which do not seem to be used these days, still happens to be mosquito-blocking bed nets that can

> HAMBONE

reduce malaria deaths by 30 per cent. We can save many lives with these simple yet high-impact shields. Newer technologies like releasing millions of genetically modified or bacteria embedded mosquitoes to reduce their numbers hope to bring the current crisis under control. Another effective approach is to implement the Wolbachia method. Mosquitoes with Wolbachia, a bacteria introduced into the mosquito, will make it less able to transmit viruses to people, decreasing the risk of mosquito borne illnesses. This approach has been welcomed by local governments, health agencies and community representatives in Sri Lanka, Fiji, Vanuatu and Kiribati as a natural, cost-effective and long-term solution to the burden of mosquito-borne diseases. This programme is being tried out in 10 countries around the world. India should evaluate the outcome of these studies. Genetically-tweaked mosquitoes or Wolbachia-modified ones may be our best hope for controlling the mosquito-borne diseases. Indian public health authorities should evaluate the potential of this new approach. H N Ramakrishna Michigan USA Letters can be mailed, faxed or e-mailed to: The Editor, Business Standard Nehru House, 4 Bahadur Shah Zafar Marg New Delhi 110 002 Fax: (011) 23720201 · E-mail: [email protected] All letters must have a postal address and telephone number

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OPINION 11

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Volume XXII Number 194

MUMBAI | MONDAY, 14 MAY 2018

ILLUSTRATION BY BINAY SINHA

Data blues Govt must urgently improve CSO’s functioning

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recent Reserve Bank of India (RBI) monograph, titled Examining Gross Domestic Product Data Revisions in India, shows how advance estimates of gross domestic product (GDP) are consistently biased downwards and are frequently updated upwards in subsequent periods. Updating GDP figures is an accepted international practice; as more and better data becomes available, it is but natural to incorporate it in the final figure. However, when the initial estimates are consistently biased in one direction, it only shows that not all is right in the country’s statistical regime. Unfortunately, this is just one of the many issues plaguing Indian economic data. Arguably the chief among them is the lack of comparability of the new and the old GDP series. The old method, which mainly relied on production data from various sources, was very different from the new one, which relies on value-added data reported to the Ministry of Corporate Affairs by companies. On paper, the latter is a better system because it relies on value-added data rather than production data, which then needs to go through many steps before it can be converted into a GDP figure. However, when the Central Statistics Office (CSO) itself admits that the two estimates are not comparable and that it is unable to create a back series for others to compare, the conclusion is that something is seriously amiss in India’s statistical office. The biggest casualty in this is the credibility of economic data, which, for all its flaws, was, till recently, acknowledged globally to be fairly accurate and credible. But today, leave aside the global community, even within the government there is a believability gap. Compounding the problem is the lack of historical comparability, which prevents analysis and fine-tuning of economic policy and resource allocation. The GDP back series, therefore, is critical and must be constructed. Moreover, improvements in GDP and other economic estimates are not a one-time affair, they need to be organic and ongoing, absorbing better technologies, methods and data. From all available evidence, it is apparent that the CSO is unable to meet the demands of the new economy. The solution is not just to correct the flaws in GDP estimation but also to improve the functioning of the CSO itself. The rapid digitisation of the Indian organised sector economy, combined with the sustained significance of the informal sector, necessitates the coexistence of the old and the new and is throwing up both challenges as opportunities. Estimating and aggregating across various sources require organisations such as the Indian Statistical Institute to develop and test new methods — a function it was created for, but is found wanting. At the same time, estimation is now not just within the realm of statistics or economics. Large amounts of real-time data are now accessible through Application Programming Interfaces (APIs) such as those from tax records, digital payments or e-commerce. It requires data science and information technology professionals to work with statisticians and economists. According to a parliamentary finance panel, India’s economic revival is hindered by a lack of reliable and quality data. It also noted the consumer price index did not adequately capture the changing cost of services such as education, health care and transport. The CSO must change itself and be in tune with the new realities.

Sebi’s twin moves The regulator acts to improve trading and access to primary market

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he Securities and Exchange Board of India (Sebi) has been trying to improve the trading experience and make it easier for companies to access the primary market. For instance, the market regulator has given the go-ahead for extending trading hours for equity derivatives, from 9 am to 11.55 pm, with effect from October 1. This step brings the trading hours for equity derivatives in line with those for commodities. This time extension enables investors to respond quickly to price-sensitive news flow that may occur in other time zones. It, therefore, allows Indian exchanges to compete with exchanges in Dubai and Singapore, which offer India-specific contracts over long trading hours. Sebi is also discussing with the Reserve Bank of India the possibility of extending trading hours for currency derivatives. However, it is not yet clear what contracts will be on offer during the extended time period. Will trading during extended hours be restricted only to index-based instruments or will the full range of indices and single-stock futures and options be made available? Either way, brokerages and exchanges will have to tighten monitoring systems and reconciliation and compliance procedures once the hours are extended. Then, a consultation paper released by the Primary Market Advisory Committee (PMAC) of the regulator has proposed welcome changes to the norms and processes for raising capital. One of the proposals is that companies should be allowed to float rights issues of up to ~100 million without being obliged to submit a draft prospectus. Such an exemption is currently available only for rights issues up to ~5 million. The enhanced limit is expected to allow corporates to tap existing shareholders for larger sums, without the burden of more paperwork. The regulator has also suggested reducing the minimum application size for anchor investors to ~20 million from the current level of ~1 billion in the case of initial public offerings (IPOs) for small and medium enterprises (SMEs). This will ease the stress for anchor investors and may make it easier to raise funding for SMEs. The PMAC has also proposed that IPOs should announce price bands within two working days, instead of taking the current five days to fix bands. However, both IPOs and follow-on public offers will be allowed to extend the actual issue period to five working days, from the current three days, without changes in price bands. While the enhanced exemption limit and issue period are positive steps, the regulator should tread carefully on the suggestion to simplify mandatory disclosures about group companies at the time of an IPO. The PMAC has proposed that only information on related-party transactions needs to be mentioned. Currently, disclosures include the financials of group entities as well as any litigation related to group entities. Omissions of such details could lead to a serious loss of transparency. Moreover, the regulator should review certain aspects of the trading regime. For instance, given the extension in trading hours, it becomes very hard to justify the ban on sharing data with foreign exchanges — a step taken supposedly to prevent trading volumes migrating outside India.

Understanding Netanyahu BOOK REVIEW IAN BLACK Anshel Pfeffer’s biography is superbly timed — appearing as Israeli justice closes in on a man who has been in power for nearly a decade and is a major player in what he famously calls a “tough neighbourhood” for far longer. Bibi, as he is known at home (though the use of his childhood nickname does not automatically imply affection), comes across as a more complex figure than his legendary mastery of the sound byte suggests. Family background and tribal politics are two of the main strands of his story. America, where he spent much of his early life and formative stages of his career, is another significant one. If there is a master key to cracking the

Bibi code, this insightful and readable book argues, it is his identity as someone who has always stood outside the mainstream. Mr Netanyahu’s grandfather and father were members of the right-wing “Revisionist” movement at a time when Zionism was dominated by the left in Eastern Europe, America and Palestine. In the case of the Netanyahus, the “inability to become part of the establishment,” as Pfeffer puts it, made for unusual continuity between the generations. Mr Netanyahu was born in Tel Aviv in 1949, a year after Israel’s independence and what Palestinians call the Nakba (“catastrophe”) forged one of the world’s most intractable conflicts. His experience attending high school in Philadelphia, where his father had taken an academic job, instilled in him views that were out of sync with then “little” Israel’s collectivist ethos. He has often been accused by his critics over the years of being more American than Israeli. His elder brother Yoni, an officer in the Israeli Army’s elite Sayeret Matkal unit,

Concerns about high-tech companies The story of high-technology companies in India will now turn on the interfaces between them and the regulators

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echnologists were imbued with the notion that they are building a wholly new world, that the laws of today are a pesky problem that must be brushed away. This is part of the “move fast and break things” philosophy. In previous years, the policy community was indulgent towards technologists when it appeared that valuable new things were being done. Then came the recent years, where the Internet was an accessory to the rise of authoritarian regimes around the world. The kid gloves are now off, and we have a collision of regulation with high technology. In India, this story turns on state capacity for regulation. The early dawn of Unix and the Internet was driven by utopian dreamers. They set out to build a wholly new world with a new set of rules. There is much to admire about these philosophical underpinnings, as much as their remarkable engineering achievements. As the Internet revolution started spawning billionaires, it attracted a different breed of commercially-oriented AJAY SHAH people. We have gone from trusted geniuses like Bill Joy (who was in the founding team of Sun Microsystems from 1982 to 2003) to people like Travis Kalanick of Uber or Mark Zuckerberg of Facebook. The dreamers insisted that they were building a wholly new world, and that their capacity to innovate would be hampered by conventional notions of law and regulation. At first, the policy community was indulgent towards this new world. The idea was to

foster innovation, and the disruption of complacent old economy industries. The technologists were seen as good guys, who were building a better world. Things have changed on a few fronts. There are fresh concerns about competition policy, with the rise of network monopolies such as Facebook and Uber. There are concerns about privacy, and particularly the use of data in Russia and China for repressive purposes. Psychologists are raising the alarm about the extent to which Facebook and Twitter are harmful for their users. Finally, Facebook and Twitter have helped damage the political discourse worldwide, and were accessories to the rise of authoritarian regimes worldwide. The Internet was invented by idealistic geniuses. It is a cruel turn of events when it has become a tool for authoritarians and monopolists. The climate of opinion has shifted worldwide. The question of the age is: How do we deal with this dystopian outcome? There is a knotty array of problems of competition policy, associated with network monopolies. When well-funded technology companies were subsidising consumers, that was welcome, but now many of these companies have achieved monopoly status and are embarking on recoupment through higher prices. Once recoupment gathers momentum, competition authorities worldwide will initiate investigations. The old toolkit of competition policy, which was useful when dealing with IBM, AT&T or Microsoft, may not be optimal.

SNAKES & LADDERS

There is a search for new solutions, such as interconnection regulation through open APIs (Application Programming Interfaces). There is a privacy crisis. Technologists emphasise the useful things that can be done if a lot of information is observed about the user. But users and policymakers increasingly mistrust the firms. Most firms cannot be trusted to “do no evil”. Things are particularly problematic in non-democratic countries: The Internet is the dictator's dream panopticon. Dissenters are crushed, based on information gleaned from the Internet. Perhaps the USSR would not have collapsed in 1989 if the Internet had come along a few decades earlier. Psychologists see Facebook and Twitter as a public health problem, a bit like cigarettes and fast food. Happiness and mental balance in the world would increase if more people could avoid social media. The leading lights of the Internet are uncomfortable about their kids getting on social media. Parents have been warned about cigarettes and fast food for many decades, but are mostly unaware of the harm caused by social media. When Unix and the Internet were in some virtual terrain, building a world of computer networks and email and the web, this was cut off from the physical world. But as software has come to “eat the world”, there is a collision with public policy in the old economy. Taxis in Bombay are regulated, and so should Uber and Ola’s cabs. FSSAI (Food Safety and Standards Authority of India) rules about food safety should apply to food purchased from websites. When drugs are sold online, there should be rules about safety and checkpoints about access to prescription drugs. The story of high-technology companies in India will now turn on the interfaces between these companies and the regulators: The Reserve Bank of India, Securities and Exchange Board of India, Telecom Regulatory Authority of India, the upcoming Data Protection Authority, Competition Commission of India, etc. The uniquely Indian twist is the problems of state capacity that afflict regulators. Regulators in India have weak processes, and tend to defend incumbents, and prevent innovation. A first taste of this is visible in the unhappy evolution of digital payments and fintech. These organisations will now shape the lofty questions described above. As of today, nobody knows the answers to these lofty questions. We know one approach that is wrong: The China model. This replaces the domination of a foreign company (e.g. Uber) by an Indian company (e.g. Ola or Meru). This is mere nationalism. Replacing Twitter with an Indian clone does not solve the problems of Twitter. The China model harms the interests of consumers in India if an Indian offering (e.g. Flipkart) is inferior to the global one. The Indian technology policy community will need to rise to these challenges. The bottom of the stack is the toolkit for state capacity at regulators. The next layer is cross-cutting problems such as privacy, competition, and psychological factors. The top layer is domain knowledge in the field, such as payments, banking, and telecom. We require a new community that will develop knowledge, establish a high-quality public discourse, and inhabit the revolving door between regulation, think tanks and industry. The writer is a professor at National Institute of Public Finance and Policy, New Delhi

Can open banking empower customers?

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ne of the most pervasive services in our lives is banking. Opening bank accounts for the poor was the very first mission of Prime Minister Narendra Modi. “Financial inclusion”, the first step of which is a bank account, is an important agenda of the ministry of finance, Reserve Bank of India, international development institutions, and dozens of nongovernmental organisations (NGO), which are marching in the countryside, hoping to bring millions into the fold of formal finance. And yet, banks, more often than not, harm their own customers. Bank charges are opaque and arbitrary, floating interest rates float up but not down, and highly incentivised bankers routinely mis-sell life insurance products to the elderly and uninformed, promising them that these are better than the fixed deposits they want to open. After the 2008 crisis, caused mainly by US bankers and supported by European ones, there has been a lot of soul-searching on what should be done to fix rogue bankers running amuck and even bringing whole economies down (as happened with Iceland). Despite the efforts of cer- DEBASHIS BASU tain US lawmakers, the US bankers have largely got away scot-free, given their vice-like grip over policymaking. Their business model has not changed and consumers remain exposed to the harmful products that bankers concoct. A new oversight body called Consumer Finance Protection Bureau has come up in the US but it was ineffective under Barack Obama and is a lame duck under the Trump presidency. Policymakers in the UK have gone a bit further in their efforts. Financial markets need to be “honest,

fair and effective so that consumers get a fair deal,” is the stated objective of the UK regulator. For this, the Financial Conduct Authority (FCA) oversees the behaviour of all financial services companies that deal with retail investors and small businesses across different sectors. And yet, the behaviour of banks has not changed fundamentally. Five large banks (Barclays, HSBC, Lloyds, Santander and Royal Bank of Scotland) control 80 per cent of the retail banking market, leading to charges of market abuse. The UK also has something called the Competition and Markets Authority, which has been trying to foster competition and encourage innovation among banks. It launched an initiative a few months ago called Open Banking, which forces nine of the biggest banks (the big five plus Bank of Ireland, Allied Irish Bank, Danske and Nationwide) to release not only all the data about its own services but rich customer data of spending and borrowing in a secure standardised format so that third parties can use it to create products such as apps. The customers, of course, need to agree to share their data. The experiment is important because it hinges on technology. With India’s push to digital, cashless payments and new payment systems, we should be watching how Open Banking shapes up. The UK regulators believe that Open Banking will make it easier for customers to compare product offerings and financial results of different financial service providers. The new rules direct banks to use open application programming interfaces (APIs), so that customers can share their financial information with other providers, if they want to. Open APIs would make

IRRATIONAL CHOICE

was a powerful influence, one magnified by grief when Yoni was killed in the Entebbe hostage rescue mission in 1976. Bibi served in the same unit. His role commemorating the fallen hero provided his first intense exposure to public life. By the early 1980s, after studying at MIT and working as a management consultant, Mr Netanyahu was a rising star at Israel’s Washington embassy. It was there, and later as ambassador to the United Nations, that he honed his formidable public relations skills (known as “hasbara” in Hebrew), befriending columnists, talkshow hosts and influential and wealthy Jewish and other Americans, including the real-estate entrepreneur Donald Trump. Pfeffer is one of the smartest and most prolific of Israel’s younger generation of journalists. His work for Haaretz reflects that paper’s liberal bent, instinctively opposed to Mr Netanyahu and much of what he represents. It is hard to imagine that this author ever voted for his subject. Bibi, obsessed by hostile “left-wing” media, complained pre-emptively that this biography would be a “cartoon.” It is not: It fleshes out a superficially familiar and

invariably quotable figure with a wealth of background information and analysis that provide necessary and, of course, often highly critical context. Yet it is also fair. In 1995, before the trauma of Yitzhak Rabin’s assassination by a Jewish extremist, Mr Netanyahu was widely accused of “incitement.” Not fair, Pfeffer concludes, explaining that Mr Netanyahu nevertheless chose to ride the “far-right tiger.” Mr Pfeffer rightly focuses on Bibi’s attitude toward the Palestinians. In his first term of office in 1996, he inherited Rabin’s landmark Oslo agreement with the PLO, which the Likud opposed, but still grudgingly complied with. Back in power in 2009 after a period that encompassed the second intifada, Arafat’s death and Ariel Sharon’s unilateral withdrawal from Gaza, he came to appreciate how Oslo maintained Israel’s security while allowing settlements to expand as the American-led “peace process” went nowhere slowly. Mr Netanyahu was initially seen as committed to a two-state solution while simultaneously demanding that Palestinians recognise Israel as the nation-state of the Jewish people. But a few years later the most he

it easy to transfer accounts, manage payments, and run transactions through other banks and nonbanks. In theory, Open Banking is good news for bank customers. Banking thrives on creating barriers to switching. Note that in India, portability is possible in health insurance and mobile services but not in banking. Banks have declared it technically impossible and there are no discussions on how to get around the problem. With open APIs, switching could be easier. Unfortunately, there are multiple barriers to entering this technological utopia. One, only a small number of customers will share data and so, banking would remain the preserve of a few giants. Two, those who do share data could be bombarded with marketing messages, and run the risk of data leaks. Three, as happens with most digital initiatives, technology will exclude precisely those whom such projects are intended to benefit — senior citizens, those not tech savvy, and those with low incomes. Remember how Aadhaar has become a tool for denial and exclusion of genuine beneficiaries? Mick McAteer, of the UK’s Financial Inclusion Centre, says it is naïve of regulators to assume that consumers will have ownership of their data and turn the tables on banks currently giving them a raw deal. Allowing 80 per cent of the market to remain with five banks and then looking for a technological magic bullet to empower customers is perhaps not the best way to make the banking terrain customer-friendly and fair. Banks must face the pressure of more competition from within. India has allowed just four new banks over the last 15 years. Instead of fintechs working with bank data, we need to allow a host of new banks, including online banks like www.simple.com. The writer is the editor of www.moneylife.in Twitter: @Moneylifers

was prepared to contemplate was a “stateminus.” Rivals further to the right do not even go that far. “The only peace he has been willing to consider,” Mr Pfeffer concludes, “is one where Israel bullies the Palestinians into submission. Until that happens, he will continue building walls.” In recent years his “primary obsession” has been the danger from Iran, whose plans to acquire nuclear weapons (and break Israel’s regional monopoly on them) he says threaten a new Holocaust. Barack Obama’s support for the 2015 Iranian nuclear agreement and his efforts to curb Israeli settlements meant that mutual loathing between president and prime minister was inevitable. Donald Trump is a different and of course unfinished story. Bibi’s standing has been tarnished by investigations into bribery and corruption — accused of accepting gifts of cash, champagne and cigars — and by the antics of his wife, Sara, whose tantrums and lavish sense of entitlement at public expense made for damaging leaks. For his fourth election victory in 2015 the Bibi campaign bombarded disenchanted Likud supporters with messages about the dangers of a Palestinian

state and racist warnings about Arab citizens voting “in droves.” The result is an erosion of Israel’s democracy. Still, for better or worse he embodies Israel as a modern, “hybrid society of ancient phobias and high-tech hope, a combination of tribalism and globalism.” In fact, the greatest achievement of Bibi’s career can be seen as a negative one, as Pfeffer describes it, “trying to ensure that Israel did not have clearly defined or internationally recognized borders.” This book is a necessary contribution to understanding a high-profile and internationally contentious figure and the fractured country he has led for so long. It is, inevitably, already out of date. But Bibi’s turbulent times are not over yet. Updated editions look certain. © 2018 The New York Times News Service

BIBI The Turbulent Life and Times of Benjamin Netanyahu Anshel Pfeffer Basic Books 423 pages; $32