The Times of India | Boycott Button

We love pressing it, whether the injury be grave or slight.

By Anupam Manur

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The Times of India | Consumers@complaints

Why they are all on X and how little it helps

By Anupam Manur

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E-commerce: Don’t let Protectionism Drive Policy

It is hard to imagine how prohibiting high discounts and attractive offers is supposed to protect consumer interests. It is easier, however, to imagine how this move can help the “offline” stores in their competition against the online ones

The new rules also mandate e-commerce companies to provide a domestic alternative for any imported goods or services offered for sale. Consumer protection rules imposed on e-commerce firms should not be used for the atmanirbhar and swadeshi drive.Perhaps the most contentious rule, which highlights a misunderstanding of how marketplaces work, is the “fallback liability” clause. In short, this clause makes the e-commerce entity responsible for the goods and services sold by sellers registered on the platform. This is not dissimilar to holding a mall responsible for the products sold by individual retail shops within it. This is impractical and unfair to the marketplace.Further, there is an array of rules that increase compliance requirements, such as registering with the department for promotion of industry and internal trade, mandatory partnering with the National Consumer Helpline, and the appointment of compliance officers. Every e-commerce platform must appoint a chief compliance officer (who will be liable for third party information on the platform), nodal contact person (to coordinate with law enforcement), and a grievance officer.In the final analysis, though, these rules will fail the test of necessity and proportionality. Most e-commerce firms have fairly robust systems of customer care, which consumers can approach for grievance redressal. Further, e-commerce platforms facilitate refunds and returns in cases where customers are dissatisfied with the products. Beyond that, they have built a network where users rate and review both products and sellers of the products that can provide crucial information to any potential customers.

It would behove the government to withdraw most of these proposed rule changes, as the veneer of consumer protection peels away rather easily to reveal the underlying protectionist motivations.Read the full article here

Flawed regulation can undermine the digital payment ecosystem

Anupam Manur writes in Hindustan Times on why the limits placed on Unified Payments Interface (UPI) transactions for third-party apps by NPCI is flawed.Systemic risks are automatically lower when consumers, merchants, and third-party app developers are all multi-homing, meaning they simultaneously use more than one app for the same purpose. The UPI ecosystem is radically substitutable. In the case of failure, consumers and merchants can switch from one app to another without the slightest friction. Though two apps, PhonePe and GPay, dominate the UPI market (with roughly 80% of UPI transactions), consumers are not without choice — there are at least 52 UPI service providers, 189 issuers and around 21 third-party apps. Third-party app developers also can and do have tie-ups with multiple banks simultaneously, such that the YES bank-PhonePe fiasco will not be repeated.Beyond being unnecessary, the rule is also improper, incomplete, and inconsistent. If the aim is to mitigate the systemic risk of failure of one big market player, the rule change should apply to all apps providing UPI services, and not just third-party apps. Is the systemic risk different when the app of a scheduled commercial bank fails as against a third-party app?The entire article can be accessed here

Consumers should get the benefit of falling oil prices

At a time when even deficit hawks are clamouring for an expansive fiscal policy to fight the severe economic consequences of Covid-19, it will be tempting for the government to exploit every opportunity to fund the welfare programmes. When oil prices first dropped to less than $30 per barrel, the Modi government had promptly increased the central excise duty. However, this will not result in increased revenue due to the enforced lockdowns and halting of economic activity.If the objective is to help the economy rebound and bolster government finances, there are better ways than raising petrol taxes. In fact, lowering it will increase the disposable income of consumers, who will go out and spend more on other goods and services. Apart from increasing incomes, it will also help the government collect higher indirect taxes. Many businesses, which are reliant on petrol, such as transport and logistics, will get a much-needed fillip by reduced petrol prices.Since the price of oil has a cascading effect on the general price level in the economy, maintaining petrol and diesel prices at the same level or increasing it can lead to higher inflation and can further dampen their demand. Moreover, additional revenue gained by the government is offset by increased subsidy payments and revenue foregone from sectors dependent on oil. Further, since petrol is outside the purview of GST, states will want their fair share as well and will competitively increase VAT on petrol.The additional amount that can be raised by petrol taxes is about Rs 30,000 crore, which will not make a dent to the Rs 8-10 lakh crore required for the post-pandemic economic revival package. It’s time to pass on the benefit to the consumers.This appeared in The Print's Talkpoint

Use the oil price crash to boost India’s strategic reserves

One area in which India can definitely use the lower oil prices to its advantage is to stock up on the commodity for future use. Like many other countries, India maintains strategic petroleum reserves (SPR), which is an inventory of oil for emergency purposes. To mitigate supply-side risks and cover for vulnerability to external oil shocks, India holds an emergency oil stockpile in underground salt caverns, which can provide around 4.5 days of import cover. There is additional capacity for five days of oil import cover, which must be filled up at this time when oil prices are at historic lows. Indian petroleum refineries hold an additional 65 days of import cover.India has been delaying the start of phase two of its SPR plans, which was to add another 12 days of oil storage capacity. This was to be done in partnership with either ADNOC (Abu Dhabi) or Saudi Arabia’s Aramco. It is probably the right time now to get this off the drawing board.Alternatively, we can also look at options outside India. We could persuade the Sri Lanka government to kick-start the utilisation of oil storage facilities at Trincomalee. This could be done in a mutually beneficial manner. We could also shop around for storage space in Oman (Ras Markaz) or the United Arab Emirates (Fujairah). Right now, we are in a bizarre situation where the storage space is more expensive than the commodity itself, but things will revert, and any investments now will help India in the long run when oil prices rise again.Finally, the private sector should look at this as an opportunity to lock into long-term contracts with oil suppliers based at current prices. The government can help the struggling Indian airline industry, for instance, by providing it lines of credit to enter into or renegotiate oil contracts.Here's the full article 

Let's make the most of dirt cheap oil

In a dramatic and unprecedented turn of events on Monday, crude oil began trading in negative territory for the first time since records began. The price on a futures contract for West Texas crude that was due to expire on 21 April crashed to minus $37.63 a barrel. This is a direct result of the market mayhem caused by covid-19, which has resulted in lockdowns around the world, brought economies to a screeching halt, and crushed demand for transport fuel. Reports say there is so much unused oil in the US that there is no space left to store fresh supplies. Storage costs money. Thus, oil producers had to pay to offload their stock.The sudden fall in oil prices is tied not just to a demand crunch, but also tensions among the world’s major suppliers. The global effort to contain the pandemic, international pressure, oversupply, and still-sluggish demand seem to have struck both Russia and Saudi Arabia hard. Though a production cut has since been agreed to, demand is estimated to have fallen far more than that.The best way to turn this situation to India’s advantage, therefore, is to grab this chance to fill up the country’s strategic petroleum reserves (SPRs). We should move quickly to boost our strategic petroleum reserves and strike long-term supply contracts with global oil suppliers.Read the full article here

We must avert an economic disaster due to Covid-19

Indian economy will suffer due to COVID-19, but govt can ease the pain for individuals and firms with decisive and meaningful action nowFor businesses, the union government should think of delaying GST payments, tax credits, and any other policy that could support employers to keep their staff on board.  As on March 24, the Finance Minister, Nirmala Sitharaman has announced a few measures to ease the compliance and regulatory burden for businesses: increasing the threshold of default that triggers the insolvency and bankruptcy proceedings from 1 lakh to 1 crore, easing some of the rules for corporate affairs, and extending extending the deadline to pay excise and customs duty and GST. Government should ensure that the flow of critical supplies and services are uninterrupted, including food, healthcare, security, groceries and other provisions, electricity, telecom, ATM and banking.Most importantly, we need to think about how to protect the unorganised and informal workforce. While the salaried class, small as it may be, can afford to work from home and be assured of payments at the end of the month, the daily wage earner does not have the same luxury. A limited form of targeted Basic Income (not universal) using the JAM (Jan Dhan-Aadhaar-Mobile) trinity could be used to ensure sustenance. The union government can use the unexpected bonanza from the lowering of oil prices to fund some of these programmes.It is important, however, that any policy made for these emergency purposes come with sunset clauses. If not, the extraordinary measures to combat the disease and its impact will linger on far after the disease has faded from human memory.Read more here

Bengaluru needs more high-tech companies, not fewer

The Karnataka government is set to release a new industrial policy next month with the goal of encouraging investment in tier-II cities. As it has been in the past, this goal is likely to be framed in zero-sum terms i.e. achieved by pushing IT companies to move away from Bengaluru and in other cities instead.We will limit this article’s focus on what such a policy direction would mean in high-tech sectors such as biotech, aerospace, and IT. , this push towards creating an alternative of centre gravity for the high-tech industry seems to be an intuitive answer for achieving balanced regional growth. And yet, this view is wrong because it doesn’t square with the empirical experience of high-tech clusters elsewhere in the world.Read more at: https://www.deccanherald.com/opinion/bengaluru-needs-more-high-tech-companies-not-fewer-780314.html

The Puzzling Ban of E-Cigarettes in India

The Indian government’s own disastrous experience with bans of various substances and services in the past should categorically advise it against such a move in the future. Yet, it is planning to go down the same route again with the case of “e-cigarettes” also known as Electronic Nicotine delivery systems (ENDS). A ban on ENDS, however well-intentioned, will put several former smokers at a greater risk of limiting their access to no-tar alternatives and will end up defeating the larger public health objectives.

In a landmark 200-page report titled “Nicotine without smoke: tobacco harm reduction”, the Royal College of Physicians in the UK concludes that e-cigarettes are not a gateway to smoking, nor do they result in the normalisation of smoking. They find that the available evidence indicates that “e-cigarettes are being used almost exclusively as safer alternatives to smoked tobacco, by confirmed smokers who are trying to reduce harm to themselves or others from smoking or to quit smoking completely”. Importantly, they further categorically find that the long-term harm caused by e-cigarettes is less than 5 percent compared to other tobacco products.

By allowing ENDS to operate in India legally, the government and regulatory bodies can have a lot more control over the product. This includes levying appropriate taxes, issuing public use guidelines, providing information about the product, enforcing a minimum age for sales, and individual product restrictions surrounding flavour choices and nicotine concentration in tobacco or e-cigarette products. In fact, regulators could go further to ensure product standardisation, labelling requirements to indicate the level of nicotine (something which is not in practice today for normal cigarettes), and technological developments in the field to further reduce the harm caused by the products.

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India needs to urgently address its investment problem

Things are looking bleak for the Indian economy. GDP growth in the latest quarter was a subdued 5.8 per cent, unemployment levels are at record highs, the fiscal deficit numbers projected in the Budget are suspect and presumed to be larger, export growth hit a 41-month low in June this year, and growth in the eight core sectors of the economy remained sluggish at 0.2 per cent. On the demand side, passenger vehicle sales, tractor sales, two-wheeler sales, and domestic air traffic growth have all been declining for around six months. FMCG sales are slowing down as well. Further, the trade war and the prospect of a global growth slowdown should be giving our economic policy makers sleepless nights.

One of the core issues which lie at the heart of many of these problems has to do with India’s dwindling investment rate. In just under a decade, India’s Gross Capital Formation (investment rate) has fallen about 9 percentage points from a high of 40 per cent of GDP in 2010-11 to about 31 per cent in 2017-18. The situation has become worse in the preceding few months where announcements of new projects have drastically declined. According to the CMIE database, Indian companies announced new projects worth ₹43,400 crore in the June 2019 quarter for both the private sector and public sector combined. This translates to about 81 per cent lower than what was announced in the March quarter and a stunning 87 per cent lower than the same period a year ago.

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Need to Update Competition Law

There are other major deficiencies in the competition law when it comes to understanding internet companies, Manur said. “Without establishing that a company is dominant, the CCI cannot take any action. But we haven’t clearly defined what the relevant markets are for internet companies. Are Ola and Uber the two largest cab companies? Or are they small players in a very large transportation market that included cabs, metros, trains, etc?" This is one of the defences used by internet companies—that their relevant market isn’t restricted to the internet space. For instance, Google and Facebook argue that they are small players in the larger advertising market, online and offline.As it stands, the competition law is not even equipped to detect some of the antitrust issues in the internet space, added Manur, an antitrust regulation researcher.Manur said it was imperative to add the data footprint of an internet firm as one of the metrics in considering the impact on competition. “The consumer data owned by an internet company is one of the most important indicators of its dominance and impact. In gauging M&As in the internet space this factor needs to be added to the list of considerations."Read more

Delhi must wake up and smell the opportunity

Deepening competition between the US and China over trade and technology is bringing forth a new set of economic and strategic challenges for India. Navigating these successfully requires New Delhi to mitigate and manage the threats, while leveraging the opportunities that arise. Doing so, however, requires the Indian government to undertake key reforms and adopt a strategic outlook with regard to certain domestic policies.A protracted Sino-US tech war could limit India’s room to maneuver, with the possibility that the global cyberspace and technology and innovation ecosystems could splinter into spheres of influence. This necessitates the adoption of a strategic outlook towards domestic policies.Read more at: https://www.deccanherald.com/specials/sunday-spotlight/delhi-must-wake-up-and-smell-the-opportunity-739059.html 

The folly of breaking up Big Tech

Further, breaking up these companies would significantly reduce the value consumers get due to the high interconnectedness of the products. A lot of the value that Google has seen in the Maps platform, for instance, comes from all the data that they have from Search. Customers also receive a lot of value from other Google products that are cross-subsidised from revenue earned in other products. YouTube, for instance, is widely believed to be non-profitable but is supported by revenues earned by other products.We would also have to stop and wonder how is it that one of the most integral parts of our lives — Google Search — is provided free of cost. Google can give the service for free because it can monetise it with advertising. If Google is broken up, this would no longer be possible. Breaking up any one of these services would give us substantially less valuable services.Breaking up these technology companies would also have a severe impact on innovation in the sector. As an article in Politico points out, “The top five spenders in research and development in 2017 were all tech companies. Amazon alone spent more than $22 billion. The development of autonomous vehicles, artificial intelligence and voice recognition wouldn’t be nearly as advanced as they are now if it weren’t for the work of Google and Amazon”. Investing in R&D and finally introducing them into the market is an expensive ordeal. However, big tech companies can afford to do so because of the nature of interconnectedness that exist within their products...Read the entire article 

We need more trade, not a trade war

The decision by the Trump administration to withdraw preferential treatment to Indian goods should serve as a strong warning to the New Delhi that prioritising narrow domestic politics over good economic policy can have dangerous consequences.Trump’s decision to levy import duties on erstwhile exempted goods did not, as commonly understood, come out of the blue, nor was it the first strike in an emerging trade dispute. The US Trade Representative has appealed to New Delhi multiple times in the past to remove the trade barriers that it has imposed on US goods and investments. This move by the US is largely due to three distortions introduced by the government that hurts not only US business interests but also Indian consumers. These are the price caps on cardiac stents and knee caps, the new FDI in e-commerce industry rules that prohibit foreign e-commerce firms to run inventory based retail, and the ban on American dairy products.It is not in India’s national interest to get into a trade war with the US. We have more to lose than them by doing so. India should drop the threat of escalating the trade war. Relative size of an economy and dependence on trade with the other partner are crucial in determining whether trade barriers can achieve the necessary outcomes. The US is a lot more important trading partner for India than India is to the US.Geopolitical realism instructs us that India cannot afford to indulge in such a trade war and that the damage we can inflict upon the US is not big enough to force it to change its trade regime. If India escalates the matter, it could very well lead to a full-blown trade war that could potentially witness bigger retaliation from the US in the form of higher tariffs on pharmaceutical products or non-trade barriers on Indian software products, which can truly hurt the Indian economy. We could also suffer due to decreased investment by US firms in India and, at a time of decreasing domestic investment, this can be damaging.Read more at: https://www.deccanherald.com/opinion/panorama/we-need-more-trade-not-a-trade-war-with-us-722934.html 

Reliability of GDP data

In terms of the reliability of official data, India is getting dangerously close to Chinese territory. The year that witnessed demonetisation, when 86% of the cash in circulation was declared as illegal tender overnight and which was perhaps one of the greatest assaults on private property in recent history, is now being touted as the year of highest GDP growth in the last eight years. This was the year when all other macroeconomic indicators took a nose-dive, but the GDP for that year has been inexplicably revised upwards to 8.2%, which has left everyone confounded.Good policy-making requires reliable data. Collecting and publishing data has always been a difficult affair in India, given the magnitude of the task, compounded by the presence of a large informal and unorganised sector. We do not need deliberate manipulation and withholding of data to make the task even harder.Read more

Go Easy on Amazon and Flipkart

The FDI in e-commerce policy clarifications made by the DIPP was done in order to help the small retailers from getting exploited at the hands of the big e-commerce players. While it may help them in the short run, an atmosphere that is not conducive to investment in this sector is bound to hurt them in the long run.Both Amazon and Flipkart have planned to approach the government together to reconsider these provisions. If they fail to convince the government, they will shrink the size of their future investments. This can have a significant negative effect on the entire e-commerce sector and can lead to job losses due to the closing of their private labels. Not to mention the loss of the number of jobs they would have created by their extension plans. Cities in the US are fighting with each other to provide incentives and attract Amazon’s second headquarters, while the Indian government is driving away from the investment.Finally, the decision is bound to hurt the Indian consumers. By limiting the number of discounts given by the private labels, the consumers will have to pay a higher price for their purchases. It will also reduce the variety of goods that are available to the consumers for online purchases.Vertical integration can have anti-competitive practices but can be dealt with in a far more efficient manner than outright bans on such operations. Antitrust authorities across the world have tools to recognise and prevent practices that can hurt consumers and small retailers. The competition commission can be given the mandate to develop these tools and implement them instead of killing the goose that lays the golden eggs.Finally, this would also be the right time to revisit the policy of not allowing FDI in multi-brand retail. The parochial fears of potential harm to small retailers are overplayed in the public discourse. All of the small retailers in question have benefited massively from the presence of these platforms. They are now able to reach an unimaginable number of customers because of the platform. Similarly, multi-brand retail can have a massive positive effect on economic growth and job creation.Read More

How to Regulate Internet Platforms Without Breaking Them

The biggest anticompetitive element of platforms is the violation of neutrality. When the platform, such as Amazon, also acts as a player on the very platform, it can lead to a conflict of interest. Once vertically integrated, the platform has an incentive to exclude competitors either directly by delisting competing vendors or indirectly through higher commission fees and manipulating the rankings.

Anticompetitive mergers and acquisitions of platforms also tend to go under the radar, as competition authorities normally make the decision to investigate cases according to a monetary threshold. However, the monetary value of a deal may not always highlight its anticompetitive effects. Stories of big technology firms acquiring small start-ups at bargain prices are quite common. The value of these start-ups could lie in the networks (user bases) or the data they possess. Thus, it would make sense for competition authorities to automatically review any deal that involves an exchange of certain forms (or a certain quantity) of data. If this principle had been in place, Facebook’s acquisitions of WhatsApp and Instagram would have come under greater scrutiny.

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The addictive nature of bad policies

Al Capone, the infamous prohibition-era US gangster, once remarked, “I am like any other man, all I do is supply a demand.” In Bihar, the smuggling supply chain has already been well established. Around 6.5 lakh raids have been conducted and 1.22 lakh people have been arrested. Altogether, 16.4 lakh litres of Indian-made foreign liquor and around 12.4 lakh litres of various types of country liquor have been seized so far since the law was enacted in 2016. The seizures and arrests reflect the prevalence of the problem. Some of the seized illicit liquor started disappearing from police stations as well.

Further, crime statistics also betray the ineffectiveness of the law. Total cognisable crimes rose 11% in April 2016 to December 2017 period compared to the same period before prohibition. Crimes related to other prohibited substances have increased as well.

There are also significant socioeconomic losses. At least 35,000 direct jobs have been lost as 21 alcohol manufacturing plants and 5,500 retail outlets have been shut down. Add to this the number of indirect jobs lost, because of forward and backward linkages, and the number becomes daunting. For instance, tourism in Bihar has taken a hit. The food and beverage sector revenue declined by around 30%. Room occupancy rates have drastically fallen and corporate conferences and events have almost completely stopped.

Finally, as expected, Bihar’s finances have taken a toll. The 2017-18 financial year saw an approximate loss of ₹5,500 crore because of lost revenue from excise and value-added tax (VAT). To compensate for this, the Bihar government has raised the VAT on 600 other items and has also resorted to higher state borrowing, which has pushed up the fiscal deficit. The loss in revenue from taxing alcohol has also impacted government expenditure. Expenditure across crucial sectors, such as education, pension, health, and energy was much lower than the budgeted figure. The political parties promising prohibition in Madhya Pradesh are also promising a farm loan waiver, another bad policy that is contagious. Funding a farm loan waiver, while losing out on the excise revenue, would derail state finances.

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What Explains the High Demand for Low Paying Government Jobs?

My hypothesis is that this can be explained by three factors:

1. The number of private jobs available is obviously too few. Job creation has stagnated and even receded in the private sector. Thus, the industry does not have the capacity to absorb a large number of graduates and post-graduates who are passing out of the system. Since the supply of labour far outstrips the demand for labour, employees have increasingly stringent qualification requirements. Only the best of the lot get a good, high paying job in the private sector.
2. There is also an obvious skills mismatch. A lot of the students who pass through the Indian education system are not as qualified as their degrees tend to signal. A typical Post-Graduate often has the skills of a person who has passed the 12^th grade and thus, cannot obtain or at least retain a high paying job which would require the skills of a Post-Graduate (One report, for instance, finds that nearly 80% of the engineering graduates in India are unemployable as their skills set do not match the requirement of the industry). What further complicates this issue and turns it into a vicious cycle is the fact that a lot of individuals end up studying due to the lack of job opportunities. These are students who enter into an educational programme solely due to the signalling value and to differentiate themselves from the nearest competitors. However, while the degree gained has some signalling value, the skills gained are inadequate for industry standards.
3. A person who has gained a degree but not the appropriate skills cannot get a job in the private sector which will assure a reasonably high salary and job security. The private sector option is typically a low paying job, which can be lost at any time and with no benefits. Given this scenario, a government job that is assured of job security, even at the cost of a lower salary seems attractive.

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