Tuesday, January 25, 2022

Resurrecting Netaji Bose

A hologram of Netaji Bose has been created at India Gate. A granite statue will replace it. The intention is to bring Bose into the mainstream narrative of the freedom struggle where he has thus far been a secondary figure. It is also in keeping with the attempt, under the present government, to convey that there was a great deal more to the freedom struggle than the Congress, Gandhi and Nehru.

Bose was president of the Indian National Congress for two terms. He resigned during his second term in 1939 when it became clear to him that Gandhi and other Congress leaders would not let him function as president. Gandhi had called the defeat of his candidate Pattabhi  Sitaramayya at Bose's hands "my defeat'. Thereafter, Gandhi's acolytes kept sniping at him and undermining him until his position became untenable. Gandhi and Bose differed on many issues, including the issue of how to deal with the British following the onset of WW2. Gandhi was initially inclined to provide support to the British; Bose was resolutely opposed to it. But, more fundamentally, Gandhi perceived in Bose a certain sympathy towards the revolutionary movement in India and did not take kindly to it.

Bose decided that it was in India's interest to align with the Fascist powers in order to oust the British- the underlying principle was 'enemy of my enemy is my friend'. He seemed to have overlooked the fact that, whatever the failings of the British, the Fascist powers could not be expected to create a better world. He also seemed to think he could persuade the Fascist powers to keep out of India after assisting him to get rid of the British by military means. In this, of course, he was being hopelessly naive. Those who believe that it is wrong to exalt Bose argue that his reading of history was flawed. 

Bose quit the Congress and founded the Forward Bloc. He was arrested by the British government in India. He escaped and made his way to Germany via Afghanistan and the Soviet Union. The Hitler regime put him up in an exclusive quarter of Berlin and gave him a generous allowance to run his activities. At one point in his stay, he got to meeting Adolf Hitler. The meeting did not go off well. Hitler made it clear to Bose that Germany was in no position to intervene militarily in India until it was done with the war in the East. Hitler had made some negative references to Indians- and he was of the view that British rule was good for India- in his book, Mein Kampf. Bose suggested he delete those references as the British would use these to drum sentiment against him. Hitler was not willing to oblige. 

Hitler seems to have decided he had little use for Bose's Indian National Army, at that time made up of Indian prisoners captured in North Africa. He decided to pass Bose on to the Japanese. Bose made his way to Japan in a German U-boat, transferring in mid-ocean to a Japanese submarine. The INA was strengthened after he landed in Japan with Indian soldiers captured in Singapore, Malaysia and elsewhere by the Japanese. The Japanese did not think highly of the INA as a military force and were not willing to give it a lead role in their campaign in Burma.

After the war, the INA soldiers were tried for treason. The trials did not proceed very far as Congress and the general public hailed them as heroes and independence was at hand. Following independence, the Indian army refused to take back the INA soldiers. Nehru had pleaded for their rehabilitation before independence but did not press the issue after he became PM. 

The INA did not make much of an impact militarily. But its creation did not give rise to fears in the British government of an insurrection on the part of armed forces in India. The naval mutiny of 1946 especially reinforced these fears and it was a contributory factor in expediting Britain's exit from India. This was, perhaps, an unintended consequence of the formation of the INA.

Bose was a charismatic leader with a terrific connect with the masses. He was above communal sentiment and his appeal was universal. He was courageous, selfless and utterly devoted to the cause of national regeneration. He had about him a certain nobility that one associates with blue blood at its best. Giving Bose a place of prominence in the story of Indian independence is well-merited, whatever the reservations about the particular means he used to further his cause.

It is also true that the mainstream narrative has been overly dominated by Congress, Gandhi and Nehru. It is good to have alternative figures and narratives emerge. There was the Congress and the non-violent struggle. There were also Congress rebels such as Bose, there was Ambedkar, the revolutionary movement and liberals, such as Gokhale and Srinivasa Sastri who believed that negotiation and constitutional methods would better serve India's interest. 

Let the story be told in full without glorifying any one side - and if that means raising new monuments to personalities such as Bose,  it is welcome. 

Monday, January 24, 2022

How to salvage stalled housing projects

 My latest column in BS. It is behind a pay wall. I reproduce it below.



Propping up the property market

A credit guarantee can give housing a boost

India’s housing landscape is littered with thousands of stalled housing projects.  Stalled or delayed projects spell loss of output and jobs. They also spell grief for homebuyers.  Getting these projects through to completion must rank high on the agenda of economic revival. 

Stalled housing projects are not strictly a post-Covid phenomenon. These had happened even before Covid struck in early 2020.  The problem is not affordability, but a fear psychosis among buyers. Customer confidence has fled in the wake of bad experience with stalled projects, including some high-profile ones. 

Residential housing projects are financed through a mix of equity, debt and advances from customers. Builders need advances in order to earn a decent return on their own investment. However, customers today are reluctant to make advances because they are not sure that the project will go through to completion. 

Customers are willing to pay only for projects that are completed or near completion. In many cities, the price of an apartment appreciates the moment the builder produces an Occupancy Certificate, which is proof that the building is ready for occupation. We have a chicken-and-egg situation facing the residential housing sector. The builder needs advances to complete launched projects but the customer won’t pay till the project is completed. The problem needs to be addressed.

In September 2019, the government announced a scheme to address this issue at affordable and mid-income housing projects. (Special Window for Affordable and Mid-Income Housing, or SWAMIH). 

Under SWAMIH, the government committed to set up a fund with a corpus of Rs 25,000 crore to invest in stalled projects. The government would contribute Rs 10,000 crore and the rest would come from LIC, SBI and private insurers. The fund achieved its first closure in December, 2019, with investors committing a total of Rs 10,037 crore. Until October 2021, SWAMIH had provided final approval for 95 projects with sanctions worth Rs 95,000 crore which covered 57,700 homes.

SWAMIH is a helpful initiative but it is limited in its size. Moreover, the problem of stalled or delayed projects has worsened consequent to the two waves of Covid. A survey in August 2021 by a property consultant — and reported in the papers — showed that 1,73,740 housing units were stalled across six cities (excluding Mumbai). The value locked up in these projects was Rs 140, 613 crore. In addition, housing units that had been delayed numbered 4,54,890 with an estimated value of Rs 3,64,802 crore. SWAMIH covers less than 10 per cent of stalled and delayed housing units.

Customer demand for housing has revived but customers remain reluctant to pay up significant advances. They are willing to make an exception in favour of builders with strong financial backing (for instance, corporate entities such as L&T, Godrej and Adani). Buyers are confident that, even without significant customer advances, these entities have the financial muscle to complete their projects.

Bank finance is essential to breathe life into stalled or delayed projects.  However, banks are wary of taking exposures to developers at the best of times. They will lend to stalled or delayed projects only if there is some mitigation of risk.

There is a case for a credit guarantee scheme for residential Housing similar to the Emergency Credit Line Guarantee Scheme (ECLGS) extended to small and medium enterprises (SMEs) last year. The ECLGS was a bold and timely initiative and it has saved firms and jobs. The ECLGS was subject to stringent eligibility criteria. The same should apply to any credit guarantee scheme for residential housing. It is possible to indicate a few. 

First, the project must involve a certain minimum number of buyers, say, 100. Secondly, it may apply to projects that have been delayed by over 12 months. Thirdly, the project must be for affordable and mid-income housing.

Fourthly, the project must be solvent, which means assets must exceed liabilities. The assets of a housing project would comprise value of receivables and value of unsold inventory. The liabilities would be the cost to completion of the project plus project liabilities. 

Fifthly, the bank must satisfy itself that there has been no diversion of funds.  Again, the computation involved is simple. Total expenditure incurred minus (customer money received plus construction debt) should be positive.  

Bank finance for projects that meet the above criteria should be guaranteed by the government. There could be a system of graded guarantees, say, 100 per cent guarantee for projects that are 90 per cent complete, 90 per cent guarantee for projects that are 80 per cent complete and so on. These criteria may be refined through discussions with bankers and real estate professionals.

A credit guarantee scheme along the above lines will give a boost to the construction sector. The sector is employment-intensive. Migrants who lost their jobs and have gone back to their villages and enrolled for the Mahatma Gandhi National Rural Employment Guarantee Act scheme can get their jobs back.  Not only will the economy benefit but the government will be able to assuage the grievances of a large community of disaffected people. 

The coming Budget will not have much to offer on the macro-economic picture. It is through sector-specific proposals, such as one to boost housing, that it can expect to make an impact.

Sunday, January 23, 2022

Ukraine crisis: the price of honesty

The Chief of Germany's Navy, Vice Admiral Kay-Achim Schönbach, has resigned after a controversy erupted over remarks he made during a recent visit to India.

The Chief was commenting on the crisis in Ukraine. Russia has made it clear that Ukraine cannot become a part of NATO nor can NATO or the US place nuclear missiles there because these pose a fundamental threat to Russian security. It is not a position that reasonable people can quarrel with. When the former Soviet Union wanted to place missiles in Cuba, President Kennedy was ready to risk a nuclear exchange. The Americans have made it clear that they will not tolerate Russian missiles in Latin America. But the West has a different set of standards when it comes to threatening Russia.

Schönbach said that talk of Russia wanting to invade Ukraine was "nonsense" and that Russia and Putin deserved respect. He also said that Ukraine could never hope to win back Crimea which Russia had annexed. 

These are nothing but statements of fact- you could say that plain truth. Alas, truth is not what authority wants to hear. Within any system- whether it is government or a company- you are expected to toe the official line, not speak the truth.  Schönbach's remarks evoked such fury in Germany and its allies that he had to quit.

Former CIA chief and former defence Secretary Robert Gates lays down the official line in an article:

Since becoming president in 1999, Putin’s objectives have been straightforward: to restore and expand central government authority (not to mention enhancing his personal dominance and wealth), and to return Russia to its historical role as a major power. 

Anything wrong with those objectives? Are the objectives of any other major country, including the US and China, very different?

Gates quotes John Kerry, former US Secretary of State:

 After Russia’s invasion of Crimea in 2014, then US secretary of state John Kerry complained: “You just don’t in the 21st century behave in the 19th-century fashion by invading another country on a completely trumped-up pretext.”  

That's more than a little rich. Anybody remember the US invasion of Iraq? 

Ashoka University woes

 I return to my blog after a long lay-off caused by my having to relocate. It's taken me longer than I thought to settle. I hope to regular with my posts hereafter- fingers crossed!- TTR

Ashoka University was in the news recently- and, not for the first time, for quite the wrong reasons. Two co-founders and trustees of the University have been charged in a case filed by the CBI and have since stepped down from their posts at the University. Ashoka had made news only a few months ago when one of its faculty members, Pratap Bhanu Mehta, resigned. Mr Mehta, who has been critical of the government, had indicated that some of the top brass had conveyed to him their discomfort with his writings.

Ashoka University’s problems highlight a fundamental problem with setting up quality educational  institutions in the private sector. Such universities require support from those with deep pockets, which mostly means businessmen.

When businessmen are associated with a university, there are two issues. One, you never know when a business donor will get into trouble with the law. Two, it is not  easy for businessmen to allow the sort of freedom of expression that goes with the best of academia- there will always be pressure from those  in authority. For these reasons, quality academics will be reluctant to associate themselves with private institutions. There is no great University in the west that is associated with a corporate. The great Universities of the US are non-profit, private universities or government universities. 

The US has outstanding private universities that attract huge endowments. But these endowments typically come without strings attached from a large number of alumni, not from a few corporates. Donors do not, in general, ask to be associated with the university to which they contribute. Wealthy individuals, who have made their money from business contribute - and, often, after their association with a corporate has ended. Even if the corporate gets into  trouble later, it is not a problem for the University or School. The culture of large philanthropic contributions to academia  is almost unique to the US. It certainly does not obtain in India.

The IITs and IIMs have built their reputations overwhelmingly through government funding. While they have received large donations in recent years from alumni, they have, with rare exceptions, been wary of any association with Indian business. They have sometimes attracted funds from alumni who became successful entrepreneurs  in Silicon Valley and elsewhere but have been hesitant to tap Indian corporates for funds. Rightly so, judging by the troubles at Ashoka.