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TODAY’S TALK ON EDITORIALS CIVILS360

SEPTEMBER 8, 2017

For a robust data protection regime

  • On July 31, the government set up a five-member committee chaired by former Supreme Court judge, Justice (retd.) B.N. Srikrishna, to draw up a draft Data Protection Bill. The Bill, if made law, will be India’s first exclusive statute providing protection to online users’ personal data from breach by state and non-state players.
  • The office memorandum of the Srikrishna Committee notes that the “government is cognisant of the growing importance of data protection in India. The need to ensure growth of the digital economy while keeping personal data of citizens secure and protected is of utmost importance.”
  • The recent privacy judgment highlights the committee’s role in evolving a “robust data protection regime”. The court recognised the government’s efforts to initiate the process of reviewing the entire area of data protection. It observes that “it would be appropriate to leave the matter for expert determination…”
  • The government has undertaken in the court that the Ministry of Electronics and Information Technology would work with the panel and hand over all necessary information to it within the next eight weeks, after which the latter will start its deliberations. The committee is expected to submit its report soon.
  • One of the primary guiding factors for the committee would be the exhaustive report submitted in October 2012 by a group of experts on privacy led by former Delhi High Court Chief Justice A.P. Shah, which was constituted by the erstwhile Planning Commission. Both the government and the court have agreed that this would be the “conceptual foundation for legislation protecting privacy” in the form of the new Data Protection Bill.
  • The new Bill would be based on five salient features:
    • technological neutrality and interoperability with international standards;
    • multi-dimensional privacy;
    • horizontal applicability to state and non-state entities;
    • conformity with privacy principles; and
    • a co-regulatory enforcement regime.
  • The Justice Shah group had emphasised on taking the informed and individual consent of users before the collection of their personal data. It had proposed giving users prior notice of information practices, providing them with choices, and collection of only limited data necessary for the purpose for which it is collected. If there is a change of purpose, it must be notified to the individual.
  • Most importantly, the report proposed access for users to their personal information held by a data controller. Users should be able to seek correction, amendments, or deletion of inaccurate information.

Demonetisation: now a proven failure?

  • Demonetisation as a means of tackling the black economy was destined to fail. It was carried out on the incorrect premise that black money means cash. It was thought that if cash was squeezed out, the black economy would be eliminated. But cash is only one component of black wealth: about 1% of it. It has now been confirmed that 98.8% of demonetised currency has come back to the Reserve Bank of India. Further, of the Rs. 16,000 crore that is still out, most of it is accounted for. In brief, not even 0.01% of black money has been extinguished.
  • Black money is a result of black income generation. This is produced by various means which are not affected by the one-shot squeezing out of cash. Any black cash squeezed out by demonetisation would then quickly get regenerated. So, there is little impact of demonetisation on the black economy, on either wealth or on incomes.

Changing goalposts

  • The government changed the goalpost earlier in November 2016 when it suggested that the real aim of demonetisation was a cashless society. Now it says that idle money has come into the system, the cash-to-GDP ratio will decline, the tax base will expand, and so on. But none of these required demonetisation and could and should have been implemented independently. Further, anticipating the failure of demonetisation in 2016 itself, the government started saying that demonetisation is only one of the many steps to tackle the black economy.
  • The government’s argument that cash coming back to the banks will enable it to catch the generators of black income, and there will be formalisation of the economy, does not hold. Much of the cash in the system is held by the tens of millions of businesses as working capital and by the more than 25 crore households that need it for their day-to-day transactions.

Those who bore the brunt

  • So, large deposits by businesses do not automatically become black. The Income Tax department has to prove that the sums deposited resulted from generation of black income. But it does not have the resources for dealing with lakhs of tax payers. According to the Finance Minister, big data analytics would track black money holders who have deposited cash in their bank accounts. During the Income Declaration Scheme in 2016, the same was said. Nothing came of it and demonetisation was announced.
  • The big failure of demonetisation is that it was carried out without preparation and caused big losses to the unorganised sector. This has not been factored into the recent data on growth rate, so the loss to the economy would be in lakhs of crores of rupees. Farmers, traders and the youth are all agitating.
  • The black economy needs to be tackled, but demonetisation is not the way. The brunt of this move has been borne by those who never had any black money. The note shortage is slowly waning and the long-term economic and social effects are becoming evident.

Social revolution in a JAM

  • JAM, deriving from Jan Dhan, Aadhaar and Mobile, combines bank accounts for the poor, who barely had the money to deposit in them, direct transfer of benefits into these accounts and the facility of making financial payments through mobile phones. Aadhaar is the pivot here, allowing the government to ensure that benefits reach the poor and enabling them to make payments through ordinary mobile phones. For furthering the latter the government has devised the Bharat Interface for Money (BHIM) app. The Minister spoke of these developments as a “social revolution”, perhaps alluding to the feature that the poor are the most direct beneficiaries.

Beyond bank accounts

  • A financial inclusion, in the sense of everyone having a bank account and access to reliable and free electronic payments system, is not the same as economic inclusion. At its most basic level, inclusion from the economic point of view would entail equal access to opportunities for earning a livelihood. This in turn implies employment opportunities.
  • As the demand for labour is a derived demand, in the sense that it exists only when there is demand for goods and services, a significant element in ensuring inclusion is to maintain, directly or indirectly, the level of demand in the economy.
  • Next, even when the demand for labour exists, potential workers must be endowed with the capabilities to take advantage of the opportunity offered.
  • The potential of the JAM trinity for bringing about either of these conditions for economic inclusion is limited. This is so because JAM functions in the digital space while much of our life is lived in the brick and mortar world. In the latter space we have seen very little improvement, not just recently but since economic reforms were launched over 25 years ago
  • The economic reforms of 1991 were largely in the nature of liberalisation of the policy regime, meant to make it easier for firms to produce while at the same time exposing them to international competition with a view to increasing efficiency in the economy. What a strategy based exclusively on liberalisation overlooks is that an ecosystem of production is constituted not only by the laws and regulations determining the ease of doing business, but also the access that firms have to producer services ranging from water supply to waste management. These producer services require large capital outlay, often deterring private firms. When private entities do provide these producers services they tend to be expensive, deterring their off-take. It is for this reason that globally they are generally provided by governments.
  • In India the case for public provision of producer services, and there is no reason to provide them free of charge, is particularly high as the overwhelming part of employment is in the form of self-employment. These units are scraping the barrel as it is. Even when producer units employ workers they are poorly capitalised, making it almost impossible for them to generate producer services themselves. Thus the public provision of producer services should be an essential part of public policy. Empowerment in the brick and mortar space would require public infrastructure on a gigantic scale compared to what we have now.

Focus on capabilities

  • Moving from production to being, JAM cannot even claim equalisation, leave alone empowerment. Amartya Sen effectively settled a longstanding debate on the question of the metric to be used to gauge equality when he proposed that it should be human capabilities. These are the endowments that allow individuals to undertake functionings they value. We would have achieved a social revolution when we have equipped all individuals with the essential capabilities. This happens when a society has, at a minimum, universal health and education infrastructure accessible to all.
  • We have in recent weeks witnessed governance failure on a major scale in many parts of the country. In U.P.’s Gorakhpur district children have died due to systemic failure that meant that a district’s only hospital is not able to maintain a steady supply of oxygen. Later a heavy downpour in Mumbai led to a complete shutdown, widespread loss of livelihood and some of life. And most recently, in Delhi’s suburb of Ghazipur a garbage mountain came crashing down, again causing death and disruption. But we would need to turn to Bengaluru to recognise the limits to information technology in solving problems of living. Lakes that are toxic when they haven’t been gobbled up by the real estate mafia, traffic snarls and inadequate sewerage make life less than easy in this IT hub aspiring to play first cousin to Silicon Valley.
  • Given the extraordinary challenges faced by India in the provision of public infrastructure ranging from health and education to drainage and sewerage, the claim made for JAM is breathtaking in its simplicity. JAM ensures seamless transfer of welfare payments and facilitates the making payments in real time. Once again, these are worthy objectives, but fall well short of the social revolution the honourable minister claims for them. Our social revolution will arrive when all Indians are empowered through an equality of capabilities. This would require committing resources to building the requisite social and physical infrastructure and investing time to govern its functioning.
  • JAM may have achieved equality in the digital space but is far from having empowered Indians in spheres in which they are severely deprived at present, an empowerment that they clearly value. The government has leveraged IT smartly in operationalising JAM but the possibility of replicating this to transform the ecosystem of production for firms and the ecosystem of living for individuals is limited. The widespread disempowerment faced by the people of this country predates the arrival of Narendra Modi, but his government appears to give false comfort through its claims.

Slip-sliding economy

In a market economy one of the markers of what the public think of the government’s policies is the response of private investors. Private investment in India has declined steadily over the past few years. Overall growth had however been maintained, partly through the demand generating impact of public investment. But now even growth appears to be stalling. The latest GDP figures from the Central Statistics Office show growth in the first quarter of the current financial year to be lower than the average for 2016-17. Data actually point to a steadily slowing economy with growth having been successively lower in the past five quarters. There appears to be a mismatch between the government’s own assessment of its policies and the private sector’s valuation of their worth. The jubilation over JAM is an instance of this.