Indian states need to strategise their development
The Modi government has been pulling all stops to improve the ease of doing business rankings since it came into power in a bid to improve Indias image as a business-friendly economy and attract global investment.
In the last three years, the states have been given a 98-point, 340-point and 295-point reform agenda to achieve key targets that determine the World Bank ranking. The states have themselves been caught up in a frenzy to attract investment. State Chief Ministers have been seen making trips to other nations to woo investors and almost every major state has picked up the trend of organising an investment summit on the lines of Gujarat.
However, Mamata Banerjee's trip to Germany last year to attract investment to West Bengal failed to yield any results. Similarly, Amarinder Singh's recent trip to Mumbai elicited demands of first revamping Punjab's industrial policy and criticism for a lack of action to revive existing industries. Elaborate investment summits in these states have suffered a similar fate. Although these efforts are laudable, Indian states need to understand that one size indeed does not fit all.
First, Indian states are as big as nations across the world. For instance, Uttar Pradesh's population that lives below the poverty line equals the entire population of South Africa. Similarly, Bihar, which has the dimensions of the 16th-most populous state of the US (Indiana), is home to a population equalling the combined population of the first four most-populous states of US. So, quite clearly, strategies that work for one state will not necessarily work for the other.
Each state needs to understand its drivers of competitiveness and play them up for prospective investors in that area. For instance, Punjab was historically an agrarian success story. So, it could incentivise setting up of food processing units by playing out the proximity it has to offer with high-yielding farms. It can also work on reviving its dying industrial cities of Jalandhar and Ludhiana as sports and cycle industry linkages already exist in thesecities. West Bengal can work upon developing a steel cluster owing to its proximity to neighbouring resource-rich states. Yhe northeastern states can develop a thriving tourism industry. States with port facilities can encourage development of export-oriented industries.
The investment summits that states have put so much faith into fail to follow such a focussed approach. When anything and everything is on the table, industries fail to see how a particular state is unique in its competitiveness. Throughout history, economic successes of regions have been stories of rise of particular industries followed by reinvention with the times. 
For instance, both New York and London were centres of garment production and trade followed by the rise of financial industries when labour became costly. Regions like Detroit that were once known for being a production hub of certain industries but failed to reinvent have fallen into oblivion.
This brings us to the second point of the fallacy in the idea of merely attracting investment. More than business incentives, industries follow skill. Bengaluru has become an IT hub not because the Karnataka government offered tax breaks or speedy contracts -- but due to easy access to a pool of talent in the field. An initial kernel of engineering talent attracted companies like Infosys and a virtuous cycle of workers attracting potential employers and employers attracting potential employees developed.
Human capital, more than anything else, explains economic successes of regions. A study in the US showed that as the share of population with a college degree in an area increases by 10 per cent, its per capita gross product rises by 22 percent. On the contrary, an area with a skill-deficit usually loses out in the long-run. Detroit, which was once a production hub for cars attracted plenty of low-skilled workers and when the firms moved out of the city after the labour began demanding higher wages, the city failed to re-invent itself unlike New York or London due to a lack of skill in the area.
Therefore, to ensure economic success, states need to understand these two things: develop and showcase their drivers of competitiveness and simultaneously develop a vast pool of talent for long-term sustainability of its economy.
The role-reversal of corporates running after chief ministers for setting up industries to chief ministers wooing the former is a welcome picture in the Indian business landscape. However, short-sightedness and a lack of strategy is delaying change across Indian states. 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.


'Invocation of RBI's corrective plan would curb many activities of banks'
The invocation of the new Prompt Corrective Action (PCA) framework announced by the Reserve Bank of India (RBI) recently would put a curb on many activities of government-owned banks, said investment banking firm Jefferies.
In a report issued on Tuesday, Jefferies said the invocation of PCA threshold would require these banks to act on many fronts.
"Some of the actions may require them to stop paying dividends and cease branch expansion. In addition, they may be required to raise capital and increase provisioning," Jefferies added.
Last week, the RBI came out with revised PCA framework whereby capital, asset quality and profitability would be the basis on which the banks would be monitored and has defined three kinds of risk thresholds.
The RBI said mandatory action that would be taken when a bank breaches the risk threshold includes restriction on dividend payment/remittance of profits, restriction on branch expansion, higher provisions, restriction on management compensation and director's fees.
The RBI has classified the risk thresholds into three categories and the PCA depends on the type of risk threshold that was breached.
The RBI said the breach of 'Risk Threshold 3' of CET1 (common equity tier 1) by a bank would identify a bank as a likely candidate for resolution through tools like amalgamation, reconstruction, winding up and others.
"The PCA framework would apply without exception to all banks operating in India including small banks and foreign banks operating through branches or subsidiaries based on breach of risk thresholds of identified indicators," the RBI said.
According to Jefferies, the five associate banks of State Bank of India (SBI) were breaching one or more PCA thresholds.
Post merger of the five banks with SBI, the consolidated bank should not be breaching any of the thresholds, Jefferies said.
According to Jefferies, a total 21 (including the five associate banks of SBI) out of 27 government-owned banks have breached asset-quality trigger.
In fact two of the state owned banks have breached 'threshold 3' of asset quality, with their net non-performing asset (NNPA) above 12 per cent.
Continued losses in the last two years meant eight of the state owned banks are likely to breach 'threshold 1' of profitability.
Jefferies said based on the data up to Q3FY17, the private sector banks are well above the thresholds of the individual areas.
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.




2 weeks ago

Wonder when we will give up all these dramatics and acknowledge the real issue with these banks - corruption and complete lack of knowledge of banking. This is not a joke, these jokers are hired based on their caste and references and ability to siphon funds, not for their banking knowledge.


Kunal Singh

In Reply to Gupta 2 weeks ago

That's what happens. Apparently, a random person commenting on the internet is qualified to lead a bank, aye? Why not apply when the vacancies are announced?


In Reply to Kunal Singh 2 weeks ago

Sure. The day the vacancy doesn't require an SC/ST and doesn't require commissions to be sent to political masters and the day this so call CEO has the authority to sack striking employees rather than indulging them, lots of bankers will apply. Why did a young aditya puri apply for a hdfc bank job in 1994 but only a retired banker apply for BOB when the govt invited private sector CEOs for BoB for the first time? Easy to comment here without getting into facts and realities. Fact is that India has the highest NPA in the world - more than double or triple the next highest - despite all the cover up schemes we have to restructure and avoid calling a lot of loans NPAs. The best and only viable solution for NPAs is to not create them. Why is there not a single PSU bank with no NPA problem if we have smart bankers sitting there? Not even 1 smart guy in 27 banks? Why only 2 private banks and 1 foreign bank suffered from this problem when there are so many of them? How does an hdfc or kotak manage to get away completely unaffected by the NPA problem? Hdfc today has a market value more than all 27 PSU banks put together. Can't we see the writing on the wall? We haven't even acknowledged the real issue yet which is corruption and not economic environment or sectoral issues or RBI regulations preventing recoveries. God bless our ignorance and determination to keep running away from reality.

Govinda Warrier

In Reply to Gupta 1 week ago

We can go on asking questions. What's that market value of bank, we are discussing? Why private sector banks improve their market share in banking business to a decent level from the present below thirty percent which is not a pass mark(with moderation)? True, public sector banks are not allowed to recruit professionals from the market, paying market related remunerations.True, the burden of serving semiurban and rural areas which is unremunerative is exclusively given to PSBs. True, Government and politicians treat PSBs as their servants. True, in Government and public sector we don't have a respectable HR policy in place. But can we shift the entire blame for all these to PSBs alone? Till BBB came under Vinod Rai, there was no talk about professionalising bank boards or factorising incentives and disincentives in remuneration of public sector bank employees. Media and analysts have a blow hot blow cold approach while talking about Indian Public Sector which is still the backbone of Economic Growth and Scientific Development in this country.

Simple Indian

2 weeks ago

High time the Govt sets up a Banking Regulatory Authority of India, on the lines of TRAI for telecom sector. The Banking Regulator should oversee operations of both public sector as well as private sector Banks to ensure they abide by all Govt/RBI rules and also serve their customers as promised in their charter of services. The Banking Ombudsman has often been indifferent towards Bank customers' plight and those who have the time and resources approach RBI for resolution. The PCA framework should also include arbitrary increasing of charges by Banks to benefit/compensate one set of Bank's customers at the cost of another set of customers. For instance, the SBI Chairperson was frank & honest enough to declare recently that SBI will increase MAB substantially for all regular customers, to compensate for JDY A/c maintenance by SBI. This is a clear case of robbing Paul to Peter syndrome. Mind you, regular S.B. A/c holders will have to maintain higher MABs while NOT getting any improvement in services for themselves. Such unethical practices should be stopped by PCA rules.

Govinda Warrier

2 weeks ago

This is a welcome initiative from RBI. Gradually, both Government owned and private sector should come under uniform regulatory requirements and have a level playing field for conducting banking business. After all, both raise resources from the same source namely deposits from the public. Post nationalisation, somehow an impression was created that private sector banks are "commercial" banks and only the "nationalised" banks were responsible for ensuring flow of credit for priority sectors and reaching out to rural and semi-urban areas with banking services. Several concessions like depositing shortfall in targeted lending in Rural Infrastructure Development Fund maintained by Nabard strengthened this impression. The differentiation affected public sector banks adversely in all areas including HR management.

Trump is Hiring Lobbyists and Top Ethics Official Says ‘There’s No Transparency’

President Trump has stocked his administration with a small army of former lobbyists and corporate consultants who are now in the vanguard of the effort to roll back government regulations at the agencies they once sought to influence, according to an analysis of government records by the New York Times in collaboration with ProPublica.


The Times adds new details to our previous reporting on Trump's weakening of ethics rules and former lobbyists working on regulations they opposed on behalf of private clients just months ago.


The Times scrutinized financial disclosures of top White House staffers and found that the lobbyists and consultants in their ranks had more than 300 recent corporate clients and employers, including Apple and Anthem, the insurance company.


One striking case involves Michael Catanzaro, an appointee on the National Economic Council whose portfolio includes energy and environmental issues. Catanzaro was formerly a lobbyist for oil and coal companies that strenuously opposed the Obama administration's clean power regulation. Three industry sources told the Times that Catanzaro is now working on that same issue in the Trump administration.


Even under Trump's weakened ethics rules, former lobbyists like Catanzaro are not supposed to work on issues that they formerly had lobbied on.


Still, under Trump's executive order, he can issue waivers at any time to staffers, Catanzaro included, for any reason, and never disclose it.


Even the federal government's top ethics official, Walter Shaub, who runs the Office of Government Ethics, is being kept in the dark.


"There's no transparency, and I have no idea how many waivers have been issued," Shaub told the Times.


At the Labor Department, there are at least two former lobbyists appointed by Trump who previously sought to influence agency regulations. One worked for a financial service firm fighting attempts to regulate financial advisers who manage retirement investments. Another, Geoff Burr, was the top government affairs official for the construction industry trade association, lobbying the agency on matters related to wages and workplace safety.


The hiring of dozens of lobbyists represents a reversal from Trump's statements during the campaign, when he said he would have "no problem" banning lobbyists from his administration.


The White House did not respond to specific questions from the Times. Instead, it offered this statement: "The White House requires all of its employees to work closely with ethics counsel to ensure compliance and has aggressively required employees to recuse or divest where the law requires."


We've also reached out to the White House for comment.


In another blow to transparency, the administration announced Friday it will keep White House visitor logs secret, dropping the Obama-era practice of regularly posting that information.


Those logs offered the public a window into who was getting face time with the president and his staff. They were also used by journalists in countless stories: ProPublica, for example, used the visitor logs for a story last year about a lobbying campaign to push through a controversial airline merger. The logs showed that Rahm Emanuel visited the White House after meeting with airline executives who recruited him to push for the merger.


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