Tuesday, June 23, 2015

Koan Partner Vivan Sharan on NewsX (Yoga Day)

"How Yoga Expands India's Soft Power" by Koan Partner, Vivan Sharan (Businessworld, June 21)

Today the world will awaken to the ‘International Day of Yoga’, perhaps with a Surya Namaskar. While some would dismiss this labelling as an attempt by the new government to refine India’s ‘snake charmers and elephant herders’ image on the international stage; others may think of this as an attempt to ‘saffronise’ the global events calendar. A few may think of it as a brilliant marketing gimmick. PM Modi may not have given it any more serious thought than this. However, it stands to reason that since it is already instituted, the international day of yoga must now be neatly placed within India’s soft power projection as well as its larger economic and political aspirations. 
The origin of India’s soft power narrative is closely tied to the Non Aligned Movement (NAM), of which most former colonies were a part in the early nineteen fifties. Jawaharlal Nehru championed the NAM, the influence of which isstill seen in India’s foreign policy. The country went on to become a leader within the Group of 77 (G-77) in the mid-sixties and spearheaded the development agenda in various important debates ranging from climate change to global trade. On account of its large population and growing economic footprint, the India’s participation still holds key to G-77 contributions to the global governance discourse. 

For many who see India as a poor developing country, like the rest of the G-77, India’s yogic traditions are likely perceived through orientalist lens. That is, yoga is assumed to be a practice developed by scantily clad men, living Spartan lives, isolated in forests. There is a sort of temporal dissonance in seeing yoga as such. 
On the other hand, for many,India has also come to be associated with rapid economic growth fuelled by a highly skilled workforce. While the specific drivers of this economic growth narrative remain nebulous to a majority, information technology is seen as India’s ‘x factor’. Silicon Valley is arguably India’s soft power nerve centre, even as it is not physically situated within. And there is no shortage of yoga instructors in the San Francisco Bay Area.  
For those who see India as a rapidly developing emerging economy, yogic traditions represent an opportunity to achieve nirvana in a capitalist dystopia – as the IT entrepreneurs likely have done with the return of high IT valuations in the financial markets! The rigours of the typical sedentary white collar job, staring at computer and phone screens, transiting between airports and hotel rooms, have given birth to a ‘wellness’ industry that attempts to save modern man from the pitfalls modern life. And yoga takes centre stage in the plethora of wellness solutions that help rejuvenate, resuscitate and reflect on the present, even as attention spans attenuate. 
Increasingly India is also seen to be moving from its role in the ‘global opposition’ as part of the G-77 to a new role on the global high table, as part of groupings such as the G-20 and BRICS. This transition to become an agenda setter from being an agenda taker has been accelerated by the financial crisis originating in the transatlantic economies. Although India’s capacities to set the rules for the road in terms of redesigning the global financial architecture or standard setting in the global value chains of trade remain strained; inclusion in such elite economic groupings has sharpened its ‘brand value’ abroad.  
Meanwhile the 21st century India is increasingly choosing to describe itself as both an emerging and developing economy. At least Indian diplomats and policymakers seem to be fairly comfortable with this sometimes amorphous identity. To the extent that this allows the country flexibility in global negotiations, it is hard to debate. Where it needs to be assertive it can emphasise its emerging country image, and where it seeks to be defensive, it can rely on its developing country image. For those who have begun to understand this India, yoga likely represents a convenient bridge between the known and the unknown. 
Complexity is widely considered to be an Indian characteristic. And complexity is enmeshed in every aspect of life in India. It permeates family structures, social groups, class hierarchies and of course decision making at all levels including executive, judicial and legislative. For foreign investors, the country has come to represent a group of economies that offer unparalleled investment returns. Simultaneously, it has the dubious distinction of being a risky investment destination where political support remainscritical to business activity. Such boundless commercial opportunities and intractable ground level challenges co-exist seamlessly.
PM Modi’s hope should be that somewhere within the scope of its complex self-identity, this branding exercise serves to enhance its projection as a regional and global power. From a purely realist point of view, it is irrelevant whether the true depth of the yogic practice is understood, whether India spends a minimal proportion of its budget on healthcare and wellness or indeed whether yoga continues to be largely associated with difficult postures and better physique. 
Vivan Sharan is a Partner at the Koan Advisory Group and a Visiting Fellow at the Observer Research Foundation 
- See more at: http://new.businessworld.in/opinion-columns/how-yoga-expands-india%E2%80%99s-soft-power#sthash.T2M3wEOX.dpuf

Saturday, June 13, 2015

Koan Advisory partners with FISME to host the Indian Defence Minister on 11 June 2015 for a workshop on opportunities for MSMEs in the Defence Sector

Koan Partner Vivan Sharan on 'Key Questions for India at Paris'

Vivan Sharan explores the questions Indian policymakers must ask in the run up to the UNFCCC negotiations.
In December 2015, world leaders including Prime Minister Modi will gather in Paris to try and agree on the successor to the Kyoto Protocol under the UN’s Framework Convention on Climate Change (UNFCCC). This potential new agreement is eagerly anticipated by climate change observers. In India, a country with 800 million living at less than two dollars a day, this amounts to only a handful of people in New Delhi. The fact that over half of the country relies on agriculture for employment is of more immediate concern than international negotiations.
There has been a rise in farmer suicides in India – poor farmers, heavily dependent on rain-fed agriculture have been unable to cope with the pressures of crop failure due to erratic weather. India needs to urgently protect its farmers from income risk due to erratic weather. Notwithstanding the overwhelming scale of domestic action required to prepare for these impacts of climate change, Indian policymakers must be able to find the answers to the following key questions in the context of the UNFCCC negotiations.
How ambitious does India want a new agreement to be? This question sounds innocuous but is linked with several implications that need to be carefully evaluated. Any agreement signed now, is likely to be in force for the next decade or more beyond 2020. A low level of ambition will correlate with a high discounting of future costs of climate change. However this strategy may not be entirely irrational given the uncertain outcomes of technological progress. For instance if Lockheed Martin is able to unlock the potential of nuclear fusion, as its experimental ‘Skunkworks’ division promises to do within a decade, all energy can become clean and free within our lifetimes. Of course India should not count on the benevolence of the US military industrial complex for technology transfer!
A high level of ambition on the other hand, is unfortunately being conflated with expansiveness of the agenda set by the agreement. An expansive agenda of the sort the sustainable development conversations have reflected can be its own enemy. On the 20th anniversary of the pivotal ‘Earth Summit’ at Rio, world leaders signed a very expansive sustainable development agenda but failed to agree on definitions of now ubiquitous terms. Terms such as “green economy” have come to represent the abstractions of the sustainable development discourse and a climate agenda that is expansive could also potentially be non-constructive.
A fine balance between expansiveness and ambition will determine the credibility of an international agreement. For India, limited but focussed ambition would go a long way in ensuring that low hanging fruits such as energy efficiency, that can save up to half of urban energy consumption in the form of transportation and buildings, can be reaped.
Should the agreement be legally binding and who should monitor it? These are two interrelated questions that OECD countries have focussed extensively on. The US in its UNFCCC submission on the elements of a 2015 agreement for instance has stressed that some elements of the agreement will necessarily have to be internationally legally binding, including most controversially, a timeline for commitments. For India to agree to an emissions ‘peaking timeline’ would imply that India is ready to cap its socio-economic progress at a certain date. Given that around 300 million people in India still lack access to electricity and per capita energy consumption is at a small fraction of OECD levels, this would amount to political suicide. The Indian parliament, much like the American congress, has to ratify all international agreements that have legal force.
Monitoring and assessment of commitments is another area that OECD countries have insisted on both in climate change negotiations as well as in the parallel negotiations on the Sustainable Development Goals under the UN General Assembly. However this is another problematic area. India’s genuine fear is that monitoring and assessment will be heavily biased against developing country priorities – including the need to build requisite governance capacities before implementing deep domestic reform. Even if a third party institution is set up, countries such as India simply do not have the capacity to contribute meaningfully.
A parallel can be drawn from the complex world of global financial regulations where India continues to be a recipient of rules based frameworks despite being a G20 member. This is owing to the inherent design of rule setting institutions such as the Basel Committee on Banking Supervision and the lack of high level Indian expertise and participation in rule setting discussions. Despite his broad understanding of monetary issues, India’s Central Bank Governor Raghuram Rajan cannot be substitute for a cadre of capable financial market professionals who can negotiate in such forums.
Should India be on the defensive in terms of local action? This is perhaps the only no-brainer from among the key questions. India has more than enough to show that it’s voluntary commitment both in has been remarkable. In a recent Brookings Institution report that I have co-authored with Samir Saran from the Observer Research Foundation, we have shown that India’s per capita commitment in terms of spending on renewable energy has been more than commensurate with its economic weight. In 2012, “the average Indian spent about one and a half times what the average Chinese spent, between 2.2 and 4.3 times what the average Japanese spent, and around 2 times what the average American spent” on renewable energy. In addition, the new targets of 100 gigawatts of solar and 60 gigawatts of wind energy over the next few years signal strong commitment that perhaps no international process could solicit.
Former Australian PM Kevin Rudd has recently authored an article for New York Times in which he has stated, rather worryingly, that India’s growing population makes it an important stakeholder in the debate on climate change. In fact this is precisely the narrative that has to be countered by Indian policymakers. India’s population is largely living at subsistence levels, and the lifetime energy consumption of the average Indian is at a fraction of the lifetime energy consumption of an average OECD citizen. Indian policymakers would do well to involve civil society and media in a meaningful attempt at presenting such facts. India’s population is not holding it back from its commitments as the per capita spending on renewable energy proves.
In addition, in terms of local action through taxation, India is well ahead of the curve according to its latest Economic Survey. The implicit carbon tax on diesel (42 dollars) and petrol (60 dollars) is well above what is considered to be a reasonable initial tax on carbon dioxide equivalent emissions per ton. India’s tax on coal is also relatively high at one dollar per ton.
What role will markets play and what will be considered as ‘credible’ policy signals? Markets will likely be a critical piece of the climate change financing puzzle. Given that the world is finding it difficult to mobilise 100 billion dollars for the Green Climate Fund (some 5 billion dollars have been earmarked thus far), markets must be leveraged to fill extant financing gaps. Long term institutional investors are sitting on enormous amounts of capital, close to 110 trillion dollars, more than enough to fulfil the global financing requirement (World Bank estimates that the cost of adapting to a climate that is two degrees warmer than today between 2010 and 2050 would be around 70 to 100 billion per year).
The challenge lies in getting investors such as Sovereign Wealth Funds and Pension Funds in OECD economies, to realize that they need to diversify their portfolios to hedge risks of being overinvested in advanced economies. This in turn requires a change in risk assessment metrics, a new financial culture of the sort the United Nations Environment Programme’s Inquiry into the Design of a Sustainable Finance System is advocating and a more context appropriate conversation in the global regulatory forums.
And finally, how should India partner with China and the US? Both countries have effectively capped their level of ambition by signing a bilateral deal at the last APEC Summit. While US President Obama has been keen on leaving a policy legacy that is not simply of inaction, China is willing to commit to peaking emission by 2030 given that it has installed large coal capacities in a short period of time. For China, the energy production baseline is already much higher than India can hope to achieve. Instructively, China produces more energy through coal than all of the oil extracted in the Middle East.
China, like the US, has seen a proliferation of clean technologies, both in conventional and unconventional energies. This has been largely led by US firms that are spearheading innovations that can also transform the Indian energy landscape. This is precisely the technological gap that India must bridge through close bilateral and trilateral cooperation.
An additional source of clean energy technologies is the US military industrial complex referred to earlier – and to solicit such technologies India would need to create a robust domestic ecosystem of policies and institutions that enable technological diffusion. A National Offset Policy would be one such clear policy measure that could help bring cutting edge clean technologies to Indian industry. As of today, a poorly articulated defense offset policy is all the country has in terms of a technological lever to help create domestic R&D capacities as a positive spin off from large defense deals. This can be democratized so that all industries can benefit from offset obligations of foreign technology firms.

Vivan Sharan is a Partner at the Koan Advisory Group and a Visiting Fellow at theObserver Research Foundation.

Koan Partner Vivan Sharan on "Cooperating through BRICS"


he global economy is fragile. Very few new full time jobs are being created in OECD economies and GDP growth ofmost developing economies still does not measure up to pre-financial crisis levels. Perhaps most worrying of all, income inequality is growing across the developed and developing economies alike. The leaders of Brazil, Russia, India, China and South Africa, countries that constitute the‘BRICS’ grouping, will be meeting in Ufa in July amidst these sobering global trends. 
In preparation for the Ufa Summit, experts from BRICS met at a Track II meeting in Moscow this week. As India’s representative on economic issues, my interventions were premised on the fact that there are at least five sectors within which enhanced intra-BRICS collaboration can yield relatively quick results.
The first isagriculture. The sector’s share of GDP, employment generation and exports shows its continued importance for all BRICS economies. The sector employs 56 per cent and 40 per cent of people in India and China respectively, is responsible for about 34 per cent and 10 per cent of Brazil and South Africa’s total value of merchandise exports respectively and perhaps surprisingly accounts for around 10 per cent employment share in the fossil fuel rich Russian economy. 
So far, BRICS cooperation in the agriculture sector has been uninspiring. An information exchange system has been set up which is counterintuitively limited only to government bodies. It must be both broadened and deepened. 
In addition, aside from China, each of the BRICS has significant distance to traverse in terms of agricultural productivity.  China’s rice productivity is 4.67 tonnes per hectare, compared to 2.4 tonnes per hectare in India. The key difference lies in the volume of investments in the sector. Aside from creating an enabling environment for investments in agriculture within BRICS, emphasis must be placed on developing farm extension services. The System of Rice Intensification is an example of an easy to disseminate, proven productivity enhancing cropping practice prevalent in some Indian states that must be mapped and shared. 
The second is the digital economy. The impressive mobile phone penetration rates in BRICS range from around 0.7 phones per person in India to around 1.8 phones per person in Russia. At the same time, only around 63 per cent of the rural population on average within BRICS have bank accounts. Mobile phone penetration can be leveraged to bank the unbanked and enhance basic service delivery. 
An illustration of this is India’s ambitious ‘Jan Dhan Yojana - Aadhar-Mobile’ trinity. BRICS would do well to create enabling domestic ecosystems for cross border investments into telecommunication networks and differentiated banking systems such as mobile payments. In addition, the relatively low rates of internet penetration, averaging around 40 per cent across the five countries, present a commensurate opportunity for scaling up connectivity and digital inclusion. 
The third is theservice sectorwhich accounts for nearly 60 per cent of value added in the BRICS’ GDP. Services accounted for as much as 42 per cent of exports in value added terms from G20 countries and more than 50 per cent in China and India. The growth in the value of services trade of BRICS with the world between 2010 and 2014 was around 30 per cent even, remarkable even though not calculated in value added terms. 
Trade numbers also highlight the imperative for standards cooperation in services with a view to creating regional value chains of services trade integrated with merchandise trade supply chains. Aside from the comparative advantage of the sector, the emergent rules based agreements on the anvil such as the Trade in Services Agreement of which none of the BRICS are a part, should be enough justification to merit serious multi-stakeholder conversations on standard setting in services. 
The fourth sector is mining and power. Even in the post financial crisis world, energy demand continues to be driven by the BRICS economies. They also happen to account for 35 per cent share in the global primary production of energy. Coal production in China today provides more energy to the global economy than the combined oil production in the Middle East. 
On April 22 2015, BRICS Environment Ministers mooted a platform for exchanging clean technology know-how. The rapid development of‘clean coal ’technology in China offers a ready template for private sector innovation and technological dispersion across BRICS. In addition, Brazilian and South African mining companies could partner with Indian companies looking to take advantage of domestic policy emphasis on commercialised mining and technology intensive exploration. 
And finally, since urban centres are the drivers of growth within each of the BRICS economies, urban development must become a priority area for cooperation. India estimates that it requires around $625 billion over the next twenty years in urban development spending alone. The‘Smart Cities’ initiative of the new government is tailor made for exploring Public Private Partnerships (between ICT firms and local governments in particular) and city to city cooperation on key areas such as market based financing. 
It is also useful to note that Indian urban local bodies (ULBs) will have a large role to play in fulfilling objectives of ‘smart’ infrastructure creation and service delivery. There is significant scope for sharing experiences with local governments across BRICS countries. In addition, collaborative capacity development on areas such as audit and taxation can go a long way in ensuring the financial viability and institutional credibility of local governments. 
The author, Vivan Sharan, is a Partner at Koan Advisory Group (www.koanadvisory.com)
- See more at: http://www.businessworld.in/news/economy/cooperating-through-brics/1869007/page-1.html#sthash.VRGY3rJB.dpuf

Koan Partner Vivan Sharan at the BRICS Academic Forum, Moscow, May 2015

Koan Partner Vivan Sharan on "Learning to Regulate"


India is perhaps one of the few major economies in the world, where economic policies are formulated by ‘Empowered Committees’ of politicians and bureaucrats. The Empowered Committee of State Finance Ministers is a case in point. This Committee has been closely involved in preparing the Goods and Services Tax (GST) framework along with the Central Government. There is little doubt that there are few subjects less political than those that impact the revenue collections of State Governments. Equally, there are few subjects less well understood by State Governments than the impacts of the proposed tax reform, despite a representative committee. This merits some introspection.  
Does the country need to look towards a fresh set of policy formulation processes for regulating the economy? Given the emergent need for regulating new, technologically intensive sectors such as ecommerce, a case can be made for reimagining regulations in the days ahead. 
Most bureaucrats are inherently defensive about the gaps in the government’s capacity to regulate the economy.  When confronted with the inadequacy of extant policies, such as the absence of objective and transparent principles for auctioning natural resources, a common response is that policies should be critiqued keeping in mindthe temporal context within which they were formed. Indeed policies tend to respond to static questions rather than future scenarios – think bank nationalisation or Agricultural Produce Market Committees. 
To hedge for the unknown future, there seems there is no policy making tool more useful than the thesaurus – Indian policymakers have seldom felt the need for definitional certainties. This is a challenge for the ecommerce sector, which is poised to cross US$ 6 billion in revenues (ex. Tourism and Ticketing) in by 2015. As yet, there is no government department which has taken on the onus of proposing comprehensive policies for the sector. Instead authorities are simply relying on synonyms for circumscribing ecommerce. This sector is hampered by the lack of a nodal authority such as the Civil Aviation Ministry for the airline industry, which by its very existence is purposed to regulate the sector. 
At a stakeholder consultation meeting hosted by the Department of Consumer Affairs in September 2014, a proposition was placed on the table that “entirely new subjects of ecommerce and direct selling” should be brought under the purview of the Consumer Protection Act, 1986. The minutes of the meeting are publicly available, and indicate that ecommerce is not well understood. Similar discussions have been initiated by tax departments of various State Governments, currently mulling how best to extract revenues from the sector. Given that the sector occupies a large share of advertising, and has managed to appropriate precious media reporting space, tax departments are keenly observing developments in the sector. 
The Department of Industrial Policy and Promotion has played an inadvertently critical role in the evolution of existing ecommerce business models, through a preventive FDI policy. Earlier this year, the Department of Consumer Affairs tried to suggest that nine nodal authorities take charge of regulating the sector. Where else in the world would such a fragmented regulatory framework be proposed? It is the equivalent of suggesting that the ubiquitous kirana stores, on account of having bank accounts, telephone lines and home delivery options, should be regulated by the Central Bank, the Department of Telecommunications and the Ministry of Home Affairs. 
What is admittedly daunting about ecommerce is that it will force authorities to think deeply about some hardquestions. What really is consumer protection – can it be defined objectively? Does the consumer protection policy framework dilute competitiveness concerns of SMEs? Can consumption grow in an economy which does not create new jobs through innovation? Does the lack of clarity in existing regulations, aid discretion of enforcement officials? How can businesses be protected from regulatory harassment? Are the existing means to recourse available to them – primarily through the complex judicial system, viable? What principles of ease of business does the country have to strive towards – do these necessarily entail a slew of compliance procedures that penalise businesses that do not have the capacity for paying legal and tax teams?
It is unlikely that any Empowered Committee will be able to answer the above. Even if successful in doing so, a number of domain specific issues will remain unaddressed unless stakeholders are consulted continuously (and not just by soliciting comments on draft policies through online portals). A good example is a recent stakeholder consultation in Bangalore, hosted by the Retailers Association of India, in the run up to formulation of additional rules for packaged commodities. In this robust discussion between legal metrology officials andthe private sector, it was pointed out that certain Food Safety and Standards Authority of India’s regulations overlap with regulations under the Legal Metrology (packaged Commodities) Rules, 2011. 
As a result, dealers of packaged food items, some of them ecommerce companies, are not sure which rules to follow, which flying squads of enforcement officials to pay obeisance to. Such concerns of regulatory overlaps and consequent confusion are not uncommon – and cannot be addressed by a single government department alone.A systemic recalibration of how this country regulates is required – across all departments. The departments not only need to talk to the private sector, they need to talk to each other!
In the absence of defining regulations for the ecommerce sector, the government must use the inherent technological capacities of ecommerce companies for mutual benefit. For instance, ecommerce companies acting as online marketplaces aggregating buyers and sellers – can easily give detailed reports on the sellers on their platforms to tax, metrology and other officials. Indeed ecommerce companies should themselves realise that ease of administration can be facilitated through inexpensive technological solutions. Given that existing regulations such as Value Added Tax Rules are not black and white with respect to ecommerce,businesses must hedge against hurdles by volunteering all relevant supply chain details, to various concerned authorities. 
In an increasingly integrated global supply chain paradigm, technology should become a friend to regulators rather than remain a foe.  It is incumbent upon the private sector, to use incremental technological innovations at justifiable marginal costs to enable this. And the government should play its part in embracing and harnessing the positives of technological change, rather than burying its head in the sand and pretending its the 20th century.
The author, Vivan Sharan, is Partner, Koan Advisory Group
- See more at: http://businessworld.in/news/economy/india/learning-to-regulate/1859419/page-1.html#sthash.mMgtIFqR.dpuf