There is a need to make history more inclusive

It is unusual, if not sacrilegious, to invite a person who does not have history bred in his bones to a conclave of men and women steeped in the intricacies of a much talked about but inadequately understood human pursuit that dwells on the past and seeks to enlighten or confound the present. I, therefore, deem it a great privilege to be invited by the Indian History Congress to inaugurate its 75th session.

My own academic discipline in the distant past was political science and I do recall Professor John Seeley's jingle, well-known in my time and presumably not forgotten today, that "History without political science has no fruit and political science without history has no roots."

In more recent times, and for professional reasons, I came to value Winston Churchill's aphorism: "Study history, study history; in history lies all the secrets of statecraft."

Historians at all times have endeavoured, as Herodotus put it, "to preserve from decay the remembrance of what men have done." Historians have dwelt on the facts of the past and sought to make implicit or explicit judgements about those facts. Not to be ignored is a mid-nineteenth century caution that historians "have been seduced from truth not by their imagination but by their reason" pursuant to the impulse of "distorting facts to suit general principles."

Equally hazardous is the propensity to read the past into the present or the present into the past; so is the temptation to ignore the distinction between memory and history. Memory is based on identification with the past and is unavoidably egocentric, while history is based on its treatment as an external object and not a part of the self. History also cannot be faith-based. The domains of the two exist separately and conflation does not further the cause of either. To a lay person, a number of questions are unavoidable. What then is history, and with what does it deal? What is the task of the historian? Is history a science, or an art, or a bit of both?

A simple answer is that it is a method of inquiry, which deals with what has reportedly happened and not exactly as it happened. It is a narrative of change. It has been suggested that historical objectivity is seen to be not a single idea but rather sprawling sets of assumptions, attitudes, aspirations and antipathies. It is evident that on most if not all occasions, the narrative is contested. Such contestations nevertheless need to have a basis in facts, demonstrable and logically sustainable. As E H Carr put it, "the historian without facts is rootless and futile; facts without their historian are dead and meaningless." He added that "the study of history is inescapably the study of causes." This would exclude what has been called "counterfactuals" or the "what if" category and its simplistic assumptions and premises.

It is thus evident that methodology is critical to the study of history. Efforts to curb "intellectual efflorescence" through official dicta can only be viewed as undesirable. Furthermore, contestations over the historical past need civility of discourse to ensure that it does not cross the imperatives of ensuring social peace and societal cohesion. Carr also dwelt on history's wider relevance: "an individual stripped of memory finds the world a confusing place: a society with no sense of history is unaware of where it has come from or where it is going."

Is there a more practical relevance of history? To my mind, it helps us know and learn from the mistakes of the past. Those mistakes relate to frailties in judgement leading to mistakes in statecraft and governance. These as one historian has put it, could be due to tyranny or oppression, excessive ambition, incompetence or decadence, and folly or perversity. In each, the inability or the unwillingness of society or its ruling establishment to pay heed to reason and realism, to dissentingopinion and to alternative courses of policy or action, led to unfounded certitude resulting in mistakes. It is for this reason that in every period of the past, beginning perhaps with the 30th century BC Egyptian King Menes, codes for dispensing justice were enunciated. Alongside, manuals were penned for the guidance of rulers. Departures from these and the resulting consequences is what historians have dwelt upon.

History writing, and history teaching, has a contemporary relevance in a more evident sense. We live in a world of nation states but the idea of a homogenous nation state is clearly problematic. Diversity is identifiable even in the most homogeneous of societies today. The global scene in modern times has been replete with complexities and tensions of what has been called the national question.

In our own country the sheer diversity of identities, 4,635 communities according to the Anthropological Survey of India, is a terse reminder about the care that needs to be taken while putting together the profile of a national identity. It has of necessity to be liberal and accommodative; marked, to quote an eminent scholar, neither by complete homogenisation nor by the particularism of closed communities. Instead, it is a balance struck by "the mutual gravitational pull of disparate sections that make the whole." Our sagacity in building pluralist structures that have stood the test for over six decades, stands in contrast to many strait-jacket edifices in other societies that came to grief. By the same token, these structures need constant nurturing.

It is no longer a matter of debate that history has to be more than narrowly political or economic. The imperative is to make it comprehensive and inclusive of neglected groups in society. These subaltern classes, as Gramsci had pointed out, are not unified and their history, therefore, has to be intertwined with that of civil society. It has challenged what has been called "the univocality of statist discourse." It has sought to focus on Dalit and gender issues. The methodology of studying these opened up new and enriching vistas of study for historians.

The pasture of stupidity, said the great medieval historian Ibn Khaldun, is unwholesome for mankind. He warned historians not to succumb to the "temptation of sensationalism", adding that "a hidden pitfall of historiography is disregard for the fact that conditions within nations and regions change with the change of period and the passage of time."

The great Indian healthcare challenge

Last week I was at a private hospital in Kolkata when I came across the family of a patient who was admitted in the Critical Care Unit (CCU). The breakdown of the current bill for the patient, which the family shared with me, showed the CCUcharge alone at around Rs 8,000 ($129) per day. Of course, this is just a small part of the bill, and only the first day's. In a country where the per capita monthly income is less than Rs 7,000 ($112), these are exorbitant prices for even middle-class households like the one I met, let alone the poor.

So why wouldn't they opt for treatment at a government hospital where prices are subsidised? Because - the family told me - they wanted the best facilities and doctors, which they believe were simply missing in state-run health facilities. The family has had to dip into its savings. It is not unusual in India where out of pocket payments (OPP) or direct cash outlays by individuals/families for healthcare account for more than 70 per cent of total health-related spending. To put things in perspective, consider that the concomitant figure in the US is below 12 per cent.

There are three aspects to the problem at hand: (a) the poor state of government hospitals (broadly lacklustre state participation in the health sector as a whole); (b) the choice citizens make in favour of private healthcare; and finally (c) poverty and health inequality. It is well known that poor Indians who dip into their family savings to pay for privately-provided healthcare often plunge back into the below-poverty-line (BPL) zone as critical illnesses potentially wipe out a lifetime of savings. Remember that even a 0.5 per cent increase in poverty would mean an addition of 6 million BPL households in India.

The three aspects highlighted above are distinct but connected to each other, with each feeding into the other.

The first disturbing reality is that there is a near absence of either a comprehensive/universal state-sponsored insurance programme or a publicly-funded health system in India. The piecemeal health schemes that exist are reportedly marred by ineffective implementation, poor health infrastructure to back up, and even corruption. With the turn of the millennium, India opened up health insurance to private players, but the latter play a marginal role in the health insurance market. Existing public health insurance programmes (by way of employee/ employer contribution) put together cover not more than a quarter of the total population. Importantly, these schemes exclude 51 per cent of Indians who are self-employed (auto-drivers, housemaids, farm labourers and what have you).

The Rashtriya Swasthya Bima Yojana does cover BPL households and its implementation by states has had tangible effects on curbing private expenditure. However, a lot of the dispensaries and hospitals in India's overall public health network lack doctors, beds, medicines and surgical and other infrastructure. Clearly, more state funds need to be channelled to the sector.

Government health expenditure as a percentage of GDP in the US is higher than seven per cent and ranges between six and eight per cent in EU countries. At 1.4 per cent of total GDP, India's state expenditure compares lowly against even other developing countries, leave aside the OECD. India's bed-to-patient and doctor-to-patient ratios (basic parameters) are way below global averages and even below the WHO's minimum ratio stipulations. This situation is fundamentally owed to government hospitals, particularly in remote parts of the country.

On the other hand, across India today, the very word 'private' evokes efficiency. And this perception has penetrated the psyche of ordinary Indians - poor, affluent and those in between. Irrespective of income situation and the impact on domestic finances of making such a choice, a large majority of Indians (an estimated 75-80 per cent) prefer to avail private healthcare facilities for minor and major illnesses. However, unless the situation with public healthcare provision improves substantially from where it is today, we can't even begin to consider reflecting upon the issue of citizen's affinity for the private sector as being a 'problem'. It is safe to assume that people will respond with their feet if government facilities are adequately shored up and brought in line with the advanced diagnostic and treatment facilities of our times.

The Social Progress Index, which ranks countries based on developmental outcomes, ranked India as low as 95th and 97th in the 'Health and Wellness' and 'Nutrition and Basic Medical Care' sections respectively. In the more popular Human Development Index (HDI) India ranked a miserable 135ththis year. Indeed, we don't need global indices to tell us how serious the health policy problem in India is. The situation merits a range of measures: increasing state spending in the sector and beefing up government health infrastructure is a good place to start. A focus on basic hygiene andsanitation meanwhile can aid in prevention. On the cure side, broad-basing and streamlining existing insurance schemes under one umbrella will ensure better delivery and implementation.

Turn the PPP model on its head In restrospect, private sector participation in infrastructure was a case of too much too soon. Now, govt should build assets, and then sell them to private operators

A fundamental feature of our political economy is the demand for social protection. Any government in this country will struggle to create fiscal space for investment spending and make budgetary allocations for infrastructure. Private sector involvement in infrastructure development has therefore become a strategic imperative.

Although the scale of private participation in infrastructure has grown dramatically over the past 15 years, the experience has been mixed. Infrastructure services are a quasi-public good. It is not easy to balance the interests of the general public that expects to have access to affordableelectricity and transport facilities with the profit motive of private developers.

The nature of these services is such that it requires the return to investors to be regulated in the broader public interest. This is not easy to do. Private-public partnerships, or PPPs, require sophistication in design and effective dispute resolution. In retrospect, India's experience in this area has been a case of too much too soon.

Over the past three years, confidence has taken a beating and private infrastructure development has been set back by a combination of regulatory uncertainty, bureaucratic delay, and allegations of corruption. Investment in infrastructure has fallen drastically. But India still needs an additional $1 trillion in infrastructure investment over the next five years. Unless remedial action is taken, this will remain elusive. Before the next wave of infrastructure asset creation can be launched, we must learn from the lessons of the past.

First, land acquisition for project development has been much harder than anticipated and exacerbated by the previous government's thoroughly over-engineered and complex legislation, the Land Acquisition Bill, 2013. Difficulties with land aggregation hit road development projects particularly hard. Under pressure from government to show progress, banks funded projects well before all the land was made available by the concessioning authority. As the land could not be delivered in the promised time, projects suffered delays, leading to cost overruns that in turn made half-completed projects unviable.

Second, the sluggish and unpredictable pace of regulatory approvals, especially environmental clearances, similarly contributed to project-cost escalation.

Third, in view of these execution risks, private developers took to gaming bids. Gold-plating of project costs was widely used by developers to take out their equity through means other than project cash flows.

Fourth, the government did not deliver on many promises. The most important example of this is the delivery of coal. About 40,000 Mw of generating capacity has already been built or is currently under construction on the promise that Coal India would deliver enough coal to have these plants operate at a Plant Load Factor (PLF) of 85 per cent. Coal India has fallen short of these targets, as a result of which many plants have either become unviable or are operating at capacity utilisation levels too low to service their long-term debt.

Fifth, the theory that competitive bidding is the best mechanism for allocating contracts because they lead to objective price discovery has been belied by the Indian experience. Bidding procedures have been poorly designed and subject to manipulation. Bidders have also bid irresponsibly. This has led to a backlog of dysfunctional bids particularly in the power sector where electricity generation contracts were bid on the basis of the lowest quoted tariff. These projects have become unviable and are stuck in litigation between state-level regulators who insist that the terms of the original contract be adhered to, and private developers who are invoking the force majeure clause to change the contract in view of circumstances beyond their control.

Sixth, the judiciary's efforts to intervene in this mess have been quite draconian. The cancellation of telecommunication licences and coal mines allocated to private parties with retrospective effect may have been technically justified in a legal sense, but have caused major dislocation and damage to investor sentiment in the infrastructure space.

Seventh, a combination of skill gaps, lack of discipline and moral suasion from government has led to irresponsible funding by banks. This had added to the burden of non-performing assets that is weighing down the balance sheet of the banking system.

Finally, a disproportionate burden of funding infrastructure has fallen to the banking system that is not structurally equipped, from a risk management perspective, to provide long-term financing of the type needed by infrastructure projects.

The reality is that although the private sector played a significant part in the recent boom in infrastructure spending, it is the government that will have to lead the next wave of asset creation in this sector. But the government's own fiscal resources remain scarce. So how might it be possible to get a resource-constrained government to lead the recovery in infrastructure investment?

Our recommendation is to turn the orthodox PPP model on its head. Instead of getting the private sector to build, own, operate, and then transfer the asset to government - in other words, to take the cost and high risk of green-field construction on to itself and then transfer an operating asset to government - our recommendation is to reverse the process. The government or a public sector entity should take on the cost and risk of green field construction. It should then sell down the project to private investors once the asset is generating operating cash flows.

In so doing not only would the allocation of risk be more appropriate between public and private stakeholders, the public sector would also easily make a profit from its sale to the private sector. This is because the public sector is much better equipped and supported to tackle the challenges of land aggregation and obstacle course of regulatory approvals involved in green field construction, and the discount rate applied to post-construction risk is materially lower than that applied to construction risk. There are numerous foreign investors with deep pockets that would be willing to come into the Indian market to own, operate and manage infrastructure assets of scale provided they do not have to take the risk of constructing these projects. Pension funds looking for predictable, but not very high returns the world over have become important owners of operating assets such as power plants and toll roads. As the operational assets are transferred to such investors, the initial equity invested by government for construction would be returned at a profit, allowing the government to more than recover the fiscal cost of building the asset.

But who in government would be equipped to take on the responsibility for building new infrastructure assets in this manner? In the power sector the obvious candidate is NTPC, which is extremely well qualified to build new generating capacity. In fact, NTPC could easily create a world- class EPC (engineering and project construction) company that would be focussed on building new power generating plants with the goal of selling the same down to private investors once they are built.

In the road sector, NHAI may not have the skills to build its own EPC company, but it could use (and has done so in the past) private EPC contractors to build new highways and expressways, while carrying the equity on its own books, but with the goal of selling these down to private investors once they are operational. Using this reverse BOT approach we believe that it is eminently feasible to build about $60 billion worth of new power and road infrastructure projects every four to five years, selling them down to private investors once operational and redeploying the proceeds into the next wave of asset creation.

Why govt wants a unified gas allocation policy

It will eliminate several anomalies in the current guidelines and redraw the priority list

Among the tasks the Narendra Modi government has taken up is the complete overhaul of the policy framework for the allocation and utilisation of domestically-produced natural gas. The implications are huge and spread across multiple sectors including power, fertiliser, petrochemicals, transport and even atomic energy and space research.

The ministry of petroleum and natural gas last week moved a note detailing the changes for approval by the Cabinet Committee on Economic Affairs. The ministry has proposed to give top priority to those who sell compressed natural gas (CNG) for transport and piped natural gas (PNG) to households. Second in the new priority list are plants that provide inputs to atomic energy and space research. They are followed by hydrocarbons, including petrochemicals, urea plants and power plants, provided they sell the entire electricity at regulated tariff. At present, urea factories are on top of the pecking order, followed by liquefied petroleum gas (LPG) plants, power stations and city gas distributors who sellCNG and PNG.

CHANGING PRIORITIES

EXISTING LIST Urea manufacturing fertiliser plants LPG plants Power plants City gas distribution PROPOSED LIST City gas distribution Strategic sectors Petrochemical and LPG plants Urea plants Power plants

The new gas allocation policy would eliminate multiple anomalies and correct many imperfections in the current policy of allocation. Natural gas available in India is divided into two categories: domestic and imported. Imported gas is unregulated: marketers are free to purchase and sell it as they like. The challenge is with domestic gas. It falls under four distinct sets of rules: those under the administered price mechanism (APM), non-APM, pre-New Exploration Licensing Policy (NELP) and NELP. Each category of gas is allocated under different gas utilisation policies. Though the policies have almost similar order of priority, there are many ambiguities and anomalies, justifying the need for a uniform policy.

The new order
As a first step, the new government issued the new natural gas pricing guidelines on October 25, 2014, raising the price from the existing $4.2 per unit to $5.6 per unit for all categories. Two, under the current policy, APM gas is allocated to a few strategically important plants in preference to other sectors. However, the current utilisation policy for non-APM and NELP gas does not provide any such priority. The oil ministry has already received requests for allocation of small quantities of gas for plants supplying essential inputs to strategic sectors. Hence, the need to accord higher priority to atomic energy and space research.

There is ambiguity regarding extraction of higher fractions in the current utilisation policy. During its exploitation, natural gas is broken down into multiple fractions each of which is processed into a specific product. Higher fractions of gas emerge first during the production process and are wasted if not used. These fractions can be used only by petrochemical and LPG plants but they fall in the lower order of priority in the current policy. Since the higher fractions are of no use for sectors other than petrochemical and LPG, they cannot be utilised if the hydrocarbons are not extracted.

In the case of the fertiliser sector, an Empowered Group of Ministers (EGoM) had last year accorded highest priority to existing gas-based urea plants for allocation of NELP gas. However, in the non-APM gas utilisation policy, highest priority has been accorded to all gas-based fertiliser plants. Moreover, the EGoM decided to "maintain at 31.5 million standard cubic meters per day (mmscmd) the level of supplies of domestic gas to fertiliser sector". While agriculture expansion in the coming years would increase the demand for fertilisers, the 31.5 mmscmd cap would mean higher imports for the sector, leading to higher fertiliser subsidy.

Expansion of the city gas network through replacement of liquid fuels (diesel and LPG) by CNG andPNG is not viable on imported liquefied natural gas. But CNG and PNG are cleaner, safer, cheaper and more convenient than liquid fuels. Also, the replacement of liquid fuels by CNG and PNG will result in savings on foreign exchange through reduction in crude oil imports. Moreover, the Supreme Court in a 2002 judgment had directed the government to give priority to transport sector with regard to allocation of CNG.

Since gas supplies to CNG and PNG have lower priority under the current guidelines, a situation arose where some city gas distributors were receiving 100 per cent supplies, while others were receiving nil. This was challenged in the Gujarat High Court which ordered the allotment of gas to Ahmedabad at the same rate as Delhi and Mumbai. Cuts were imposed on supplies to non-priority sectors in order to implement this directive.

Finally, according to the APM gas policy, in case of reduction in availability of such gas, supplies to customers should be reduced on a pro-rate basis. In case of NELP gas, reverse priority cut order is applicable with reduction in supply of KG-D6 gas. The non-APM gas policy is altogether silent on the mechanism that would be adopted in case of reduction in supply. There is need for uniformity, which the new guidelines seek to bring in.

Step in the right direction
Experts say the new priority order and the overhaul of the gas utilisation policy appears to be a step in the right direction. "It makes sense because of multiple reasons," says India Ratings Director Salil Garg. "As no new urea plant is coming up right now, CNG and PNG must be promoted because they are cleaner fuels. PNG through the city gas route replaces LPG and thus does not carry the burden of subsidy. And the demand from strategically important sectors may not be huge but must be given priority." Garg adds that the power sector is suffering because of investment in new capacities without firm allocation and the decline in gas production from allocated sources, not because of its placement on the priority order.

Govt norms on e-marketing of farm produce soon

The proposed portals aim to eliminate the role of middlemen and unfair trade practices

The government will soon come out with guidelines to set up online agri-platforms, on the lines of Amazon and Jabong, to promote hassle-free sale of farm produce and thereby help farmers get good returns.

Already, some states like Karnataka, Andhra Pradesh andMaharashtra have set up such e-marketing platforms with their own funds on a small scale. The Centre wants to enhance it to countrywide level.

"We are in the process of finalising the guidelines to provide e-marketing trading option to farmers at APMC mandis," a senior Agriculture Ministry official told PTI.

The proposed e-marketing portals, to be set up with Rs 100 crore allocated under the 'Agri Infrastructure Fund' announced in the previous Budget, aims to eliminate the role of middlemen and unfair trade practices, the official said.

According to sources, the government initially plans to promote at least 600 mandis and provide an unified online trading option to farmers besides the existing traditional one at the Agricultural Produce Marketing Committees (APMCs).

Both small and big farmers can avail the option of either selling via online or through the traditional way in mandis.

The government is still discussing on list of commodities to be allowed for online trading, the likely name of the portal and roping in of e-marketing service provider and other private players.

Sources also said that Rs 20-35 lakh per mandi would be given to the state government to put in place necessary infrastructure like storage, grading, sorting and other facilities required for smooth functioning of online trading.

The entire transportation and godown facilities at agri e-marketing platform would be covered by the APMC Act unlike other online shopping portals like Jabong, Amazon or Flipkart, sources added.

The Karnataka government had last year launched Rashtriya e-Market Services (ReMS) in partnership with NCDEX Spot Exchange (NSPOT) in 47 major APMC markets. It is offering online trading in 4-5 commodities at present.

Is India prepared to tackle a Sony like cyber attack?

A national cyber crime and coordination centre meant to fend off such attacks is still awaiting approval

The recent data hack at Sony Pictures that has threatened a cyber war between the US and North Korea has raised questions about the preparedness of India if faced with a similar attack.

Experts are concerned that the country may not be adequately armed to counter such attacks against its corporations or the government. A National Cyber Coordination Centre (NCCC), which was planned to monitor traffic flowing through the country and possibly fend off such attacks, has been on the drawing board for a couple of years and is still awaiting approval.

India can only find solace in the fact that its Internet penetration is still one of the lowest in the world and digitisation by corporate and governments is still limited.

“In a way, the fact that we (India) are not completely digital, which could be looked at as one of the weak points from the business perspective, is working out to be one of the strongest points when seen from the cyber security point of view as it seals business from such attacks,” said Sanjay Deshpande, co-founder and chief executive officer, Uniken, a digital security firm.

The government’s digitisation push with the Digital India project will lead to an unprecedented spike in online transactions. This will require huge investments towards securing the country’s cyber perimeter. According to officials, the NCCC, which will cost the exchequer around Rs 800 crore and will take a year’s time to be operational, will watch Internet traffic flowing across the country without snooping on the content. It will help in mitigating or warding off domestic or international attacks by building trends and analytics on incoming or outgoing traffic.

However, the project is yet to be approved.

A senior official with National Technical Research Organisation (NTRO) told Business Standard the country might have all the relevant machinery and infrastructure in place to protect against cyber crimes, but such attacks usually occurred from the most remote or the least doubted points of entry. The agency claims to have detected around 30 attacks in the last four years. Set up in 2004, theNTRO is a technical intelligence agency under the National Security Adviser in the Prime Minister’s Office.

Earlier in December, hackers infiltrated into the servers of Sony Pictures to resist the release of a comedy film called The Interview, a movie depicting the assassination of North Korean leader Kim Jong-un. The film, along with other unreleased movies, were stolen and leaked online causing significant financial damage to Sony.

Following this, Sony cancelled The Interview’s widespread Christmas release to screen it in limited theatres and on the Internet later. Details of corporate finances and private emails between producers and Hollywood figures were also hacked and released on the Internet. This led to a war of words between the US and North Korea, where President Barack Obama promised to respond “proportionately” to the cyber-attack.

The US has reportedly also sought help from China to fight off attacks from North Korea, which relies heavily on Chinese electronic equipment.

North Korea had been on the US list of state sponsors of terrorism for two decades until the White House removed it in 2008 as part of now-stalled negotiations relating to Pyongyang’s nuclear programme.

“Cyber security needs to be looked at as a full chain. More holistic solutions need to be designed to protect business. Every aspect of the chain needs equal attention, starting from putting up the right infrastructure to running it appropriately through trained staff,” Sanjoy Sen, doctoral researcher in strategic governance at the UK-based Aston Business School said.

A Forrester report predicts that at least 60 per cent of brands will discover a breach of sensitive data in 2015. But while high-profile attacks such as those against Target, Home Depot and Sony in 2014 might be the most expensive and damaging of all time, they were not the norm, said the report. A third of all breaches occur as external attacks, but the most common source of a breach (46 per cent) is an internal incident that could involve malicious intent or an accident, or both.

“More than half of business and technology decision-makers rate lack of staff as a challenge, and 53 per cent find unavailability of security employees with the right skills as a major challenge,” Forrester’s Heidi Shey and Kelley Mak said in the report.

Although sectors like banking and financial services and also pharmaceuticals were beginning to invest more in cyber security given the sensitivity of the data they handled, India still had a lot of ground to cover, said officials.

PM against interference in PSBs, but supports political intervention

Modi said with public sector banks controlling 81% of branches and 77% of deposits, their net profit should improve from the current levels of 45%

Public sector bankers who often find themselves in a fix due to the dual regulation they face, that is, from the Reserve Bank of India (RBI) and the government which are often contradictory, will take heart from the statement made by none other than Prime Minister Narendra Modi and alsoFinance Minister Arun Jaitley.

"Banks would be run professionally, and there would be no interference. But accountability is essential… he (PM) is against political interference, but supports political intervention in the interest of the people," said a finance ministry statement.

The statements come in the backdrop of recommendations of the P J Nayak committee, a high-level panel appointed byRBI to improve corporate governance in banks.

The panel had recommended that the government should give up its control in public sector banks and cut its stakes below 51 per cent. It has also observed that dual regulation due to government's interference has crippled the functioning of these banks.

Modi said with public sector banks controlling 81 per cent of branches and 77 per cent of deposits, their net profit should improve from the current levels of 45 per cent.

To improve the functioning of state-run lenders, the PM has recommended that there should be common strengths in areas such as advertising and software that can be built upon.

Modi also asked banks to prioritise on loans to students. With non-performing assets rising in the education sector, banks have been cautious on lending to the education sector.

The PM also called for an end to lazy banking and said the parameters for success should be redefined. For instance, let them prioritise loans to enterprises, which will generate more employment," said the finance ministry release, quoting the prime minister.

Going ahead, the PM has also asked banks to set goals for the 75th Independence Day in 2022, adding that with the government's agenda of providing housing for all by 2022, this is an opportunity that banks should play on with 11 crore more houses required in the country.

Earlier in the day, finance minister Arun Jaitley said, "There are a series of steps that the government has taken and there is a need now for the banking system in India in a big way to finance infrastructure, infuse liquidity."

Slow demand in the corporate sector is one of the key reasons that had led to tepid credit offtake. As per RBI data, as of December 12, credit grew 10.8 per cent year-on-year, compared with 14.9 per cent during the corresponding period last year. This was the worst credit growth since 1997. The credit growth was only 5.2 per cent in the current financial year. (April-December).

Jaitley also expressed concerns over the high level of NPAs and said the levels were "unacceptable" in some cases. He also added that there was a need to get better talent into the system.

Separately, Jayant Sinha, the minister of state for finance, said he expected credit offtake to improve, as the economy improves and the interest rates come down.

"Credit offtake depends on multiple factors; it has to do with economy, interest rates, consumer demand. There is also an overhang off NPAs, which has been higher in the public sector than private sector. So, as the economy improves, the interest rates come down, which will certainly happen in the next few months. I am very hopeful and sure that credit offtake will improve."

After hiking interest rate thrice between September 2013 and January 2014, the central bank has maintained status quo since then, amid slowing economic growth. Many experts believe that interest rates should have come down to spur growth, as inflation has softened.

Retail inflation slowed to 4.5 per cent in November, the slowest rate recorded since the data series was first published in 2012.

On Friday, a finance ministry official had said the government could consider candidates from private sector to head large PSBs, if such recommendations were made by the search committee.

On the issue of fiscal consolidation, Sinha said the government is committed to fiscal consolidation and is confident about the road map and the target for achieving it.

"The numbers can always be achieved, and it was done so in the past through various mechanisms which I don't think anyone of us was comfortable with. It is really the quality of the numbers that is important," he said.

According to data released in December, the fiscal deficit during April-November was 98.9 per cent of the 2014-15 Budget Estimate.

Sinha also said it is important to ensure that the economy is set on a higher growth trajectory of 7-8 per cent, but it needs to be both sustainable and non-inflationary.