How to fix PPP financing

Structuring infrastructure PPPs is complex. Optimal risk sharing among stakeholders is needed. Also, delays in achieving project milestones weaken project economics and reduce investor appetite

 

 Make in India" is the hallmark programme of Prime Minister Narendra Modi's administration. It envisages India increasingly becoming a global manufacturing hub, attracting investment, and generating the employment needed to grow the economy and power it to middle income status and beyond.

But the hard reality is that attracting investment in India will hinge on filling the sizable infrastructure investment gap. Whether to service the vast domestic market or target export markets, the success of "Make in India" will require overcoming delays in infrastructure investment and implementation.

Until recently, public investment has been the main vehicle for infrastructure development in India. Since 2012, however, the government has shifted some of the focus away from public spending. The Twelfth Five Year Plan envisages the private sector contributing $500 billion - about half of the $1 trillion of investment planned - primarily through public-private partnerships (PPPs).

However, structuring infrastructure PPPs is complex. Optimal risk sharing among stakeholders is needed to ensure a proper alignment of incentives. This is especially true in India where adequate project development requires detailed feasibility studies, negotiating complex land acquisition processes, obtaining environmental and forest clearances, and mobilising scarce equity. Delays in achieving project development milestones weaken project economics, resulting in completion delays and reduced investor appetite.

A recent study commissioned by the Asian Development Bank and undertaken by CRISIL Infrastructure Advisory found that on average 40 per cent of projects in major infrastructure sectors are delayed for reasons beyond the project's control. The reasons include delays in land acquisition and obtaining environmental and forest clearances beyond the time envisaged in the concession agreement, along with interstate coordination issues and local protests. Delays of two years are the norm, resulting in average cost increases of around 30 per cent - mostly due to accumulating interest costs during the delay period and cost escalation. These account roughly in equal measure for the resulting cost escalation.

Moreover, with infrastructure accounting for around 30 per cent of stressed assets, banks are increasingly unable and unwilling to lend further to infrastructure. While the Reserve Bank of India's (RBI) guidelines allow banks to fund additional "interest during construction" (IDC) to stressed projects, this still requires banks to take on additional risk exposure to stressed projects and fund accumulating costs.

This makes financing infrastructure a hard sell, given that banks are reaching exposure limits and face asset liability management mismatches on their balance sheets. Many banks in India have already begun to limit their infrastructure exposure. Against this backdrop, it is not surprising that the high-level Deepak Parekh committee on infrastructure has scaled down its achievable infrastructure investment estimate by nearly 40 per cent for the Twelfth Plan.

The good news is that there may be a solution. Drawing from global experiences in several PPP markets, notably in Latin America and Indonesia, a potential solution can be fashioned that could help both investors and lenders alike. The solution entails establishing a facility that guarantees servicing interest to banks during delay periods, so long as the delays are beyond the control of the project. Under this arrangement, the project developer would apply for a guarantee from the proposed facility against delayed interest payments by paying a fee prior to financial closing, and negotiate a reduction in bank charges that would compensate for the guarantee fee. Interestingly, this is also beneficial to banks because even though they are charging lower rates, they are no longer subject to completion delay risk. Subsequently, the facility becomes a lender to the project and recovers the paid-out amount by way of senior or subordinate debt. The advantage of the subordinate debt structure is that it reduces the additional equity needed to fund the cost escalation and to maintain a constant debt-equity ratio in accordance with RBI guidelines.

The proposed mechanism addresses several issues in one fell swoop. First, the facility would secure developers' interest obligations due to delays and potentially reduce the incremental equity needed to fund cost escalation. Second, because the risk profile of projects would improve, banks would be able to expand financing for guaranteed projects. Next, non-performing assets and restructuring would be reduced as interest payments would be serviced through the guarantee facility.

The proposed facility would also expedite financial closure and reduce delays resulting from re-negotiating bank lending to already stressed projects. Finally, the facility promises a more effective use of capital against reduced downside risks from adverse selection, which can be mitigated by pooling guaranteed projects.

The trick is of course in getting the pricing right. The guarantee fee and the terms of the subordinate debt must hold value for both the facility and the project developers.

For the government, getting investments into essential infrastructure projects will help it to deliver on the promise of "Make in India". But it will also require innovative solutions to significantly scale up investment. It cannot afford facing further delays in the drive to bridge the infrastructure investment gap. The proposed project completion risk guarantee scheme represents a win-win-win situation for government, financiers and developers alike and is worth pursuing in the interest of current and future generations of Indians.

Four ways how women suffer more from climate change than men

Climate change affects men and women differently and the difference mostly boils down to cultural norms and expectations 

Women hold up half the sky.” But as man-made changes damage the earth’s atmosphere, former Chinese communist party chairman Mao Zedong’s metaphorical statement is imbued with new meaning today. Climate change affects men and women differently and the difference mostly boils down to cultural norms and expectations. Here are four ways how women suffer disproportionately from climate change.

1. More women die than men during natural disasters
Research on natural disasters has shown that women suffer more. A United Nations Population Fund (UNFPA) study shows that in a natural disaster, women and children are 14 times more likely to die than men. During the 2004 tsunami in Asia, more than 70% of the dead were women. This is not due to physiological or biological reasons, but cultural norms. For instance, the International Union for Conservation of Nature (IUCN) has noted that in Sri Lanka, men survived the tsunami more easily than women as the latter are usually not taught to swim or climb trees: skills which can prove life-saving when natural disasters strike. Cultural norms which privilege men can also see food and relief material directed more towards men than women.
While research on gender-related mortality during natural disasters is mostly based on events and case studies, a 2007 paper by researchers Eric Neumayer and Thomas Plümper analysed disasters from 141 countries during 1981 to 2002. They found that not only do more women die than men in natural disasters, but that the rate of death of women increases with the severity of the disaster.

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However, there can be regional differences to this. An analysis of natural hazards during 2004 to 2013 in the US also showed that more men died than women. This may be the result of cultural expectations that encourage men to take more risk (without taking adequate precautions) during natural disasters. 2. Water stress impacts women more adversely
Climate change also leads to droughts and water scarcity. This adversely affects women and young girls as the burden of water collection largely falls on them. This is especially true for India where only about half the households have access to clean water on their premises.

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Studies in Kenya have shown that finding and fetching water can consume up to 85% of a woman’s daily energy intake. Drought situations can see women spend up to eight hours a day searching for water. Similarly, collecting firewood is also predominantly a woman’s responsibility in many countries. Dwindling forest resources also mean greater hardships for women who have to travel longer distances just for gathering solid fuel sources.
3. Climate change increases health risks for women
Women and children are more vulnerable to the health effects of climate change. For instance, data for 2000 and 2012 from South-east Asia show that diarrhoeal diseases, which are common during instances of flooding, killed more women than men.

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This is chiefly due to perpetuation of gender inequality, which results in unequal access to health services as well as a general neglect of women’s health in unequal societies. Studies in India, Bangladesh and Indonesia showed that the sex of a child influences the extent of the care given. Delayed hospitalization and lower rates of hospitalization is more common for girls than boys. In another instance, the Women’s World 2015 report notes that certain effects of climate may affect older women more as they tend to live longer, citing examples of the 2003 heatwave in Europe and Shanghai.
That’s just one part. Women are primary caregivers for families and this responsibility increases during times of emergency and disaster. Women are also more likely to suffer from malnutrition following a disaster as the nutritional needs of pregnant and breastfeeding mothers may be neglected, owing to food hierarchies that favour men.
4. Women farmers face greater hurdles in adapting to climate change
Across the world, women make up 43% of the agricultural force. However, they often have smaller landholdings and face greater hurdles in accessing farm credit and technical know-how. The Food and Agricultural Organization (FAO) has noted that gender gap exists in agriculture, whereby women farmers’ productivity is hurt due to the challenges women experience in accessing, using, and supervising male farm labour and the fact that women use less fertilizer and of lower quality, among other things. This vulnerability raises the risks women farmers face from climate change.

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What makes it harder for women is that they are under-represented in decision-making when it comes to climate change. They have far lower access to management of natural resources. Studies conducted in 24 developing countries showed that women were under-represented in formal forest user groups. Even this can be traced back to bias in education, whereby women face disadvantages in educating themselves and advancing in fields such as science, technology, engineering and management.

GST: Arvind Subramanian panel recommends standard rate of 17-18%

Panel backs scrapping proposal of a 1% additional levy by states on the cross-border transport of goods

 A panel under chief economic adviser Arvind Subramanian, constituted by the government to decide on goods and services tax (GST) rates, has recommended a revenue-neutral rate of 15-15.5%, with a standard rate of 17-18% which will be levied on most goods and all services.

A revenue-neutral rate is a single rate at which there will be no revenue loss to the centre and states in the GST regime.
The panel has recommended a three-tier rate structure wherein some essential goods will be taxed at a lower rate of 12%; so-called demerit goods such as luxury cars, aerated beverages, pan masala and tobacco products at a higher rate of 40%; and all remaining goods at a standard rate of 17-18%.
All services are proposed to be taxed at the standard rate of 17-18%.
The committee has recommended doing away with the additional 1% tax to be levied on supply of goods over and above GST.
It has also recommended broadening the GST base by including petroleum, electricity and real estate.
The rates proposed by the Subramanian panel are much lower than the 27% rate initially arrived at by the National Institute of Public Finance and Policy (NIPFP), working at the behest of the centre and the states. The government said the rate was too high.
Subsequently, last month, NIPFP submitted its revised calculations. The report said that the standard rate could be in the range of 23-25% if goods are taxed at three different rates—a special rate for precious metals, a lower merit rate for some important goods as well as a standard rate that will be applicable to most goods.
It had also suggested a GST rate of 18-19% in case of a single GST rate—that is all goods are taxed at the same rate.
GST is expected to remove barriers across states and integrate the country into a common market, reducing business costs and boosting government revenue. The indirect tax would replace existing levies such as excise duty, service tax and value-added tax.
A low GST rate is considered key for the successful implementation of the indirect tax regime as a high rate will not only be politically unacceptable, it will also encourage tax evasion as many small traders may prefer to stay out of the tax net.
A moderate rate will be politically more acceptable than a revenue-neutral rate.
The government had set up the committee under Subramanian in June to arrive at GST rates by factoring in the economic growth rate, tax compliance levels and taxpayer base.
To be sure, the final rate will be decided by the GST Council, a representative body made up of the Union finance minister and finance ministers of all the states.
However, this GST Council can only be constituted after the Constitution amendment bill is passed by Parliament. This bill, needed for implementation of GST, is currently awaiting legislative passage in the Rajya Sabha.
Though the government will miss the April 2016 implementation deadline for GST, it is hopeful of implementing this reform in 2016-17 itself.

Per capita nutrition supply in India among the lowest in the world

Per capita nutrition supply in India among the lowest in the world
India has one of the lowest per capita daily supply of calories, protein and fat, according to OECD, a club of rich nations

In December last year, the government promised a 40% increase in the supply of subsidized grain to expand coverage of the food security law. Whether the target of higher food supply coverage will be accomplished is hard to tell, but data show how the supply of nutritious food remains a challenge.

India has one of the lowest per capita daily supply of calories, protein and fat, according to the Organisation for Economic Co-operation and Development (OECD), a club of rich nations. This is lower than even South Africa, Brazil and Indonesia. Per capita amount of food available is typically calculated as production plus imports minus exports divided by the population.

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In India, poor per capita availability is largely a reflection of high poverty, which makes it difficult for a large fraction of the population to access nutritious food. In an October report, the World Bank said India has been the biggest contributor to poverty reduction between 2008 and 2011, with around 140 million or so lifted out of abject poverty. Even that hasn’t been enough. with the country accounting for 30% of those living in extreme poverty in the world in 2011.

“India is a hugely demand-constrained economy. People don’t have enough money because of which per capita food supply is low despite high production. If people had enough resources, per capita food availability would have been higher and India would not have the huge buffer stocks it currently has,” said Biswajit Dhar, professor at the Centre for Economic Studies and Planning School of Social Sciences at Jawaharlal Nehru University in Delhi.

When demand is low, an increase in local production need not translate into increased availability as a larger portion of the produce may be exported. In India’s case, it also depends on changes in government stocks. The Economic Survey show that net cereal production has hardly changed at 465gm per person per day from 2000 to 2013. However, per capita availability of cereals has increased from 422gm in 2000 to 468gm in 2013. However, it was largely a function of changes in government stocks. In the previous two years, availability of cereals was lower at about 410gm per person per day.

The average Indian had access to 2,455 kcal per day with protein and fat availability at 60gm and 52.1gm, respectively, according to OECD. This is far lower than the at least 3,000 kcal per day availability for OECD nations. Things have also not improved since the beginning of this century (see chart 3). Factors such as wastage of stocks are also to blame for poor availability. For instance, Food Corporation of India data show 3,000 tonnes of foodgrains were damaged in 2015-16. In 2014-15, quantity of damaged grains stood at 19,000 tonnes .

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Per capital food availability doesn’t reveal the whole picture. Actual consumption may be even lower depending on the magnitude of losses and wastage in a household, for instance, while cooking and preparation. As data from the National Sample Survey Office show, both total calories and proteins consumed have fallen in the two decades to 2011-12. The average rural Indian consumed only 2,099 kcal per day and urbanites 2,058 kcal per day.

The average intake, according to NSSO, is higher than what is needed. India has a minimum dietary requirement of 1,760 kcal per person per day, according to the Food and Agriculture Organisation (FAO). This number is calculated as the weighted average of minimum energy requirements of different gender and age groups in the population.

However, calorie intake is also clearly a function of income, NSSO figures show. The bottom 5% of the rural population (ranked by per capita expenditure level) consumes only 1,633 kcal per person per day compared with 3,264 for the top 5%.

Poor supply of nutritious food and inadequate per capita income to access good food feeds into health issues such as disability and malnutrition.

“Whether it be poor women’s participation in the workforce or wasting and stunting in children under 5 years of age, it can all be addressed to a large extent by supply of good food,” Dhar said.

While the government is making efforts to fill shortages in dietary consumption, it is long-term solutions that are truly needed. One fear among experts is that policy makers will start working towards short-term solutions.

“Providing cheap sources of energy in the form of refined cereals, sugars, oils … may lead to earlier onset of risk factors like overweight and obesity, high blood pressure, etc,” said Shweta Khandelwal, associate professor at the Public Health Foundation of India, an autonomous foundation in New Delhi. While calorie and protein consumption have fallen, fat intake has increased both in urban and rural households, NSSO data show.

- See more at: http://samvegias.com/per-capita-nutrition-supply-in-india-among-the-lowest-in-the-world/#sthash.5deN2aLl.dpuf

Governance and the Seventh Pay Commission

Governance and the Seventh Pay Commission
The report of the Seventh Pay Commission has yet again lost a massive reform opportunity
Pay commissions are appointed to reform government as a delivery system, not just to hike salary scales of government employees.

Pay commissions have over time become trivialized into vehicles for raising the salary scales of serving and retired government employees, justified by citing the need to raise the calibre of aspirants to government service. Pay commission reports also do some minor tweaking of service conditions such as leave and medical entitlements, but neither these nor the salary hikes will by themselves transform the civil services into a functioning delivery system. It will happen only if the structure of government is reformed so that it is shaped to deliver.

The report of the Seventh Pay Commission has yet again lost a massive opportunity for effecting such reform. Surprisingly, for a salary hike that is justified on the grounds that it will raise the calibre of future entrants, no surveys of aspirants are ever performed to get what they are looking for. Are they just looking at salaries?

The terms of reference given to the Seventh Pay Commission were well drawn and explicitly directed them to “...foster excellence in the public governance system to respond to the complex challenges of modern administration and the rapid political, social, economic and technological changes, with due regard to expectations of stakeholders...” Although so empowered, the commission refrains at several points in the report from encroaching on administrative issues. They would have been applauded for doing so by a nation fed up with the bureaucratic gridlock.

The first deep reform needed was to mark a date—say 15 years into the future— beyond which posts at central ministries, including at the highest level, would be filled exclusively from services executing the function required in each. There is a Central Engineering Service (Roads), yet you would never find them occupying top posts in the ministry of road transport at secretary or additional secretary level, or in the National Highways Authority of India. Is it any wonder that an IIT graduate prefers to sit for the civil services exam for entrance into the Indian Administrative Service (IAS) rather than the Indian Engineering Services (IES) exam? The prospect of rising to secretary rank has to be advertised at the time of IES entrance for it to have an impact on the aspirant pool. Structural reforms need to be made today with that kind of forward delivery date.

The service parity issue has indeed been addressed in the report, but in terms of promotion intervals and pay disparities. The more serious consequence of the hierarchy between services has to do with disruption to functioning when a ministry with a particular deliverable is manned at the top by officials with no specialist knowledge or experience in delivering that service at the ground level.

What is technical? The report falls into the common trap of classifying the Indian Audit and Accounts Service (IA&AS) and all other accounts services as non-technical (para 7.4.5). But accounting and auditing are as technical as engineering, in the sense of requiring a specialized course of study. And how does the Indian Railway Store Service get into the technical list? These are all inherited categorizations which need to be done away with. The fundamental distinction is specialist versus general. Specialist services alone should fill posts delivering that specialized service. Simple.

The second failing of the system which the commission accepts as given is that there will be elite Group A services (including the IES inductees), accounting for as little as 2.8% of the total number of central employees (which itself, at 3.3 million, is small by international standards relative to the size of the population). The major task of delivering governance rests with Groups B and C, who are rewarded by being shut out from decision-making posts. This segmentation even within each deliverable has shattered internal cohesion within government.

The thin sliver entitled to key posts together with seniority issues makes for the continued shuffling of senior bureaucrats between ministries. Add to this the absurdity of certain ministries carrying more prestige than others, and you have the elite services themselves more disgruntled than pleased by the rigidities in the present structure. With constant movement at the top, the stable and stagnant base which actually executes the function within each ministry develops resentments and disrespect translating into dysfunction, enough to thwart even the most well-meaning and able IAS officers appointed to head them.

Therefore, the second deep reform that the pay commission needed to do was to define verticals for each of the major functions listed in part 7, and look at induction and progression through the vertical as a whole. IES service cadres constitute 15% of all engineers in government service. The vast majority of engineers are appointed not to a service, but to a subordinate post, with quotas governing the proportions of vacancies that can be filled through mobility from lower to higher posts. The pay commission tweaks these proportions, but quotas with floors for compulsory filling from lower levels are as damaging as ceilings to mobility. What is needed is a deeper reform of engineering into a single common service, with functional specializations, cadres within each graded A to E, and entrance to every grade and every level within every grade open to in-service applicants. A diploma holder who enters the service in Grade E should in principle be able to rise through talent and hard work all the way to Grade A.

The third reform needed is non-uniform retirement ages within each functional service. This nettle has been grasped in the armed forces, for example, where it is understood that combat troops have to retire earlier than those in desk jobs. Equivalently, there are jobs like that of linesman in electricity companies, where the rules prescribe an age ceiling for the work of line repair at 45, but where the individuals remain on the payroll up to the uniform retirement age of 60. In an upwardly mobile vertical, these employees can graduate up to higher levels, but for those who do not, the retirement age has to be equated to the performance limit for the function.

IES inductees at least take a separate engineering entrance examination. But a whole host of other services share a common entrance examination with the IAS. We then have the self-reinforcing system whereby, in a structure where higher posts are routinely filled by the IAS, the top ranking candidates in the common examination naturally choose the IAS, which then perpetuates the assignment of top posts to the IAS on the grounds that they got a higher rank in the common exam. The system constantly loops back into itself.

An example is the IA&AS, a Group A service. The post of Comptroller and Auditor General (CAG) as a constitutional position cannot be assigned to any service, so the highest post the IA&AS can aspire to is that of deputy CAG. In practice, the post of CAG is filled by retired IAS officers. Given that, clearly even applicants with excellent prior education in commerce and accounting would prefer the IAS, because among other advantages they get included in the pool from which the national auditor will eventually be drawn. Senior posts in ministries of financial adviser are also typically not filled from any of the accounts services.

The entire accounting and auditing vertical needs to merged, both horizontally across the several services into which it is splintered at the elite level (defence accounts, railway accounts and other such), and also merged vertically with posts into which accountants are inducted on the strength of prior degrees without an entrance test. With full merger, and unobstructed access to senior posts requiring accounting skills, we would begin to see the strength and confidence needed for ensuring that government expenditure is effective, without the obstructionism born of resentment.

The final paradox is that as salaries are regularly winched up for employees on the permanent payroll of government, the salary bill is sought to be held down in practice by either not filling vacancies, or filling them with temporary staff. The data on vacancies show one in five positions vacant as on 1 January 2014 on average across all departments, ranging up to nearly one in two positions in some ministries (the finance ministry among them). This is the single most important indicator of dysfunctionality of government in India, since elsewhere in the world, vacancies either address a functional need (in which case they are immediately filled), or not (in which case the post is axed). The report says nothing about either that or related issues such as the protection (not) accorded to contractual workers in outsourced services for the running of office canteens, security services, and maintenance of buildings and grounds, other than a feeble injunction (para 3.80) against exploitation of such employees.

Every commission is a reform opportunity. That is why the failure of the Seventh Pay Commission to look more deeply at the structure of government is something of such profound consequence. A pulpit like that happens only once in 10 years.

A history lesson for Indian MPs

Rather than spend taxpayer money to reaffirm their faith in values of Constitution, MPs will do well to familiarize themselves with the history of the debates at the Constituent Assembly that led to the drafting of Constitution

It is something like this: we wanted the music of veena or sitar, but here we have the music of an English band,” K. Hanumanthaiah, Constituent Assembly member, said about the draft Indian Constitution on 17 November 1949.

In between snatching the latest updates from the exciting third cricket Test match between India and South Africa, much of India last week was riveted by a parliamentary debate on the Indian Constitution. It was meant to mark the day—26 November—in 1949, when the men and women preparing the tome (only around a dozen, or 5% were women) signed off the draft that was adopted two months later as India’s Constitution.

In the course of a 1.05 hour-long speech, Congress party leader in the Lok Sabha, Mallikarjun Kharge, a stalwart from Karnataka, warned that any attempt to review the Constitution would result in… Well, we can’t spell out the word because the Lok Sabha Speaker ordered it expunged from the records after an instant uproar from the treasury benches. “Consequences” is how Indian papers reported the word, which is incorrect.

But here’s a hint of the word in the form of a puzzle: what’s the phrase that’s common between the writings of the great Chilean poet Pablo Neruda and the American art-house rock band The Doors? Googling may not help. Found the answer? Now transliterate the entire phrase into a single word (Eureka!) and translate it into Hindi.

Many observers believe Indian politics today has reached a point where there seems to be a growing trust deficit between the ruling Bharatiya Janata Party (BJP) and the opposition—the centrist Congress, the Left and a large group of parties bidding to build upon their regional influence to try and oust the federal government.

The trust deficit is what explains Kharge’s remarks—made no doubt in the heat of the moment. More calibrated were the remarks of Congress president Sonia Gandhi, who described the Constitution Day as an attempt by the BJP to claim a bit of constitutional history when it had played no role at all in India’s freedom struggle. The BJP, of course, did not exist at the time of that struggle, but she clearly meant “it and its ilk”—that is, the Hindu rather than secular nationalists.

Much of this had to do with the way home minister Rajnath Singh had spelt out a slightly disparaging view of the inclusion of the word “secularism” in the preamble to the Indian Constitution. The word secularism, he said—making an inexplicable and largely incomprehensible distinction—meant “non-sectarian” rather than “non-religious” as it has been translated in the Hindi version of the Constitution. The logic of this argument could be any number of things, such as: 1. India is not a “non-religious” state; 2. It’s okay for the state to fund religious institutions and religious schools; 3. All religions are not equal before the eyes of the state.

It is difficult to make sense of this parliamentary debate in the context of political science or the evolution of a democracy. It springs to life, however, the moment you see it from the prism of politics, specifically electoral politics. At that moment, the Indian Parliament becomes an arena of political grandstanding, much like a rally venue.

Rather than spend taxpayer money reaffirming their faith in the values of the Indian Constitution, members of Parliament will do well to familiarize themselves—or reacquaint for those familiar—with the history of the debates at the Indian Constituent Assembly that led to the drafting of the Constitution.

They would then learn that the word “secular” in the preamble of the Constitution is symbiotically linked to the words “federal” and “democratic” (and even the welfarist interpretation of “socialist”, although that’s a tiny bit more complex a relationship). The entire architecture of the preamble collapses like nine pins if you take out a word here, insert another there and conjure up arcane interpretations.

The Indian Constitution is not an anti-Hindu document, nor even “non-religious” for that matter. It could not have been, for the overwhelming majority of those drafting the Constitution were Hindu. The Congress party, of course, reigned supreme in the assembly, as the party of independence. But even within the Congress, there were members who were known for their strong Hindu rather than secular leanings. More to the point, those who led the debates were all listeners. True, diversity in less aware times was not the hallmark of the membership of the Constituent Assembly. “Women members were very few… of these, some dropped out for various reasons and their places were filled by men,” India’s first prime minister regretted in 1950, while urging political leaders to “keep up and add to the number of women in Parliament”.

The socialist, Damodar Swarup Seth, described the Constituent Assembly as representing, “at best”, the 15% of Indians who had elected the assembly’s members in an indirect election. Seth also made a heroic bid to enshrine the separation of the church and state in the Indian Constitution, which is one of the many definitions of secularism. In 1948, he proposed the following, rather bluntly put, provision in the Indian Constitution: “The use of religious institutions for political purposes and the existence of political organizations on religious basis is forbidden.”

It was shot down, which shows that the characterization of the Constituent Assembly as a homogenous unit dominated by Oxford-educated liberals, Fabian socialists and Congressmen is a mockery of history. Indeed, rather than dispute what kind of history should be taught to Indian schoolchildren, the prescribers of school textbooks can do no better than include a detailed exposition of the history of the Constituent Assembly and the wonderful debates surrounding the founding of the modern Indian state.

The state of the Indian economy

The GDP numbers point to a recovery, but given the number of caveats involved, it might make sense to wait for the third quarter’s numbers to see whether this is sustainable

Is the economy expanding?

Is manufacturing growing?

Is consumption-driven growth back?

Is investment demand back?

These are important questions. They should also be questions to which there can only be one correct answer.

Let’s then try to answer them:

1. Yes. According to the latest gross domestic product (GDP) data, the economy expanded by 7.4% in the second quarter of 2015-16. There is an ongoing debate on the representativeness of the new GDP series, but be that as it may, the 7.4% growth marks an improvement over the 7% growth rate seen in the previous quarter and is higher, albeit marginally, than what many expected it to be. It also comes on the back of the 8.4% growth in the second quarter of 2014-15.

2. Yes, but with caveats. The GDP data shows that manufacturing grew 9.3% in the second quarter of 2015-16. The Nikkei India Manufacturing Purchasing Managers’ Index, released a day after the GDP data was released, has fallen to an over two-year low of 50.3, although it remains the highest among emerging economies in Asia. China’s is at 48.6. Any number over 50 indicates expansion.

3. Yes, but again, with caveats. The GDP data shows that both private and government consumption are growing at a healthy rate (the first by 6.8% and the second by over 5%). There is also anecdotal evidence of an urban-centric spike in demand for certain products and services. A recent revision in pay of government employees that kicks in early next year should power the sails of the consumption economy to some extent. The full impact of the ongoing agrarian crisis, though, is yet to be reflected in the rural economy.

4. Yes, surprisingly. The cold hard numbers show that gross fixed capital formation accounted for almost 30% of GDP growth in the second quarter of 2015-16. Much of this, as the Reserve Bank of India acknowledged in its policy on Tuesday, 1 December, is probably on account of public investment. The poor order book position of some large equipment makers and low capacity utilization across sectors seems to suggest that private investment may not follow immediately.

What does this mean for India? The numbers point to a recovery, but given the number of caveats involved, it might make sense to wait for the third quarter’s numbers to see whether this is sustainable.

If those numbers are similar to the second quarter’s, 2016-17 might well be a better year for the Indian economy.