Sunday 3 September 2023

PM Modi speeds up Blockchain in digital drive (The Sunday Guardian)

 The RBI needs to remember that unless global crypto norms get established as suggested by the PM, several of its measures may have a negative impact on domestic jobs, revenue and economic growth.

In times of crises, people in India turn to gold, and this is what they did soon after the 1962 aggression by the PLA took place. The austere Finance Minister of India, Morarji Desai, came up in 1963 with what he thought would be a solution to the swelling imports of gold. Ban import of gold completely. For millennia, the people of the subcontinent had been purchasers and holders of gold, often for use as a last resort in case times turned sour. To expect them to stop buying gold was a leap too far of faith in the potency of government edicts in a sprawling country. Till Morarji’s ban, India had not just been an importer but an exporter of gold, often in the form of jewellery. More than two million citizens were directly or indirectly involved in the gold business. Overnight, they lost their occupations, and less scrupulous individuals took their place in the now illicit gold trade. It was from India’s 1963 Gold Ban that Dubai began its ascent as a major trading hub. Sending gold to India through a medley of ways became a lucrative business in the sheikhdom. Among the undesirable side effects of the banning of gold was the appearance of the mafia, in the shape of illegal importers of gold from Dubai to India. Smuggling of gold remained a profitable business in India until 1992, when Prime Minister Narasimha Rao once again legalised the trade by scrapping the ban. During the UPA period, Finance Minister Chidambaram imposed a 10% duty on imports of gold. After that, smuggling once again became viable, and illegal operators entered a boom period. Not surprisingly, recorded gold imports fell drastically and collections from the new tax were small. Business in gold flourished, but illegally and in cash, with the government getting no revenue out of such business. An import duty on gold in excess of 5% promotes not revenue but smuggling of the precious metal. Dubai’s rise as a trading power dates back to the banning of gold imports in 1963. Had Narasimha Rao’s policy of permitting the gold trade not been reversed by the UPA, by now India would have been the global hub of the gold trade, and would through its exchanges exert a powerful effect on not just supply but price of the precious metal. Unsustainable taxes and overzealous regulation only succeed in driving away legal activity to other shores and inflating the illegal economy.

More than a third of the GDP of the Irish Republic has its origin in a few high-rise buildings in Dublin that serve as corporate headquarters for companies selling their goods across the world. Rather than having headquarters in their home countries, they operate from Dublin because of the lower tax that needs to be paid. 10% of a million is 100,000, while 40% of 100,000 is just 40,000. A low tax and easy compliance system that promotes growth would generate far more revenue than a high tax regime and regulatory mechanisms that soak up much of the time of top and middle management in matters of compliance (rather than in market development and product upgradation). CCP General Secretary Xi has converted the business environment in China into a morass, thereby giving a chance for India to acquire a faster and faster growth rate. This has begun to happen during Modi 2.0, and needs to be in full bloom during the next five years.

There is need to be watchful that those with control freak mindsets, such as those behind such self-goals as those made by Morarji and Chidambaram on gold policy, are kept out of economic policymaking. Finance Minister Nirmala Sitharaman has subtly reminded the Reserve Bank of India that the central bank should not kill jobs in the belief that higher interest rates (rather than lowering supply constraints) would curb inflation. All that higher rates would do would be to reward those (mostly external players) who depend on arbitrage for their millions. Instead of cosying up to arbitrage vultures, central bankers need to give them a wide berth. In the US, Fed Chairman Jerome Powell and Treasury Secretary Janet Yellen are slowly choking the status of the US dollar as the reserve currency of the world by the Fed’s high interest rates and Treasury’s Russia sanctions. However, in other fields the Biden administration is doing well, among which is the rapidly emerging market in crypto assets. Binance (a PRC-controlled crypto platform) exulted at the fall of FTX, but before long, it too was substantially taken down, together with Coinbase. The hand of US authorities was scarcely concealed in such takedowns. As a consequence, the US-based NYSE and CMX are emerging as the biggest crypto exchanges in the world. That honour could easily go to India. There was a time not long ago when India had over a hundred million crypto wallet traders. Since then, a crackdown supervised by the central bank has seen almost all such traders migrate to other platforms, none of which are based in India. Worryingly, several migrated to PRC-controlled platforms, and as a consequence, while authorities in India became unaware of crypto trades by Indian nationals, the CCP was in the know. When an asset is not tax deductible when it loses value, but pays a hefty tax when it gains value, few will hold that asset and make legal trades in the taxing country. Those behind the “crypto crackdown” in India had the effect of stifling a domestic industry that continues to grow worldwide. Central bankers need to pay attention to the words of Prime Minister Narendra Modi, who ignited the massive digital revolution that has been taking place in India over the past six years. The RBI needs to remember that unless global crypto norms get established as suggested by the PM, several of its measures may have a negative impact on domestic jobs, revenue and economic growth.

Prime Minister Narendra Modi has looked towards mainstreaming Blockchain technology and ensuring the creation of platforms based on that technology. Once this happens, exchanges and the transactions taking place in them will be transparent, and therefore tamper proof where operators skilled in rigging and manipulation of stocks and commodities are concerned. PM Modi is right, for Blockchain is the future. Crypto assets are inevitably going to be a part of that future. India could have been the global hub of the gold trade, but Morarji and Chidambaram made that possibility stillborn. Another example is Prohibition, which was once imposed in Haryana. All that Chief Minister Bansi Lal succeeded in doing was to ensure the proliferation of mafias in his state, not stop the consumption of alcohol. Bihar Chief Minister Nitish Kumar, by adopting Bansi Lal’s ways, has cost the Bihar exchequer as well as public health countless sums of money by imposing Prohibition. Unless political leaders understand the realities of the 21st century and adapt policies to them, they will harm the people who trusted them with power. The sooner policymakers in India accept the realities of the present, the faster will India be what it once was, the global hub of commerce. Policies are needed that benefit India, rather than have the effect of driving business away to other shores.

Whether it be e-commerce, gold or crypto, India can be the global leader in legal and well managed transactions. The foundations of policy need to reflect in full measure the 21st century mindset that Prime Minister Modi’s enthusiasm for digital solutions and support for the adoption of Blockchain reveals.

PM Modi speeds up Blockchain in digital drive

India stands up to Xi’s bluster (The Sunday Guardian)

 The year 2023 will be a special period in the roster of G20 annual meetings. It is the year after the members of NATO became engaged in a proxy battle with the Russian Federation, so far in Ukrainian territory. It is the year that followed the “informal” distribution of a set of maps in the Samarkand summit of the SCO during 15-17 September 2022 by the Chinese delegation. The maps were inaccurate, to say the least, as it showed vast tracts of sea and land territory as belonging to other countries but which the cartographers labelled as Chinese. The international institution that was given the task after World War II to keep the peace globally was fractured, as its permanent members were divided into Russia and China on one side and the US, Britain and France on the other. It was only at the last moment that a sufficiently anodyne agreed statement was presented to the world by all the members of the G20. If 2022 was difficult, it was clear that 2023 would be even more challenging. Rather than walk away from the challenge by consigning the rotating chairmanship of the G20 to an insignificant space, Prime Minister Narendra Modi decided on the opposite course. The group would get a makeover and be placed in a much higher orbit in the world of international diplomacy than it ever had been before. There would be explosions all around, and many minefields to traverse, but India would wade through them and brave the fire. The country would showcase the concerns of the Global South in a manner not witnessed before within the G20. What this writer christened the G200 (standing for the group of 200 members of the Global South) would be given a seat at the table each time there was a meeting during the Indian presidency, and there were an unprecedented number of meetings. In each, task forces set to work in order to come up with diagnoses and solutions to the problems facing the world, and by the time the 2023 Summit takes place in Delhi, each of them would have cogitated and come up with reports that would be of immense value to those policymakers seriously rather than superficially concerned about the state of the world.

More than 95% of the work of the task forces set up under the Indian presidency is complete, which means that the leaders gathering in Delhi will have a full menu of options to consider in their deliberations. For too long, the G20 was a talking shop, a sideshow that featured indifferent international theatre. All that changed in 2023. Next year, it is certain that Brazil will enthusiastically take up the baton given to South America’s largest country by India, the world’s most populous country, and thereby ensure that the G20 remain on the elevated trajectory that it has been placed in durinG2023. Of course, there are those who seek to ensure that any peer country is seen to be less than successful, and that appears to be China’s dynamic with India where the 2023 G20 is concerned. This would surely have been anticipated by Prime Minister Modi and External Affairs Minister S. Jaishankar, and shock absorbers created to offset the effect of any of the “shocks” to the 2023 G20 Summit that CCP General Secretary Xi Jinping was likely to attempt. In case reports that Xi is skipping the 9-10 September Summit are accurate, it would be out of frustration that thus far, the proceedings of the G20 have gone well. Xi’s absence would indicate in a way few other actions can that he is not sincere in his protestations about boosting the prospects of the Global South. After all, the concerns of the Global South are at the centre of the deliberations thus far of the different mechanisms of the G20. Vladimir Putin showed grace and regard for India by not attending. Were he not to attend the Summit, Xi would demonstrate a lack of grace as well as make public his dislike of the world’s most populous democracy, indeed the most populous country in the world. Prime Minister Modi will continue on the path he has mapped out, flagging the concerns of the Global South in particular and the need for the G20 to work harder at making the world a better place. Not every leader of a big country sees life in Zero Sum terms in the manner that Xi Jinping quite clearly seems to. Given the strong foundation that has been built over the past nine months, what is certain is that the 2023 G20 Summit will be a success. That would be a victory for the entire Global South, in the way that the Chandrayaan-3 landing has been


India stands up to Xi’s bluster