#4 Updates in Law, Economics and Policy
The Ghost of Ladli Behena, Conquest and LFPR, Amendments to Commercial Laws
It has been a busy week so I am back with updates from two weeks instead of one! A long-ish post follows. A lot has happened in law and economics since!
Law Update
1. Commercial Courts Amendment Bill— If wishes were horses, beggars would ride
Commercial Courts Bill seeks to amend the Commercial Courts Act 2015 and Civil Procedure Code— Draft released for public consultation. Following is a summary of the proposed amendments:
a. Enabling state government to create/designate dedicated commercial courts for arbitration [S.3, S.10 CCA]
b. Shortening delays
The filing limit for written statements is reduced to 60 days[Order V CPC], Judgment is to be delivered within 60 days of the conclusion of hearings[Order XX r. 1], Discretion to the court to impose costs including progressive costs for adjournments [Order XVII r.1], adjournment for parties who have been granted injunction made more difficult [Order XVII r.1], Injunctions to be disposed of in ninety days—if without notice matter to be disposed of in thirty days [18A CCA], non-appearance post adjournment can empower the court to grant ex-parte decrees[Order IX r. 7A], All procedures post an application for execution of decree to be executed in twelve months[Order XXI, r. 10A]
c. Other
Technology integration facilitated and mandated [S. 26, CPC; Order XX, Order VIII, Order V, CPC; S. 19, 19A of the CCA, new definitions], Reinforcing that interim relief shall not interfere with pre-institution mediation- in case interim relief is sought and granted or refused — pre-institution mediation is mandatory [S. 12A], the Bar of limitation on appeals may be relaxed in extraordinary circumstances [S. 13 ACA], S.13 appeal conditional on prior notice[S.14 CCA], Conciliation was deleted given the new act on Mediation.
Related links
1. The Commercial Courts Act in 2015.
There are at present 67 commercial courts — 49 of which are in Delhi— in the country. Good data for economists to toy with.
Their functioning is discussed here
2. Arbitration Act Amendments
Furthering the momentum on amending the ACA,1996 in light of the earlier report by B. N. Srikrishna and the new report submitted by a committee headed by T. K. Vishwanathan, the ACA amendment bill, 2024 has been proposed.
Many perspectives have flown in since. Some argue the amendment provides clarity, and some suggest “Don’t fix what ain’t broken” (1, 2). Here is my favourite breakdown (1, 2). Amidst this, there are also murmurs about the government's anxieties on the rising costs of arbitrations to which it is a party and recent judgments including one invalidating unilateral appointment of arbitrators.
Some key changes:
Redefining arbitral institutions to promote institutional arbitration—freeing arbitral institutions from court approvals; Clarifying seat and venue; Introducing an emergency arbitrator as was recognised by the Supreme Court; and amending the act to streamline and expedite the process.
3. Sambhal and the Places of Worship Act
Sambhal violence reminds us, that the Places of Worship Act is central to peace in present-day India. Gyanvapi's judgments allowed the surveys of the alleged Shiv Ling and have kept the pot boiling. Meanwhile, the SC has prohibited any court from registering suits and passing any interim or survey orders in any matter about the PoWA, 1991.
When the Gyanvapi survey order was appealed in the SC, the SC allowed the survey. After heaping praise on the PoWA in the Ayodhya Judgment, the Ex-CJI orally remarked during the Gyanvapi proceedings that PoWA was no bar on the survey and determination of the historic religious character on 15th August 1947. PoWA only prohibited suits and claims of conversion. The SC then also allowed a “non-invasive” survey. This certainly has great potential for conflict using a practised script.
4. Some interesting articles
S Rajagopalan reminds us of the travesty of the victims of the Bhopal Gas Tragedy. [Paper]
Equities or equitable interests? Which should supersede? An 1861 judgment whose reverb still permeates, and the confusion that still survives. What were Lord Westbury’s intentions in Phillips v Phillips?
Economics Update
5. The Unseen Behind Unconditional Cash Transfers — Part-I
Following Rajasthan, Madhya Pradesh and Maharashtra, now, Delhi too has announced an unconditional cash transfer to women. I wish to make two arguments about why cash transfers are so salient in the first part and then understand the fiscal consequences of Ladki Bahin Yojana in MH.
The Nabard survey on financial inclusion in rural India points to some data which in my opinion would explain why cash transfers are working:
Extent of indebtedness
55% of agricultural households and 52% of all rural households are indebted. One in four houses have non-institutional loans. The average debt of indebted households is upwards of 90,000. Even if indebted households match average consumption they have about ten months of consumption worth in debt [principal only] to repay. In contrast with the 2016-17, the 2017-18 survey suggests a visible increase in indebtedness in some states, albeit consumption expenditure has also increased. Carefully also note the state-level variation.
Steady growing rural household income — But drastic fall in % income from Manual Labor, very slow growth in income from cultivation
Source: Calculations based on the NAFIS Surveys 2016-17 and 2021-22. Real Monthly Income
A 7% CAGR for real income in rural India is in keeping with GDP growth overall. The caveat is that income measurement is fraught with challenges and limitations. One interesting observation from NAFIS is that the proportion of total income from Manual labour for both Agricultural and Non-agricultural HH has fallen from 43% in 2016-17 to 20% in 2021-22 (26% for non-agricultural households). The average income from manual labour for the rest has also crashed. Roughly 20% of the income of the total has shifted to government/private jobs or other enterprises. Either the data seems erroneous or we are missing a major structural shift.
What is the most worrying is that growth in real average income from cultivation was a meagre 1.35%. Rural wage seems to be dipping and people are exiting manual labour in search of other jobs or no jobs and very high youth unemployment. This is consistent with other accounts— from Labour Bureau data for example.
This chart below showing Real Wage in Rs/day will give any economist nightmares. Jean Dreze is writing here, here:
Source: Dreze, Ideas for India
6. The Unseen Behind Unconditional Cash Transfers- Part II
The Ghost of Ladki Bahin Yojana will haunt Maharashtra.
The Mukhyamantri Mazi Ladki Bahin Yojana promised to give Rs. 1500 per month to all. Ten million beneficiaries were anticipated. However, the land ceiling limit of 5 acres for the eligibility of beneficiaries was removed. If the husband was domiciled in Maharashtra, the woman from any state marrying him could benefit. The age limit of eligible women was increased to 65.
The total number of beneficiaries now is 2.34 crore! Some officials suggest that 15 million beneficiaries from other schemes like the one for retired unsupported women have “crept into” the scheme leading to duplication of benefits. Some argue that the checking was lenient, which I can attest to.
As it stands, the scheme is set to cost 46,000 crore rupees per year : 2.34 crore*18000=42,120 crore. Add to that 10% interest. The government plans to further increase it to Rs. 2100, leading to an expense of 55,000 cr. This is maniac and unsustainable. The government also spent 200 crores on advertising the scheme.
For contextualising those numbers here are some figures from the Budget, Economic Survey :
If Ladli Behena Yojana were a ministry, it would have the second-highest outlay.
The debt-GDP ratio of Maharashtra is at 17.6% which is excellent fiscal health, the FRBM act prescribes a limit of 25% for states.
The fiscal deficit previous fiscal year was 2.8% and jump up from the year before, given it was a pre-election year.
The total capital outlay by the government on buildings, roads, bridges and all else put together was 57,000 cr. The spending on Ladli Behena Yojana is 15% of all development expenditures.
The spending is completely non-discretionary and twice the health budget or the social welfare and nutrition budget in Maharashtra. The amount equals water, sanitation, housing and urban development budgets put together.
The Maharashtra Government could have attempted to build cities that are well-financed and cities that work. Here is a menu card of things we could have spent on:
Source: Economic Survey of Maharashtra, 2023-24. The table shows Total outlay i.e. Captial+Revenue outlay.
5. If it costs about 250 crores to build a medical college and 2.5 crores per month to run it, we could have built one medical college for each of 36 districts and run them for 20 years including interest costs. One in each district of Maharashtra in just one year's worth of Ladki Bahin Yojana’s spending.
Here are Maharashtra’s nutrition outcomes where there is so much we could have done with that money:
Source: Niti MH, Health Profile
Neeraj Hatekar and Savita Kulkarni remind us of the worst rural deprivation in Maharashtra, worse than other counterpart states. The ratios of relative district incomes are worsening, quality of public infrastructure in rural Maharashtra is very poor. Multi-dimensional poverty in Nandurbar is as high as 33%. Block-level outcomes are much worse. Tribal development budgets could have also benefitted directly from this money.
Over five years at 8 pcpa interest rate, the government of Maharashtra will have spent 2.91 Lakh Crore Rupees on the scheme. On increasing it to 2100, the government would’ve spent to the tune of 3.41 lakh crore rupees on the scheme. At 10% nominal growth rate and supposing the interest and principal due in each year is paid from revenues; the fifth year principal and accumulated interest of five years will amount to 1.5% of GSDP.
If the entire scheme were debt funded, by the fifth year, Maharashtra Government would have added to its debt stock [at 10 % nominal growth and 8 pcpa interest rate] 5.7% of the SGDP. Overall, 23 ish %, well under the 25% threshold but only if everything goes right. The headspace available from extra growth for discretionary spending is soaked away substantially. Maneuvering space on fiscal deficit remains narrow. If Maharashtra runs the scheme for ten years completely debt-financed (which will happen unless other expenses don’t grow proportional to GSDP) without changing anything else, it will risk a 8.9% increase to the debt-GDP ratio.
Reducing Debt-GSDP ratios, especially when counter-cyclical policy is much needed is a painful process.
This is an interesting experiment where the State is spending more on Unconditional Cash transfers than capital outlays. How this pans out remains to be seen. Will this save rural consumption from the ditch? How long will the scheme continue? Will this set-off a competition for cash transfers? What will this do to politics? Will Maharashtra slow down on building capacity of spending and governing? All things remain to be seen.
7. Conquest? Spurious correlation can be dangerous
[“How is this economics?” caveat applies, but this is important. ]
Dr. Evans hypothesizes that conquest is a good possible theoretical explanation for the growth of honour or izzat associated with the chastity of women in turn associated with a relatively low Female LPR in Bihar and UP. She makes a visual inspection of ancient statues in Bihar and finds that post the 14th century, the figurine representation of women has changed and they are much more chaste thereafter. After giving the necessary caveats she locates gender divergence in “conquest”.
We should be cautious because the literature might tell us a different story.
Such inferences can be perilous in deep-divide societies and researchers ought to be very meticulous. While the observation is valid I disagree with her reasoning on the theory of conquest for following reasons:
A.S. Altekar, a nationalist historian, in his renowned volume on the position of Hindu women concurs marshalling primarily literary evidence that purdah spread with Islamic invasion; but, argues that the spread of purdah was common and simultaneous over Rajputana, Bengal, UP and Bihar and happened at a wider scale in UP and Bihar only in the early 16th century. The 14th-century UP-Bihar theory that Evans proposes is too simplistic to hold ground. Altekar also argues that purdah was initially limited to upper-class women before it took firm root.
When exactly purdah took root and was popularised is disputed and hard to prove. RS Sharma traced it to the Delhi Sultanate in the early 1200s, and some others to a later period. Evans’ inference also confounds with the gradual strengthening of the Tughlaqs who amassed control over an extensive tract of India in the late 14th century far beyond UP or Bihar and if they enforced purdah it must have gone all over the country. Khaljis, before Tughlaqs did not control Maithil and other regions of Bihar. During the 14th century, Khayarawal, Oiniwars were said to have ruled parts of Maithil and Bihar but little is known about the dynasties.
Altekar further notes that some seclusion of women-expectations of reserved behaviour, and restrictions on movement were not uncommon in ancient Hindu India. Altekar traces this to a reduction in age at marriage from 15-16 years to immediately after puberty which he happened in late Vedic and early Christian period: the rise of Dharmashastras and Smriti-kaars in the 4th century BC seems to have marked this shift. Sati, Niyoga, and dispossession from heir-ship all therefore predate Islamic invasion. A close reading of Arthashastra and the Manusmruti will also give this away. Reduction in age of marriage according to Altekar accorded more control and power to the husband. This in my opinion more properly constitutes the beginning of the elements of honor and izzat in Hindu Society much before the Islamic invasions.
When speaking about topless figurines in the book, he also distinguishes the sculptor’s imagination and upper-class tastes in art from the life of the people by citing contemporary literature to demonstrate that the artistic depiction of nudity and eroticism may not be representative of popular belief about norms around eroticism. In so doing he denies alternate challenges to this theory that the literature is limited and Brahminical, or these figurines were made by Dravidian sculptors whose style was markedly different, etc. He also disputes the linear understanding of the evolution of nudity by pointing to other older nude statues in Gandhara style. We should be much careful in making inferences about public life through the evolution of surviving art.
While Altekar’s writing is criticised (See here a scathing from Uma for example) for advancing a romantic and tinted view based in Brahminical sources and national pride, his engagement with the literature is still extensive. The idea that the access of women to public spaces was restricted even before the advent of Islam in India is also accepted by Altekar’s critics. See here for an example.
Though I may be wrong, the bronzes in the post shared aby Evans are likely Pala bronzes dated to circa 10th century. The Pala empire ruled over that part of Bihar and it ended by the mid-twelfth century and with them likely their art forms too perished. Further, comparing figurine representations with imagery is hardly proper. Figurine representations of several Goddesses continue to bear weapons and are much akin to older representations.
Nude representation in late medieval India certainly seems to have been rescinded. But the reasons seem more complex than any linear understanding of conquest and its precise influence on art. E.g. Very few prominent temples after the 15th century bear erotic representations countrywide in areas with or without predominant Muslim influence [except some in Vaishali, Udaipur and Cudappa]. Even in Vijayanagara paintings for example, the representation of women changes after the 15th century. While Dr. Evans is latching onto something important, a causal association with conquest must invoke a skeptic response.
Related: For imagery in the Mughal period see Private pleasures of the Mughal Empire and this. Also see, brief review of paintings of women.
8. Indian Corporates should do FDI
We can trust Ajay Shah with wild big-picture thinking and he is back with an excellent short piece exhorting Indian firms to do FDI: FDI strategy for Indian firms. Let this line linger with you:
“In the field of international trade, the traditional classification has been that between tradeables (things like ball bearings) vs. non-tradeables (things like haircuts). But once FDI is in play, it is perfectly possible for an Indian firm to deliver haircuts to a customer in New York by doing FDI. Hence, the distinction between tradeables and non-tradeables is no longer that useful. The useful distinctions are between firms in India who have low vs. high engagement with the Indian state, and their going into high rule of law environments vs. other countries.”
Can Indian multinationals do effective FDI? Are there firms that are nimble enough? Difficult questions.
9. China dominates the world's Manufacturing Supply Chains massively
Offered without comments:
Source: Twitter
10. Ashish on his blog is simplifying Indian Power sector
My favourite Indian power sector chart:
Source: Electricity Distribution Report, NITI
One can in this chart alone explain comparative advantage, power micro-economics, state capacity, subsidies and public finance, contracting and negotiation. I hope Ashish writes about it.
11. Who got the PLIs
3/4th employment is from 4 out of 14 industries.
If the numbers are to be believed, they are impressive! 36% jobs of those promised claimed to have been created. Solid growth in mobile manufacturing, food processing and pharmaceutical. Most sectors have generated some employment. A more detailed CBA is necessary. Automobiles has had slow growth which is understandable because we have an unreasonably large inventory. PLI of 1.97 Lakh Cr attracted an investment of 1.23 L Cr, we must wait and see over five years if this investment expands, especially as the cycle picks up. Advanced Cell Chemistry batteries are yet to pick pace. Textiles are off mark.
12. Loneliness in American Youth
American youth are lonelier than ever. Somewhat true of urban youth in most metropolitan cities.
From Alice Evans:
Half of those single are not looking for a relationship or to date. An old related post, South Korea is disappearing.
13.Data Updates
a. GDP estimates recorded a marked slowdown and the Monetary Stance Remained Unchanged (Governor’s address, MPC Resolution, Minutes-to follow).
Private consumption is picking momentum. Hopefully, it sustains. Construction growth remains robust. Manufacturing and Mining unfortunately still remain sluggish. Sale of commercial vehicles struggling. Rates remain unchanged.
b. Latest data on Indian states from RBI is out