Possible solutions to the economic downturn
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Dr Arvind Virmani, an economist, says higher unemployment is a consequence of slowdown in GDP growth. He says decisive action must happen on:
1. Lowering of bank base rates and improvement in liquidity, to counter sky-high real interest rates.
2. Stricter RBI regulations and transparent credit ratings of non-banking financial companies (NBFCs)
3. Prompt payment of govt dues and front-loading of investments.
4. Simplification of GST to the extent possible.
5. Do what it takes to attract manufacturing that is leaving China, a one-time opportunity.
Longer-term
6. Skills development should happen at all levels on a much larger scale.
7. Quality of education must be improved in a significant way at primary and secondary levels.
8. Research and development spending should go up as a percentage of GDP (mine).
According to his working paper (Aug 2019), page 15-16
https://egrowfoundation.org/site/assets/files/1225/dr__virmani_gdp_egrow_working_paper_1_1.pdf

"Lowering of corporate tax rates to East & S.E. Asia levels (i.e. 20-22%) and a simplified Direct Tax Code will help eliminate Tax Terrorism (& improve EODB in paying taxes), and recoup tax revenues from improved compliance over time. In these circumstances, fiscal deficit slippage in one year will be acceptable to the markets. A drastically simplified 3-tier GST structure must be put in place. Rates can be worked out to keep GST revenues unchanged."

"Converting welfare subsidies into Direct Cash Transfer has already eliminated corruption, reduced handling costs and delivered expected benefits to the needy. Application of DBT to all subsidies will release funds for Govt' social agenda, eg. Drinking Water, Health, Housing and Job Skilling. Capital expenditure, particularly in defence sector has slipped. It can be enhanced by sale of loss-making Public Sector Units."

Out of the above, govt is likely to address points 1 to 5 but fall short on points 6 to 8. Govt's actions in stimulating economic demand and improving the financial situation of industry, can be seen in reduction of corporate tax rates and the commitment to reduce its dues to industry. It will also spur consumption though putting more money in the hands of farmers and through proposed, dramatic reduction in income tax rates. Beyond this, govt seems to be targeting reforms through these measures:

1) Ease of doing business - where the outstanding are:
-- paying taxes (ie simplified GST / lower personal taxes / lesser harassment / fair tax adjudication)
-- registration of property (comprehensive authentication, foolproof land records with state guarantees)
-- legal disputes (overhaul of courts, easier legal process, infrastructure, evidence gathering & policing)
-- state-level reforms (speedy & hassle-free logistics, lower transaction costs, simpler rules, efficient handling, transparency and accountability, new infrastructure and manpower for the same)

2) Do reforms of old Labour laws, such as formulating cogent and easier-to-implement labour rules; formalising employment in gig sector ensuring workers are paid minimum wages and other employee benefits; new social security provisions for the unorganised sector; and easing on retrenchment rules for large firms (?) so that larger firms will be established as a norm and production will be scaled up to more efficient levels.

3) Fix ineffective banking governance through public sector bank amalgamations, superior bank credit risk management, transparent & accurate risk assessment of NBFCs, etc
4) Reduce losses in PSEs via sale of Air India and restructuring of BSNL & MTNL
5) Realise foreign participation for FDIs, technology partnerships and debt financing, though country-to-country & heads-of-corporates level interactions.

6) Promote exports by various means incl. cheaper export credit, beneficial trade deals, etc

7) Domestic defence manufacturing will be boosted by higher indigenous R&D through encouragement of private sector efforts & collaborations of private sector with public sector R&D institutes. There is also a commitment towards higher private sector manufacturing, encouragement of start-ups (in niche products) through direct financing and procurements, easing of export controls, etc. MOD & services will lay out procurement needs in a transparent way, encourage suo moto proposals (eg HAL's HTT-40 platform accepted by IAF) & reduce delays in the acquisitions process. They will take on board industry ideas on ease of doing business, acquisition process, strategic partnerships, etc.

8) Make in India (general): lower corporation taxes doing away with MAT regime, CSR to be allowed in collaborative R&D, reliable power supply and lower power tariffs, good supply of water, lower freight haulage costs of road & railways and cheaper logistics via inland waterways development, further opening up of FDI through automatic route and personalised facilitation of large investments (over Rs 500cr), progress in laying down economic corridors infrastructure and availability of readymade industrial areas of various types across the country; improvements in EODB, etc

9) Make in India (specific):
-- Gas as there is massive potential in extraction (near-term) and coal gasification (in future)
-- Steel, coal mining and other heavy industries (eg power, railways)
-- Solar PVs due to high installation targets
-- Hydro & nuclear power projects, as bottlenecks are eased, transmission added & costs lowered
-- Electronics due to exponential growth in demand
-- Telecom equipment as firms commit to buy mainly Made-in India products
-- Knowledge industries (eg medical equipment, pharmaceuticals) due to industry strengths
-- Fuels such as ethanol from sugarcane, bio-CNG from waste, and industrial methanol due to potential
-- Bamboo (furniture, flooring, fuel) and other agricultural products (eg food processing) due to potential
-- Handlooms, tribal arts and forestry products due to financial and marketing support

10) Fix the troubled sectors like auto (eg vehicle scrappage policy) and construction (ousting defaulting developers and completing projects on risk-sharing basis)
11) Step up increase in infrastructure spending, to improve efficiency & capacities
12) Planned high growth in public health services and emphasis on quality education
13) Promote digital working and digital payments, improved digital payment platforms, payments infrastructure, national control of personal data and data security.
14) Reduction in economic losses caused by lack of water, sanitation, cleanliness & waste management; air pollution; malnutrition; deaths & injuries due to accidents; laxity in dealing with law & order, transnational crimes and border security; and disruptions caused by foreign and domestic players.

Fact-Finding teams of GIA present reports to the Union Minister
Kashmiris want to punish the politician looters. No sympathy for jailed separatists.

Three teams under the banner of Group of Intellectuals and Academicians (GIA) visited Kashmir, Jammu and Ladakh regions of the erstwhile state of J&K, to know the ground realities and understand the aspirations of the people. The teams found that people have high hopes from the Centre particularly after the UT status was granted. They want to punish the politicians who looted the state for seven decades and have no sympathy for jailed separatists. The Report was presented to Union Minister Dr Jitendra Singh in Delhi on October 23, 2019.

"The objective of visiting the state was to observe the daily lives of people in Jammu, Kashmir and Ladakh regions and to catalogue conditions in their entirety. Therefore we spoke to the people in streets of Kashmir, sought appointments with members of civil society and Government, and met people from across all political and economic streams,” Smt Arora said.

The team met random persons on the streets across rural and urban Jammu, Kashmir and Ladakh. The teams also met the minority groups in Jammu, Kashmir and Ladakh—Shias, Sikhs, Kashmiri Hindus. They also met the marginalised groups in Jammu, Kashmir and Ladakh including members of SC/ST communities. The groups meet the political party activists belonging to mainstream political parties as well as terrorist groups. The discussions were held with the representatives of the Armed forces, state agencies and government officials in all three regions.

The Jammu fact-finding team visited Jammu, Akhnoor, Sundarbani, Nowshera and Rajouri areas and covered both rural and urban areas. The Ladakh team spent time in Leh and visited several villages. They visited Government offices, Colleges, schools, people's homes, market places and spoke to men, women, youth and children in urban and rural areas.

The Kashmir fact-finding team looked at issues such as those impacting women, nationalist Kashmiris and minorities, to help develop a framework for furthering the aspirations of people in the State. The report states there is no lockdown. It noted that shops are open, there is usual traffic on roads, there is no scarcity of doctors and medicines, and there is no evidence of any kidnaping by security forces or other brutalities.

People of the region are happy that corrupt politicians have been detained. “Kashmiris across the board seek healing from a corrupt, oppressive, social and political culture that has emerged over the past 70 years and become embedded in the last 30 years. They want the UT model to work particularly in Kashmir, and are looking towards Centre to reach out to them with real change. The report recommended that any group, nationally or internationally that tries to derail the healing or normalisation process should be effectively countered.

The Situation in Kashmir

The fact-finding team observed the intense petitioning and activity in the media for the release of jailed Kashmiri leaders in Kashmir, and loud proclamations to establish that Kashmir is under ‘Lockdown’ and there is ‘genocide’. There are reports that 1300 children have been picked up and lodged in jails outside Jammu & Kashmir. There have been calls for restoration of mobile and internet connectivity. On the contrary, there is no sympathy for jailed Kashmiri leaders amongst the common people of Kashmir. People want the Government of India to take the leaders to Court and convict them for corruption. There is no Genocide in Kashmir. The only Genocide observed was that of Kashmiri Hindus in 1990. At present Kashmiris are not under any kind of lockdown or genocide.

The team found that there is a large section of people who credit the amendment in Article 370 and the removal of Article 35A with saving many lives. “Women are safe in Kashmir. We saw women on the roads driving cars. We saw them actively working in the Panchayats. They are not being harassed due to their religious identity. Sarpanches are looking forward to BDC elections. However, they need urgent security and reassurances from the government. The minorities of Kashmir seek closer interaction directly with the GoI. They want that Kashmiri Hindu Genocide must be recognised by the GoI. The experiences of the victims cannot be equated with the brutalisation of Kashmiri Muslims in the State by non-State actors. The Kashmiri Hindus were targeted for their religious identity. There is a silent constituency of wisdom amongst Kashmiri Muslims. They seek closer interaction with the government,” the report said.

The team found no evidence of children being picked up by security forces and randomly arrested. Media persons are freely travelling and reporting in Kashmir. No one stopped the team during the extensive travel through Kashmir. The brutalisation of people by terrorists still exists in rural areas. They are not allowing people to resume daily lives, the report added.

The Situation in Jammu Region

The team that visited the Jammu region found everything normal. Markets, shops, transportation services, schools, colleges, universities, hospitals, mobile and landline phones were working as usual. Internet services are available on Wi-Fi at homes, Internet Cafes and all government institutions. Only mobile phone internet was withheld till date. All the people interacted during the visit welcomed the decision to set aside Article 370 and 35A. Many people shared their apprehensions regarding the loss of lands and jobs as they fear influx of outsiders. A few students also were enthusiastic about expected increase in competition and their own possibility of skill development. “The team felt the prolonged pain and suffering of the victims of 35A. No compensation can reverse the years of their mental agony and all kinds of loss. There is dire need for development of the neglected and discriminated areas and communities in the region. The government needs to identify and prioritise its tasks on immediate and long term basis,” the team said in its report.

The Situation in Ladakh & Kargil

The team that visited Ladakh observed that in both Leh and Kargil people are engaged in deriving benefits from the UT status and are looking at ways in which their regions will develop mechanisms for empowerment through BDC elections and the like. There is a demand for greater focus on the preservation of the Bhoti. They also want greater participation of local populace in the decision making process. People want a greater focus on land connectivity because large parts of South Ladakh are even now accessible only on foot. Similarly, air connectivity, communication connectivity etc. also need to be strengthened. Education infrastructure is required to be strengthened in local area, as it has been a dominant concern of the local population since long.

Since lot of focus is on creating the economic opportunities, concerted focus is required on local value addition, development of local resources with adequate documentation and adoption of technology, suitable distribution of the surpluses generated and active participation of the community in the process. Focus is also required in a concerted manner on local skill formation in the locally relevant sectors and then creating economic and entrepreneurial opportunities to absorb these skilled people. Tourism has been a contributing factor to social unrest in this strategically important region; the government has strong incentives to pay closer attention to the effects of tourism as well as tourist facilitation. Since Ladakh’s main attraction is its culture and natural environment, the government needs to be open to initiatives aimed at protecting these. In this context grant of Union Territory status to Ladakh makes perfect sense. People from Leh and Kargil have been brought closer and are now able to resolve mutual differences with greater attention.

People in Kargil are very delighted with setting aside of Article 370. However, some people are not aware of the outcomes and therefore they are a little confused. K Hassan Pasha, a politically active resident of Kargil, said that educated people of Kargil are very happy with the removal of Article 370. They feel that now onwards the Kashmir centric policies will stop and they have finally got independence in the right sense of the word. The future is bright and now we will get our rights.

“Ladakh is a place where the Ladakhi and Indian identity is bigger than the religious identity, all groups coexist harmoniously. While the developmental concerns remain, those are endemic to the place and concern all. What does emerge is that for the isolated geographical places and distinct cultural and linguistic groups living therein administrative political and developmental dimensions need to be seen beyond the constraints of a larger administrative mechanism like a state where these identities get marginalised. In this context grant of the Union Territory status to Ladakh makes perfect sense,” the report of the Fact-Finding Team added.

Survey: Kashmiris for punishing the looters and No sympathy for jailed separatists

According to NITI Aayog’s “Digital Payments (2018 edition)”, India’s digital payments industry is estimated to grow to $1 Tn by 2023. It also suggested that the value of digital payments will likely jump from the current 10% to over 25% by 2023.
BHIM 2 launched by govt to make it at par with Google Pay, Phone Peand, Paytm

While India's payments landscape is largely driven by cash, digital payments are making headway. Going by a recent survey, one in every three respondents went cashless during the festive season, that is, 32 per cent of those surveyed used at least one digital payment method during the survey period. Only one in 10 respondents (10 per cent) claimed to have not made a single digital payment in the period leading up to Diwali.

When asked what encourages them to use digital payments more frequently, 42 per cent said that they wanted better rewards (discounts, incentives or cashbacks), followed by 24 per cent who saw faster and more seamless checkout (more convenient than cash or card payment) as the key motivating factor.

The survey, conducted by UK-based data analytics firm YouGov and payments systems company ACI Worldwide, also revealed a consistent picture across age groups in terms of the digital adoption: 77 per cent of millennials used digital payments at least once during the festival season, compared to 72 per cent of Gen Z and 69 per cent of Gen X. Nearly half (45 per cent) of baby boomers indicated that they had used digital payments within the survey period.

Among various payment methods,  44 per cent of the respondents resorted to merchant websites (e-commerce) or apps (person-to-merchant) and 36 per cent on peer-to-peer channels to make low-value payments up to Rs 1,000.

"Digital payments, including UPI and other e-wallets, are increasingly becoming the payment method of choice across a wide spectrum of consumers in India," said Kaushik Roy, vice president & country leader - South Asia, ACI Worldwide.

The study highlighted consumer concerns and industry opportunities as well. For example, 44 per cent respondents see internet connectivity as a top concern in the growth of digital payments, followed by failed transactions (36 per cent), problems processing refunds (32 per cent) and frauds (29 per cent). The sample size of the payments survey included 1,025 adults. The online fieldwork was carried out during the October 9-15 period.

However, banks, fintech players and merchants must take note that 40 per cent also see data privacy as a top area of concern when it comes to digital payments.

Meanwhile, latest data released by National Payments Corporation of India showed that UPI transactions hit an all-time high of 95.5 crore in September 2019 as compared to 91.83 crore in August. There has been a 135 per cent YoY increase in the number of transactions.
Festive season discounts, incentives and cashbacks drive digital payments

The announcement of the Regulatory Sandbox for fintech companies by the Reserve Bank of India has caused a flutter in the country’s fintech sector. While the regulatory guidelines are in place, the nature of the regulations per se are pretty much a work in progress as both the regulator and the regulated will learn as the sector gets further and more rapidly disrupted with technological advances. To discuss the finer aspects of the regulatory sandbox, how it can empower and enable the fintech ecosystem, what bottlenecks continue to remain and how some of the grey areas can be addressed, ORF organised its third edition of the Mumbai Tech Talk on 9 October 2019. The Mumbai Tech Talk was organised in a roundtable format that saw a range of stakeholders including representatives of government, start-ups, fintech companies and digital payments and banking community discuss the theme of ‘Regulation disruption and deepening digital payments in India’.

The first session, that saw a healthy discussion on the regulatory sandbox, started with lauding India as the leader in soft and digital payments infrastructure. Services by RBI like RTGS which provide real-time procedures have played a substantial role in the expansion of soft-infrastructure in payment market in India. While countries like the United States are leading in the growth of physical infrastructure, India is on the forefront in terms of the development of soft infrastructure. With decreasing transaction and technology cost, risk management has become the most important factor for regulators and therefore, the guidelines put forth by the RBI were welcomed as a laudable initiative. While the idea of a sandbox was first introduced in the United Kingdom in 2016, and followed by countries like the United States and Jordan, the RBI sandbox couldn’t have come at a better time, it was observed.

At the same time, stakeholders noted that at present, business models in India are shaped by “highly regulated” markets. In a scenario where technological advances are occurring at a faster rate than the regulations, the regulations are increasingly becoming “rule-based” as opposed to being “principle-focused”. In order to foster a healthy innovative environment for fintechs, it is necessary that the regulations must follow the business model and not vice versa. It is important that the financial service providers are allowed the space to experiment and be able to provide efficient and cost-effective services to their consumers. Smaller economies like Jordan, for example, have a sandbox which enables interoperability to create global fintech solutions that can be compatible with cross-country regulations. In India, the sandbox will allow the regulators such as RBI, SEBI and IRDA to look at regulations from a more broad-based perspective. However, if the regulations do not align with the business models, businesses are likely to fail.

There was a general concern regarding the themes of the sandbox and principles that RBI is planning to work with. Another issue brought up was about how innovators, who are mostly fresh out-of-college engineers, would not have the prescribed eligibility when creating a new product. Moreover, they would find it risky to enter a sandbox as an experiment that might not reach the execution stage. Hence, the RBI needs to set up a helpline or a similar platform through which such start-ups can approach it easily. Additionally, with various regulators in the financial industry, there is also a need for a guide who understands regulations across all of them in totality. With the introduction of new laws around data, relaxations in the sandbox as mentioned in the RBI guidelines, might not be possible. Therefore, it was felt that there is a need for some sort of “self-regulation” when designing a product.

It was also mentioned, however, that RBI has been known to give guidance over a number of products. RBI has been approachable to banks and thus banks have the knowledge on what rules to follow. If banks are open to sponsor fintechs or partner with start-ups, the process might speed up. However, each start-up should be ready to be regulated. They need to be properly represented in the industry so that the RBI can understand them better and support them accordingly.

The second session was on strengthening digital payments, with outlining questions on whether cards are better than cash and if the focus of digital adoption should be on merchants or users and lastly whether India can and should go cashless.

Data indicates that as of 2019, cash is still the preferred means for transactions, more so after demonetisation. There is still a huge shortage of POS (point of sale terminal) machines because of prohibitive cost. Cash in circulation surged to Rs 21.16 lakh crore in June 2019 – registering an increase of 24 percent over the cash present in the system just before demonetisation happened in October 2016. Thanks to financial inclusion initiatives such as the Jan Dhan Yojana, the number of debit cards in circulation exceeds more than 840 million, though the number of POS terminals still remains at around 4.4 million. Thus, building acceptance infrastructure needs to be increased by onboarding more merchants.

The participants mentioned that while digital payment offers convenience because of the perceived ease of use, users are not confident about the digital system. It was noted that while a cashless economy is the goal, the need of the hour is to focus on a less-cash economy. There is also an urgent need to spread awareness about digital services, looking at the large disconnect between the urban and rural population. Even within the urban areas the tier 3 and 4 cities do not compare with the tier 1 in terms of digital payments. The tier 3 and 4 cities are less aware and it is necessary to question what efforts are being made to reach out to this section of the society.

Discussing behavioural habits of the consumers, it was pointed out that people spend more when using cards than when they use cash. Digital modes of payment also come with additional benefits, which are absent in cash. Even if the consumer wants to be ahead of the curve and go digital, the merchants need to have the required infrastructure. Greater thrust towards going digital possible if people are made capable and not forced to change behaviour. For example, a member pointed out that a bank was incentivising Business Correspondents (BCs) to carry out digital transactions in remote places by giving them Rs. 10 for opening an account and encouraging people to download the banking application on their mobile phones. Almost 70 percent of the people went ahead to do the same. This proves that individuals are ready to adopt digitalisation. Another way mentioned was using local languages in apps, thus helping local players and entrepreneurs.

The behavior of both women and men too differs with regards to the use of digital payments. Fewer women in India have access to digital payment systems and therefore continue to use cash. Since most digital users in India are men, the consumer data is skewed towards them. Therefore, the government and regulators must refrain from generalising data. Challenges at the ground level like phones unable to scan QR codes due to low-res cameras or network issues was also pointed out by members. This needs to be rectified by telecom service providers and mobile phone makers. But the bigger problem that was agreed upon was the high levels of trust deficit in India. For example, the RBI came out with guidelines for Near-Field Communication (NFC) cards and said that transactions below ₹ 2,000 did not need an additional factor of authentication. However, in practice, users remained suspicious of NFC cards when they saw money getting deducted from their accounts without any PIN or OTP.

The enormous size of the country’s informal economy was also an impediment in the spread of digital payments. India has a sizeable labour and retail sector that operate informally, where all transactions are cash dominated. The scale of digital transactions cannot increase until India is able to create a network to absorb the cashless transactions. Those engaged in the informal sector are most often not able to save and hence might not have a bank account. This makes the process of digitalisation increasingly difficult. It was recommended that the digital payments medium must change from smartphones to feature phones as more informal workers have the latter.

The discussion concluded on the note that a substantial force of change is present in the financial ecosystem but there is a need to accelerate the pace of change and identify the catalysts. In order to do this, it is necessary to bear in mind the cultural differences and evolving patterns observed in India and plug the gaps such that the business moves to the next level. Evading systemic risk is a characteristic concern of the economy; therefore, a regulatory sandbox is essential to bridge the gap between the regulator and the service providers without disrupting innovation.
Regulating disruption and deepening digital payments in India

Make-in-India in Defence sector will help realise $5 trillion dream

Rajnath Singh, Minister of Defence emphasised on promoting domestic industries in the Defence sector and said it will play a key role in achieving $5 trillion economy by 2024. He said, “Security of any country is of prime importance for the development of the nation. If the borders of the countries are not secured, if there is no internal peace, then the dream of development would be a far-fetched one."

"The government has already set up two defence industrial corridors—one in Tamil Nadu and the other in Uttar Pradesh, which will create state-of-the-art defence infrastructure with support of the government as well as the industry. In 2018-19, defence production was Rs 80,000 crore. We want to reach Rs one lakh crore by next year."

ARMY CHIEF, NAVY & AIR FORCE CHIEFS FOR GREATER INDUSTRY ROLE
Army Chief General Bipin Rawat said that “Make in India” initiative is helping minimise defence expenditure by a huge margin, such as a product that used to cost Rs 80 lakh, was manufactured using home-grown technology at just Rs 30 lakh.

“The Indian Army has witnessed the power shift and that is why the Army is giving utmost importance to forming public-private partnership for indigenous defence products. Indian Army wants to utilise the strength and capabilities of start-ups."

“The Indian Army has allowed suo moto proposals to come from the industry and 11 of such proposals are under consideration. To promote home grown technologies, a Rs 100 crore technological development fund for defence production has been given a go-ahead. Bureaucratic red tapism will be reduced for quicker clearances to industry in the future."

Both Indian Navy Chief Admiral Karambir Singh and IAF Chief Air Chief Marshal R.K.S. Bhadauria said MSMEs and new start-ups can significantly help to speed up the rate of production apart from cutting down on costs. Both emphasised on indigenisation of key components, and development of niche capability and technologies, such as in field of robotics for unmanned weapons platforms.

“Failing this, the whole effort of the government and the services will go to waste."

Air Chief Marshal Bhadauria said the IAF faced a major challenge of sustaining the existing fleet of aircraft. While the Indian aerospace industry, led by the Hindustan Aeronautics Limited (HAL) was already occupied with production of Su30s, Jaguars and Mirage 2000s, there is room for private players to step in.

He said dependence on public sector, namely DRDO, for weapons development had reduced in the last couple of years, though he felt that jet engine development remains the biggest challenge, which industry can take up.

Indian Navy Chief Admiral Karambir Singh welcomed industry collaboration in warship building which, he said had the greatest potential for private partnership. He said warship construction required 6.5 times greater workforce as compared to building commercial ships and hence this segment offered great opportunity for the industry. Private players must learn to convert commercial solutions into military products.”

The Navy chief added that, "Warships are retained for decades during which specialised maintenance and repair is done. 90% of such work is done in India. India has [the capability and therefore has] great potential for becoming the regional ship repair hub."

DEFENCE FOR BOOSTING ECONOMIC GROWTH: NARAVANE, NATARAJAN, DRDO 
Defence as an avenue for economic growth.

Lt Gen M.M. Naravane, Vice-Chief of Indian Army asked for a transformation, through an attitudinal change that favours domestic products over imports. He said that Indian Army is committed to indigenization and gave suggestions to making the process of domestic defense manufacturing faster.

He called for a strong supportive posture towards the defence industrial base, for further reforms of the sector, and for giving impetus to Defence Industrial Corridors, leveraging the potential of “Make in India”, and increasing the scope of exports.

He said there was a need to focus on integration of all the government initiatives, to harmonise efforts and match global standards; and set operational goals towards meeting financial turnover targets in defence production.

DG K. Natarajan, Indian Coast Guard Chief, said that ICG is in exponential growth and is now the world’s 4th largest Coast Guard. Indian Coast Guard have been promoting indigenous industry since 1987 when ICG inducted first indigenous Dornier.

He talked about ICG’s projects with the Indian [private] shipyards such as interceptor boats built by ABG shipyard, L&T shipbuilding, Bharti Defence Ltd; specialist vessels built by ABG shipyard; offshore patrol vessels built by L&T shipbuilding; 14 FPV & training ship under construction by Reliance Naval and Engineering Ltd.

He said that “Make in India” will help in maintaining operational preparedness, will bring savings in procurement, will reduce problems post-contract in requesting for upgradation of equipment and systems. He also highlighted gaps in indigenization and how ICG was working with industry.

DG DRDO, Dr S. Guruprasad spoke about DRDO technology clusters such as Naval systems & materials, micro-electronic devices and computational systems, life sciences, electronic and communication system, missile and strategic systems, armament and combat engineering systems and aeronautical systems.

He discussed how DRDO is working with different stakeholders such as forces (users), Ministry of Defence, academia, think tanks and various private industries.

He highlighted milestone achievements of DRDO which include fighter jets, war tanks and missiles; but also talked about how indigenous development of these technology platforms has been challenging under the very deliberate technology denial from foreign powers.

‘NEED TO FOCUS ON R&D IN DEFENCE SECTOR’
Development opportunities in defence production and modernisation needs.

Lt General (retired) Subrata Saha said the government must do more on R&D in the defence sector as it spends just 0.09% of its GDP, whereas the US spends 0.41% of its GDP on the same.

“There should be detailed mapping of the defence sector needs, and more focus on Indigenously Designed, Developed and Manufactured products. Govt needs to develop strategic partnership with industry and provide financial autonomy to the three services,” he said.

Lt General S.S. Hasabnis said that the armed forces requirements should be duly advertised in the open market and internet, so that new people and even foreign players can approach us with solutions and most advanced technology.

Vice Chief of the Naval Staff (VCNS) G. Ashok Kumar said that indigenous defence production should be the key goal of the armed forces.

"Indian Navy's ships have been largely indigenously developed and Made in India, and 48 more advanced ships including 4 submarines will be ordered. There is a huge scope for startups in ship building, as it involves development of many technological systems. The Navy is the first service to get indigenous surveillance system, guns and radar system manufactured in India,” he said.

Air Marshal Sandeep Singh said, “We are fully committed to creating the necessary demand for Indian manufacturers, and would also be enhancing our exports in due course. In the last 5-6 years, we have made the Make in India process simpler; in the coming days, it will become more friendly for small-scale industries."

"Our security scenario is changing very fast so that the timeliness of what we want is important. Industry players need to keep timeline in mind, and must be ready to take risks [now], as the process requires investment capital and a long gestation period,” he said.

‘EXPORT IMPORTANT FOR VIBRANT DEFENCE INDUSTRY’
Ashok Kumar, Defence Secretary said that exports are an important component of a vibrant defence industry. Already, defence exports are in application in dozens of countries, and government is extending line of credit to promote them. Indian defence exports which were Rs 1,500 crore three years ago, went up to Rs 10,500 crore in 2018-19 and are expected to cross Rs 15,000 crore in 2019-20.

He said, it is a crucial time in the partnership between the industry and DRDO, which is now unfolding. The relationship between government and industry, which was earlier that of a buyer and supplier, has now changed to collaborator and partner.

Industry is taking up more challenging tasks without any government assistance, and these innovations must be integrated to defence platforms. In this regard, industry can approach forces with their proposals and forces can take their call on it. He stated that Defence PSUs have an important role to play, whilst also praising the work of start-ups, saying their participation in large numbers in the Defence sector is a very good sign.

He said: “We have seen more and more start-ups entering the defence sector and what is amazing to see is how small start-ups have come out with such astonishing technological solutions. While some big international companies are joining with start-ups, even our forces DRDO and other government agencies have shown interest in working with these start-ups."

CRON Systems official, an Indian start-up (from Comments)
He said: “The forces have no issue whether the technology is being developed by a private company or a public sector enterprise. As long as your technology is good and functional, the army is willing to give you an opportunity.”

Views of Foreign parties on "Make in India"

FRANCE READY TO CONTRIBUTE TO MODERNISING INDIAN FORCES: LENAIN
Addressing the session on “Indo-French Strategic Partnership”, French Ambassador A.M.B. Emmanuel Lenain said his country is ready to contribute to modernising the Indian forces. “You are well aware of France’s longstanding adherence to “Make in India” as a policy. It is an effort that we will continue to amplify and our proposals, particularly for armaments, will always bear this mark. As such, France is ready to contribute to India’s priority of modernising its forces.”

“More generally, we are very keen on expanding our partnership in research and innovation. How we tackle the technological challenges today will decide how tomorrow’s world will shape up. This is even truer with the digital transformation our societies have embarked on. The partnership for critical digital infrastructure between ATOS and the Centre for Development of Advanced Computing is an example to emulate,” he said and called for “pooling of our expertise to provide state-of-the-art technology for tomorrow”.

“It is often easier, and more reassuring, to simply react. However, we will effectively promote our vision only if we take initiatives, if we proactively propose solutions, if we work to secure a compromise when necessary. France believes in being bold. As evidenced by President Macron’s invitation to India to the G7 Summit in Biarritz, last August, France wishes to be the partner of the emerging global India,” the French Ambassador pointed out.

RUSSIAN ENVOY REMINDS TIME-TESTED INDO-RUSSIAN FRIENDSHIP
In his address, the Deputy Chief Mission of Russian Embassy Roman Babushkin said the special and privileged strategic partnership between India and Russia is a testimony of the advanced level of bilateral relations. “It is unique, confiding and mutually beneficial by nature, encompassing all possible areas of cooperation. This relationship is based on similar civilisational values, time-tested friendship, mutual understanding, trust, common interests and proximity of approaches to the fundamental issues of development and economic progress,” he said.

He said India-Russia ties have successfully coped with the turbulent realities of the contemporary world. “They have never been and will not be susceptible to outside influence. Development of the entire gamut of India-Russia relations is a foreign policy priority for both the countries,” he said, adding “that explains why our leaders, who also enjoy strong personal chemistry, meet each other several times per year – for annual bilateral summits as well as on the sidelines of major international events such as G20, BRICS, SCO, EAS etc”.

Talking about future opportunities, Babushkin said: “Next year, we expect many high-level opportunities to further expand our cooperation. In 2020, Russia will host more than 120 events during the Russian presidency in BRICS and numerous meetings as the chair-country in the SCO. Along with traditional annual bilateral summit with India, we are looking forward to welcoming PM Modi to attend the celebrations on 9 May (next year) in Moscow’s Red Square dedicated to the 75th anniversary of the victory in the Great Patriotic War with fascist Germany, which was the major contribution to the end of the World War II.”

INDIA-ISRAEL PARTNERSHIP BASED ON VALUES
The Ambassador of Israel to India, Dr Ron Malka, said the “natural allies”—India and Israel—must come together to fight bigger challenges like food and water scarcity and cyber attack for larger global peace and harmony. Speaking at the summit, Malka said India and Israel have the potential of developing niche technology and innovations to get rid of water and food scarcity apart from countering the common threat of terrorism.

Citing a personal experience from the water scarcity in the entire Middle East nearly 40 years ago, Malka said Israel has been successful in new innovations to achieve water security and now it is in a position to meet the water requirements of neighbouring countries. He said that the India-Israel partnership was based on the values and the vision the two countries share with each other.

‘INDIA NEEDS TO UNSHACKLE THE HOLD OF BUREAUCRACY’
The message coming out of the roundtable session, “India’s Strategic Partnerships and Defence Acquisition”, at the Indian Defence & Aerospace Summit was that the Modi government’s “Make-in-India” move is a step in the right direction, but for the Defence sector to flourish, India has to unshackle the hold of its bureaucracy and further push the ease of doing business in the country. The session, moderated by Ashish Singh, Editor-Strategic Affairs at NewsX, was attended by Brig Gavin Thompson from the UK, Col Ludovic Dumont from France, Capt Daniel Fillion from the US, Col Assaf Mahler from Israel, and Capt Simon Bateman from Australia.

“Businessmen will go where they would find easy to do business. India, for that matter, has certain clear advantages over others. Foremost being easy access to cheap labour in India,” said Brig Thompson, adding that ease of doing business would help. “Ease of doing business in India isn’t very good despite considerable improvements shown by the country in the last few years.” Col Dumont agreed as he said, “Ease of doing business is the key.” Capt Bateman, however, believed that the change would happen with time. “India has to be patient. It is reforming and it’s very important. But the process would take a long time, just like turning a ship,” he said with a smile.

On India being the second largest arms importer, the esteemed panelists believed that India needed to have “strategic patience” and “is doing the right thing”. “No country is completely self-reliant in the defence sector. You can’t make everything yourself,” said Capt Fillion.

According to Col Mahler, this is the era of partnership, especially in the defence sector. He, however, added that there “is no one single solution to strategic partnerships. It’s a process that takes time… It may have an organised structure but the process also needs to be flexible to decide on a case-to-case basis.”

Capt Fillon said that two-way business is already in currency and would further increase. “We have to make it three-way or even multi-way. American industry is very much interested in doing business in India.” He then said something that gladdened the audience to no end. “We want India to succeed and modernise. After all, we share common interests and even values.”

On the important issue of the Modi government’s decision to create the Chief of Defence Staff (CDS), the panelists thought it was a “good move” but India needed to be pragmatic and patient.

“Yes, it’s a good move but India must be patient. It must give 5-10 years to get things in place. The forces of resistance and status quo will have to be tackled effectively,” observed Brig Thompson. Capt Fillon concurred when he said, “India is ready but it has to have a realistic time-frame. It’s a two-generational plan. We must understand that it’s not just about army, navy and air force, but also about the bureaucracy that needs to be handled.”

UNITED KINGDOM HAS LEARNT A LOT FROM INDIAN ARMED FORCES: FRASER
Admiral Tim Fraser, UK's Vice Chief of the Defence Staff, spoke about modernisation of the armed forces and bilateral cooperation between the Indian and the British armed forces.

“Working with the Indian armed forces closely during the United Nation’s peace-keeping mission in South Sudan, we have worked closely in many aspects and have learnt a lot from them and we can take this experience forward in all our future cooperation,” Admiral Tim Fraser said.

He further said that with the changing times, the armed forces also needs to change and that armed forces will need to collaborate with the industry to enable more intelligence and advanced technology and modernisation.

“We need to collaborate with enterprises from outside the Defence segment who could have more advanced or modernised technology and this way, the industry can contribute towards the development of the armed forces,” Fraser said.

Interacting in a round table conference, India’s Army chief General Bipin Rawat and Admiral Tim Fraser, the UK’s Vice Chief of Defence Staff spoke on different topics, including defence cooperation between India and the UK. Rawat said India should be given a larger role in global decision-making.

“India should be given a bigger role in making decisions at the global level. The time has now come to make decisions. India is one of the largest contributors to UN peace keeping and we have always participated as and when we have been asked to,” he said.

Commenting on terrorism, Fraser said that there was no common solution to how to combat terrorism as every nation has its own definition of terrorism. “What all nations must come and do is to participate in information and intelligence sharing at both bilateral and multi-lateral level as it will act a key aspect to deter terrorism,” he said.

Agreeing with Tim Fraser, General Rawat said that sharing of information and intelligence is necessary at the international level. “The scope of bilateral and multilateral cooperation between India and UK has a lot of scope,” he said.

On the issue of bilateral cooperation between India and UK, General Rawat said, “India inherited the UK’s system of armed forces. The UK has moved forward. It is time for us to move in that direction and as rightly done by the UK, we need a joint structure which the UK already has in place,” he said.

Rawat said that India needs to learn the new non-contact technological warfare from the UK. “The UK has recently acquired new technological advancements in cyber warfare and there is scope for a bilateral cooperation. We should develop strategic partnership in defence cooperation,” he said. He added that India and UK can also share technology related to Air Force and Navy.
Indian Defence and Aerospace Summit 2019: report

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Military Seminar videos (and comments below)

Defense Minister : https://www.youtube.com/watch?v=zEhEbI_6PM8

IA COAS-1:          https://www.youtube.com/watch?v=hj_zfRjyHGw

IAF CAS-1:           https://www.youtube.com/watch?v=sAKEMp-QflE

IAF CAS-2:           https://www.youtube.com/watch?v=LPMWd59vYCE

IN CNS-1:             https://www.youtube.com/watch?v=95k0SzoL3PU

IN CNS-2:             https://www.youtube.com/watch?v=hpNjvKeEfOM

DG ICGS:             https://www.youtube.com/watch?v=7YP2a8_cQhQ
DRDO:                  https://www.youtube.com/watch?v=W4vq-lpSa6s

VC IA Naravane   https://www.youtube.com/watch?v=fSh1gvPRK1A
Vice-Chiefs           https://www.youtube.com/watch?v=yluJ7YJS2-8

Russia:                  https://www.youtube.com/watch?v=H88U7yMmLhU

Israel:                    https://www.youtube.com/watch?v=9RCYV3bXBAk
UK & COAS        https://www.youtube.com/watch?v=Saq7kUf_fyo

Union Power Minister talks to State power ministers about self-inflicted problems
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A very good speech. He says the future of the country is more important than your next state election. "I have been in politics - I can tell you if you do the right things, people will still vote for you!!" 

India can't reach the goal of becoming a developed nation if power is not managed properly. India recently upped the renewables target to 450GW to assuage other countries on climate change, but there can't be renewables or any other form of power, if state discoms are making losses. Don't suffer losses he says, use the examples of Gujarat and Haryana - take strong criminal action against defaulters, and give incentives to good payers like 24x7 supply and cheaper rates. 

He says "our demand is increasing, we want to give people affordable 24x7 power" but:
♦ If power contracts are not honoured, then investors will stay away and foreign govts will complain to us.
♦ If discoms don't pay suppliers, banks will not lend to stressed power sector.
♦ If industry is paying 8 or 9 rupees, then you are overcharging - no industry will not come, you will not create jobs.
♦ Customers must have the right to choose from multiple sellers. The choice should be theirs - why should they pay more just because state discoms are inefficient, badly managed, and choose not to control theft?



Electricity diplomacy makes economic sense
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India benefits from expansion of its cross-border electricity exports, and Sri Lanka is just the latest to be targeted. India has large number of stressed thermal plants waiting for buyers of power, abundant coal reserves and a railways that depends crucially on coal freight. One difficulty is that viable thermal plants have benefited from lower domestic coal prices due to coal-market reforms, whilst stressed plants are stuck with expensive imported coal. Another is the renewables squeeze, with Govt's massive scaling up of solar PVs, where India is one of the cheapest producers, and of affordable hydropower for balancing the grid. Also, new high voltage DC (HVDC) power lines are nullifying transmission losses and increasing competition from remote or distant power plants; and air pollution control devices -- that eliminate 90 to 99.6% of toxic gases(!!) and a statutory requirement by 2022 -- will push up thermal per-unit costs by 10+%. Fortunately for these stressed plants, neighbours are willing to pay over-the-odds for power, and Indian govt is more than happy not only to oblige them, but earn diplomatic kudos from it. In saying this, gas-based thermal plants will get revived earlier as they can also balance the grid.
India looks at overhead electricity link with Sri Lanka

New solar mega-projects with high chance of success
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Solar PV mega-projects are proposed for the Gujarat desert (40GW), and for high-attitude plateau of Ladakh (35GW). These are barren lands with high solar incidence, but crucially, projects are in states with minimal credit or contract default risk. For example, Gujarat has high power consumption with a profitable, well-managed discom. Ladakh is a UT that can leverage NTPC's strong customer base. The projects should attract good investor interest and below-average tariffs.

Status of Jammu & Kashmir hydropower projects (Aug 2019)
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Centre will be stepping up efforts to develop the infrastructure following the Jammu and Kashmir Reorganisation Bill, and the creation of two new UTs. As UTs give Central government direct control over J&K’s affairs, it is expected to speed up the granting approvals for infrastructure projects. It will also provide good governance and reduce conflicts with the state government.

♦ NHPC plans a total of 3814 MW hydropower projects, either on its own or through JVs with the state government. These projects include the 800 MW Bursar project (fully owned) and the 850 MW Ratle project (JV with state entities). It is implementing the 1000 MW Pakal Dul, 624 MW Kiru and 540 MW Kwar hydropower projects in JVs with state entity and PTC India Ltd.

♦ NHPC has been the chief benefactor of the state, where it has invested Rs 21,000cr over 4 decades. Besides it gives 13% free power, and pays hefty water charges (Rs 5,400cr). NHPC is owed Rs 1,500cr, because J&K govt had halted payments since April 2012. It is seeking union power ministry’s intervention to facilitate recovery of unpaid dues. “The dues are pending for a very long time. Given sensitivities involved, NHPC continues to supply electricity to J&K," said a senior union government official.

Hydropower projects in India's North East
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Apart from J&K, some of the new hydropower projects in India on which the work is expected to start in full swing include 2,880 MW Dibang and 2,000 MW Lower Subansiri hydropower projects in Arunachal Pradesh and 500 MW Teesta-VI project in Sikkim. The other promising state is Himachal Pradesh. 

Total hydropower potential of India’s NE and Bhutan is about 58,000 MW. Of this Arunachal alone accounts for 50,300 MW. “Doors are open for projects in India’s North East. Hydropower is slated to play a very important role in the development and integration of the North Eastern states with the mainland India," said NHPC’s Joshi, adding “Projects given to private firms are not getting constructed, so Arunachal govt wants NHPC to take up these projects. We are interested if there are no legacy burdens".

Work needs to be expedited in view of China’s gigantic $62 billion south-north water diversion scheme of the rivers that feed downstream into the Brahmaputra. Out of 8 Arunachal river basins, Subansiri, Lohit and Siang are of strategic importance, as they are closer to the border with China.

Concessions to kick-start hydropower projects
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To expedite hydro projects, State governments have asked PSUs to take over the completion of stalled projects, which are mostly stuck at early stages due to financial, technical or legal reasons. For example, NHPC took over 500 MW Teesta-VI, a stressed project with Lanco, from insolvency procedures. Rs 5,750 crore will be spent on it. To boost the financial health of the sector, Centre has asked States to provide concessions to the extent necessary to make hydropower tariffs viable. Centre has already provided benefits, like treating hydropower projects as renewal projects and allowing debt repayments over 18 years rather than 12 years.

State concessions in two states (with more to follow?):
♦ 624 MW Kiru was restarted after J&K exempted it from GST (ie 50% of total), and minimised water charges & free power costs in the first 10 years.
♦ 10 new hydropower projects of 2,920 MW (worth Rs 28,000 cr) on Chenab river were signed with NTPC, NHPC and SJVN, where Himachal waived its share of GST (ie 50% of total) and deferred the 12% free power in the initial years.
States asked to forego free power to make hydro projects viable

Renewed thrust on hydropower projects 
==================================

“Coal fire projects are on their way out slowly. The government of India has recognized the need for boosting hydro power. A great activity time for hydropower is foreseen by us," said Balraj Joshi, chairman and MD of state run NHPC Ltd. 
Hydropower projects are ideal to meet peak loads as compared to thermal power plants. These plants can be swiftly turned on and off, as compared to thermal power plants, helping the grid withstand fluctuations caused by intermittent supplies from solar and wind. Executing a hydropower project is time-consuming and tedious and involves a thorough survey and investigation and detailed project reports. Many projects are stuck due to  issues like resettlement of the affected population and infrastructure development, and this is leading to a decreasing share of hydropower in the country’s energy mix. 

Bringing back large hydropower
“Hydropower has been reclassified as renewable power. This will help in green financing," said NHPC’s Joshi. 
At present, India has an installed power-generation capacity of 357,875 megawatts (MW), of which around 13% or 45,399.22 MW is generated through hydroelectric power projects. Hydropower projects, often located in remote regions, are crucial to stabilize the grid as India looks to add renewable capacity of 450 gigawatts (GW) by 2030. Government plans to add hydro capacities of about 30 GW by 2022, which is over and above the existing hydro capacities of 45 GW. It is aiming to reach 175 GW in renewable energy basket which includes solar, wind and small hydro, from the current level of 80 GW. Large hydro will push the renewables energy target to 250 GW by 2022. 

With nearly 100 GW of hydro power potential in India’s rivers lying untapped because of high tariffs, the NDA government has approved a slew of measures under the hydro policy to make it competitive. Under the new hydro policy, large hydropower projects have been declared as renewable energy sources, making them a part of the renewable purchase obligation, which requires power discoms to buy a fixed amount of renewable energy to cut reliance on fossil fuels. Earlier, hydro projects up to 25 MW capacity were considered as renewables and were eligible for various incentives like financial assistance and cheaper credit. With the government's decision, hydro projects above 25 MW can also avail the benefits.

Making hydropower affordable
“So hydropower is not costly at all. It is very much comparable with solar despite giving 12% free power to the state and 1% free power towards local area development fund," said Joshi. 
At present, hydro power tariff is more expensive than other sources. Discoms are reluctant to sign Power Purchase Agreements (PPAs) for hydro power due to higher tariffs, particularly, in the initial years. New measures would allow back loading of tariffs (thereby reducing the rate) after increasing project life to 40 years, increasing debt repayment period to 18 years and introducing escalation by 2% pa. These measure would help rationalise the tariff by large hydro power projects. The average tariff from NHPC’s hydropower projects in Rs3.34 per kilowatt-hour (kWh). In comparison, wind and solar power tariffs hit record lows of Rs2.64 per unit and Rs2.44 per unit respectively, but have recently firmed up.

Surging electricity demand
The electricity demand in the country grew by 6.9% in the last quarter.  This comes as India made 26.4 million new electricity consumers, which according to Paris-based International Energy Agency (IEA) is the largest expansion of electricity access in the mankind’s history. Per capita electricity consumption has reached 1189 kilowatt-hour (kWh) as compared to a global average of 3600 kWh. 

Is hydropower back in India's energy mix?