Unlock = Open, not Choked!
Posted by
Shyam Ponappa
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Jun 15, 2020 03:04 AM
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Don't let a virus stall initiatives and weaken the economy.
This article first appeared in the Business Standard and on June 4, 2020.
A recent column in this newspaper juxtaposed the way smart, experienced people have high expectations, only to be disappointed by our weak state’s predictable failures (Strong expectations from a weak state, May 25). Is there justification for any optimism, or at least hope? Here is an exploration of reasons for persisting in the face of continued odds, and pushing for economic recovery. Why should one persist with constructive efforts? Because a rising tide lifts all boats, and one’s contribution can affect outcomes. And because attempts at partial opening will not suffice.
There could be new economic opportunities by way of capacity, logistics
or markets, or a wider array of sustainable consumer choices, whether
for manufactured goods, services, or activities. Think back, and surely
you have witnessed government action extend beyond the grind of just
keeping everything going.
One instance of major change that affected the economy was in 1990, when
the secretary of the Department of Electronics N Vittal worked in close
consultation with industry. This resulted in path-breaking reforms,
such as the setting up of “high-speed” links (of a mere 64 kilobits per
second at the time) between Information Technology (IT) companies in
Indian software technology parks and their international clients, and
various tax incentives that followed much later. The offshore services
industry gathered strength, and later expanded to cover IT-enabled
services with call centres and business processing, extending to
knowledge processing.
Likewise, telecommunications reforms began in 1990, when prime minister
Chandra Shekhar led a shaky government for a brief period. The
telecommunications ministry was looking for a private sector consultant.
Through an invisible network, an investment banker who had been a
management consultant in San Francisco was asked to look into
telecommunications reforms. This led to the setting up of the Athreya
Committee and its recommendations: On separating policy-making from
operations, corporatising the Mahanagar Telephone Nigam as an operating
company for Delhi and Mumbai, and Bharat Sanchar Nigam for the rest,
while recommending access to private sector operators. All this was not
smooth and painless, and took years, but did happen eventually, although
the separation remains untidy.
By 1998, telecommunications operators were in a situation similar to the
predicament some months ago, of weak revenues and a debt overhang, with
some differences. There were many operators with heavy debt because of
government charges and limited revenue generation capacity, because of
smaller networks and less clients. This is the “winners’ curse” of
auctions, when exorbitant amounts are paid to government for auctions,
with nothing left for building and running networks and enterprises to
generate the revenues to justify those payments. There are exceptions,
as in the social democrat Nordic states, or state-controlled allocations
as in China, or in Japan for a number of years.
Key people in government grasped this. The Prime Minister’s Office
consulted with industry and external consultants, and took action. This
resulted in the New Telecom Policy 1999 (NTP-99), whereby the major
change was converting up-front licence fees to revenue sharing, although
the policy was uneven because of cherry-picked recommendations.
Initially, the government set the percentage share too high. It took
years to reduce and trigger rapid growth. This came about through
reduced government charges, calling party pays (which cut call costs),
and a price war, brought on by the stealth entry of a new technology
(CDMA) network, which the authorities allowed despite incumbent
protests. Mobile services then grew exponentially from 2004, until the
2G spectrum scam surfaced in 2011.
A stream of articles advocated extending revenue-sharing to spectrum
fees as for licence fees, and for shared infrastructure including
spectrum. In 2011, a senior official in the DoT was sufficiently
impressed to explore the possibility of evaluating alternatives using
simulation models. But the 2G scam broke after the first few meetings of
DoT officials, and this process was aborted. Instead of major changes
based on simulations, a mere statement of intent about spectrum pooling
and sharing made it into NTP-2012.
There were other incredible developments, although with no apparent
results (yet). For instance, in 2013, a non-governmental organisation,
the Centre for Internet and Society in Bengaluru, arranged for the
former chief technology officer of the US Federal Communications
Commission, Jon Peha, who had pioneered changes in America, to meet with
top officials of the DoT, the Telecom Regulatory Authority of India,
and some IIT professors. The latter conducted successful trials using TV
White Space spectrum for the Ministry of Electronics and Information
Technology. The details are many, but the point is that constructive
advocacy can have an impact.
Reviving the Economy Now
We are in a difficult situation, with our economy and society battered
by the lockdown and much else. We will need to do everything possible to
recover, and it will take years. Attempts at partial opening will not
suffice. Systemic revival calls for unrestricted flows of money, people,
activity, and goods and services.
While reactivating the economy, we will need to be cautious through the
pandemic (through “social distancing”, using masks to reduce infection,
avoiding close contact with outsiders, and so on). But survivors have to
live with this virus, as with other strains of viruses and bacteria,
and other threats.
Consider traffic accidents, which average over 145,000 deaths annually (data 2013-2017: https://ncrb.gov.in/sites/default/files/chapter-1A-traffic-accidents-2017_0.pdf).
Extrapolating, this means a million fatalities in seven years, yet we
don’t shut down all traffic. By comparison, Covid-19 had about 6,000
fatalities since January.
A proportion of the medical fraternity opines that (a) there is
community spread of Covid-19, and (b) with many cases milder than the
expected severity, that most patients need home care rather than
hospitalisation. If these continue, our health systems will not be
overwhelmed with severe cases. Also, so far, India has had a relatively
low fatality rate of 2.8 per cent (see chart).
Source: Data - https://ourworldindata.org/coronavirus
As long as these factors hold, our priority has to be unfettered
economic activity. Countries with higher fatality rates, including
Sweden, China, Japan and Germany in the chart, have open economic
activity (with tremendous productivity). We will weaken and our problems
will escalate if we are held back.
