Tuesday, July 14, 2015
Smart Cities: A Reality Check, Businessworld, June 27
To make smart cities a reality, what is needed is a framework that can harness low hanging fruits such as regular scrutiny by civil society, meaningful participation of the private sector and provision of technical support for instituting best practices within Urban Local Bodies, writes Vivan Sharan
The familiar adage that ‘India lives in its villages’ will stop holding true within a few decades. And this transition, represented by urbanisation on an unprecedented scale outside of China, is already changing domestic politics. Urban areas were given scant attention in the ‘gareebi hatao’ era, marked by an emphasis on social schemes catering to the rural poor. Today, they are veritable microcosms of India’s various challenges and opportunities. Urban areas arealso the drivers of production and consumption in the Indian economy; accounting for 60 per cent of GDP.
Perhaps in recognition of such inexorable socio-economic realities, the NDA Government has taken it upon itself to create 100 ‘Smart Cities’ and renew another 500 as part of Atal Mission for Rejuvenation and Urban Transformation. The Cabinet has approved Central Government spending of about Rs 98,000 crore on these two initiatives over the next five years. These initiatives along with Housing for All (by 2022), were formally launched on June 25 by PM Modi. Even so, a number of outstanding concerns remain.
The UPA Government too had an ambitious urban development programme called the Jawaharlal Nehru Urban Renewal Mission (JNNURM), not too different from the new initiatives on offer. The Comptroller and Auditor General (CAG) audited JNNURM in November 2012, to find that the implementation statistics left a lot to be desired. Among other glaring implementation failures, it found that only 253 of a total of 2815 projects were completed by March 31, 2011. The CAG attributed this failure to poor management, including deficiencies in the guidelines, delay in release of funds and so on. Have the right lessons have been learnt from this?
Unlike the JNNURM, the Smart Cities initiative will give more control to the states and place the onus of self-assessment on them. And consequently it is hoped that the States will compete with each other on performance to receive enhanced support from the Centre. TheCentral Government for its part will have to rise above political compulsions of giving preference to NDA ruled states. It would also have to adhere to transparent and objective methodologies for sanctioning monies on time (and not in the last quarter of each fiscal in a rush to match targets), utilisation of interest, monitoring of funds etc.
Smart Cities & Governance
Another critical question is one of governance capacity. The CAG report found that the monitoring and assessment of JNNURM was poor, at all levels. Therefore devolution of monitoring and assessment duties to the states is not necessarily likely to be a panacea. And herein lays the importance of a robust conceptual framework. Any framework that presumes the existence of implementation, monitoring and assessment capacities of local governments, even to assess their own weaknesses, is likely to fail. Instead what is required is a framework that can harness low hanging fruits such as regular scrutiny by civil society, meaningful participation of the private sector and provision of technical support for instituting best practices within Urban Local Bodies (ULBs).
Importantly, the financial data of ULBs must be comparable. A number of ULBs continue to follow single bookkeeping system of financial accounting, a primitive practice to put it mildly. The National Municipal Accounts Manual (NMAM) issued in 2004, endorsed by the CAG, prescribes a common accounting framework for ULBs. This serves as a good starting point. Among other things, it suggests the replacement of single entry cash basis of accounting by double entry accrual based system of accounting. It also encourages compliance with the ‘Generally Accepted Accounting Principles’;accounting Standards issued by the Institute of Chartered Accountants of India. There is also a clear opportunity here to learn from experiences in other countries.
The corporatisation of ULBs can yield significant benefits in terms of reporting of financial data. Corporate bodies owned by ULBs have to adhere to the provisions of the Companies Act, 2013. Their books of accounts are open to inspection by relevant nodal authorities and they have to file copies of key financial documents such as balance sheets, profit and loss accounts with the Registrar of Companies. In addition the corporatisation of ULBs may help local governments address the fundamental challenge of inadequacy of finances to deliver on the Smart Cities and AMRUT mandates of creation of ‘smart’ infrastructure and efficient delivery of basic services.
Under existing external commercial borrowing guidelines, ULBs are not eligible to directly raise debt funding from external lending agencies. On the other hand, a public company may borrow up to its share capital and free reserves. A publicly owned company can also raise capital in the form of share capital or by issuing debt. Under the Companies Actand the regulations prescribed by the Central Bank, companies can raise debt in the form of debentures and bonds as long as they follow the recently establishedguidelines by Securities and Exchange Board of India (SEBI).
How To Build A Smart City
To meet their financing needs,only a fraction of which can be met by them Central Budget, corporatised ULBs can try to leverage a variety of financial instruments. Bonds issued by ULBs with good financial track records could become alternative investment avenues for conservative investors. In fact, various categories of bonds including General Obligation Bonds, Revenue Bonds and Green Bonds can also be looked upon by ULBs. They must look to capitalize on the fact that there is excess liquidity in the global financial system.
The bad news is that the Indian municipal bond market accounts foronly around 0.012 per cent of GDP at current prices compared to the United States where the aggregate principal amount outstanding by the fourth quarter of 2014 was about 21.7 percent of the country’s GDP.Financial inclusion and stable inflation will be prerequisites to the growth of the fixed income market in India. Indeed many of the challenges associated with urban development require a deeper introspection on the structural deficits of the Indian economy.
Nevertheless given existing constraints, innovative financing models will have to form the backbone of urban development and eventual creation of smart cities. Some possible alternatives could include user fees models, value capture models, tax increment financing and civic crowd funding. Each of these will require serious study and demand that the government adopt a multi-stakeholder approach for soliciting expert inputs. Indeed, the experiences of the Municipal Corporation of Delhi, which struggles to pay its workers, show that there is no guarantee that corporatisation of ULBs will make them financially viable. However, through appropriate process innovation and guiding policies, the central and state governments must ensure that this is the exception rather than the rule.
Vivan Sharan is a Partner at the Koan Advisory Group and a Visiting Fellow at the Observer Research Foundation
Tuesday, June 23, 2015
Op Ed on international day of yoga, Businessworld, June 21
Today the world will awaken to the ‘International Day of Yoga’, perhaps with a Surya Namaskar. While some would dismiss this labelling as an attempt by the new government to refine India’s ‘snake charmers and elephant herders’ image on the international stage; others may think of this as an attempt to ‘saffronise’ the global events calendar. A few may think of it as a brilliant marketing gimmick. PM Modi may not have given it any more serious thought than this. However, it stands to reason that since it is already instituted, the international day of yoga must now be neatly placed within India’s soft power projection as well as its larger economic and political aspirations.
The origin of India’s soft power narrative is closely tied to the Non Aligned Movement (NAM), of which most former colonies were a part in the early nineteen fifties. Jawaharlal Nehru championed the NAM, the influence of which isstill seen in India’s foreign policy. The country went on to become a leader within the Group of 77 (G-77) in the mid-sixties and spearheaded the development agenda in various important debates ranging from climate change to global trade. On account of its large population and growing economic footprint, the India’s participation still holds key to G-77 contributions to the global governance discourse.
For many who see India as a poor developing country, like the rest of the G-77, India’s yogic traditions are likely perceived through orientalist lens. That is, yoga is assumed to be a practice developed by scantily clad men, living Spartan lives, isolated in forests. There is a sort of temporal dissonance in seeing yoga as such.
On the other hand, for many,India has also come to be associated with rapid economic growth fuelled by a highly skilled workforce. While the specific drivers of this economic growth narrative remain nebulous to a majority, information technology is seen as India’s ‘x factor’. Silicon Valley is arguably India’s soft power nerve centre, even as it is not physically situated within. And there is no shortage of yoga instructors in the San Francisco Bay Area.
For those who see India as a rapidly developing emerging economy, yogic traditions represent an opportunity to achieve nirvana in a capitalist dystopia – as the IT entrepreneurs likely have done with the return of high IT valuations in the financial markets! The rigours of the typical sedentary white collar job, staring at computer and phone screens, transiting between airports and hotel rooms, have given birth to a ‘wellness’ industry that attempts to save modern man from the pitfalls modern life. And yoga takes centre stage in the plethora of wellness solutions that help rejuvenate, resuscitate and reflect on the present, even as attention spans attenuate.
Increasingly India is also seen to be moving from its role in the ‘global opposition’ as part of the G-77 to a new role on the global high table, as part of groupings such as the G-20 and BRICS. This transition to become an agenda setter from being an agenda taker has been accelerated by the financial crisis originating in the transatlantic economies. Although India’s capacities to set the rules for the road in terms of redesigning the global financial architecture or standard setting in the global value chains of trade remain strained; inclusion in such elite economic groupings has sharpened its ‘brand value’ abroad.
Meanwhile the 21st century India is increasingly choosing to describe itself as both an emerging and developing economy. At least Indian diplomats and policymakers seem to be fairly comfortable with this sometimes amorphous identity. To the extent that this allows the country flexibility in global negotiations, it is hard to debate. Where it needs to be assertive it can emphasise its emerging country image, and where it seeks to be defensive, it can rely on its developing country image. For those who have begun to understand this India, yoga likely represents a convenient bridge between the known and the unknown.
Complexity is widely considered to be an Indian characteristic. And complexity is enmeshed in every aspect of life in India. It permeates family structures, social groups, class hierarchies and of course decision making at all levels including executive, judicial and legislative. For foreign investors, the country has come to represent a group of economies that offer unparalleled investment returns. Simultaneously, it has the dubious distinction of being a risky investment destination where political support remainscritical to business activity. Such boundless commercial opportunities and intractable ground level challenges co-exist seamlessly.
PM Modi’s hope should be that somewhere within the scope of its complex self-identity, this branding exercise serves to enhance its projection as a regional and global power. From a purely realist point of view, it is irrelevant whether the true depth of the yogic practice is understood, whether India spends a minimal proportion of its budget on healthcare and wellness or indeed whether yoga continues to be largely associated with difficult postures and better physique.
Vivan Sharan is a Partner at the Koan Advisory Group and a Visiting Fellow at the Observer Research Foundation
- See more at: http://new.businessworld.in/opinion-columns/how-yoga-expands-india%E2%80%99s-soft-power#sthash.T2M3wEOX.dpuf
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