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Daily Editorials

The Super Centre


  • The return of single-party dominance and its implications for politics after nearly 25 years of minority/coalition governments at the Centre (December 1989-April 2014) has been widely commented upon.
  • As have concerns over rising corporate market power and their expression, whether in the ongoing protests against the three central farm laws or the grant of bank licences to industrial houses.


Post 2014, two centralisations — of political and economic power — continue to reinforce each other, with profound consequences for the country and potential to define popular narrative in days ahead.

The BJP under Narendra Modi, like Indira Gandhi’s Congress in its time, faces no political competition within or outside

Real power is with Centre, which holds the purse-strings in these fiscally-challenging times.

Chief ministers reduced to satraps:

  • There are states that are still opposition-ruled — Punjab, Rajasthan, Maharashtra, Kerala, Tamil Nadu, Andhra Pradesh, Telangana, Chhattisgarh, Jharkhand and West Bengal.
  • However, as many have noted, chief ministers today have been reduced to satraps.
  • The real power is with the Centre, which has the all-important “agencies” and holds the purse-strings in these fiscally-challenging times.

Shortfalls in GST revenues:

  • States had to consider however little the Centre provided through a particular borrowing window of Option-1 in case of shortfall of GST revenue.

Handling of Central Agencies:

  • The Government of Maharashtra couldn't prevent handing over the Elgar Parishad case to the National Investigation Agency.
  • In connection with suspected money-laundering and gold smuggling investigations, Kerala Government has been a silent observer of the Enforcement Directorate grilling its officials and a minister.


Decentralised crony capitalism model:

  • Earlier political financing use to come not from large corporates as much as sugar and textile millers, cooperative barons, liquor and PWD contractors, grain traders/arhtiyas, land sharks, builders and miners.
  • They were mostly regional capitalists who invested in provincial leaders.
  • This translated into a decentralised crony capitalism model, where every party/politician had a chosen set of businessmen for bestowing favours and receiving funding in turn.

Political Financing and Competitive Electoral Democracy:

  • The mutually-beneficial partnership between the aspiring politician and the small-to-middling capitalist did allow for the emergence of new tycoons, including from diverse regional and social backgrounds.
  • So long as the “cronies” and their political backers didn’t remain the same, it ensured a frequent reshuffling in the ranks of capitalists and also a competitive electoral democracy.

“Entrepreneurial capitalism”:

  • The period of Nineties was synonymous with not just coalition governments and regional parties taking centre stage, but also a period of “entrepreneurial capitalism” in India.
  • “Entrepreneurial capitalism” was more a result of the 1991 economic reforms that opened up new industries for private investment.
  • After 2014, despite being marked by political stability and the institution of a near-Presidential system of governance, has seen more capital destruction than creation or accumulation.

Rise of Andhrapreneurs:

  • Andhrapreneurs: Epitomising the above rise and fall are the “Andhrapreneurs” or businessmen from undivided Andhra Pradesh (AP).  It is not a coincidence that the fortunes of the “Andhrapreneurs” grew precisely when its politicians were vital to propping up coalition governments at the Centre.
  • The Telugu Desam Party was either part of non-Congress, non-BJP governments (in 1989-90 and 1996-98) or extended critical support to the first BJP-led ruling National Democratic Alliance from 1998 to 2004.
  • Undivided AP also sent the largest contingent of Congress MPs to enable the formation of the United Progressive Alliance government in 2004 and 2009.


  • The transition from “entrepreneurial” to “conglomerate” capitalism has obvious repercussions from an economic and business standpoint.
  • In many industries — from telecom, airlines, steel, cement and aluminium to synthetic fibres, polymers, toiletries, tea and biscuits — there are now two, at most three, players holding dominant market position.
  • Leadership Issues: Some groups have leadership straddling multiple sectors: Reliance (petrochemicals, telecom and retail), Tata (steel, commercial vehicles, salt and IT services), Aditya Birla (cement, aluminium and chlor-alkali) and Adani (ports, private power, branded edible oil and, next, airports).
  • Ramifications for politics:
    • The political scientist Adam Ziegfeld has shown that regional parties thrive when coalition governments are the order of the day.
    • On the other hand, if single-party majority rule becomes the norm, political actors have little incentive to establish or join state-level parties that can share the spoils of power at the Centre.
    • A corollary to this is that the regional capitalist no longer has ministers or MPs through whom he can get things done in New Delhi. They are as powerless as he is.


  • The absence of intermediation channels for medium-scale or even many large industrialists isn’t helped by the party at the Centre not really requiring their money.
  • The BJP under Narendra Modi, like Indira Gandhi’s Congress in its time, faces no political competition within or outside. It can afford to operate a centralised funding system overwhelmingly reliant on Big Capital.
  • Not only regional parties, even the once-powerful liquor, contractor, sugar or arhtiya lobby hardly matter in the new business-political oligarchy regime. Their support isn’t needed when unlimited large corporate financing is possible through electoral bonds that protect the donor’s identity and the contributions are tax-deductible to boot.
  • If the current agitation against the undermining of the traditional agricultural produce mandi system is any indication, the challenge to the oligarchy will come only from below. The political Opposition can latch on at best.

The power of democracy and the challenge from big tech


Recently, four of the United States' big tech companies viz. Amazon, Apple, Facebook and Google appeared before the US Congress Antitrust Subcommittee to defend their business practices.

This editorial analyses the challenge from big tech companies and the power of democracy to address those challenges.


2.1 The giant four

  • The four companies in question have a combined market capitalisation of $5 trillion, which is twice India's GDP.
  • The leaders of the four companies were confronted by the US Congress Antitrust Subcommittee, for
    • using their market power to crush competitors
    • amassing data and customers to realise sky-high profit
  • All four executives testified virtually at the 'big tech hearing'.

2.2 The power of democracy

  • The 'big tech hearing' reflected the power of the US Congress as a co-equal branch of government in a presidential system.
  • The four CEOs viz. Sundar Pichai, Tim Cook, Mark Zuckerberg, and Jeff Bezos who are technology and management behemoths in their own right behaved with utmost deference, being aware of the power of the US Congress to affect their businesses through acts and new regulations.


Both, the Republicans and the Democrats criticised the companies in a unique display of 'bipartisanship', albeit for different reasons.

3.1 Criticism from Democrats

  • The Democrats criticised the tech giants for:
    • monopolistic practices
    • buying up potential rivals
    • disadvantaging competitors on their platforms
    • impacting small business negatively
    • using data generated by rivals for developing their own competing products
    • deriving profit from user data, often without explicit consent
    • not paying for news content carried on their sites

3.2 Criticism from Republican

  • The Republican criticism of the tech giants focused on:
    • perceived censorship of conservative viewpoints - these tech giants were perceived to be influenced by Left-of-Centre views of their employees
    • A case in point is the incident at Google, when it backed out from participating in Project Maven of the Pentagon at one stage.
    • The reason for walking back by Google was backlash faced from the employees since the project involved of the use of AI for drone strikes.
    • Furthermore, Facebook was criticised for not taking enough measures to keep a check on proliferation of fake accounts which are to the tune of nearly 6.5 billion every year as investors and advertisers are lured by user base

3.3 Remarks by David Cicilline

  • The chairman of the subcommittee, David Cicilline, held that "these companies are so central to our modern life, their business practices and decisions have an outsized effect on our economyand our democracy. Any single action by any one of these companies can affect hundreds of millions of us in profound and lasting ways....Their ability to dictate terms, call the shots, upend entire sectors, and inspire fear represent the powers of a private government".
  • Cicilline concluded by saying that these tech giants wield unacceptable power and there is an urgent need to break up these companies or further regulatethem.
  • Instances from the bygone times were cited to illustrate how the Rockefellers and Carnegies of yore had used their monopoly to extract huge profits and trample competition.


4.1 Need of further regulation

  • Today, there is an urgent need to put more regulations on these tech giants, especially on their data usage practices.
  • The debate around use of data by these technology behemoths has been centred around privacy, but now has gone beyond privacy and there are talks on putting bulk anonymised data tin the public domain for competitor use and to stimulate innovation.

4.2 Similar debate in India

  • A similar debate regarding non-personal data and its use for public purpose beyond private profit and market power of the data aggregator is presently underway in India as well.
  • There could be opportunities for Indian companies as well in case there is an attempt to unravel some of the acquisitions of these companies.
  • The restrictions put on Amazon from using the competitor data from its platform is very similar to the restrictions put on Amazon in India on its inventory-based model.

4.3 Measures taken by other countries

  • Other countries are also taking various measures on the issue, some of which include:
  • Australia
    • Australia has granted three months to Google and Facebook to negotiate with Australian media regarding fair pay for news content.
  • There are several measures being considered in Europe as well. Some of which are:
    • making the preferential treatment given by Amazon and Apple to their own products an illegal act
    • mandating Google to share search data with smaller competitors
    • requiring Facebook to make its services work more easily with rival social networks
    • levying a digital tax on the tech giants to enable a revenue for government and society where data is being generated and then using it to earn profit


1.1 Impact of COVID-19 pandemic

  • The concerns regarding data privacy, data security and unfair business practices are much more relevant today.
  • This is because, due to the COVID-19 pandemic, the digital space in making further inroads in our daily lives.
  • Given the increased role of cyberspace and digital in public life, it is very likely that the power of there companies will come under further scrutiny.

5.2 Underlying personal interest

  • The probability further increases as Europe will want to promote competition through its own champions.
  • China will also need to assess the impact on its own companies, as there is an increased debate on security and data privacy challenges globally.

5.3 Breaking up – not an easy task

  • However, breaking up these companies or putting them under effective and strict controland regulation is not going to be an easy task because:
    • these companies have tremendous power of lobbying Congressmen and Senators and
    • these companies will make a case for the need for size and flexibility to meet the challenges thrown by Chinese companies who havethe backing of their government
    • many regulations that were imposed on banks and financial companies in the US aim the wake of 2008 financial crisis have slowly been eased out

5.4 Need of national champions

  • There are talks in India as well, of the need of national champions across sector to address the competition from China, South Korea, the US, Europe and others.
  • While there is a definite need of indigenous tech giants, this needs to be balanced by ensuring :
    • the due power to the consumer
    • space for the innovator
    • due diligence by elected representatives.


The 'Big tech hearing' has shown the true power of democracy.

It has also shown that despite the technological and financial dominance of these tech giants, smaller businesses and consumers have the power to make their voices and concerns heard through their representatives.

RBI’s new loan recast scheme


Recently, in its monetary policy review, the Reserve Bank of India has cleared a loan-restructuring scheme for borrowers under stress.

The scheme is supposed to provide much needed relief to companies and individuals affected by the Covid-19 pandemic and are under stress because of it.

The editorial discusses the working of the scheme and the safeguards in place to prevent the misuse of the scheme.


2.1 Eligibility criteria

  • Companies and individuals whose loan accounts are not in default for more than 30 days as on March 1, 2020.
  • Borrowers who qualify the above criteria are eligible for a one-time restructuring of their loans.

2.2 Corporate Borrowers

  • The banks can invoke a resolution plan for corporate borrowerstillDecember 31, 2020 and implement it till June 30, 2021, however, such loan accounts will continue to be standard till the date of invocation.
  • The one-time restructuring window is available across all the sectors.

2.3 Personal Loans

  • The banks can invoke a resolution plan till December 31, 2020 for personal loans, and can be implemented within 90 days after invocation.
  • The facility restructuring of personal loans is also available only for the accounts classified as standard and are not in default for more than 30 days on the cut-off date of March 1.

2.4 Benefits from the scheme

  • The scheme is aimed to provide a sigh of relief to that companies and individuals that were fulfilling their loan obligations on time till March (cut-off date) but have found it difficult to service their obligations afterwards as their revenues came under stress due to the covid-19 pandemic.

2.5 Apprehensions regarding the scheme

  • The one-time restructuring window facility is not available to the companies that were already in default for more than 30 days as on March 1.
  • Experts believe that this move will affect the plans of revival of those companies that were about to regain profitability but came under stress with the declaration of the lockdown.


3.1 Expert Committee

  • For the implementation of the scheme, the RBI has setup a five-member expert committee under K V Kamath, former Chairman of ICICI Bank.
  • The expert committee will make recommendations on the required financial parameters.
  • The RBI has given broad contours for the applicability of the scheme.
  • The expert committee will recommend the sector-specific benchmark ranges for such parameters to be factored into each resolution plan for borrowers with an aggregate exposure of Rs 1,500 crore or above at the time of invocation.
  • The committee is also supposed to undertake a process validation of resolution plans for those accounts that are above a specified threshold.

3.2 RBI’s role

  • The RBI will provide a further notification along with the modifications in 30 days.
  • This indicates that the RBI will have the last word on the eligibility and parameters in context of the scheme.
  • RBI's systemic risk survey has revealed that the worst affected sectors due to the covid-19 pandemic are
    • tourism and hospitality
    • construction and real estate
    • aviation


4.1 Relief to the banks

  • The most important and prominent impact of the scheme will be that the banks will be able to check the rising non-performing assets (NPAs).
  • However, the scheme will not lower down the NPAs from their present levels and legacy bad loans to the tune of Rs 9 lakh crore will remain within the banking system.

4.2 Burden on the banks

  • Banks will also be required to maintain an additional 10% provisions against post-resolution debt.
  • Furthermore, lenders who will not sign the Inter-Creditor Agreement (ICA) within 30 days of invocation of the plan will have to create a 20% provision against post-resolution debt.
  • Maintaining of the provision will be a burden for the bank.


5.1 Corporate Debt Restructuring (CDR)

  • The RBI discontinued the scheme from 1 April 2015.
  • The corporates had been misusing the CDR scheme with the regulator too neglecting the manipulations done by shady promoters in connivance with certain banks.
  • Banks had also created a separate CDR cell under the scheme and the process was overlooked by the erstwhile IDBI.
  • The promoters of many big corporates misused the scheme to siphon off bank funds while their units suffered.
  • These promotors approached the CDR Cell to get their loans recast with some promotors doing it multiple times.
  • The promotors somehow managed to get fresh loans and they used the liberal loan recasts to evergreen their accounts and keep out of the NPA books.
  • Presently, some of the promotors are in the bankruptcy court.

5.2 Strategic Debt Restructuring (SDR) scheme

  • Under this scheme, the banks were given an opportunity to convert the loan amount into 51% of equity, which in turn was to be sold to the highest bidder, once the firm became viable.
  • However, this scheme failed to help the banks address the problem of bad loans and only two such sales could take place through the scheme due to certain viabilityissues.

5.3 Sustainable Structuring of Stressed Assets (S4A) scheme

  • Under this scheme, the banks were not willing to grant write-downs due to lack of incentives to do so.
  • Write-downs of large debtors could exhaust the banks’ capital cushions.

5.4 The 5/25 scheme

  • The scheme got derailed since the refinancing was done at a higher rate of interest in order to allow the banks to preserve the net present value of the loan amount.
  • There were apprehensions that the bank is using a scheme as a tool to cover the NPAs by the banks.

5.5 Asset Reconstruction Scheme (ARCs)

  • The major problem with this scheme was that asset reconstruction companies (ARCs) found it difficult to resolve the assets that they had bought from banks.
  • Due to this, the ARCs wanted to purchase the loans only on low prices and consequently, the banks were reluctant to sell the loans on the large scale to the ARCs.


  • The RBI has built in safeguards in the resolution framework to make sure that the scheme is not misused leading to ever-greening of bad loans as has been done in the past.

6.1 Corporate loans

  • The restructuring of large exposures will require the following:
    • independent credit evaluation by rating agencies
    • process validation by the Kamath-led expert committee

6.2 Personal Loans

  • However, there will be no requirement for a third party validation by the expert committee, or by credit rating agencies, or need for ICA for personal loans.

6.3 Additional Safeguards

  • Additionally the RBI has stated that under the resolution process the term of the loans cannot be extended by more than two years.
  • In case of multiple lenders to a single borrower, the banks will need to sign an ICA.
  • To mitigate the impact of expected loan losses, the banks will be required to maintain a 10% provision against such accounts under resolution.
  • Furthermore, for banks not willing to be part of the ICA, a penal provision of 20% has been specified.


  • While the present scheme has an entry barrier - it is only available to companies under stress due to COVID-19 pandemic, which is to be identified by the March 1 cut-off date, the earlier restructuring schemes did not have any entry barrier or eligibility criteria.
  • While the current scheme has strict timelines regarding invocation and implementation of the resolution plan, the past schemes left were largely open-ended regarding the timeline.
  • The schemes makes the signing of ICA largely mandatory for all lenders once the resolution plans has been majority-voted for, else they face twice the amount of provisioning required.
  • Further safeguards include:
    • Independent external evaluation
    • process validation
    • specific post-resolution monitoring