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Within the next three months, a new government will gather the reins of power. Once again, government officials will try and resume work on economic issues that have been put on the backburner. Unfortunately, elections tend to have this impact. Overall, the tamasha is so compelling that innocent bystanders are sucked in to watch the acrobatics, all the while trying to make sense of the events being played out.

Three issues will immediately grip the attention of policymakers. The first will be jobs. India needs them urgently.

The second will be the worsening financial situation – especially when it comes to banks. They have been buffeted by loan waivers on one hand, while on the other they have been pressured to give away imprudent loans. Despite war cries against corruption, there is enough evidence that suggests the old corrupt ways continue. Bank managements continue to be arm-twisted to bail out airlines and favour industrialists.

The third challenge will be to find out ways in which the worsening balance of payments (BoP) situation can be remedied.

This article is an attempt to suggest how the third objective can be achieved, and in doing so, how the first objective could be addressed.

But a caveat is needed here. There are many ways to cope with the looming BoP problem. There are short-term solutions, long-term, and more sustainable solutions. But if a solution can meet the short-term requirement and unleashes long-term benefits, that would be wonderful.  That is what this article explores.

Let's take a look at the country's balance of payments. The author has deliberately opted to look at data offered by the last Economic Survey for two reasons. The rupee figures given by the government and RBI recently could be misleading, because the rupee has depreciated significantly since then. It is better to stick to dollar-denominated numbers instead.

The second reason is that the numbers show how imports have now begun growing faster than exports. And this trend is likely to continue in the coming years. There is a global economic slowdown that is beginning to take firmer roots than ever before.

Moreover, trade barriers are being raised by countries to which India had conventionally exported substantial quantities. This includes the US, and the EU. India will have to refocus its attention on countries in Africa, South East Asia, or even Russia and China.

This is because the latter two countries could enjoy synergies with India that the rest of the world may not offer. Singapore may have a role to play here. But more on that another time.

It is these three countries that could be primarily responsible for actually causing the centre of gravity for global trade to shift to the East.

However, India will have to adopt other strategies as well. At a time when export growth cannot be pushed up easily, the country will have to find ways to reduce its import bills, without sacrificing growth. And this is where the author has been constantly pushing the case for boosting rooftop solar and converting waste to energy.

There's money in waste

Waste to energy alone has the potential of generating methane (which is similar to LNG or PNG as cooking or vehicle fuel). Just human and animal waste being converted into methane has the potential to generate around Rs 18 lakh crore worth of methane. Agro-waste has the potential to generate two or three times this amount.

One needs to look at the work Swedish commercial vehicles manufacturer Scania has done in Karnataka. It has set up small digestors in a few villages and has trained villagers to operate and maintain them. They are encouraged to sell rotten vegetables to the digestor at Re 1 per kg. The volumes collected produce enough methane to offer free cooking gas to households in the village on a daily basis. This way, farmers get money for vegetables as well, which could not be marketed earlier. And households can cook food without breathing in noxious fumes from burning cool can cause respiratory ailments.

If one goes by the Economic Survey of  2016-17 (Vol 2, para 5.22, the "negative impact on the respiratory system, cardiovascular diseases, neurological effects, etc" by just coal is tremendous.

Moreover, the report said, "The annual number of deaths linked to coal-based power plants pollution is estimated to be around 115,000 and the total monetary cost is around $4.6 billion." Multiply this by a factor of 10 because of the widespread nature of burning firewood, and the economic cost to India can be appreciated.

Now take a third of the potential for methane generation that India has through agro-waste and human and animal waste, and you then begin to realise that India can reduce its fuel import bills almost entirely. It could generate revenues of over a quarter trillion dollars. Surplus methane can be compressed, bottled and sold to other South East Asian and African countries. The savings on healthcare costs is a big bonus.

The sun is a healer

Nothing is a better antiseptic than sunlight - that is what most people often say. For India, the sun could improve its economic health. As pointed out in a recently-published column, there is no better solution for transforming India into rooftop solar.

What is interesting is that adopting the rooftop solar power strategy could create almost 80 million jobs within a few years. In fact, it has sometimes taken chief ministers to actually lobby with the Union power minister to let them adopt rooftop solar power in their respective states.

Now look at the other table. It is about the country's principal imports.  Watch the number for petroleum, oil and lubricants. This number is easily the biggest import bill that India has to pay.

What is amazing is that both waste to energy or methane generation and solar power can help India reduce this bill significantly. Moreover, the scale of operations that rooftop solar will involve would easily allow India to master technologies relating to smart micro-grids and solar power management. These are skills that much of South East Asia and almost all of the African continent will be looking for. India could begin positioning itself as an exporter of such technology besides exporting methane.

That would take care of two of the biggest headaches the new government will have to confront – employment and balance of payment.

But what about the poor finances of banks and the financial system. Unfortunately, that has less do with strategy and more to do with the venality of India's policymakers. If only there were a short cut solution to integrity, and transparency.

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The commerce ministry has called a meeting of stakeholders including export promotion councils and other government departments to discuss ways to increase exports to China, an official said. Officials from the agriculture ministry, Agricultural & Processed Food Products Export Development Authority (APEDA), and representatives from export promotion councils would participate in the meeting.

Growth in exports to China is beneficial for India as it has huge trade deficit with the neighbouring country.

Trade deficit with China increased to $63.12 billion in 2017-18 from $51.11 billion in 2016-17.

India is taking several steps to promote shipments to China. Recently, it has managed to export agricultural goods such as non-basmati rice to China.

India is seeking greater market access for various agricultural products, animal feeds, oil seeds, milk and milk products, pharmaceuticals in light of the potential of these products/services in the Chinese market.

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The Income-Tax (I-T) Department will begin compiling comprehensive profiles on taxpayers from April 1. The move, which is a part of Project Insight, aims to track compliance of tax paying individuals and bring more people under the tax net, the paper said.

The department will collect information on taxpayers, including relationships, social networking, ITR status and asset details, the report said.

The database will also help identify errant taxpayers after demonetisation, and those with pending demands of above Rs 10 lakh. The tax department had on March 15 given instructions officials instructions to access the insight portal, The Economic Times reported.

The information on the portal will be segregated into various segments and include an integrated information management system, the report said.

One segment will have the taxpayer’s master profile, which includes address, signature and tax returns. The second segment, a business intelligence hub, will contain parameters to identify non-compliant taxpayers.

“The objective of this system is to leverage machine learning in organising, creating, sharing and using it for getting the right perspective at the right time,” an official told the publication.

The portal will also provide details of an individual’s movable and immovable assets to speeden recovery in cases where the pending dues exceed Rs 10 lakh.

Officials will also be able to monitor the status of cases where large sums of cash were deposited during demonetisation, the report added.

Project Insight, launched in 2017, uses data analytics to collect information from social media sites to identify mismatches between income declaration and spending patterns.

The Income Tax Department also has an agreement with L&T Infotech to help improve tax compliance.

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The Election Commission of India (EC) on March 10 announced the schedule for the upcoming Lok Sabha polls. The poll panel also announced the Assembly election schedule for four states.

Polling will be held in seven phases starting April 11 and will conclude on May 19. Counting of votes will take place on May 23.

The election, to be conducted in April-May, is being pegged as the largest election exercise in history.

The poll panel also announced Legislative Assembly election schedule for the states of Andhra Pradesh, Arunachal Pradesh, Odisha and Sikkim. The two polls — Lok Sabha and Assembly — will happen simultaneously in these states.

Here are some of the key facts about the election:

> Approximately 10 lakh polling stations will be set up. The number is up from 9 lakh in 2014.

> Voter-Verified Paper Audit Trail (VVPATs) will be used with all Electronic Voting Machines (EVMs) at all polling stations.

> The total electorate will be around 90 crore. The number has risen from 81.4 crore in 2014.

> 1.5 crore voters belong to the 18-19 years age bracket.

> Photographs of candidates will be added to the EVMs.

> Social media now comes under the purview of the Model Code of Conduct.

Seven-phase voting

> Phase 1 voting: April 11 (91 constituencies in 20 states)

> Phase 2: April 18 (97 constituencies in 13 states)

> Phase 3: April 23 (115 constituencies in 14 states)

> Phase 4: April 29 (71 constituencies in 9 states)

> Phase 5: May 6 (51 constituencies in 7 states)

> Phase 6: May 12 (59 constituencies in 7 states)

> Phase 7: May 19 (59 constituencies in 8 states)

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For early humans the tribe was their society – their state, markets, and community rolled into one. It was where all activities were conducted, including the rearing of children, the production and exchange of food and goods, and the succour of the ill and the elderly. The tribal chief or elders laid down the law and enforced it, and commanded the tribe’s warriors in defense of their lands. Over time, as we will see in Part I of the book, both markets and the state separated from the community. 

Trade with more distant communities through markets allowed everyone to specialise in what they were relatively good at, making everyone more prosperous. The state, aggregating the power and resources of the many communities within it, not only regulated markets but also enforced the law within its political boundaries, while defending the realm against aggressors.

Markets and the state have not only separated themselves from the community in recent times but have also steadily encroached on activities that strengthened bonds within the traditional community. Consider some functions the community no longer performs. In frontier communities, neighbours used to help deliver babies; today most women check into a hospital when they feel the onset of childbirth. They naturally prefer the specialist’s expertise much more than they value their neighbour’s friendly but amateurish helping hand. On a more mundane level, we used to offer to take our elderly neighbour shopping because she did not have a car. Today, she orders her groceries online. Similarly, the community used to pitch in to rebuild a household’s home if it caught fire; today the household collects its fire insurance payment and hires a professional builder. Indeed, given the building codes in most developed countries, it is unlikely that a home reconstructed by neighbours would be legal.

The community still plays a number of important roles in society. It anchors the individual in real human networks and gives them a sense of identity; our presence in the world is verified by our impact on people around us. By allowing us to participate in local governance structures such as parent-teacher associations, school boards, library boards, and neighbourhood oversight committees, as well as local mayoral or ward elections, our community gives us a sense of self- determination, a sense of direct control over our lives, even while making local public services work better for us. Importantly, despite the existence of formal structures such as public schooling, a government safety net, and commercial insurance, the goodness of neighbours is still useful in filling in gaps. When a neighbouring engineer tutors our son in mathematics in her spare time, or the neighbourhood comes together in a recession to collect food and clothing for needy households, the community is helping out where formal structures are inadequate. Given the continuing importance of the community, healthy modern communities try to compensate for the encroachment of markets and the state with other activities that strengthen community ties, such as social gatherings and neighbourhood associations.

Economists Raj Chetty and Nathaniel Hendren attempt to quantify the economic impact of growing up in a better community. They examine the incomes of children whose parents moved from one neighbourhood into another in the United States when the child was young. Specifically, consider

neighbourhood Better and neighbourhood Worse. Correcting for parental income, the average incomes of children of long time residents when they become adults is one percentile higher in the national income distribution in neighbourhood Better than it is in neighbourhood Worse. Chetty and Hendren find that a child whose parents move from neighbourhood Worse to Better will have an adult income that is, on average, 0.04 percentile points higher for every childhood year it spends in Better. In other words, if the child’s parents move when it is born and they stay till it is twenty, the child’s income as an adult will have made up 80 percent of the difference between the average incomes in the two neighbourhoods.

Their study suggests that a child benefits enormously by moving to a community where children are more successful (at least as measured by their future income). Communities matter! Perhaps more than any outside influence other than the parents we are born to, the community we grow up in influences our economic prospects. Importantly, Chetty and Hendren’s finding applies for a single child moving – movement is not a recipe for the development of an entire poor community. Instead, the poor community has to find ways to develop in situ, while holding on to its best and brightest. It is a challenge we will address in the book.

There are other virtues to a healthy community. Local community government acts as a shield against the policies of the federal government, thus protecting minorities against a possible tyranny of the majority, and serving as a check on federal power. Sanctuary communities in the United States and Europe have resisted cooperating with national immigration authorities in identifying and deporting undocumented immigrants. Under the previous US presidential administration, communities in the state of Arizona resisted in the opposite direction, ignoring the federal government while implementing stern penalties on undocumented immigration.

Although no country can function if every community picks and chooses the laws they will obey, we will see that some decentralisation in legislative powers to the community can be beneficial, especially if there are large differences in opinion between communities.

A critical function the community plays in modern market democracies is to serve as a training ground for aspiring politicians – recall that Barack Obama was a community organiser – with the community itself constituting a readymade structure for political mobilisation. Furthermore, it is community- based movements against corruption and cronyism that time and again prevent the leviathan of the state from getting too comfortable with the behemoth of big business. Indeed, as we will see in the book, healthy communities are essential for sustaining vibrant market democracies. This is perhaps why authoritarian movements like fascism and communism try to replace community consciousness with nationalist or proletarian consciousness.

In sum, the proximate community is still relevant today, even in cosmopolitan cities where ties of kinship and ethnicity are limited, and even in individualistic societies like those of the United States and Western Europe. Once we understand that the community matters, then it becomes clear why it is not enough for a country to experience strong economic growth – the professional economist’s favourite measure of economic performance. How that growth is distributed across communities in the country also matters immensely. People who value staying in their community are not very mobile. Since they cannot move to work where growth occurs, they need economic growth in their own community. If we care about the community, we need to care about the geographic distribution of growth.

What then is the source of today’s problems? In one word, imbalance! When the three pillars of society are appropriately balanced, society has the best chance of providing for the well- being of its people. The modern state provides physical security, as it always has, but also tries to ensure fairness in economic outcomes, which democracy demands. To do this, the state sets limits on the markets while also ensuring they offer people a level playing field. It also has to make sure that most people have the ability to participate on equal terms in the market, and are buffered against its fluctuations. The competitive markets ensure that those who succeed in it are efficient and produce the maximum output with the resources available. The successful have both wealth and some independence from the state, thus they have the ability to check arbitrary actions by the state. Finally, the people in industrial democracies, engaged in their communities and thereby organised socially and politically, maintain the necessary separation between markets and the state. By doing this they enable sufficient political and economic competition that the economy does not descend into cronyism or authoritarianism. Society suffers when any of the pillars weakens or strengthens overly relative to the others. Too weak the markets, and society becomes unproductive, too weak a community and society tends toward crony capitalism, too weak the state and society turns fearful and apathetic. Conversely, too much market and society becomes inequitable, too much community and society becomes static, and too much state and society becomes authoritarian. A balance is essential!