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Issue 7

Decoding the Union Budget 2021: Q&A with Professor Nishant Chadha

Q: There are a lot of worries about the Fiscal deficit for this financial year. Could you tell us the concerns around it and how the government plans to fund it? 

A: Very loosely put, the fiscal deficit is the difference between the government’s expenditure and its receipts. The concern that surrounds it is how do you fill up the gap between your spendings and receipts? Or if you borrow today, how do you repay it tomorrow, and will you have enough to repay it? 

And if we don’t borrow today, then how will we finance what we want to do? That is the same decision that any business or economic entity faces. Your borrowings are contingent on your belief that you can generate more income and pay off the debt later. Granted your activities are productive enough to cover the costs of borrowing. It’s the same logic that works for the government, but it can get a lot more complicated sometimes. 

The fiscal deficit is higher owing to the huge shock to the economy last year that resulted in low receipts and businesses shutting down.. So, where does the government get its revenue from? Now, since the government does not do any productive activity (like run businesses or earn profits from them), it essentially taxes other productive work, its citizens, businesses, etc. That is how it raises its revenue. Now, when you have an economic shock, especially one as large as the COVID-19 pandemic, your productive activity slows down as businesses aren’t creating much since they are not profitable. So, their tax revenues, which are the proportion of what they produce go down.

So that’s the reason why you have a higher fiscal deficit. Now, the question about concern is really about how optimistic we are about our future and about our ability to meet the government’s increased debt burdens. 

So the last part of the question you asked was how do you finance the fiscal deficit. One way is to disinvest. So you have wealth which you sell off and use the assets to finance expenditure.

The second way is that you go to people and borrow. So that’s the debt market. Typically, that’s the way the government fills the gap.

And the third way is by monetizing the fiscal deficit, which is essentially printing money. This is done by the RBI buying the government bonds and printing more money against that. So, it’s essentially just increasing the money supply. 

Q: Could you tell us something about the expenditure for the agriculture sector. A lot of reports mention that there isn’t a lot being done for the farmers, even against the backdrop of the protests. Can we observe an emerging pattern of inequality here? 

A: Yeah, I have an unpopular view about this. I think the only thing the government or the society can do for the farmers, is to ensure that we have fewer farmers. That is the only way out. 

So I think that agriculture adds about 14-15% to our GDP and employs about 45-48% of the people. That is where you have inequality. At the upper end, you have people who are in productive sectors like services but on the lower hand, people are tied to agriculture.

Increase in productivity with so many farmers is bad for the farmers, it is good for the consumers. So the only thing the government can do is, therefore, focus on moving people away from farming into value-added activities. Typically it would involve people moving to cities and into manufacturing or services. Our problem has been that we don’t have a manufacturing sector, so we have been unable to implement this transition. And it is a very difficult transition as services typically require the kind of skills and human capital that people in rural India don’t have. So now what happens? This is a structural feature and the government has two choices: either people’s income increases itself so that they are no longer poor and reliant on you or if they remain poor, you will have to pay to support them. And that is the essence of this distinction between growth and inequality discussion.

If you don’t do anything in terms of investing in people, if the skills don’t improve, if they don’t engage with other jobs, there’s nothing you can do. None of them are leaving agriculture or moving away from social security schemes. So where do you bring the money from? So to me, this expenditure needs to be balanced. This choice needs to be made. And the only way to have to be able to manage this is to invest in growth.

Q: So does the government have to invest in education training or similar programs to encourage having fewer farmers in the agriculture industry to increase labour productivity?  

A: See that is unfair. We all blame the government, but it is a difficult job to do. As I said, the government doesn’t engage in productive activities, but what it can do is enable the right kind of environment to generate productive activity. The bottom line is that businesses need to grow.

We need more of the right kinds of businesses and entrepreneurs, and more formality in our labour markets. The government’s job is to worry about why jobs are not being created. Now what they can do to resolve this is to encourage entrepreneurship and increased business activity so that people can start or grow businesses and hire more people. 

Now, what is the challenge here? Consider how in a lot of banks that you deal with, look at what has happened with the call centres. They’ve all been replaced by chatbots. Call centres are not really skilled jobs. You just have to talk to people. But they were a huge boost to India in some sense, because they moved a lot of people out of lower-middle-class backgrounds into a sort of middle class, but now they’ll all go away. Just like how mobile phones ran out the STD booths. This is a reality that we are going to run into very soon. So what should the government do now? Well, at the micro-level, they should essentially invest people with enough skills and create an environment which encourages business activity. 

So when we think about what the government can do in terms of job creation, I think over the long term, we need to be cognizant of the fact that by its own admission, this government is spending huge amounts of political capital on digitization but aren’t spending anything on creating it. The question is who will work in those areas? So if I look at the education of the labour force today in India, 28 to 30% or one-third of our labour force is illiterate. We don’t have the labour composition that can be a part of this economy that we are talking about. For example, mobile phone penetration in India is high, but only in absolute numbers. So it is a huge market for people. However, the government’s job is not to create huge markets, but to figure out what is happening to those people who don’t have mobile phones. How will they survive? 

The digital divide in this country is huge. So, what technology 4.0 we are talking about? We don’t even have automation of the basic kind right now. Most businesses in this country don’t have computers. We really need to understand the reality in which we exist.

We have this challenge in the long-term that we need to start acknowledging and addressing now, and then you hope that there is enough creativity and innovativeness in your country’s population, which will take care of itself. And I believe there is. The government’s job is just to create and keep creating the right environment and then hope for the best. 

There are things that they do in terms of job creation, for example, investing in infrastructure will create jobs, but they’ll create construction jobs. The whole world is moving towards, you know, having AI, ML and robots in construction and moving people away to more productive work. We are trying to create jobs where we have people moving from agriculture to construction. This is okay for now, but is this really what we want for the future? These are some hard questions that we need to answer.

Q: We also wanted to ask you about your expectations from the budget and whether or not they were met? 

A: Honestly, I think this is a fair budget and I’m quite okay with it. 

One of the things that I do like about the budget is asset monetization. There’s a lot of land that is lying around, which is not the government’s job to hold anyway. So, releasing productive assets and transferring them to other people in the economy who can use it better is a great idea. I would also like the Indian government to have a national social infrastructure pipeline at some point. 

And I really would like them to have a plan, (like the one that they have for capital expenditure they’re making on infrastructure, for example; in which they give a plan for three, five or 10 years) for education and health. I think now is the time to make commitments. India needs to start thinking about how they’re going to tackle this problem of a low level of education and skilling and increasing enrollment ratios in secondary education.

There is all this discussion around technology 4.0, but how are we going to do it? Our kids don’t even finish school. So what are they going to do? They just want to use YouTube. They become a market for others. Agreed, the mobile phone penetration is high in India, but that just increases the size of the market for somebody else, because the technology is not in the hands of producers or entrepreneurs, that technology is in the hands of consumers. So yes, we’re consuming technology a lot, but what are we doing with it? Or we are basically giving a huge market to Google and Facebook and YouTube.

And yes, we can replace TikTok with Tik Kik and PUBG with FAU-G. But that is not what we need to do. If you want to harness this technology, you need to turn these to as many people as possible, especially to producers and entrepreneurs.

We really need to have a plan for education and health, just like we do for other forms of investment because human capital is a form of investment, not expenditure. We really need to get our act together there.

Q: There’s a lot of information available about the budget. What would you recommend as a good, informative source for somebody who just wants to understand it? 

A: I would suggest that you just look at the budget documents, they are annotated along with footnotes explaining everything. You can just go to the website (www.indiabudget.gov.in).The best way to learn for yourself is to spend time on it and make your own judgments, that is what I would advise. 

Nishant Chadha is a Fellow and Head of Projects at the India Development Foundation, and a visiting associate professor of Economics at Ashoka University.

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Issue 7

Taking from the Rich: Reddit, GameStop and the Consequences of Greed

Near the middle of 2019, a Reddit user, known as “Roaring Kitty” boasted his $53,000 investment in “GameStop” a declining video game company. GameStop bought and sold video games, and it isn’t hard to see why that kind of model seems unsustainable in the streaming and digital age. u/RoaringKitty made his post on a subReddit known as “r/WallStreetBets” henceforth known as WSB. Every commenter on WSB cried out that this investment was foolhardy, that GameStop was dying but u/RoaringKitty paid them no heed and continued to keep his investment there. Today, that $53,000 stake is worth $48 Million. How did this happen? 

To begin, we need to understand a few terms. 

What is a share? 

When a company is formed, it’s corpus consists of a set of discrete units. The owners of these discrete units are shareholders and become direct stakeholders invested in the company. In the case of GameStop, there are roughly 65 million shares up for grabs. 

What is a short? 

A short is a financial action one can take concerning shares. While the obvious way of profiting off of stocks is to buy some shares, wait for the prices to rise, sell and profit off of the differences, there is a means of profiting off of the fall in the price of a share. The way to do this is through “shorting”.

What one does is, when they anticipate that the price of a company’s shares is going to drop in value, they “borrow” shares from shareholders, sell them at current market prices, then once the price drops, they buy the shares back and “return” them, and keep the difference for themselves. Now, when one shorts a given company’s stock, it is legally required to eventually return the borrowed shares. This means they have to buy back the shares, regardless of what they cost. 

In the case of GameStop, hedge funds (financial institutions that profit through the buying and selling of stocks and shares) shorted 140% of GameStop’s shares. How do you short 40% more shares than those that exist? Well, that’s actually not too wild. Essentially, shares can be double-counted. Suppose I buy a share in GameStop and then lend it to a broker who intends to short it. This broker sells it to another customer, named say, Saman. Now, to Saman, this is just another share, there is no association with me, so she can further lend the share to someone else who could short it. This way, we can have over a 100% short interest. 

What did u/RoaringKitty do?

Now, u/RoaringKitty didn’t just brag about a weird investment, he noticed something nobody else did: GameStop wasn’t a dying company. GameStop had reasonably large cash reserves, they didn’t have much debt, and with the release of the new PlayStation 5 and Xbox Series, the chain of stores was doing alright. 

Roaring Kitty started talking about his investment on YouTube, Reddit, and TikTok, and people began to notice. Specifically, Michael Burry. Some of you might know him from Christian Bale’s portrayal of him in The Big Short, but for those who don’t, Burry was one of the first people to realize that there was a crisis imminent before the 2008 Economic Crisis and made a massive profit off of it. Burry, at last count, made a 1400% profit off of his investment in GameStop in just under 5 months. 

This discourse on GameStop’s financials, as well as public filings showing massive short interests from various hedge funds like Citron and Melvin Capital, became the seeds of a perfect storm. u/RoaringKitty mobilized r/WallStreetBets with the information that GameStop was viable fuelling thousands of members of the subReddit to buy millions of shares. This artificially drove the price of GameStop stock up hundreds of dollars and decimated the short position of various hedge funds. Melvin Capital lost nearly $4 billion throughout January. 

While initially, buying GameStop stock was sound financial advice, eventually anti-billionaire, anti-hedge fund rhetoric swept the subReddit, and users decided that keeping the stock was now a moral crusade to crush meddling Wall Street titans. You can find posts like this across the website describing their hatred for Wall Street money movers, and this no doubt fueled the stock buying. Eventually, various influencers, including Elon Musk joined the bandwagon, advocating to buy GameStop and crush the short sellers. Musk specifically dislikes shorting since firms have tried to short Tesla several times over the years. 

Robinhood, a free, fee-less trading platform began restricting trading GameStop stock, to avoid “volatility” in the stock market. Now, as surprising as it may sound, Alexandra Ocasio Cortez, Ted Cruz and Donald Trump Jr. all cried out that this was anti-competitive and anti-capitalist, you’d never expect to see the three of them agree on anything, let alone the free market. Robinhood was only the first of several services to restrict trading, an act that has led to several class-action lawsuits. This leaves a valuable question on the table, who gets to truly “regulate” the market? Why is social market manipulation “volatility” while a few billionaires doing it is a “hustle”? The actual nature of power within market structures has been exposed, and it cannot be allowed to fade from public memory. The “free” market is a selectively free market. 

Now, as trading continues it is to be seen which forces buckle first, the Redditors, or the hedge funds. As the value fluctuates, there are ripple effects across the industry. This entire incident is also provoking a series of questions about the power of social media. A user on Reddit mobilized millions of dollars through thousands of small traders, and apps like Parler managed to mobilize thousands to storm the US Capitol. While one shouldn’t conflate the two events, there needs to be cognizance of how these networks hold the power to organize people in ways that the people are not prepared for. But beyond that, the story is still unfolding, and we need to ask ourselves, who wins at the end of this? How do we even imagine “winning” in this scenario? And, where does this leave us? 

Vibhor is a third-year economics major, and frequent Redditor, with an interest in economic history, behavioural science and decentralised systems. He is a frequent critic of the free market and enjoys reading about market failure and similar shenanigans.

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Issue 7

The Biden-Harris Campaign: Representation or Presentation?

On 20th January, as Joe Biden was sworn in as United States of America’s 46th president, Democrats celebrated Donald Trump’s departure from the office while also rejoicing in Kamala Harris’ entry. Kamala Harris, the vice-president with several firsts, has been the talk of the news cycles ever since she was picked by Joe Biden as her running mate, after she suspended her own presidential campaign in August.  USA’s first woman, Indian-American, Asian vice president’s candidacy has added onto the world’s fixation with US politics because of the position and the power the country holds in global affairs. It is extremely important to acknowledge and appreciate Harris reclaiming space where women, especially black and other women of colour are constantly overlooked, silenced and shut — as also noted by Harris in her speech. This joy gets doubled when one looks at it as a victory that comes off at the heels of an administration that has  enabled white supremacy. 

Though Kamala’s Harris’ entry is a historical win for the United States of America in most means, people of the country are looking at Kamala Harris unidimensionally, and reducing her existence to only her identity:  Indians, both in USA and abroad, have been quick to claim her as their own, just like they have always been with every successful member of the diaspora, with remote links that root them back to the homeland. The internet is flooded with people from all over the world, especially Indians reacting to someone who “looks like them” making a place for herself in a majoritarian white-male office. From people calling her “Kamala Aunty” to Mindy Kaling claiming that her toddler does not see a difference between Harris and Kaling herself, Indians, mostly Hindu, out of which a significant portion is upper caste, immediately appropriated every aspect of Kamala Harris’ existence to make it their own. Many feminists are referring to Harris as “girlboss”, a term most commonly used to describe women in power, that has been criticised time and again for straying away from activism. 

Such a reductionary approach to a politician is definitely not new but it is dangerous as it tends to be used as a weapon by the candidates to mask their intentions and mislead the voters into buying a revisionist identity. Kamala Harris’ campaign is often seen focusing on Harris “going back to her roots”, whether it is making dosas with Mindy Kaling or talking about the importance of idlis and festivals in her mother’s house, time and time again we have seen Kamala Harris’ identity been marketed as an identity tool to appeal to a particular kind of vote bank — the upper castes from the Hindu diaspora through quick and lazy surface level tropes. Identity Politics, that is crucial for bringing forward a diverse panel to avoid trampling of minorities in the country, is increasingly being misinterpreted and reduced to a marketing tactic that caters to the “feel good” sentimentality without actually bringing any tangible change. 

Representation holds concrete value, however, only when the candidate reflects back onto the struggles of the community they claim to represent. There is nothing about Kamala Harris’ candidature that separates her from her white colleagues and opponents. . It is extremely hypocritical of Harris to bring up her “Jamaican roots” and talk about smoking pot as a youngster and claiming to be for the legalisation of the same. when she saw around 2,000 marijuana related convictions during her term in San-Francisco.  All this is just talk that profits off people’s struggles by giving them a false sense of relatability when in reality it is hollow, keeps stereotypes alive,while enabling divide and rule of the proletariat. This kind of playing on the sentiments of the voters also helps the public hold their representatives less accountable — the marketing strategies of the campaign are rolled out in such a manner that only diverts all attention to just one part of the candidate, their persona, completely taking away the focus from their policies and ideology.  

During the peak of Black Lives Matter movement in America, the Jamaican side of Kamala Harris’ identity was brought out time and again. She called herself a proud black woman, talked about her experience as a black student in college, told the public about the societies she was a part of in college that helped her get a deeper understanding of her community and its struggles, she calls herself a “progressive prosecutor”. However, if one looks at her past actions, we can see how during her term alone in California, more than ⅔ of the men killed by police officers were people of colour, of which a majority were unarmed. She was also responsible for holding black men longer in jails when they were eligible for release just to extract cheap labour out of them. It is disheartening to see an important movement that seeks to bring resolution to racial disparity in the country being twisted to fit a political campaign and agenda, when the candidate does not comply with anything that the movement stands for. Kamala Harris’ campaign runs in a similar manner to that of any big co-operative, where they take people’s real struggles, and capitalise on them under the false pretense of bringing forward a social change — like how brands do with LGBT struggles during the pride month.   

Kamala Harris has also constantly referred to herself as a feminist beacon, who purportedly understands women’s struggles when her activites have shown otherwise. Harris has not done much that aligned with the feminist movement, more so, she has been dangerous to the sex workers and the trans community alike. In 2008, Kamal Harris opposed the Proposition K, which was directed at decriminalisation of sex work and prevention of STIs. She argued that Proposition K unfurled “a welcome mat for pimps and prostitutes to come into San Francisco”. Her campaign completely ignores this past of Kamala, which had put women into danger and continues to show her as a feminist crusader and a “girlboss” who would bring a fresh perspective and voice into the US politics. She willingness of people to selectively see their candidates as it seems fit to them, makes it even more convenient for the campaign to do so. She also claims to be pro-decriminalisation of sex work but has not even commented to make amends to this action she undertook as an attorney general. 

The Democratic party during the Biden-Harris campaign has shown exactly what happens when neo-liberals twist the identity politics model, and reduce it to a weapon that centres itself around one aspect of an individual’s identity and uses it as a ladder while aligning with interests do nothing to dismantle a pre-existing model, all the while disillusioning the masses into believing that they would bring some concrete and effective change. 

Madhulika Agarwal is a third year English and Media Studies major who is interested in literature by children and for children. When she is not lamenting over her tiktok career that ended before it could start, she likes learning about animals and reading books with good art in them. 

We publish all articles under a Creative Commons Attribution-Noderivatives license. This means any news organisation, blog, website, newspaper or newsletter can republish our pieces for free, provided they attribute the original source (OpenAxis).

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Issue 7

“Mark as Read” to “Mark has Read”: Privacy Policies in India

There are three imponderables when it comes to Privacy: the definition of privacy in today’s data-is-the-new-oil world, how to balance the desires of the individual and the powers-that-be (government or local law enforcement), and how to actually implement and enforce these ideas, once we’ve come up with them. In short, it wouldn’t be too wrong to say that we don’t really know what we’re doing when it comes to privacy!

Further, there’s usually a dichotomy proposed between privacy and security: you can have privacy, but that means criminals/terrorists would be able to operate without the government being able to track them. So, if you want to have security from all these evil people, you must consent to let the government snoop on your data as well.

This is actually a common thing: to protect the population from the wiles of food producers, the government sets up certain standards that these producers must obey. The government may send inspectors to check upon the processes followed, and then punish producers who do not conform. Here, however, every single one of us is a producer.

Fortunately (or otherwise) this relentless production of data by individuals is mediated by companies like Facebook, who collate and process this data, profiting from the detailed profiles they build of us in the process. So, it might be possible to regulate things simply by applying the regulations on these corporations instead of at an individual level. But it also means that there are now two entities (albeit with somewhat different incentives) who may want to read what we write, i.e., the government and the corporation. One thing is very clear: individual-level policies are insufficient. Most people do not (and cannot be expected to) have a deep understanding of privacy issues – just like we don’t all have a deep understanding of food safety norms. Some kind of aggregated negotiation tactic, then, appears to be the only solution.

Given that the government (an entity interested in seeing our data) is the one representing the population in this negotiation, civil society must be extremely vigilant about what the details are. Many people (loosely) propose some structure of the following nature: private messages between individuals must remain secret, both from the government and the corporation. However, if the government comes to the corporation with a warrant, the latter must hand over the data. This last bit, of course, is impossible in an “end-to-end encrypted” system, where only the sender and receiver can read information.

WhatsApp’s recent change is an interesting nuance in this 40,000-ft view. Your private messages in WhatsApp are still end-to-end encrypted and unreadable to anyone but the parties directly involved: nothing has changed on that front. What many may not have noticed, is that WhatsApp actually makes two different apps: one for private use, and one for businesses. WhatsApp’s new policy allows them to look only at communications with these business accounts.

Note that WhatsApp could already look at the metadata: they would know, for example, that you had been chatting with a number of mattress companies (but might not know what kind of mattresses you were looking for). Facebook could then advertise mattresses on your feed. With this new policy, WhatsApp can share data about your interactions with business accounts, so that Facebook can find and suggest the exact kind of mattress you were looking for. As far as changes in privacy go, it’s actually rather minor. Your private messages are just as private as before.

As discussed above, even an end-to-end encrypted system can reveal a lot about one’s preferences and behaviour; this is actually the main difference between WhatsApp and Signal. They use the exact same set of encryption protocols; WhatsApp provides more services (e.g., it is rolling out payments in India), but retains metadata. Signal retains no metadata whatsoever. It just knows the time you last logged in and some other basic information, nothing more, and backups are encrypted. In either case, your actual chats are end-to-end encrypted and cannot be seen by anyone else; this is with the notable exception of backups: unencrypted backups (WhatsApp does not have an option to encrypt) can be read by Google or Apple (and thus by a government with a warrant).

Any state regulation on these encryption and privacy policies would be incredibly difficult, and that’s without getting into the international nature of the problem (what happens with software written in Germany that facilitates a chat between a Japanese citizen and an Australian citizen, with the latter physically residing in India?). I think the short answer is “non-starter”. 

Perhaps the nearest we can get is a set of minimum standards, some rules about consent, and privacy scores. Such consent rules are also hard to frame, e.g., “a corporation cannot access any data belonging to a user without direct, time-limited consent, with sufficient granularity (not all-or-nothing options)”, but we have a lot of good lawyers who I am sure can do a much better job of this than I! In the short term, however, the best idea is almost certainly privacy scores, calculated by an independent government agency, providing something like a star rating to companies operating in India: this could be one way to provide citizens with the information they need to choose what is right for them. 

Debayan Gupta is currently an Assistant Professor of Computer Science at Ashoka University, where he teaches a course on security and privacy as well as an introductory programming class. He is also a visiting professor and research affiliate at MIT and MIT-Sloan. 

We publish all articles under a Creative Commons Attribution-Noderivatives license. This means any news organisation, blog, website, newspaper or newsletter can republish our pieces for free, provided they attribute the original source (OpenAxis).