Helicopter Money Drop, or QE for the People or some other Unconventional Macroeconomic Tool…? Hoping the Government of India isn’t Looking to Buy into and Sell this Rhetoric in Defense of Demonetisation.

Let us suppose now that one day a helicopter flies over this community and drops an additional $1,000 in bills from the sky, which is, of course, hastily collected by members of the community. Let us suppose further that everyone is convinced that this is a unique event which will never be repeated.

This famous quote from Milton Friedman’s “The Optimum Quantity of Money” is the underlying principle behind what is termed Helicopter Money, where the basic tenet is if the Central Bank wants to raise inflation and output in the economy, that is below par, potential, the most effective tool would be simply to give everyone direct money transfers. In theory, people would see this as a permanent one-off expansion of the amount of money in circulation and would then start to spend more freely, increasing broader economic activity and pushing inflation back up to the central bank’s target. The notion was taken to a different level thanks to Ben Bernanke, former Chairman of FED, when he said,

A broad-based tax cut, for example, accommodated by a programme of open-market purchases to alleviate any tendency for interest rates to increase, would almost certainly be an effective stimulant to consumption and hence to prices. Even if households decided not to increase consumption but instead rebalanced their portfolios by using their extra cash to acquire real and financial assets, the resulting increase in asset values would lower the cost of capital and improve the balance sheet positions of potential borrowers. A money-financed tax cut is essentially equivalent to Milton Friedman’s famous ‘helicopter drop’ of money.

The last sentence of the quote obviously draws out the resemblances between the positions held by MF and BB, or helicopter money and quantitative easing, respectively. But, there is a difference that majorly lies in asset swaps for the latter, where the government bond gets exchanged for bank reserves. But, what about QE for the People, a dish dished out by two major ingredients in the form of financial excesses and communist manifesto!!! Thats a nice ring to it, and as Bloomberg talked of it almost a couple of years back, if the central bank were to start sending cheques to each and every household (read citizen), then most of this money would be spent, boosting demand and thus echoing MF. But, the downside would be central banks creating liabilities without corresponding assets thus depleting equity. Well, thats for QE for the People, the mix of financial excesses and communist manifesto. This differentiates with QE, as in the process of QE, no doubt liabilities are created but central banks get assets in the form of securities it buys in return. While this alleviates reserve constraints in the banking sector (one possible reason for them to cut back lending) and lowers government borrowing costs, its transmission to the real economy could at best be indirect and underwhelming. As such, it does not provide much bang for your buck. Direct transfers into people’s accounts, or monetary-financed tax breaks or government spending, would offer one way to increase the effectiveness of the policy by directly influencing aggregate demand rather than hoping for a trickle-down effect from financial markets.

geoq416_special-focus_fig1

Assuming Helicopter Money is getting materialized in India. What this in effect brings to the core is a mix of confusion fusion between who enacts the fiscal and who the monetary policies. If the Government of India sends Rs. 15 lac to households, it is termed fiscal policy and of the RBI does the same, then it is termed monetary policy and the macroeconomic mix confusions galore from here on. But, is this QE for the People or Helicopter drop really part of the fiscal policy? It can’t be, unless it starts to be taken notice of the fact that RBI starts carrying out reverse repurchase operations (reverse repo), and plans to expand its multiple fold when it raises its interest rate target in order to put a floor on how far the funds rate could fall. And thats precisely what the RBI undertook in the wake, or rather during the peak of demonetisation. So, here the difference between such drops/QE for the People and QE becomes all the more stark, for if the RBI were to undertake such drops or QE for the People, then it would end up selling securities thus self-driving the rates down, or even reach where it has yet to, ZIRP. Thus, what would happen if the Government does the drops? It’d appear they spend money and sell securities, too. But in that case, people would say the security sales are financing the spending. And in their minds this is the fiscal policy, while the RBI’s helicopter money is monetary policy. If the confusions are still murky, the result is probably due to the fact that it is hybrid in nature, or taxonomically deviant.

It seems much clearer to simply say that (a) the act of creating a deficit—raising the net financial wealth of the non-government sector is fiscal policy, and (b) the act of announcing and then supporting an interest rate target with security sales (or purchases, or interest on reserves), which has no effect on the net financial wealth of the non-government sector is monetary policy. In the case of (a), whether the RBI cuts the cheques, it’s fiscal policy, and with (b), whether the RBI sells securities, it’s monetary policy. In other words, fiscal policy is about managing the net financial assets of the non-government sector relative to the state of the economy, and monetary policy is about managing interest rates (and through it, to the best of its abilities, bank lending and deposit creation) relative to the state of the economy.

So, how does this helicopter drop pan with India’s DBT, Direct Benefit Transfers or getting back the back money to be put into accounts of every Indian? What rhetoric to begin and end with? Let us go back to the words of Raghuram Rajan, when he was the Governor of the RBI. “It is not absolutely clear that throwing the money out of the window, or targeted cheques to beneficiaries… will be politically feasible in many countries, or produce economically the desired effect,” he said because the fiscal spending hasn’t achieved much elevated growth. So, bury the hatchet here, or the government might get this, import this rhetoric to defend its botched-up move on demonetisation. Gear up, figure out.

Advertisements

A Rejoinder to Public Sector Banks Lending, Demonetisation and RBI Norms: an adumbration

The country’s central bank said 405,000 counterfeit 500- and 1,000-rupee notes were found in the banking system in the year that ended in March, representing around $4 million. But researchers at the Indian Statistical Institute estimated this year that the total value of fake bills in circulation, including those that go undetected by banks, may be as high as $60 million. Now, this is a major discrepancy considering the fact that ISI is invested with data collection, and if one were to go extrapolating this discrepancy, the breach is already broken even without the government stepping in to play its complicit part. 

India is a cash-rich economy, in that most of the transactions are effected in hard cash. This predominance leads to huge stacks in store leading to culmination of corrupt-practices that multiply. One way to emaciate the flow is through narrowing the spigot, which is precisely what is expected out of this exercise, though a caveat of it leading a full circle to corruption cannot be belittled as you have wonderfully explained. But, this spigot narrowing could at least streamline the cash flows of abundance in terms of higher-denomination for the time being. But, how would this cause any lowering in corrupt practices? Probably, it might only for the time being with increased liquidity in banks seize up economy by making it difficult for large volumes of transactions, especially in sectors allied with infrastructure. 

How is the gold sector impacted? Negatively to begin with as no one is investing in gold bullion but rather placing orders to capitalise once the system smoothens. The RBI might go slow on open market operations (OMOs) till there is clarity on how much money will flow into bank deposits by December 30. Moreover, this adverse wealth impact will likely hurt higher-end discretionary demand temporarily. At the same time, lower rates should provide a buffer. A combination of two would result in RBI recouping forex reserves if the adverse wealth effect cuts down gold import demand, a teleological consequence.

rbis-open-market-operations-key-to-recovery

{Securities Transaction Tax + Commodities Transaction Tax + Revenue Foregone} = A Recipe for Illusionary Scam

Are Transaction Tax and Securities Transaction Tax synchronous? If by chance these are used interchangeably, then the rate is not 0.5%, but in accordance to a slab where sale/purchase, or transaction effects on options or futures, where it is valued in premium in the case of options and actual trade price in the case of futures. Moreover, Securities Transaction Tax differs from intra-day to inter-day transactions. Two crucial factors are the distinguishing parameters here: buying securities and selling securities would attract different STT, and is often resorted to avail exemption in case of long-term capital gain. The rate of taxation is determined by the Government. All stock market transactions that involve equity or equity derivatives like futures and options are liable to be taxed under the STT. Now this last sentence is redundant, but points out to commodities and currencies that stand out exempted from STT. If one talks of stocks, bonds and commodities in the same breath, albeit preliminarily, as different from what the governmental figures exhibit – the latter dips the figures, while it should have been higher according to those in the opposition, then clearly commodities and currency trades should have different taxation structure in the stock exchanges. But, that isn’t the case, for commodities are never traded on the stock exchanges, but on the commodity exchanges, and regulated by Forward Markets Commission and not by SEBI. Further, commodity derivatives can be settled by delivery, unlike security derivatives, which could only be settled by payment or receipt of differences. So bearing this differentiation in mind, where does one see commodities vis-à-vis securities under the rubric of revenue receipt?

I understand it has no truck with revenue foregone (it actually has, and I won’t dismiss it so simplistically!! but for brevity I am presuming it merely). Revenue Foregone is more of a myth in regards to the common misunderstanding surrounding the same. Section 5A (1) of the Central Excise Act 1944 empowers the Union Government to lower tariff rates below levels prescribed in the schedules, and are specifically applicable to mass consumable goods and more often than not are not tax sops to corporations. On the other side, Customs duty concessions are mostly for imported goods and used as inputs for exports as defined under Section 25 (1) of the Customs Act, and thus many a times run the risk of being included on the revenue foregone side, while it is mainly to boost India’s exports more competitively on the global market scene. Taken these two, the myth of Revenue Foregone only proliferates either as giveaways to corporations, or as political decisions taken on behalf of corporations, while the real demand from these corporations seldom make such warrants.

mcx-img-1

Taxation on the money made via share market trading depends largely on the purpose for which share transactions are done. An individual can trade shares for business purposes or as an investment activity. In both these cases, the STT that is levied by the Government, varies. Why this obsession with STT is the obvious question? Because: STT is fast, transparent and effective. Since tax is levied as soon as the transaction arises, instances of non-payment, wrong payment etc. are reduced to a minimum. The net result of this is, however, it pushes up the cost of transactions. Now, while calculating the estimated potential of revenues from such taxes, the possibility of migration of trade volume is generally not taken into account. Hence, actual revenue mobilized in most cases does not correspond with the estimated potential, because the revenue potential is a function of the elasticity of trading volume with respect to transaction cost/STT spread. On the issue of volatility, things settle down to an ambiguity, and as far as stock exchanges are concerned, one cannot overlook it. The impact of transaction tax on volatility is a function of market microstructures. If market fundamentalists out-number noise traders, then STT will not only affect the latter, but also have a disproportionate effects on the former, leading to a fall in the trade volume and liquidity and inversely rising volatility. This inconclusively questions the veracity of transaction tax and STT, and the two are synchronous with STT and others being merely under different headings of taxation.

Let us leave behind CTT for the time being, as that would complicate matters since we are talking stock exchanges here and not commodity exchanges. Only thing, I’d like to point out then is not using commodities for revenue receipts, if such receipts are generated from stock exchanges as there is a categorical error in bringing them on a similar platform. If one goes into different heads and nomenclatures, what good does it bring about looking at transaction tax stripped off its components is something I find difficult to fathom? Would it not defeat the purpose if one is looking at volume or volumes of trade and revenue receipts under these? Looking now briefly at CTT. First proposed in 2008, it was met with extreme opposition, and CTT was proposed again in the Budget in 2013, but only on Non-Agricultural Commodities such as Gold, Silver, Aluminium, Crude Oil among others. This time the Bill was passed & CTT was levied on Trades in Commodity Futures on & after 1 July 2013. With the introduction of CTT in commodity trading, trading volumes on the MCX and other commodity exchanges in India have seen a dip as high as 50% – 60%. It has also driven away smaller segments of the volume contributors away from the segments since scalping, jobbing, etc have become an unviable and expensive proposition.

 

Rejoinder to COMMODITY TRADING FIRMS: MORE DARKER AND SINISTER THAN CORPORATIONS

main_grains

Commodity Trading Firms (CTFs) are listed on stock markets, meaning registrations are not issues at all. They are trading entities and come out with listing in what is called a split listing, i.e. across stock exchanges to accrue better value and worth, at least they set the rules when they launch their IPOs. As to how they are different from IFIs, the idea is where do they invest and how do they invest? They are private firms to begin with and have no truck with contingency reserve funds that tie the IFIs with government and/or transnational governments. Even in the absence of any contingency reserve agreements, governments put money, rather channel money in MDBs/BDBs. This differentiates them from CTF (commodity trading firms). The investment from CTF moves thusly: investment through convertible loans tied up with rights (ownership/control), especially in places fraught with uncertain civil life versus the military regimes, markets drying up and no-takers for risks. These CTF move in there and set up shop and demand rights be transferred to them through a more than required majority of release of new shares. The deal gets struck.

Would Large Exposure Framework, LEF effectively nip the NPAs/NPLs in the bud?

The narrative that non-state actors contribute to stressed assets (NPAs/NPLs :: English / Hindi) via their infrastructural forays and are as complicit in debilitating the banking health in the country as their public counterparts (excuse me for the liberty of giving budgetary allocations the same stature) is slightly misplaced on one important count: accessibility to market mechanisms. The former are adventurous with their instrumentals (yes, more often than not resulting in ignominy, but ingenuous in escaping for a better invention of monetary and fiscal instruments), while the latter are hand-held devices suffocated by Governmental interference and constrictions. The key point lies in the fact that former and not the latter enjoy as well as enjoin connectography, the key pillar to globalised financial in- and out-flows. Turning on to LEF, which I personally feel has enough teeth to sink into narrowing the risk exposure, but, sharpness of the teeth is still speculatively housed in the orbit.

reserve-bank-of-india-rbi

Although regulatory mechanisms are on an uptick, these efforts are not yielding results to be optimistic about, and even if they are, they are only peripheral at best. Deterrents to prevent large exposure of banks’ bad accounts are marred by lenient approach towards: inadequate tangible collaterals during credit exposure enhancements; promoter-equity contribution financed out of debt borrowed by another bank, leading to significant stress of debt servicing; and short-term borrowings made by corporations to meet working capital and current debt servicing obligations exerting severe liquidity pressures on account of stress build-up in their portfolios. These are cursory introductions to the necessity of Large Exposure Framework (LEF) by the Reserve Bank of India (RBI). This framework confines banking sector’s exposure to highly leveraged corporates by recommending an overarching ceiling on total bank borrowing by the corporates. The idea is to secure other external sources of funding for corporates other than banks by introducing a cap on bank borrowings. With the introduction of this cap, corporates would have to fend for their working capital by tapping market sources. How well this augurs for mitigating NPAs is yet to be scrutinised as the framework will take effect from next financial year. But, the framework has scope for recognising risks, whereby banks would be able to draft additional standard asset provisioning and higher risk weights for a specific borrower no matter how leveraged the borrower is. The issue of concentrated sectoral-risk would get highlighted, even if the single and group borrower exposure for each bank remains within prescribed limits. The framework thus limits relentless lending to a borrower reducing risks of snowballing NPAs by throwing open avenues of market capitalisation on one hand and more discernment regarding sectors vulnerable to fluctuating performances. The efficacy will only have to stand the test of time.

Musings on Financialisation of Capital, Bureaucracy, Fascism and State PR

When one says Finance Capital is one expression of capital exerting its pressure socio-politically…I wouldn’t ever disagree on it. But, the way I am seeing this is missing the wood for the trees. Why? Because, socio-political affects are affects of the larger scheme of things we associate with finance. This is a trickle down effect (not in the strictly economic sense of the phrase). Finance Capital is becoming a controlling tool through increasing concentration and centralisation of capital in the hands of large corporations, cartels, trusts and banks. Not just that, these supranational entities are also diversifying into fields with intense financial intent thus bringing to effect financialisation of economy the world over. Once this is conceptualised, the socio-economic impacts follow. I am looking at a rigid top-down approach here.
stock-tracking-index

On to Bureaucracy. Why do I say it is impersonal? This is an idea imported from Max Weber, probably the father of Bureaucracy Theory. Bureaucracy differed from other types of organisations by its nonlegal forms of authority. Weberian take was inclined on its being technical proficiency specialised expertise, certainty and continuity. The genesis of it lay in money-based economy, the forerunner to capitalism in its variegated disguises and attendant need to ensure rational, impersonal and legal transactions. So, that is the combination spoken about that has got inverted from its traditional schemata. Also, there is an accompaniment of historical roots in the statement.

Fascism: it is absolutely necessary to insist on this essential aspect of the definition of fascism, for one can scarcely understand the emergence of the fundamental concepts of fascism and of the Fascist philosophy and mythology if one does not recognize, at the same time, that it arose from an originally Marxist revolt against materialism. It was the French and Italian Sorelians, the theoreticians of revolutionary syndicalism, who made this new and original revision of Marxism, and precisely this was their contribution to the birth of the Fascist ideology. Zeev Sternhell has amazingly outlined the history of Fascism in his “The birth of Fascist Ideology: From Cultural Rebellion to Political Revolution“. Sternhell further says, ‘From the standpoint of the temporal structure of the project, fascism is a particularly radical form of conservative revolution.

Some of the traits that will be offered by a populist leader who affirms fascism is a rebirth of a strong National Identity, making a nation strong again, reviving culture, industry, education, and the middle-class values that have sustained it. It is always a populist authoritarian movement that seeks to preserve and restore a former glory to the nation as well as military, social, and religious values based on strong patriarchal roots that center on community of nation, race, and faith. It will treat any opposition as it sees fit to the point of utter abandonment of the norms and laws of the land, seeing in them hindrances that must be circumvented under dire emergencies, etc.. It will seek to cleanse the nation of foreign and domestic threats it perceives as outside the mainstream socio-cultural order it seeks to revive and promote. It will seek to revive an organic wholeness and totality, and expunge and expel those it perceives as outsiders: immigrants, refugees, or aliens in its midst. It will begin by attacking the insiders or establishment who it perceives as decadent, corrupt, and a parasite upon the body of the Nation as a whole. It will also incarcerate and expunge the poor and poverty stricken, enforcing codes of distrust and victimization. It seeks only to bolster up the vast majority of the middle-class workers of all diverse forms. From this point of view, BJP’s rule is perfectly congruent with fascism.

On the Adanis and Guptas, why is it not a collusion of corporate and state power of the past? It is, but with a vectoral shift in axis. The Fascist revolution sought to change the nature of the relationships between the individual and the collective without destroying the impetus of economic activity-the profit motive, or its foundation-private property, or its necessary framework-the market economy. This was one aspect of the novelty of fascism; the Fascist revolution was supported by an economy determined by the laws of-the free-market ideology. The shift in the axis lies precisely in the prerogative the financial capital has over decisions political. The shift in the axis has inverted the priorities of politics and capital. So, the Adanis and Guptas decide the politics rather than the other way round. This is a journey back to some of the basic tenets of political economy, which were seemingly eroded in the first phase of neoliberal era, thanks in large part to Thatcherism and Reaganomics.

Police before the state: This is a complicated relationship and is best understood if one were to dissolve the colloquial use of the word police. Allow me another recourse here to the French Political Philosopher, Ranciere, who puts it most aptly, “I do  to identify the police with what is termed the state apparatus. The notion of state apparatus is in fact bound up with the presupposition of an opposition between state and society in which the state is portrayed as a machine, a cold ‘monster’ imposing rigid order on the life of society. This representation already presupposes a certain ‘political philosophy’, that is, a certain confusion of politics and the police. The distribution of places and roles that defines a police regime stems as much from the assumed spontaneity of social relations as from the rigidity of state functions. The police is essentially the law, generally implicit, that defines a party’s share or lack of it. The police is thus first an order of bodies that defines the allocation of ways of doing, ways of being, and ways of saying, and sees those bodies are assigned by the name to a particular place and task; it is an order of the visible and the sayable that sees that a particular activity is visible and another is not, that this speech is understood as discourse and another as noise. Policing is not so much the ‘disciplining’ of bodies as a rule governing their appearing, a configuration of occupations and the properties of the spaces where these occupations are distributed.” Therefore, by this logic the latency of police’s requisition for running the state is guaranteed. And, do we see any other way, if policing is extended to the notions of ‘moral policing’? I bet not.

Politics as the last resort of scoundrels will defeat the entire purpose of this response, and evidently, there is a strain of polity running throughout this response. Moreover, communication theories across generations have believed in media as the message and politicians of the present-day ruling regime are dramaturgists precisely in their compositions. We have had numerous examples to prove the point in the last one month or so.

Why do I call the Left academicians and practitioners idiots? Substantial segments of the left are in danger of allowing their movement to degenerate into a trite, self-indulgent counter-culture, in which an angry anti-establishment posturing conceals a lack of a positive political programme, and obviously nothing to say about the economic programme. Have we forgotten about the frittered opportunity during the 2008 crash? Globalise Resistance is one of the most visibly popular left-wing campaigns, defined by what they’re against, not what they’re for. Many people on the left are far too ready to draw an artificial moral equivalence between true tyrannies overseas and the very real but usually much milder moral failings of their own leaders and institutions. This is perpetrated by academicians and practitioners, and I am speaking of a very personal set of experience here. And still nothing seems to have changed.

Techno-politics isn’t really a slippery terrain, and for a change is one way the left can bounce back with. Humanity is being processed as mindless organisms (i.e., through processes of de-education, cultural amnesia, de-programming, etc.)  in a system of normative practices on a global scale that seek to install an ethos of domestication in a grand safety system to secure its own inhuman ends. This inhuman core is constructing secure, comfortable, and hedonistic bubbles of imprisonment that will allow it to design and further its own programmatic operations. Most of all through the pacification of the human species, and a controlled or modulated form of work and leisure; attenuated by the dictates of a global hierarchy of corporate capitalist institutions, no longer bound to ideological systems of a democracy, communism, or religious practice: the nexus of encoded cultural references that bind us to ethno-nationalists agendas, all the while seeking to envelope us in intelligent hypermedia reality machines and systems that will allay our fears and graft us into their own secret agendas of power and dominion. This is a scary proposition talked about.

There is no doubt in me when I oppose Industrial Corridors, and why Shouldn’t I? But, by electronic corridors, I mean are trading systems becoming the nerve centres of financial capitalism, say for instance, High Frequency Trading, HFTs in short. These are algorithmically powered and somehow dehumanistic by being capable of the pillars of the Fourth Industrial Revolution. One could look at the recently held World Economic Forum, where this topic was largely thrashed about. Yes, there are political ripples created against it, but as a personal friend of mine who was single handedly responsible for launching the #occupymovement told me, “such ripples are minute for they lack steam to bring on the alternative voices into a robust solidarity against corporatism.” For obvious reasons, I cannot reveal the name of this person. BTW, she is a hardcore neocon, right now. Strange, but true.

Electronic knowledge turning into digital ash is a reference given to surveillance technologies, the answer to which lies in sousveillance, but then do we have have enough resources. Sadly, in our country, the answer is a resounding no. During the cold war, East Germany was the most infamous surveillance society, but the shift is palpable to more advanced democracies including the upcoming economies. China is a bizarre case still.

The other two intervening points are largely agreed to, and thus I won’t venture there. On me being a socialist, the original writeup said, sciolist, a concert that talks of superficial pretender of knowledge. The words appear same through spellings, but are vastly different. On whether I am a socialist in the Marxian sense, I’d be short here: NO.

Socratic irony is a particular device often used in rhetoric in which one person pretends to be ignorant about an issue to lure the other person into explaining it. In a debate or argument, for example, two people may hold differing points of view about a particular subject. One of the two participants may then pretend that he or she does not understand an important aspect of the subject, and ask the other person to explain it. As the other person explains it, the first participant then comments on weaknesses inherent in the other person’s argument and has used Socratic irony to make him or her reveal them. The left needs it, as the right is weak in rhetoric, maybe, or not. But it is required.

State as a PR firm is necessarily a naive understanding of state, but fits the present-day context. Though, I must admit if it was made to look like a naive understanding. Public relations and state have been two firmly entwined concepts since the beginning of recorded history. For evidence from ancient times, take a look at Aristotle and his schools of rhetoric that taught the art of persuasive communication. In more recent times, the work of the man commonly thought of as the father of modern day public relations, Edward Bernays, and his belief that public relations is an art applied to a science provide a clear connection between the two.

To pay the piper is to pay for the dire consequences. It only highlights the despair I referred to. This does end it on a bleak note.

SMART CITIES: WHERE DOES THE FINANCIAL VIABILITY LIE?

‘Smart’ as an adjective or as a noun isn’t really the question anymore as the growing narratives around it seem to impose the latter part of speech almost overwhelmingly. This could a political strategy wrought by policy makers, IT honchos, urban planners amongst others to make a vision as expansive as it could be exclusionary. The exclusionary component only precipitates the divide in-between the inclusionary, thus swelling the former even denser. Turning from this generic stance about the notion of ‘Smart’, it is imperative to look at a juggernaut that is swamping the political, the policy makers, the architects-cum-urban planners, the financiers, and most crucially the urban dwellers belonging to a myriad of social and economic strata. While a few look at this as an opportunity in revamping of the urbane, for the majority, it is turning out to be a silent battle to eke out a future amidst uncertainty. In a nutshell, the viability of such ambitions depend on clear-sightedness, which seems to be filling up the void via the ersatz.

challenges-to-achieve-smart-cities-goal

Though, one thing that needs to be clarified here is the use of ‘smart’ is quite clearly similar to the use of ‘post’ in some theories, where it is not the temporal factor that is accounted for, but, rather an integrative one, a coalition of temporal and spatial aspects. Many a times, intentions such as these constructed as a need, and the difference between with the necessity is subtle. Smart Cities were conceived precisely because of such rationales, rather than as cahoots of impending neo-colonization conspiracies. There is a urban drift, and this dense diaspora is allegedly associated with pollution, resource crunch, dwindling infrastructure resulting in a stagflation of economic growth. So, instead of having kiosks that are decentralised, the idea is to have a control that is central addressing such constraining conditions. With a central control, inputs and outputs find monitoring in-housed through networking solutions. What’s more, this is more of an e-governance schema. But, digging deep, this e-governance could go for a tailspin because of two burning issues, viz. is it achievable, and how long would one look into the future as far as the handling and carrying capacity of data is concerned over these network solutions, since the load might exponentially rise without falling under any mathematical formulae, and could easily collapse the grid supporting this or these network(s). Strangely enough, this hypothesising takes on political robes, and starts thinking of technology as its enemy no. 1. There is no resolution to this constructed bitterness, unless one accommodates one into the other, whichever way that could be. The doctrines of Ludditism is the cadence of the dirge for the ‘Leftists’ today. The reality, irreality or surreality of smart cities are a corrosion of conformity of ideals spoken from the loudspeakers of ‘Left’, merely grounded on violations of basic human rights, and refusing to flip the coin to rationally transforming the wrongs into the rights.

While these discourses aren’t far and between, what needs a meritorious analysis of it is the finance industry and allied instruments. Now that the Government of India has scored a century of planned smart cities, their becoming dystopia and centres of social apathy and apartheid is gaining momentum on one side of the camp due to a host of issues, one amongst which is finances raised to see their materiality. In the immediate aftermath of Modi’s election, the BJP Government announced Rs. 70.6 billion for 100 smart cities, which shrank in the following year to Rs. 1.4 billion. But, aside from what has been allocated, the project is not run by the Government, as it is an integrative approach between the Government, State Government/Urban Local Bodies catalysed through a Special Purpose Vehicle (SPV). For understanding smart cities, it is obligatory to understand the viability of these SPVs through their architecture and governance. These SPVs are invested with responsibilities to plan, appraise, approve, releasing funds, implement, and evaluate development projects within the ambit of smart cities. According to the Union Government, every smart city will be headed by a full-time CEO, and will have nomination from the central and state government in addition to members from the elected ULBs on its Board. Who the CEO isn’t clearly defined, but if experts are to be believed, these might be from the corporate world. Another justification lending credence to this possibility is the proclivity of the Government to go in for Public-Private Partnerships (PPPs). The states and ULBs would ensure that a substantial and a dedicated revenue stream is made available to the SPV. Once this is accomplished, the SPV would have to become self-sustainable by inculcating practices of its own credit worthiness, which would be realised by its mechanisms of raising resources from the market. It needs to re-emphasised here that the role of the Union Government as far as allocation is concerned is in the form of a tied grant through creating infrastructure for the larger benefit of the people. This role, though lacks clarity, unless juxtaposed with the agenda that the Central Government has set out to achieve, which is through PPPs, JVs subsidiaries and turnkey contracts.

If one were to look at the architecture of SPV holdings, things get a bit muddled in that not only is the SPV a limited company registered under the Companies Act 2013, the promotion of SPV would lie chiefly with the state/union territory and elected ULB on a 50:50 equity holding. The state/UT and ULB have full onus to call upon private players as part of the equity, but with the stringent condition that the share of state/UT and ULB would always remain equal and upon addition be in majority of 50%. So, with permutations and combinations, it is deduced that the maximum share a private player can have will be 48% with the state/UT and ULB having 26% each. Initially, to ensure a minimum capital base for the SPV, the paid up capital of the SPV should be such that the ULB’s share is at least equal to Rs. 100 crore with an option to increase it to the full amount of the first instalment provided by the Government of India, which stands at Rs. 194 crore for each smart city. With a matching capital of Rs. 100 crore provided for by the ULB, the total initial paid-up capital for the SPV would rise to Rs. 200 crore. but, if one are to consider the GoI contribution of Rs 194 crore, then the total capital initially for the SPV would be Rs 394 crore. This paragraph commenced saying the finances are muddled, but on the contrary this arrangement looks pretty logical, right? There is more than meets the eye here, since a major component is the equity shareholding, and from here on things begin to get complex. This is also the stage where SPV gets down to fulfilling its responsibilities and where the role of elected representatives of the people, either at the state/UT level or at the ULB level appears to get hazy. Why is this so? The Board of the SPV, despite having these elected representatives has in no certain ways any clarity on the decisions of those represented making a strong mark when the SPV gets to apply its responsibilities. SPVs, now armed with finances can take on board consultative expertise from the market, thus taking on the role befitting their installation in the first place, i.e. going along the privatisation of services in tune with the market-oriented neoliberal policies. Probably, the only saving grace in such a scenario would be a list of such consultative experts drafted by the Ministry of Urban Development, which itself might be riding the highs of neoliberalism in accordance with the Government’s stance at the centre. Such an arrangement is essentially dressing up the Special Economic Zones in new clothes sewn with tax exemptions, duties and stringent labour laws in bringing forth the most dangerous aspect of smart cities, viz. privatised governance.

Whatever be the template of these smart cities, social apathy would be built into it, where only kinds of inhabitants would walk free, economically productive consumers and economically productive producers.