Monday, July 29, 2019

More Investments the Way Forward for Agriculture?

By Sivakami Prasanna,

(Image source: Business World)

At the time of India’s independence subsidies were necessary as they were important for the small and marginal farmers to access inputs and to encourage them to adopt new technology. But now subsidies are slowly outliving their utility. Subsidies given to the agricultural sector of India have increased from `50,440 crores in 2000 to `1,08,682 crores in 2010. Total subsidies that were given to the agricultural sector in the year 2018 was `57,600 crores.

The Ministry of Agriculture and Farmers’ Welfare is divided into three departments and in 2018 the grants were divided as following:
1. Agriculture, Cooperation and Farmers Welfare: 81 per cent
2. Agricultural Research and Education: 14 per cent
3. Animal Husbandry, Dairying and Fisheries: 5 per cent

While 81 per cent of the grants go for providing agricultural subsidies, only 14 per cent are allocated for investments in agricultural research. Subsidies have progressively increased from 2.8 per cent in 1980–81 to 8 per cent in 2014–15. But many times they have not served their purpose; often mistargeted or not implemented properly and biased towards certain crops and regions. They also
distort trade and damage fiscal budget by pushing up revenue and fiscal deficit.

Investment in agriculture can come as private investment, public investment and foreign direct investment. While private investment can be done by rich farmers, poor farmers lose out on the benefit of investment which increases the already existing gap between the rich and poor farmers.

Investments in agriculture have reduced to 2.2 per cent in 2014–15 from 3.9 per cent in 1980–81. The major areas in agriculture where we can increase investment are irrigation, fertilizers, research and development, post-harvest management, rural infrastructure and communication.

India’s Sugarcane Industry
India produced 32 million tonnes of sugar in the year 2017–18, which was more than the quantity the domestic industry and the foreign market demanded. The industry is provided with transport, export and input subsidies. The minimum support price ensured for sugarcane by India is also higher than the international prices. The transport, freight and handling charges would also be reimbursed.

The sugarcane industry is a good example of the negative impact of subsidies in the market and government’s inclination to take decisions that are affected by populism rather than the sustainability of these decisions. Our subsidy policies have led to a ‘glut’ in production. While the steps taken by the government might guarantee temporary respite to the sugarcane farmers, it may have
disastrous consequences in the future.

Comparative Analysis of Investments and Subsidies
Analysing the following,
1. The money being progressively spend on investments and subsidies
2. The impact of these subsidies and investments
3. A comparison of the returns given by investments and subsidies

we come to the conclusion that investments are much more effective than subsidies and this is because of the following reasons.
1. Investments are made directly; this ensures the elimination of any intermediaries. There is a better targeting of the beneficiaries.
2. Small and marginal farmers who do not have the capital for investment solely depend on government investment. Large scale expenditures on dams and multi-purpose projects are a good example.
3. Investing in communication, transportation and post-harvest management will ensure a higher profit and lower cost of production.
4. Investments are a sustainable solution. They are long-term solutions unlike subsidies, which are short term and only a part of the solution.

Green revolution’s success reflects a period when the government focused on the importance of both subsidies and investments. Green revolution practised selective investment. At the time of green revolution, public expenditure in agricultural research in 1964 was 1.64 billion. There was an average annual growth rate of 5.8 per cent in 1995 prices to 7.1 billion in 1990.

As a percentage of total agricultural expenditure, agricultural research and development was about 0.21 per cent in 1964 which was increased to 0.50 per cent in 1987.

The construction of dams, multi-purpose projects and expenditure in rural health, education and infrastructure during the initial years of independence helped India in achieving self-reliance in the production of crops. This was accompanied by high yielding variety seeds, fertilizers and other inputs at a lower price. Minimum support price further increased the farmers’ confidence to cultivate.

Thus, it can be concluded that the returns from investment in agriculture are much more than the subsidies. Subsidies are necessary in the initial phase of a country’s development and once the targeted growth is achieved, these needs have to be phased out. However, in a country like India subsidy becomes an increasingly politically sensitive issue. The government finds it impossible to
phase them out. Also, subsidies need to be rationalised and the excess money has to be allocated by the government to investment expenditure within the agricultural sector.

The government has to start phasing out input subsidies slowly and there should be a blending of both investments and subsidies. They need to balance and complement each other for the best possible returns. Also, the criteria for granting subsidies have to be tightened based on the income group, social group and region.

The subsidies that remain will have to be targeted properly and the leakages that exist should also be minimised. There is a need to draw a line that separates economic decisions from political decisions. Only then can we focus on policies of investment that are sustainable and effective in the long run.

(Sivakami Prasanna is Research Intern at Centre for Public Policy Research. Views expressed by the author is personal and need not reflect or represent the views of Centre for Public Policy Research)

Promoting Electric Vehicles — Are We Doing Enough?

by Rajesh K P,

(Image source:

India is home to 14 of the 20 most polluted cities in the world, and given the role of pollution caused by vehicles, there is a greater emphasis on moving to green energy sources. Electric vehicles are seen as a sustainable alternative to the traditional vehicles which rely on fossil fuels. Indian policy on electric vehicles targets the introduction of such vehicles in most commonly used means of transportation. Based on 2016 data, 79 per cent of vehicles on Indian roads are two wheelers (NITI Aayog 2018). Three wheelers, trucks and buses take up another 7 per cent. Most of the advanced technologies in electric vehicles are available in premium cars segment (cars priced over `10 lakhs and above), which is only 2 per cent of the total vehicle population. India’s Electric Vehicle policy aims at developing technology to suit two-wheeler and three-wheeler segments, which addresses a significant portion of India’s transportation needs, so that India could play the role of technology leader in this segment as well as reduce its own emission levels. Government has launched a scheme called FAME (Faster Adoption and Manufacturing of Hybrid and Electric Vehicles) which promotes purchase of electric vehicles by providing incentives. There is also a proposed import duty on electric vehicles to promote manufacturing these under the “Make in India” programme. There is also a plan to improve the charging infrastructure across the country, the target of that being a charging station every 25 kms.

Kerala’s electric vehicle policy also aims at providing shared transportation and clean mobility. Kerala State Road Transport Corporation(KSRTC) will start employing electric vehicles in a move to save operational cost besides reducing emissions. There is also a goal of achieving manufacturing capability within the state especially in this segment and a plan of moving the entire fleet of KSRTC to Electric Vehicles by 2025 (Government of Kerala 2017). State is targeting to adopt battery packs that could last 50 kms and is also looking at adopting ‘docker’ charging setup which would recharge the battery automatically, every time a bus returns to the bus station.The state is targeting to have a million electric vehicles by 2022 and is aiming to have a pilot fleet of 200,000 two wheelers by end of 2020. Kerala’s policy also looks at developing centres of excellence in the state which would work on developing technology to cater to the local demands as well as global ones. State is trying to use its startup ecosystem to further boost the skill development. KSRTC has already started the service of electric vehicles on a trial basis as of now. 

National budget for the year 2019–20 comes up with multiple proposals to promote usage of electric vehicles. True to the ‘nudge’ aspect mentioned in economic survey, budget proposes a tax exemption of 1.5 lakhs for individuals on purchasing electric vehicles. This might potentially nullify the emphasis on using public transport. However, the idea of switching over to renewable energy sources is a welcome move. One of the major concerns India has with respect to electric vehicle mobility is the charging infrastructure. Green Energy Corridor scheme is aiming to provide this infrastructure. This scheme was launched by the Ministry of New and Renewable Energy in 2015. Budgetary allocation for this scheme has remained static at `500 crore and given the targets we are trying to achieve, this may not be adequate (CBGA 2019).

Manufacturing electric vehicles was given a push through incentives and subsidies under FAME India. Current market share of electric car stands at 0.06 percentage of the total and this indicates that the scheme has not had the success we expected it to have. Once we move our road transport to predominantly electric vehicles, we should also ensure that adequate amount of power is generated via renewable sources. However, the share of renewables in power generation stands at 7.8 per cent, which is another cause for concern (CBGA 2019). A long-term policy in this regard should be more holistic in its approach. We should put more emphasis on power generation and distribution to ensure mobility, otherwise the nudge for buying electric vehicles need not have the expected impact.

(Rajesh K P is Research Intern at Centre for Public Policy Research. Views expressed by the author is personal and need not reflect or represent the views of Centre for Public Policy Research)

NITI Aayog. 2018. “Zero Emission Vehicles.”
Government of Kerala. 2017. Policy on Electric Mobility. Policy Draft, Thiruvananthapuram: Government of Kerala.
CBGA (Centre for Budget and Governance Accountability). 2019. Promises and Priorities An Analysis of Union Budget 2019-20. New Delhi: Centre for Budget and Governance Accountability.

Friday, July 26, 2019

Artificial Intelligence and Foreign Policy

By Angela Cicily Joseph,

(Image source: Pixabay)

The Sputnik moment came when DeepMind’s artificial intelligence system AlphaGo defeated Go’s world champion, Lee Sedol by a marvellous 4 games to 1. Eighteen months later, AlphaZero was released by DeepMind. Unlike AlphaGo, human experts did not train AlphaZero. Instead, it taught itself and was able to not only defeat its predecessor but also other systems. Few months later, countries started investing and announcing national AI strategies.
While the race to develop artificial intelligence has gathered momentum with countries like China and the United States of America being leagues ahead, the other countries need to catch up for better economic and political prospects. With an automated world, the developing countries will have less demand for their typical supply of unskilled labour. With AI systems being trained to come up with policy recommendations, countries will have to prepare for a daunting political future.
The most popular example of this is the Cambridge Analytica scandal in which personal data of Facebook users was harvested without their consent to create psychographic profiles and influence political outcomes for US Senator Ted Cruz. Whistleblower Christopher Wylie has stated that during the Vote Leave campaign, a group of people were identified as persuadable and then were bombarded with false information to persuade them to vote for leaving the EU. When Facebook CEO Mark Zuckerberg was questioned by the members of the US Congress over this data scandal, it showed the lack of awareness and understanding among the Congresspeople. This is the crux of the matter. The lack of policy for AI stems from a place of obliviousness. Also, we do not know the extent and impact of AI interventions in our daily life.
Both China and the US have shown no indication to develop global AI policies, but they have taken up nationalist approaches in their strategies. With the development of AI-focused start-ups, the US has created an ecosystem for extensive AI research at government organisations and major companies like Facebook, IBM, Apple, Google, and Amazon. Unlike the consumer targeting at these companies that accesses data from some devices, AI will be able to draw data from multiple devices enabling predictive control of potential dissenters. China’s A Next Generation Artificial Intelligence Development Plan is one of the most comprehensive national AI strategies, announcing their ambition to become the primary hub for innovation by 2030. Expanding on the idea of credit checks, China’s Social Credit System enables individuals to rate each other’s behaviour and trustworthiness. A citizen’s rights can be curtailed if they do not pay their bills or even if they are found playing loud music. China and Zimbabwe have entered into an agreement to deploy facial recognition software to the capital city of Harare. Similar agreements have been signed with Angola and Ethiopia. China’s increasing investments in the continent of Africa should be a reason for concern.
While the largest players in the AI domain are China and the US, the global AI ecosystem has Israel, South Korea, Japan, UK, Russia and France with thriving AI sectors and massive investments.This growing technological inequality will have major geopolitical implications. This dominating narrative of an “arms race” introduces new risks; countries will be prompted to speed up their AI development. The danger is not about falling behind one’s competitors but engaging with unsafe AI programs. This rhetoric about an arms race must be ratcheted down and cooperation among countries must be the way forward.

(Angela Cicily Joseph is Research Associate at CPPR. Views expressed by the author are personal and need not reflect or represent the views of Centre for Public Policy Research)

Monday, July 22, 2019

Analysing Investment Trends in India

By Rajesh K P,
(Image source: DNA India)

Private investment plays a significant role in a capitalist economy. Capitalist economies that are growing are really concerned about the amount of investment that flows in. India with its stunning growth rates after embracing the global order saw a rise in investment from the household sector as well as from private institutions. Understanding growth and understanding policies to promote growth also involve an understanding of investment — how it is formed and what factors control it. There are theories of investment trying to explain why economies behave the way they are. The unpredictable nature of global economy makes the debate over the ‘most suitable’ theory interesting. We will see the part played by investment in the Gross Domestic Product (GDP) of India during its growth years. We will also inquire whether we should focus on investment, given the signs of GDP growth slowing down (MoSPI 2018). Keeping that in mind, a sneak peek at policy suggestions that
could bring about some changes would be worthwhile. Do we carry a risk in endorsing those policy suggestions as some on the other side of market-based growth seem to suggest?

Gross Fixed Capital Formationover the Years
Investment, also called Gross Capital Formation (GCF), consists mainly of three components, namely Gross Fixed Capital Formation (GFCF), Change in Stocks (CIS) and the number of valuables (Gold etc.). A major component of this is GFCF and we can see that post globalisation there was a surge in GFCF as a percentage of GDP. GFCF to GDP ratio was 30.7 per cent in 2004 and it peaked at 35.81 per cent in 2007 (MoSPI 2018) . From then it started decreasing further, going down to 28.22 per cent in 2016. In the last two years this trend has slightly reversed, and the reported percentages are 28.66 and 28.87 respectively. In comparison with China, which has maintained its GCF at 40 per cent of GDP (Bank 2019), India seems to be slightly behind purely in terms of investment’s role in the economy.
This decline in total investment is accompanied by a decline in household investments. Household investments play a major role in the Indian economy and there is a marked decrease in household investments in recent years. The household sector’s share in total investment stood at 15.95 per cent in 2012 which fell to 9.09 per cent of GDP in 2017. There is a significant decline in the investment in dwellings and buildings which fell from 12.85 per cent in 2012 to 6.77 per cent in 2017. This will have a cascading impact on steel and cement sectors, apart from its obvious impact on the construction business (Patnaik and Pandey 2019).

Facilitating Investment
Capitalist economies focus on facilitating investment to aid economic activity and further growth. Indian economy expects a lot of activity in the infrastructure segment in the coming two decades. For an emerging economy like India, triggering economic activity also means larger investment in infrastructure. A large portion of Indian household savings take the form of bank savings. There are restrictions on the banks to channel this money into investment in various sectors. Banks have to lend according to the priority list and have to restrict themselves within the quota requirements for each sector. This means 18 per cent in agriculture and 7.5 per cent for Micro, Small and Medium Enterprises (MSME). Banks are also mandated to deposit in Government Securities and maintain a Cash Reserve Ratio as mandated by the RBI.
As banks have to finance infrastructure projects within these restrictions, this is seen as a growth hindrance by some economists who argue for further deregulation and removing restrictions (Patnaik and Pandey 2019). Those who argue for further reforms in the banking sector advocate for privatising banks and strengthening the bond markets to facilitate this. Inclusive banking is seen as another way to improve the household savings. Bringing more households into the banking arena has the potential to achieve this.

Bond Markets or Risky Investments?
Bank lending suffers from Non-Performing Assets (NPAs). NPAs stood at 11.5 per cent as per RBI’s financial stability report in March 2018. This has declined to 9.3 per cent in March 2019 (Reserve Bank of India 2019). However, this high number is a cause of concern for the banks. Despite this worrying factor, Indian investors have paid a lot of faith in public sector banks and trusted the public banking system backed by the government. Even the Punjab National Bank scandal did not trigger a panic withdrawal despite Nirav Modi allegedly causing the bank huge losses. Most of the NPAs in public sector banks are accounted by corporate borrowers. Their inability to pay back stems from the slowdown in the external global market. Given this context, the claim of privatisation becomes a puzzle, since by doing so we are potentially exposing our household savings into an uncertain and risky global market. Should the government pressurise the corporates to pay back the loans or attach their assets to recover the loans, or should it let the private players take the ownership of these
banks as well would be an interesting debate.

Another major policy argument is building a robust bond market and removing the restriction on insurance and pension funds to invest in bonds. At present, pension and insurance funds can be invested in AAA rated bonds and there are policy advocates who call for relaxing this further (Patnaik and Pandey 2019). This would increase the risk on those who invest in pension funds and insurance. Also, this exposes our household savings to certain investments which could turn bad and cause a crisis. But given that the government is more focused on remaining fiscally disciplined and keeping its fiscal deficit further low, it would not be keen to borrow more. Government could rely on private investments and push for reforms in bond markets to attract more investment through that route to finance infrastructure development. Whether this risk would pay off or could expose us to global financial crisis like the ones happened in 2008, only time will tell.

(Rajesh K P is Research Intern at Centre for Public Policy Research. Views expressed by the author are personal and need not reflect or represent the views of Centre for Public Policy Research)

MoSPI, Govt of India. 2018. National Account Statistics. New Delhi: Govt of India. Patnaik, Ila, and Radhika Pandey. 2019. Savings and Capital Formation in India.National
Institute of Public Finance and Policy.
Reserve Bank of India. 2019. Financial Stability Report 2019. New Delhi: Reserve Bank of India
The World Bank. 2019. World Bank Data portal.

Wednesday, July 17, 2019

Cryptocurrency and India’s Reluctance to Adopt it

Anupama Ghosh,

In the last few weeks, Bitcoin has burst back into the public discourse, following a huge surge in its price. The price, which began the year at under $4000 per bitcoin, reached $12,000 in June 2019. This has led many to speculate a potential return to the highs it saw in its price towards the end of 2017. For many, bitcoins and cryptocurrencies have been major technological revolutions that the world has seen over the past few years. The fact that a lot of demand for cryptocurrency stems from countries experiencing high inflation and currency devaluation attests that bitcoin has emerged as a viable alternative to people reeling under economic duress.

In 2009, bitcoin was first introduced as an open-source software by anonymous programmer or group of programmers, under an alias Satoshi Nakamoto. Its novelty of being not controlled by any network, government, bank or corporations made its adoption easier in countries where people were dismayed by increasingly waning economic and political conditions. It came up as the ultimate solution for financial transactions, giving its users a total control over their finances.

The South American countries Venezuela and Argentina are perfect examples of soaring bitcoin adoptions due to economic hardships. About 98 per cent of Venezuela’s exports were based on oil. The shrinking oil revenue has meant that the country’s external debt has increased, to an extent, rendering its currency practically valueless. As a result, more and more people are turning towards bitcoin as an alternative to the Venezuelan bolivar. People use bitcoins and other cryptocurrency as a way of sending money home from other countries. For many people, storing their money in a digital wallet in the form of bitcoin, Litecoin, Dash or any other, is still a better option than holding on to the national currency. To provide a solution to the economic crisis, the government has also launched its own cryptocurrency, the petro, apparently backed by oil. As Venezuela goes deeper into political and economic crisis, an organisation called is donating cryptocurrency to Venezuelans in need, to buy groceries and household goods.

In Argentina, the most pervasive problem is a weak economy, and a currency that has been quickly losing its value. Argentina’s government is looking at crypto and blockchain tech as a way to promote the country’s financial inclusion and reduce state costs. The government’s openness to blockchain projects has helped shape Buenos Aires into a hub of developers. Ripio, one of the several startup projects, is offering users a cryptocurrency exchange and software ‘wallet’ for storing their digital assets. It has also launched a service that uses so-called ‘smart-contracts’ or blockchain-based computer programs that can be used to automate complicated financial transactions, to facilitate peer-to-peer lending. Costaflores, a winery from Argentina, has also presented a cryptocurrency that will be based on the value of a bottle of wine; a project that will also use blockchain technology to make the entire harvest process accessible to anyone who wishes to invest in the coin.

India has adopted a rather cautious approach to cryptocurrencies. In its first tenure, the Modi government stated that while it supports blockchain technology used across industries, from banking to agriculture and virtual currencies, it is not in favour of digital currencies. The proposed draft of “Banning of Cryptocurrency and Regulation of Official Digital Currency Bill 2019” has proposed a ten-year long prison term for people who, “mine, generate, hold, sell, transfer, dispose, issue or deal in cryptocurrencies”. While there is no clarity on what the exact stand of the Indian government would be, many crypto exchanges based in India are shutting down. Koinex, one of the leading cryptocurrency exchanges in the country, shut down in June 2019 citing the “uncertainty and disruption” in the crypto sphere in India. Earlier, in September 2018, Zebpay had shut down its operations, after the RBI imposed an apparent ban on virtual currencies.

The anonymous nature of cryptocurrencies and their possible use for money laundering or terror financing have been the reasons cited by the government for its reluctance to adopt digital currencies. While national safety should be a major concern, it is imperative also for India, being the largest democracy in the world, to give its people the choice in spending their money and assets in the ways they want. While some regulations to check money laundering and illegal uses may be looked at, an outright ban on bitcoins and other cryptocurrencies may have some unintended consequences. After all, for many cryptocurrencies stand as a way of having the maximum control over one’s own money. Such acts of forcing people with the ways of spending their own money may lead to more and more people towards greater adoption.

(Anupama Ghosh is Senior Research Associate at CPPR. Views expressed by the author are personal and need not reflect or represent the views of Centre for Public Policy Research)

Tuesday, July 16, 2019

Framework for Skill Development in AI-Adopted Job Markets

By Darshana S Nair,
(Image source: Future of Jobs Report, 2018)

Remember those sci-fi movies in which machines take over the world, and all those times when we thought it was impossible? Well, it is time to think again. Once called the future of computer science, Artificial Intelligence (AI) has evolved into our reality in just ten years. Gone are the days when you had to slog for hours in the factory, manually lifting objects, maintaining ledgers and standing in long queues to clarify doubts. A lot of these tasks have become automated.

AI systems replacing modern manual labour, leading to risk of technological unemployment is a future possibility. On the one hand, studies by labour economists suggest that one more robot per 1000 workers would reduce the employment to population ratio by about 0.18–0.34 per cent and wages by 0.25–0.50 per cent. On the other hand, according to a survey conducted by Deloitte consulting firm, workforce reduction was ranked the lowest at 22 per cent. Here, the question is how fast we provide the alternative job opportunity, re-engineer the jobs and find the right person with the right temperament for it.

First, we need to address the skill gap. AI would rapidly change the job structure of the economy creating a large shift in the job structure and the demand and supply for skill, which has the potential to widen and close the gap among workers. According to the Future of Jobs report 2018, there are three possible methods to incorporate AI in to the job structure: hiring new workers with training, retain and retrain the old workers and automate the tasks completely. Choosing either one or a combination of these can certainly bring a change. Also, studies by LinkedIn and the World Economic Forum reveal that only 22 per cent of AI professionals are women. On a national level, this may be addressed by giving more emphasis to women initiatives under Mudra scheme, as mentioned in the 2019–20 Union Budget.

Second, there is a need to follow an augmentation strategy, whereby businesses seek to utilise the automation of certain tasks in order to enhance the productivity and efficiency of the human workforce. Human workforce and machines need to work as Co-Bots, rather than just two separate entities. Focussing on ‘specialised’ jobs would also increase efficiency.

Third, there is a need for re-skilling through in-house programmes. Providing a lifelong learning system to workers throughout the course of their employment can be a solution for skill development crisis. According to the Future of Jobs report 2018, no less than 54 per cent of all employees would need reskilling by 2022.

Fourth, there is a need to revamp the educational sector. This is necessary to people stay employable in the labour market, as discussed in the World Economic Forum 2016. Given the young population of India, the education curriculum should include technical knowledge through site-based internships, virtual reality programmes and cross disciplinary AI education. Introducing AI/ML in schools is a positive step. The setting up of ICTAIs, AIRAWAT, IP regime, CERN and CORE centres for AI is aimed towards the same.

Fifth, a proactive governmental setup is required. Partnerships with private entities can ensure the flow of capital, development of digital infrastructure and entrepreneurship, which India lacks. Using predictive technology, productivity in the agricultural sector would increase by 20–30 per cent.

Under the Digital India scheme, the rural areas too can take the benefits from AI. The creation of a multi-stakeholder owned and managed National AI marketplace and supporting Venture Capital collaborations are under discussion.

Finally, organisations and scientists have been vying for regulatory oversight and new laws, both at the national and international level to govern the use and growth of AI. The tendency to misuse AI, threatening global peace, undermining privacy and security, and business law and ethics needs to be dealt with. A national strategy is being constructed under NITI Aayog including studies on Explainable Artificial Intelligence (XAI) by DARPA.

Despite being ranked third among G20 countries in the total number of AI start-ups, India faces an 
underdeveloped digital infrastructure, and uncertain demand and supply for skilled labour. This initiates the need for skill development programmes, enhancing the performance of AI-adopted job markets. What becomes important today is accepting the fact that AI is our future, and formulating proactive measures to be ready for it.

(Darshana S Nair is Research Intern at Centre for Public Policy Research. Views expressed by the author are personal and need not reflect or represent the views of Centre for Public Policy Research)


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Monday, July 08, 2019

TRIPS Agreement: India Stuck in a Transition Mode?

By Meenakshy Menon,
(Image source: The Hindu)

The post TRIPS (Trade Related Aspects of Intellectual Property Rights) Indian economy was thought to have lesser investments and an “anti-competitive effect in the market”. However, an increased amount of investments in Research and Development sector and the entry of a number of pharmaceutical companies into the market in the recent years have proven these predictions wrong. The TRIPS agreement consists of the trade-related aspects of intellectual property rights (IPRs) and aims to protect and enforce the IPRs. It also aims to ensure that it does not become a barrier in international trade. The agreement came into existence via the Punta Del Este Declaration during the 8th round of multilateral trade agreements in Uruguay in 1995.

When the topic of India and TRIPS agreement comes together, the discussion mostly takes a unilateral turn focusing on one sector specifically; the patents for the drugs in the pharmaceutical industry. During the negotiations, just like any other developing country, India did not want IPRs to be included in the GATT treaty due to the detrimental effect that it might have on the economy. In India, there was a shift in the patent regime that granted only process patents of seven years duration compared to the one that provides patents to the product. During the negotiations, it was decided that the countries that did not have a product patent regime as of 1 January 1995 would have an additional five years along with the general transition period of 5 years, which also included India. So the question is did India completely transition into the product patent regime in the 10 years that was given to it?

The interesting factor about India’s pharmaceutical industry is that the generic drug industry has helped people in the country as well as in other developing countries in treating life-threatening diseases. This was possible because of the process patent regime and the widespread use of compulsory licensing. Process patent, in one way or the other, was suited for India for its large population and the amount of people who work in the manufacturing industries. Nevertheless, the shift in the patent regime was inevitable due to the country’s obligation to comply with the TRIPS agreement. This shift also resulted in the mailbox provision and the exclusive marketing rights (EMRs) provision. The developing countries which did not have a patent regime were supposed to use a pipeline system called the “mailbox provision” that will accept patent applications and grant five years of EMRs for the product. Yet, these provisions along with the compulsory licensing system are some of the notable loopholes in the system.

There have been cases of misuse of the EMRs by competitors and foreign pharmaceutical companies reaping benefits by selling or distributing the product which already has a patent in another country. Patents are filed by these companies anticipating that they would get both the market approval and patent in a specific country. Nevertheless, even if the products are not granted patents, these companies take leverage of the EMRs grant to get a market in that specific country. Second loophole is the usage of compulsory licensing for the manufacture of generic drugs or the ‘copied’ versions of the brand name. As per the agreement, compulsory licensing is used during a national security or health crisis, but there are countries like India that are taking leverage of the system. India uses compulsory licensing since the health of the people of the country and millions of those who come from foreign countries to avail medical treatments is dependent on its pharmaceutical industry.

One of the questions that pop up in one's mind regarding the current geopolitical situation and the TRIPS agreement is whether India will be affected by the US-China trade war. A plausible answer to this is that India cannot afford to have a conflict with China or the US taking into account the future consequences that it might lead to and the power these countries hold. So what India can do is to balance its relationship with both the countries and also take China into account as a competitor, since there is a commonality in the manufacturing capabilities of India and China.

Furthermore, the TRIPS agreement is one of the areas that India takes its strong stance. In the WTO meeting in 2016, the defence minister had said that India aims to provide impetus to its generic drug industry, which will only be possible through the continued issue of compulsory licenses. India’s other policy on the implementation of the provisions of the TRIPS agreement is setting up of a venture capital fund to promote more startups. In order to make a mark in the global investment markets, India must have a stronger IPR regime. For this, India could provide duty-free quota for drugs that cure life-threatening diseases. Moreover, a 100 per cent FDI in the field of pharmaceuticals would also increase the innovation in the country. Proper guidelines for the regulation of compulsory licensing and EMRs should be included to prevent the loopholes, which is also imperative for India to
transition completely into the product patent regime. Finally, India should not get isolated from the global market domain, and therefore must keep its national laws in harmony with the International Treaties.

If at all, a day comes when allopathic medicines are unaffordable to the people at the grassroots level, then the potential of Ayurveda can be explored. For this, the Indian Patents Act must be amended such that it allows patents for Ayurvedic medicines. But India is still stuck in a contradictory bubble where it has to ensure public health and at the same time need to comply with the international rules and regulations.

(Meenakshy Menon is Research Intern at CPPR-Centre for Strategic Studies. Views expressed by the author are personal and need not reflect or represent the views of Centre for Public Policy Research)

Monday, July 01, 2019

Artificial Intelligence and Its Use in Governance

By Namrita Shankar,
Image source: Forbes

Artificial intelligence (AI) is the simulation of human intelligence processes by machines, especially computer systems. These processes include learning (the acquisition of information and rules for using the information), reasoning (using rules to reach approximate or definite conclusions) and self-correction. Particular applications of AI include expert systems, speech recognition and machine vision.

AI is usually classified as weak and strong. Weak AI, also known as narrow AI, is an AI system that is designed and trained for a particular task. Virtual personal assistants, such as Apple's Siri, are a form of weak AI.

Strong AI, also known as artificial general intelligence, is an AI system with generalised human cognitive abilities. This means that when presented with a task, a strong AI system is able to find a solution without human intervention in a fraction of the time taken by human beings.

Before moving on to how AI can change governance, we should understand why there is a need for it. AI presents governments with new choices about getting work done, reduces the burden on officials and present objective information on the working of policies.

There are many examples about how AI has changed government bodies. One example is ‘Chatbot’. This is an automated customer care service. The US Citizenship and Immigration services employed a Chatbot by the name ‘Emma’, which has resulted in the reduction of workload by around 80 per cent.

In times of natural calamities, with the help of translation, voice recognition and text data collection, emergency responders around the world can communicate efficiently with those in harm’s way.
‘Data Science for Social Good’ — an initiative by the University of Chicago — has been using machine learning (a form of AI) to help a variety of social-purpose organisations. This has included helping the City of Rotterdam to understand its rooftop usage — a key step in its goal to address challenges like water storage, green spaces and energy generation. In addition, it has also helped the City of Memphis to map properties in need of repair, enabling the city to create more effective economic development initiatives.  Image recognition software can be used in solving crimes like in the case of Boston marathon bombing in 2013.

The city of Columbus, with the $50 million that it won through the US Department of Transportation’s Smart City Challenge, plans to use autonomous vehicles to provide transportation from a neighbourhood, where unemployment is three times the city average, to a nearby jobs centre.

Now that the benefits of AI have been summarised, many argue that there are demerits to letting AI take over. Experts argue that the funding for projects that could have a direct impact on people is delayed or not prioritised. Usage of AI for developing weaponry and the intention of governments have caused a lot of worry among innovators. Also, the development of AI can come at a huge environmental cost with the exploitation of non- renewable resources and minerals.

Even with all these arguments, many firms around the world have employed and responded positively to AI and its potential. They agree that AI can help complement the skill sets and weaknesses of the population.

In India, NITI Aayog has published a strategy proposal report for AI in India and has provided a platform to promote India’s leadership and brand in AI innovation by promoting #AIforAll. NITI Aayog focused on five sectors — Healthcare, Education, Agriculture, Smart Cities and Infrastructure, and Smart Mobility and Transportation for the initial plan. In the report, NITI Aayog has proposed a two-tiered structure to address AI research aspirations —CORE and ICTAI — a common marketplace and the skilling and reskilling of workforce, which can be achieved by the skilful expertise of the private sector.

It is encouraging to see India taking up AI positively, but it is time for the government to incentivise innovations in AI and promote it as a viable field of employment.

(Namrita Shankar is a Research Intern at Centre for Public Policy Research. Views expressed by the author are personal and need not reflect or represent the views of Centre for Public Policy Research)