MICROFINANCE

The jury is still out on what will be appropriate regulation of this sector, which has by and large remained unregulated. The recent sad developments in Andhra Pradesh, where a spate of suicides have been attributed to the activities of MFI debt collectors, a need for Central regulation of this sector were felt. The stories are a far cry from the social development plan that won Bangladeshi economist Muhammad Yunus the Nobel Peace Prize in 2006. Yunus, the founder of Grameen Bank, pioneered the use of so-called micro-loans to lift people out of poverty.

I quote here the views of Jonathan Morduch who has done extensive research on the Microfinance Industry in India and elsewhere in the globe. I am by and large in conformity with his views According to him, “globally, the microcredit industry has grown faster than the institutions that help it run efficiently, such as credit bureaus. But he says reactionary measures, like putting very tight caps on interest rates, will only serve to demolish an essential industry. "And if that happens, you're going to have millions and millions and millions of people who are left without quality financial services," he says. "And who are left really to be victims of money lenders."

Similarly, some other commentators have pointed out that state regulation of this largely unregulated sector will be self-defeating. The core issue is of maintaining process quality and having reasonable delinquency management systems in place, both of which can be done through self-regulation and minimal rules-based external regulation as deterrent.

TELECOMMUNICATION

DoT in our view should cancel the licences, in any case the regulator has recommended cancellation based on it’s finding of violation of licensing contract. The argument that it will hurt investment in the future is fallacious. In fact, the cancellation of licences will send out a good signal that there are checks and balances in place and no “cronyism” will be tolerated. The analogy is simple, if the investor has made a bad business decision by buying stolen goods he should bear the risk and cost of buying stolen goods. The due diligence has been bad by investors such as Telenor, our sympathies are with them but why should the poor pay.

I also firmly believe that investment climate may get a temporary but a reversible blow in the short run, but in the long-run cancellation of licences will send out a strong message to the investors that even if they can manipulate one arm of the government there are other “credible” institutions that can thwart the nefarious attempts.

INFRASTRUCTURE

Till the contract awarding procedure is made transparent and meets the participation constraint, the tall order of 20 Km/ day is not going to be met. Many of the highway projects have received only 2-3 bidders. On the other hand, Detailed Project Reports’ (DPRs) made by the NHAI are deficient they often result in unrealistic cost estimation, thereby creating problems and disputes between contractors and NHAI. Consultants for engineering and designing are often selected on the basis of L-1 model. Though this model minimises cost, it often compromises on quality of the Feasibility and Detailed Project Reports and cost assessment of projects. Poor quality of DPRs later forces NHAI to revisit project scope and sometimes completely changing the project plan, which escalates cost of the projects further in addition to enormous time delays.

A Mckinsey industry survey shows that in many cases, NHAI’s cost estimates are 10 to 30 percent lower than bidders’ estimates. This is usually attributed to two factors:

Complexities in the bidding process and large percentage of court litigations often delay project executions in road sector.

NEWS WITH ANNOTATES