Making India $5 Trillion Economy- What Should India Primarily Focus on?

Before the pandemic struck the entire world, India was expected to become a $5 trillion economy by 2025. The Covid-19 Pandemic had distorted all projections and left the world in an unpredictable state for almost a year. The economies all over the world crashed down due to the lockdowns and global unrest. Data from the National Statistical Office projects a 7.7 percent contraction for FY2021. 

But even if we look prior to the pandemic, India’s $5 trillion economy had many obstacles that needed focus to achieve the dream. One of the most important is India’s manufacturing sector. India’s manufacturing sector is not strong enough to allow expansion and integration in the global value chain. The Economic Survey pointed out that the global value chain exports could contribute a quarter of the increase in value-added for the $5 trillion goal and generate four million jobs by 2025 and eight million by 2030 via the Make in India initiative. (Reddy & S, 2021)

In order to integrate our manufacturing sector with the GVCs, it is very important to develop the infrastructure with top most priority. One example of this is China. China has done huge investments on infrastructure in the first half of the 20th century and the results of that can be seen now by the entire world. China has rapidly risen in the GVC due to its investment on infrastructure. This has led China to becoming the centre for world production. At this point in time, China is one of the strongest economies and has almost reached the stage of being self-reliant. 

India has announced Atmanirbhar Bharat (self-reliant India) with the view of transforming India into an important global player and making India self-reliant. The campaign has also created confusion in the minds of the MNCs as in the initial stages of the campaign India put a ban on the import of various non-essential commodities. Although these import restrictions were put to encourage domestic production to make India self reliant, these may also be seen as an obstruction in integrating India with the GVC. The import restriction can discourage global investors and in turn harms the long term goal for becoming a manufacturing hub. 

For India to achieve a $5 trillion economy, it has to encourage more and more foreign investments in the country and be as closely integrated with the GVC as possible. The policies made therefore have to be more welcoming for the global investors and MNCs and less restrictive in terms of import tariffs. 

The government should first and foremost focus on infrastructural development in the country in order to improve the manufacturing sector and be able to competitively produce. It should perhaps create a more open trade environment so that there is free trade of goods and services. The infrastructural development can also be useful for the performance linked incentive sectors. In this regard, the government’s Rs 111 lakh crore or $1.4 trillion investments in the National Infrastructure Pipeline can be seen as an important step towards building the required infrastructure. NIP consists of investment from the centre (39 per cent), state governments (20 percent) and private sector (21 per cent). It is very important at this point that the centre and the state governments work in a collaborative manner in order to devise smooth systems and proper and timely implementations of the policies. The central government should be hands on with any shortcomings of the state government so that there is minimum or no harmful repercussions felt over and beyond. It is important to make India so strong that even though India is a labour intensive country, it can have the ability to also be a major exporter of the capital intensive commodities along with labour intensive commodities. (Reddy & S, 2021)

It is as important to develop the traditional labour intensive commodities market so that India holds its foot strong in the global market when it comes to labour intensive commodities as it is one of the major aspects of the Make In India project.

Efforts of States to Achieve $5 Trillion Goal

UP Budget 2021-22 

The UP government on February 22nd brought the state budget to the table of the state Assembly. Chief Minister Yogi Adityanath presented the first paperless budget including ₹ 5,50,270.78 crore for 2021-22. It is about ₹37,410 crore more than the previous year’s budget. The focus of the budget was to make Uttar Pradesh Atmanirbhar and ensure overall development of the state. (Rudrappa, 2021)

Some of the important Budget Highlights:

1. UP government announced ₹2000 crore for Noida International Airport and also, building electronic city near airport.
2. UP budget proposed at least ₹640 crore for the overall development of Ayodhya.
3. The UP government made provision of ₹1,175 crore for metro rail projects. There is a provision of ₹597 crore for the Kanpur metro rail project in the budget presented by Finance Minister Suresh Khanna.
4. The UP government made ₹7,000 crore provision for Pradhan Mantri Gramin Awas Yojna.
5. A budget provision of Rs 976 crores for the development of canals, ₹610 crores for Saryu Canal Project, and ₹271 crores for the Eastern Ganga Canal Project were proposed. ₹104 crores was also proposed for Ken Betwa Interlink Canal Project. (D’Souza, 2021)
6. ₹1326 crore has been given for Delhi-Meerut RRTS and ₹100 crores each for Gorakhpur-Varanasi metro.

The investments on infrastructure by the UP government is one of the key aspects that could help transform India into a global manufacturing hub. The provisions made in the budget also promises to generate employment for the state leading to a higher SGDP. The infrastructural boost will lead the state to become more efficient in its development. With projects like Sabka Saath Sabka Vikas, the UP government has promised to bring taps, electricity, roads, water in every household along with making the state digitally equipped. The Chief Minister in his speech mentioned that the budget focuses on the poor, women, youth and the farmers. 

Bihar Budget 2021-22

The Bihar government announced a ₹2.18 lakh crore budget for 2021-22 with focus on social sector and infrastructural development. The Chief Minister of Bihar also announced a separate department for skill development and entrepreneurship in the state. The Chief Minister announced that the government has made the highest allocation in the education sector worth ₹38,035.93 crore followed by ₹16,835.67 crore for rural development, ₹15,227.74 crore for roads, ₹13,264.87 crore for health and ₹8,560.00 crore for energy. (Bihar’s Rs 2.18 trillion budget for FY22 prioritises social, infra sectors, 2021)

Some of the important highlights of the Bihar Budget:

1. All villages in Bihar will have the facility of solar street lights.
2. A budget provision of ₹250 crore for building link roads in rural areas of Bihar.
3. The state allocated ₹110 crores towards building of new engineering colleges.
4. Three new medical colleges are already under construction. 
5. 38 districts of the state have been declared as open defecation free.

The Bihar government has also focused on developing the infrastructure of the state along with improving the rural regions of the state. This inclusive development efforts of the state government will generate more skilled employment and improve the lifestyle of the rural people. The state government has made extra effort in building a separate skill development department in order to increase the skilled employment in the state integrating with the idea of Atmanirbhar Bharat. 

West Bengal Budget 2021-22

The West Bengal government announced its budget in the absence of the Finance Minister of the state. The government has announced a ₹29,96,88 crore budget for 2021-2022. (West Bengal Budget 2021-2022, 2021)

Some of the important budget highlights:

1. ₹1500 cr allocated for the construction of 20 lakh houses for SC/STs.
2. ₹50 cr allocated for building the infrastructure of 100 new English medium schools.
3. Building of 100 new schools for Nepali, Urdu, Kamtapuri and Kurmali language.
4. 45 lakh construction and transport workers will be given ₹1000 each under the social security scheme.
5. 100 IAS and IPS aspirants will be trained by the state government along with fooding, lodging and providing stipend.
6. All kinds of road taxes lifted from January 2021 to June 2021.

The budget of West Bengal has seen a rise in the expenditure on infrastructure 3.9 times. The state’s planned expenditure increased by 7.2 times. The expenditure on social sectors has risen by 5.6 times.These highlights show that the state government is perhaps in link with the national goal but has to do more in terms of investing in the infrastructure. To build a self reliant nation, the state governments have to work in synchronisation with the central government. 

CONCLUSION 

In view of the Modi government’s aim to make India a $5 trillion economy, the state governments’ budgets do perhaps look in sync. The state governments have focused primarily on the infrastructural developments and enhancing the skilled employment in the respective states. It is very important for these states to pull up their sock in order to provide a competitive development strategy. In order for India to become a global leader in terms of exports, it is very important that the two most important factors are strongly built-infrastructure and skilled labour. 

Being a country with the largest youth population in the world, it is our responsibility to stand out and become self reliant along with being a provider for the world. The pandemic has brought in many changes and should be seen as an opportunity to develop new skills and explore the untapped potentials of the country. 

References

Bihar’s Rs 2.18 trillion budget for FY22 prioritises social, infra sectors. (2021, February 22). Business Standard.

D’Souza, C. E. (2021, February 22). UP Budget 2021-22: Yogi Adityanath govt proposes Rs 140 crore for development of Ayodhya. ZEE News.

Reddy, K., & S, S. (2021, January 13). Building a $5-trillion economy. The Indian Express.

Rudrappa, P. (2021, FEBRUARY 22). UP Budget 2021 Live Updates: UP Presents ₹ 5.5 Lakh Crore Budget To Make State “Aatmanirbhar”. NDTV.

West Bengal Budget 2021-2022. (2021, February 22). The Times of India.

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With regard to this, India had already submitted its action plan and promised to reduce its emissions in the Intended Nationally Determined Contributions, INDC before the Paris conference in December 2015. 130 countries including India had submitted their action plans in the official languages for which they were to be held accountable. (Sinha, 2015)

What is the One Nation One Grid Gas Project?

The Narendra Modi government has strongly focussed on creating a self-sufficient economy for India- Atmanirbhar Bharat. The one nation one grid gas project is another important attempt of the government to take a step closer towards Atmanirbhar Bharat. The government has planned to expand the national gas pipeline network from 16500km to 27000km. The government is aiming to increase the share of natural gas to 15 percent in the primary energy basket by 2030. The current share of natural gas in the primary energy basket is 6.2 percent which is considerably a low amount considering the demand for energy fuel in the country. (One Nation One Gas Grid: Betting Big on Infrastructural Development, 2021)

Prime Minister Narendra Modi has introduced a 450km natural gas pipeline in Kochi-Mangalore as a step towards making India self-reliant. The 450km gas pipeline cost INR 3000cr. The power and energy sector infrastructure is due to an upliftment for decades together. This initiative can lead to a positive impact on the economic development of the nation and cater to the ever-rising demand for the energy and power generation sector. It is also looked upon as an important step towards improving the standard of living of the people along with reducing their expenses. The gas pipeline network will provide eco-friendly Piped Natural Gas (PNG) to the households. This has the potential to improve the energy infrastructure by manifolds within a few years. (One Nation One Gas Grid: Betting Big on Infrastructural Development, 2021)

Need for the One Nation One Gas Grid Project

The most important aspect to put into perspective is that India is one of the highest emitters of greenhouse gases in the world. It is therefore high time to realise the impact it has on the world’s environment and the disaster that it could create if not worked upon at the right time. There has already been a delay in understanding and taking a step towards correcting our ways. But nevertheless, the one nation one grid gas is perhaps a very positive step taken by the government to help shift India towards a more sustainable choice.

Secondly, India’s growing population demands a better energy infrastructure to deal with the simultaneously growing demand for natural gas at a reasonable rate. The one nation one grid gas project is therefore needed to supply energy produced from natural gas via a single source. It is important to connect the different regions of the country with a single source of energy. Third, the transition towards completely clean energy or solar energy country is one that will take time and the one nation one gas grid can act as a transition fuel towards clean energy. Thus, if the one nation one grid gas project turns out to be a success, there will be only one power frequency across the nation. (RSTV: THE BIG PICTURE- ONE NATION, ONE GAS GRID, 2021)

One Nation One Grid Gas – India’s Renewable Energy Journey

The Minister of Petroleum and Natural gas and Steel, Mr Dharmendra Pradhan had called for foreign investors and developers to invest in India’s renewable energy sector. In his speech at the third RE-INVEST conference, he talked about how India is now one of the most favoured destinations to invest in the renewable energy sector and that the sector has seen an interesting turn of events. According to an official statement issued by the Ministry of Petroleum and Natural Gas, India has seen an investment of over USD 64 billion in the last 6 years. (ANI, 2020)

The Union Minister also mentioned that India has a very liberal policy for FDI when it comes to renewables. The investors can invest on their own or enter into joint ventures for technical or financial collaborations. The ease of doing business was also brought up and was mentioned that safeguarding investments was a top priority. Adequate measures are being taken to safeguard the businesses that are affected due to the covid-19. (ANI, 2020)

Minister Pradhan also said that India is going through a transformative change and that the nation’s energy agenda is climate-sensitive and market-based. It was also mentioned that the vast natural gas pipeline network will open a vast range of opportunities in terms of investment and employment. He called for participants to look into investment opportunities in the Compressed Biogas initiative. (ANI, 2020)

Even though the pandemic has slowed down the economic pace, India is looking forward to transforming into a sustainably rich country with equitable outcomes for every region. 

Conclusion- A Way Forward

The one nation one grid gas initiative taken by the government requires rigorous maintenance of the policy regime in order to attract the right amount of investments for the sector. As complicated as the policy looks, it will only get more difficult to cater to the demand for such a huge population along with infrastructural requirements. There is also a need to educate and create awareness about natural gas among the people in order to make this project a success. The one nation one grid gas project has the potential to create large-scale employment along with a sustainable choice of living. 

References

ANI. (2020). Pradhan invites foreign developers, investors to be part of India’s renewable energy journey. ANI.

One Nation One Gas Grid: Betting Big on Infrastructural Development. (2021). Wire and Cable India (WCI).

RSTV: THE BIG PICTURE- ONE NATION, ONE GAS GRID. (2021). Insights Editor.

Sinha, A. (2015). India promises to cut greenhouse gas emissions intensity by 2030. The Indian Express.

Tandon, T. (2020). One Nation One Grid Energy Initiative: India paves it’s way ahead. Jagran Josh.

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Jammu and Kashmir is a region bordered between India and Pakistan and has been in conflict since British rule. Both the nations claim the mountainous valley to be part of their respective nations and thus has been in an ever long political dispute (Ishfaq-ul-Hassan, 2018). For the longest time, Kashmir has been a victim of terrorism, unstable political situation and to top that, infrastructure has also been one of the major issues. The difficult terrain of Kashmir makes it especially challenging for construction and thus has been lagging when compared with most of the other states. Kashmir was for a long time, the princely state and the only Muslim majority state which joined India in 1947. Both India and Pakistan have thereon captured parts of Kashmir but are still in a tiff to have a bigger portion of the state.

An Overview of the Infrastructure Scenario of Kashmir

Infrastructure in Kashmir which includes health, education, tourism, industrial development has lagged for an exceptionally long time.  A survey of the Union Ministry of Drinking Water and Sanitation has shown that Jammu and Kashmir have the poorest sanitation facilities compared to the other states.  It is also important to note that the majority of the population still live in rural areas so the health and education infrastructure is not still as developed as it should be (Pandey, 2019). The rural areas lack private schools and the government schools are also in a bad state. Poor school infrastructure is one of the important reasons for the low literacy rate of the state. Several surveys conducted on the schooling facilities of Jammu and Kashmir have shown that due to lack of proper infrastructure, the students are made to sit on the floors, they do not have proper sanitation facilities in those schools etc. The buildings of the schools are in a worn-out state and on top of that, the 2014 floods in Jammu and Kashmir have damaged no less than 1400 schools (Digital, 2019). This leads to higher dropout rates in the state. Another important issue faced is that most of the schools do not have electricity. These infrastructural problems have been identified over the years and even though the government did put in efforts to resolve these issues, the condition of infrastructure in the state has not improved to a large extent.

As more and more tourists turn up each year, the pressure on the mountains is increasing at an alarming rate and poor infrastructure can cause unforeseen disasters if not taken care of immediately.

Why Article 370 Was a Cause of Concern?

According to Article 370 which was drafted by the then Chief Minister of Kashmir, other than a few areas of national concern like defence, foreign affairs, communication and finance, the central government had to take the consent of the state government to apply any laws or policies in Jammu and Kashmir. This article was made to be permanent and henceforth even more stringent. In simpler terms, the people of the state did not fall under the same rules as the rest of the country and lived by the rules of the state, hence given the status of special autonomy (Jaitley, 2016). This also gave the state’s government, the power to decide who could have ownership of land, or who could and could not invest in the land of Kashmir. This led to a huge problem as people who did not belong to Kashmir, could not officially buy land. This in turn meant that there weren’t any major external investments coming to Kashmir. The Modi government has linked Article 370 as one of the major reasons for the state’s infrastructure remaining underdeveloped for an awfully long period of time. In August 2019, Article 370 was finally abolished (TNN, 2019).

All of this has led to a rise in the need for a planned and vast investment boost in infrastructure in Kashmir to look forward to a better and safer future.

Huge Infrastructure Boost on the Way

The central government has aimed to bring a huge infrastructural boost to Jammu and Kashmir. The objective of this investment is to generate employment and investment in the state. Jammu and Kashmir was officially divided into two federally controlled territories on Oct 31, 2019. The region mostly depends on tourism, handicrafts and farming and has suffered poor infrastructure for decades continuously.

Prime Minister Narendra Modi has agreed on an investment boost of $3.8 billion after scraping out article 370. This is done in the view of increasing investments in the territory and generating employment opportunities. 

Let us now look at the investment programs brought through this infrastructural boost:

1. There has been investment in an elevated Mass rapid transit system in Kashmir. Kashmir will have two Light Rail transit systems (LRTS). The LRTS I is a 17 km long corridor that connects Bantalab to Greater Kailash with 17 stations to be crossed. The LRTS II will be 6 km long that connects Udheywala to Exhibition Ground (Digital, 2019).
2. There are infrastructure plans are Srinagar which will have two corridors. It is a 12.5-km-long corridor I which will connect HMT Junction to Indra Nagar crossing 12 stations. The second corridor is a 12.5-km-long corridor II that will connect Osmanabad to Hazuri Bagh. In order to further develop Srinagar and Jammu, the Metropolitan Regional Development Authorities (MRDAs) have been set up. Satellite townships with 50,000 new houses each are being developed in Greater Srinagar and Greater Jammu. These new townships will have one million sq ft IT parks (Digital, 2019).
3.  In view of improving connectivity, there have been investments to develop the Bilaspur-Manali-Leh railway line. The corridor will help improve connectivity with Jammu Kashmir and Himachal Pradesh. This railway line will be the world’s highest railway track and 465kms long. 52 per cent of the total 465 km length will pass through tunnels. The longest tunnel will be 27 km long. The total length of the tunnels is expected to be around 244 km (Digital, 2019).
4. The construction, operation and maintenance of 2-lane bi-directional Zojila Tunnel with Parallel Escape (Egress) Tunnel were approved during 2018 by the cabinet that excluded approaches on Srinagar-Leh section connecting NH-1A at Km 95.00 in Jammu & Kashmir. The 14 km-long tunnel will be India’s longest road tunnel and Asia’s longest bidirectional tunnel. This tunnel will be a sigh of engineering excellence considering the difficult terrain that it will be built on. The construction of this tunnel will provide all-weather connectivity between Srinagar, Kargil and Leh (Digital, 2019).
5. The Dal Lake will also be restored. The government has planned investment to improve and beautify the lake further. Srinagar and Kashmir are also set for new pollution free e-buses (Digital, 2019).

Possible Impact of the Infrastructure Boost on Kashmir’s Economy

The increase in public as well the private investment is looked forward to bringing a significant amount of income through Kashmir. The government is expecting to attract $5-6 million through these investment programs (ANI, 2020). As the Modi government was for long against the special status given to Kashmir, they now hope that the scraping out of Article 370 along with such a huge boost in the infrastructure will not only lead to a better life for the natives of Kashmir but will also help generate income to a very large extent.

The boost in infrastructure will lead to improvements in the tourism sector to a large extent. The tourism sector is one of the most important sectors of Kashmir. As every year, the number of tourists only rise, the infrastructure must be able to support the rising strengths, along with protecting the mountains and the ecology of the place (Vignesh Radhakrishnan, 2019).

The railway lines and corridors approved for construction will lead to better connectivity among the places which has been a major problem for a very long time. These large constructions were due for a long time and a properly planned and executed infrastructural project can generate employment as well as income for the long term.

The geographically difficult terrain makes it even more important focus on the infrastructure of the place for it being able to operate at its optimum capacity. The natives of Kashmir have been in distress for almost all their lives along with the fear of terrorism at any given time (IBEF, 2020). The beautiful landscape has a lot of potential for generating income and employment for its people. And this huge infrastructural boost will hopefully help in attaining that potential along with maintaining an adequate ecological balance.

Conclusion

The debate on stabilizing the economy of Kashmir has been a highlight for decades now. However, with this infrastructural boost on the way and the projects taken up by the government, there seems to be some light at the end of years of the dark tunnel.

Bibliography

Infrastructure boost for Kashmir! From highest railway line to longest tunnel, check upcoming projects. (2019). Times Now.

Ishfaq-ul-Hassan. (2018, January 23). Jammu and Kashmir: Infrastructure development gets massive boost; funds for new bridges, tunnels, highways earmarked. Retrieved from DNA: https://www.dnaindia.com/india/report-jammu-and-kashmir-infrastructure-development-gets-massive-boost-funds-for-new-bridges-tunnels-highways-earmarked-2577795

Digital, E. N. (2019, June 15). Infrastructure boost for Kashmir! From highest railway line to longest tunnel, check upcoming projects. Retrieved from ETNOWNEWS.COM: https://www.timesnownews.com/business-economy/industry/article/infrastructure-boost-for-kashmir-from-highest-railway-line-to-longest-tunnel-check-upcoming-projects/436943

Jaitley, A. (2016, 26 June). India needs $1.5 trillion for infrastructure development: Arun Jaitley. Retrieved from ZeeNews: https://zeenews.india.com/business/news/economy/india-needs-1-5-trillion-for-infrastructure-development-arun-jaitley_1900273.html

ANI. (2020, August 2). Kashmir gets infrastructure boost in higher education sector. Retrieved from yahoo!news: https://in.news.yahoo.com/kashmir-gets-infrastructure-boost-higher-043022239.html

Vignesh Radhakrishnan, S. S. (2019, August 7 ). Is Jammu and Kashmir underdeveloped as stated by Amit Shah? Retrieved from The Hindu : https://www.thehindu.com/data/where-does-jammu-and-kashmir-stand-in-comparison-to-other-states-in-key-indicators-of-growth-and-development/article28855512.ece

IBEF. (2020, November 17 ). Jammu And Kashmir Presentation And Economic Growth Report | IBEF. Retrieved from India Brand Equity Foundation : https://www.ibef.org/states/jammu-and-kashmir-presentation

Pandey, G. (2019, August 5). Article 370: What happened with Kashmir and why it matters. Retrieved from BBC News : https://www.bbc.com/news/world-asia-india-49234708

TNN. (2019, August 3). What is Article 370? Three Key Points . Retrieved from The Times of India : https://timesofindia.indiatimes.com/india/What-is-Article-370Article-370/articleshow/35678708.cms

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GameStop stock prices is not a vindication of the company’s health rather it is a reflection of the battle of the investors. What basically happened is that investors on the WallstreetBets bought in all the shares when the smart money was shorting to a level that there were no shares left in the market to be traded. The hedge funds(Melvin Capital and Citron) had borrowed the shares that they sold in the hope that eventually when the price of the stock falls, they would purchase them at a lower price and so the difference would have been their profit margin. Instead, what happened is that subreddit WallstreetBets investors kept on buying the shorted shares until a time when the loaned shares that must be returned were greater in number than the actual shares for trade in the market. Now, this has lead to a Reddit v Wall Street battle where the ‘short-sellers’ are helpless since, the longer the WallstreetBets investors hold on to their shares, the higher the prices of GameStock will be. (Good, 2021)

QAnon: The Start of an Era in Anonymity

The QAnon is basically a chain of posts that were made anonymously and posted on 4chan, a message board. The person who posted this series had signed off as ‘Q’ and hence the name QAnon. These posts were known as ‘breadcrumbs’ and were pro-trump posts. QAnon army believes that Donald Trump is waging a war against the paedophiles of the government, media and business. They describe themselves as “people who love the country”. (Wendling, 2021)

The main concern with online forums like 4chan is anonymity. Since people can post anything and not be held accountable for it, they forget the difference between right and wrong. It has led to mass manipulations by such people who in the darkness of such online forums can put forth their destructive and unproductive opinions and influence atleast hundreds of thousands of people. In this age of social media influencers and the over accessibility of internet, the people are easily distracted and mislead in a lot of ways.

The QAnon posts and its supporters were eventually banned from many big social media platforms, but the harm was already done till then. QAnon has created many unproven conspiracy theories which are believed by many supporters of QAnon without having asked questions about its authenticity.

QAnon supporters create abusive hashtags and posts against people that they perceive as enemies or people who they do not consider as the true people of the nation, mostly important politicians, journalists etc. This is not only an online threat but also an offline threat to the life of many such people. Many QAnon supporters have also been arrested after such hateful posts. The QAnon supporters are relentlessly posing threat to the society in general and one of the main reasons of doing so is that Mr. Donald Trump had himself retweeted some posts of QAnon, which shows that in some way or the other QAnon has got the support from Trump and even his son had posted QAnon memes during the elections. (Wendling, 2021)

Another QAnon supporter, Marjorie Taylor Greene of Georgia was elected in the US Congress in November. It is rather shocking that such extreme posts and hashtags are being supported by influential people in the US which can perhaps lead to mass destruction of the community as a whole.

All of this could have been controlled if online forums like 4chan did not have the feature of posting anything anonymously. It gets especially difficult to culminate a wrong action if people cannot be held accountable easily for their actions.

GameStop Shares Sold by Robinhood: An Intentional Mishap

Robinhood is a stock trading platform founded in 2013. Recently, Robinhood was in controversy as a number of its users accused the platform to have sold their shares without taking permission from them.

During the last week, many customers of Robinhood posted screenshots on Twitter and other social media platforms claiming that the trading company automatically sold their shares at a low price lower than the price list. (Eric, 2021)

On 28^th January 2020, two users of Robinhood claimed that it had restricted the transactions of GameStop. Robinhood had basically restricted investors to buy shares of GameStop so as to facilitate short selling hedge funds in their tiff with WallstreetBets. Robinhood had further stopped the users to trade on stocks of AMC, GameStop, Blackberry, Bed Bath & Beyond, Nokia etc. Customers who owned shares of these companies were only given an option of selling their existing shares.

These claims have resulted in negative reviews of the trading company on google which lead to a fall in its rating from 4.2 to 1. Later google deleted a good amount of negative reviews to restore its rating at 4.2. There is already a lawsuit filed against Robinhood which claims that the trading company has tried to manipulate and therefore control the market through its actions and that it’s a clear violation of the functioning of the market. (Mathur, 2021)

On the other hand, Robinhood denied of all these claims and the spokesperson of Robinhood has claimed that they had to sell some of the shares to reduce risk since the shares were bought at the margin, whereas the investors have claimed that they bought the shares outright and planned to hold on to them.

Billions of Dollars at Risk: Who Faced the Actual Loss?

As developed from the above, the investors who have faced the loss is perhaps Melvin Capital. This is because they sold the borrowed shares that actually have to be returned at a price that they thought is higher than at what price they would have to buy. But the opposite happened. So here is the fiasco we are talking about. Now they have no option other than buying all the shorted shares in order to return what they borrowed. But since even that is not possible the other option is to sell off everything in the open market. (Good, 2021)

So, Melvin Capital had to take up a huge loss when they closed up their short position on the 27^th of January. Although the exact loss is not known the investor had taken a cash infusion of $2.75 billion from two investment banks to keep itself away from dissolving in the US stock market.

Citadel to the Rescue After the Loss Incurred by Melvin Capital

Citadel funds have invested $2 billion and the rest $750 million will be invested by Point72 Asset Management. They have planned to invest in Melvin Capital in return of a non-controlling revenue share in the hedge fund. Although many investors had given up on short-selling bets, Gabe Plotkin, the owner of Melvin Capital still has his hopes for short selling, even though he has had a bad time in it this year. Ken Griffin, the founder of Citadel has rather shown his confidence in Gabe Plotkin as he says in one of his statements that “Gabe Plotkin and the team have delivered exceptional results over the history of Melvin,”.

Plotkin has shown great interest in working harder with his team to live up to the expectations and the confidence shown to him by both his investors. (Burton, 2021)

Citadel’s Association With Robinhood Receives Scrutiny

Robinhood has spent years to form a relationship with the big market investors called the ‘market makers’ to receive real-time information about their investors and which stocks its users are buying or selling. The online trading app receives a large number of revenues from Citadel Securities. However, after the entire fiasco of short selling, the relationship between citadel and Robinhood is under scrutiny or rather a criticism. (TORBATI, 2021)

This scrutiny has happened after Robinhood has limited trading of certain stocks, namely GameStop stocks. Several Reddit users have accused Citadel founder Ken Griffin to have pressurized Robinhood to limit trading of GameStop shares in order to prevent further losses incurred by the short-sellers. This is because Citadel is an investor of Melvin Capital, the short seller here in context, to avoid any losses further. Reddit users have taken on to Twitter to accuse Robinhood of giving in under the pressure of its big business partner, Citadel as Robinhood does not charge its users so its revenue highly depends on such big companies as Citadel. (TORBATI, 2021)

Since Robinhood is not directly involved in the trading of shares but it provides information to its partners in return of a small fee and privilege to give its users the best prices for trading in the market. However, later in a post, Robinhood has denied the accusations and said that it was a risk management decision to limit trading of shares.

However, it has also taken a political turn as congress has decided to examine Citadel’s agreement with Robinhood and if there is any manipulation of the stock market by the two business partners. Critics have also said that there is a possibility of hidden tax in this entire context. Overall, the recent developments in the stock market of the US has led to increase in the scrutiny of such business relationships to check if such partnerships are hurtful for the average investors in the market. (TORBATI, 2021)

Conclusion: How Can This GameStop Story Probably End?

The entire issue occurred due to the expectation of one investor based on the normal trading behavior of other investors. The stock market simply works on the lines that there will perhaps be a priced to the share than an investor cannot say no to and eventually one has to lose or win. But here the WallstreetBets investors were refusing almost any price to it. In such situations, the other party has to only go through losses. What can perhaps be taken care of, is a better look at the market and opportunities since human behavior can perhaps be very unpredictable.

References

Burton, K. (2021). Citadel, Point72 Back Melvin With $2.75 Billion After Losses. Yahoo! Finance.

Eric, J. (2021). Users accuse Robinhood of automatically selling shares. Insider Paper.

Good, O. S. (2021). GameStop’s stock market explosion, explained. Polygon .

Kastrenakes, J. (2021). Robinhood denies claims that it sold GameStop shares out from under its traders. The Verge.

Mathur, C. (2021). Robinhood reportedly sells GameStop shares without permission from traders. NewsBytes.

TORBATI, D. M. (2021). Robinhood and Citadel’s relationship comes into focus as Washington vows to examine stock market moves. The Washington Post.

Wendling, M. (2021). QAnon: What is it and where did it come from? BBC News.

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It is only recently in India that litigation financing has received its due attention considering its innumerous benefits for the three parties involved- clients, lawyers, and financers. Globally, the concept of litigation financing is quite popular, but India is still an infant in this form of financial tool. Considering the potential market in India, many international funders and legal firms have developed an institution that will self-regulate this third-party funding concept, known as the Indian Association for Litigation Finance. This will ensure a smooth and ethical mode of conducting this new method of financing with a more structured institutionalization. (Benwal, 2020)

Parties Involved in Litigation Financing

The parties involved in the process of third-party funding can be precisely categorized into the following:

1. Plaintiffs or Clients: These are individuals or companies that need fund assistance for their case. They use external funders to monetize their legal expenses that are incurred in the duration of their claims. This helps them to have a more flexible way as money is no longer their constraint,
2. Investors: The investors are the third-party funders that invest in these legal claims in return for the future proceeds that the client may earn on winning the case. They can also invest in the litigation process of a defendant, in which they would receive the proceeds that their client might be able to defend.
3. Lawyers or Law firms: They are basically the facilitators of the different stakeholders involved in the litigation process. They keep an account of the funds and claims during the conduct of the litigation process. This helps them attain recoveries and achieve their outcome in a more sustainable manner.

Growing Relevance of Litigation Financing Globally

Litigation financing has developed and received maximum attention in the last few years worldwide. Although its existence dates to the 1980s, it is only in the last decade that people have actually started understanding the concept and its importance in the legal spectrum.

It has brought in the realization that when looked from the investment point of view, it is an investment that remains unaffected from the other business cycles. Globally, the emergence of litigation financing has only caught the pace in the 1990s and 2000s. this involves Australia, UK, USA predominantly. In Australia, this concept developed in the 1990s after the legalization of class action lawsuits in 1992. This rose the need for a more structured and legal system of investments for group claims since this required a large chunk of money during the legal procedures.

In the UK, this concept developed around the same time as Australia, although it only got popular after the Access to Justice Act 1999 which provided other methods of funding than the already existing traditional methods. With the legalization of the third-party funding, the UK market saw a significant rise in such investment companies, opening door to a new kind of investment and a new addition to the economy.

The USA although had the concept of litigation financing prior to these countries, it was only however limited to the personal injury cases. However, after 2006, the concept has now been broadened and many companies are now using litigation financing to claim their dues. The state is trying to promote this method and it has been significantly growing thereafter.
In India, there is however no legal restrictions on this mode of legal financing through the third party but the concept still hasn’t picked up the pace as it should according to its potential. Even though it looks simple, the third-party funding has some complications and that is why it will also require proper structure and regulation for it to flourish in the Indian markets. (Whillans, 2017)

Role of Regulations in View of the Complexities

There are a number of complexities involved when we talk about third-party funding. Since it is still a new concept, it is very important to have proper knowledge, structure, rules and regulations for the smooth conduct of this procedure. There are possibilities if fraudulent practices when it comes to third party funding. There are also issues related to the lack of transparency by the funded party or conflict of interest among the stakeholders.

When we talk about third party funding in the Indian context, the main issue is that investors obviously look for quick return policies, but the Indian legal system is designed in such a way that any case takes a lot of years to get solved finally. This is one of the reasons why investors are not extremely comfortable investing their large chunks of money and waiting for such a long period of time. The next issue faced is that the lawyers are not motivated enough to take up the cases very actively since they do not feel the ownership since the money is invested by a third party. Such issues call for regulations for the smooth conduct of this growing system.

As of now, there is no legal organization that facilitates or regulated the third party funding in India. However, with the coming of this new year, a self-regulatory body is being launched on the 7^th January that will be responsible for the conduct of this system. India has previously faced a number of legal scams and in the view of this, the regulatory body is hoped to bring a positive impact and build customer trust and verified services. The self-regulatory body is named Indian Association for Litigation Finance and is looked forward to bring in a more inclusive and transparent system. (Benwal, 2020)

Litigation Financing and Covid-19 – A Way Forward

2020 has been an unpredictable year for most businesses across the world. In India too we have seen the disruptions that this pandemic has brought with itself. The aftereffects of the months-long lockdown are still being felt across the nation and even globally. But such times call for innovations and economies are finding ways to hit back. Covid-19 has accelerated the demand for immediate working capital and this helps to boost the investment sector. This has, in turn, opened doors for the concept of third-party funding. On the other hand, the pandemic will also lead to a number of concerns as the primary motive of the funder is to at least cover their investment amount but with this pandemic and the current situation of the economy, it a major cause of concern as the quantum assessment has only gotten tougher.

To overcome the concerns, India would require a properly regulated system to move forward. However, the bottom line is that the pandemic has definitely opened wider doors for third party funding to flourish in the Indian markets given that we develop a proper system and develop a long term structural change that helps all the stakeholders involved in third party funding.

Conclusion

Funders are currently very sceptical to invest in any litigation financing. Surveys suggest that only 1 in 10 applications are accepted by the funders as the uncertainties of returns is very high. This is currently the most important reason why the Indian market is not running on its full potential when we talk about litigation financing. (Indge,2020)

If litigation financing is promoted positively, it can help all the stakeholders in a significant manner. The comparatively poor clients can have a chance of getting their claims and on the other hand, funders can be encouraged to invest with proper legal structure. For any new system to work smoothly, the government has to come up with regulations and at the beginning of this year, we have one such organization that can help this new concept grow widely in India. It is a very innovative method of financing and can change the way our legal system is currently working.

A very important regulatory body – Indian Association for Litigation Finance is being launched and it is hoped that this can bring a significant development in litigation financing.

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One of the most important issues faced by the local artisans during and even before this pandemic is the lack of financial support. These artisans have the minimum amount of money to invest in buying their raw materials and other requirements. Even though the government provides loans at very low levels of interest, it is still a handsome amount for them to be able to pay at such low levels of income. The second issue faced is the illiteracy and lack of knowledge of the newly developing technological world. In this competitive world, they lack the knowledge of technology that could help them be a part of the globalization. The third and especially important issue faced by these local artisans is that they work in the unorganized sector. Since they work in the unorganized sectors, they do not have any regular security of the job. They can run out of customers anytime and there is perhaps nothing they can do about it. They do not have the guarantee of their income or job any time of the year. They are vulnerable to exploitation and do not have the support system that they deserve. Since most of the local artisans are women, it poses even a greater threat to their livelihood. There are a lot more restrictions and dependency when we talk about women artisans in rural areas. They lack financial independence and are subject to a lot of misbehaviours. These aspects have to be kept in mind while developing policies for this sector, considering the importance it holds in providing employment to a large section of our society. (Muyiwa, 2020)

The global market of handicraft was valued at US$ 400 billion before the pandemic. The handicraft industry in rural economy registered an annual growth rate of 15% consistently over the last decade. However, India’s share in the global market for handicrafts is only 2% which shows us the state of our local artisans in the global market. The pandemic, however, has only worsened the situation and led to a global crisis. For these artisans, the pandemic has been the worst nightmare as they have lost their source of income for months together and they have no one to rely on. 

Government Initiatives

There have been several measures taken by the government to support the handicrafts industries and the local artisans in rural areas over the years. The handicrafts sector had already taken a hit during the demonetization and the damage seemed irreparable without government’s support. This people employed directly or indirectly in this sector need support from the government now more than ever before. (Tyabji, 2020)

However, to discuss the various revival strategies for the handicrafts sector, it is firstly important to note some of the significant existing government policies so far:

• A Scheme for Promoting Innovation, Rural Industry and Entrepreneurship (ASPIRE) was initiated to help the startups in this sector coping with the existing competition. The government also set up markets for these known as Gramin Haat.
• Various skill development programmes have been initiated by the government for the upliftment of the local artisans. 
• In 2017 the government also initiated India Handmade Bazaar to help the local artisans get better exposure to the markets.
• ‘Village to market’ linkage of products is being assessed by the government to make a smooth facility for the goods to reach the markets
• The Export promotion council for handicrafts is working extensively to promote Indian handicrafts in the global economy.
• Schemes like ‘Deen Dayal Upadhyaya Grameen Kaushalya Yojna are some of the skill development programmes in the country for rural economy handicrafts.

Revival Strategies

With the onset of the pandemic, the local artisans lost their income almost altogether. To combat this loss, the government has to step in and take even more pro-active measures to revive this sector. 

• One of the important steps that the government can take is to help these local artisans gain digital knowledge. The world economy has changed tremendously over the years and digitalization has picked up the most. To tap the global economy and improve upon the exports of handicrafts, what we need is digitalization. 
• E – retail has become the new market. Anything and everything can be sold or bought one retail. So, to provide exposure to these handicraft products, the focus should also shift to online marketing. Online marketing strategies can be developed by the government.
• Brands like Tjori, Ethnic Kraft etc which sell handmade local products should be encouraged. Such brands do exist but are very limited than what we need for this sector. 
• Skill development programmes should be initiated more regularly to help the artisans hone their talent.
• Another important step that the government can take is to develop programmes for the artisans to enhance their technical knowledge with machines. Better machinery can be used to speed up production and also save labor. 
• Since most of the local artisans are generally women, (Data shows that 55% of the local artisans are women), it is important to ensure that they do not face any kind of exploitation. 
• Since the local artisans have little or no money to start their proper enterprises the government should increase financial aid to startups of this sector. To boost this sector and encourage more and more artisans to start their enterprises the government will have to increase its spending on this sector the most. Even though the government does provide them loans with lower rates of interest but it requires more than that. Even the lower rates of interest are quite high for them to be able to pay. 
• Another important measure for the government would be to exempt this sector from GST. The GST that was implemented in 2017 has been eating in a significant share of the earning of these local artisans and it is only fair to exempt them from this tax. Their earnings are anyway very less and can only accommodate ‘hand to mouth’ and the GST on top of that has been a nightmare for these artisans.
• Keeping in mind the growing competition, these local artisans are losing out even more due to the lack of exposure. Since these artisans belong to rural areas, they do not have the required knowledge of the markets and thus cannot tap suitable consumers for their products. The government can still work for increasing their visibility with the urban markets where they can sell their products at a decent price. 
• Illiteracy has also been a major issue with these artisans due to which they get easily exploited by the middlemen. Here, the government can intervene in two ways. One, by providing at least the minimum education required for these artisans to work in this sector and the second by curbing the role of middlemen. Middlemen tend to exploit these artisans the most, by shaving their profits and earning money through them.
• The handicrafts sector is essentially a part of the unorganised sector causing even more problems to keep a track of. However, there should be policies to secure their livelihood and protect them from further damage. A proper record should be maintained of these businesses and supervised regularly to check on the needs of these artisans as they are essentially the representation of our rich culture. 

Implementation of the Strategies in Rural Economy- A Way Forward

It is of utmost importance that this sector is taken care of since it has already been hit hard twice in the recent past, once during the demonetisation and the other during this pandemic. The handicrafts sector is the second largest employer of the country after the agriculture sector which shows that a large number of people are attached to this sector.

Implementing these strategies would require a lot of government involvement and also a lot of government spending which is the only way forward from here. These strategies will help the handicrafts industry in realising its full potential. If there is proper implementation of these strategies, it can also boost the demand for these products and that can actually help revive this sector. It is going to take time to come out of the aftereffects of this pandemic but we need to boost the sectors that need the most attention. If left on their own, the local artisans will lose their livelihood and the country will lose a large chunk of its culture and art. The government needs to redefine a lot of norms and be more inclusive while formulating any policy for the country. It’s the root of our country that matter the most right now. Rural India is where a maximum of Indians reside and it is important to develop and boost the small economy businesses of the unorganised sector, one of which is the handicrafts industry.
The government is working towards reviving this sector but there needs to be a more pro-active involvement of the government in terms of policies, programmes, financial aids etc. It is important that we come up with more such strategies and develop a stronger rural India that represents our strong culture and defining history. 

References

(2020). Retrieved 24 December 2020, from http://www.handicrafts.nic.in/pdf/NHDP%20(final)%20Anex-III%20dt%2001.01.2016.pdf

Handicraft exporters call on government for support. (2020). Retrieved 24 December 2020, from https://www.graphic.com.gh/business/business-news/handicraft-exporters-call-on-government-for-support.html

Government Intervention In India. (2020). Retrieved 24 December 2020, from https://www.civilserviceindia.com/subject/General-Studies/notes/government-policies-and-interventions.html

Food and Agriculture Organization of the United Nations. (2020). Retrieved 24 December 2020, from http://www.fao.org/policy-support/policy-themes/rural-poverty-reduction/en/

Jha, T. (2020). A CHEER TO ARTISANS ON THE BANKS OF GANGES IN THE NORTH TO KAVERI IN THE SOUTH – WISER WORLD. Retrieved 24 December 2020, from http://www.wiserworld.in/a-cheer-to-artisans-on-the-banks-of-ganges-in-the-north-to-kaveri-in-the-south/

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