#313 Second-order ThinkingIndia's Response to Trump Tariffs, the Political Economy of E20 Petrol, and a Guest Post on Street Dog Management
India Policy Watch #1: Know ThyselfInsights on current policy issues in India—RSJThe temple of Apollo at Delphi had a simple two-word maxim inscribed upon it - gnothi seauton or know thyself. That, for ancient Greeks, was the starting point for all other philosophical or material ruminations of the world around you. Who are you, what are your limits, and how did you get here? If you have clear and objective answers to these questions, you will have better odds of making the right decisions for yourself. This applies to individuals and is most certainly relevant to policy-making for nations. Do you really know the hand you are dealt with and the game that you are in at any time? Do you have a dispassionate view of what got you here? What worked, what didn’t and why? Do you know your place in the cosmos (as Plato would ask)? I have been in this philosophical state of mind since Trump pulled the rug from under India’s feet at the beginning of this month with those Truth Social posts. I have been analysing India’s response to this unexpected train of events. My conclusion is that we don’t have a coherent, long-term view of what to do at this moment because we failed at the very start of such an analysis. Of knowing thyself. Let’s begin with foreign policy. For much of the past quarter-century or so, India has managed a delicate balance of being in all camps simultaneously. It has worked to be a US ally with a historic nuclear deal to show for it, strengthened its ties with Russia regardless of its continued regression to a kleptocracy, established BRICS to eventually mount a challenge to the US economic might, and enthusiastically joined the Quad to build a counterweight to China in the Indo-Pacific. This geopolitical dance of contradictions required some nifty diplomatic footwork and exploiting a happy coincidence of circumstances where India could afford to be a relatively unaffiliated ‘swing’ power, which could cast itself in different roles depending on the context. What worked for India was how it was perceived - a responsible, if chaotic, democracy with a stable and harmonious polity and a large market. India was just significant and strategic enough to feel good to have them on your side, but not so powerful or ambitious that you would feel threatened by its rise. It takes effort and good fortune for this ability to ‘swing’ in geopolitics and not be seen as an opportunistic or a hypocritical player. Once you settle on that sweet spot, however, this is a privilege that can be milked for a long time as long as you stay humble and stay under the radar (the equivalent of hiding your strength and biding your time). You thank your lucky stars, and you hope no one comes along who calls you out as being too clever by half all along. Unfortunately, for the past few years, India has taken this privilege for granted by talking it up, gloating about it, and often lecturing others about their hypocrisy. The gains of such an approach in the global arena are negligible. The only reason for taking this approach was to play up to a mythical image among the domestic constituency and media that this is some kind of new India that is assertive and responds in kind to any real or imagined slight. Never has more been lost for a handful of Vishwaguru and “red eyes” memes. It is a clear case of not knowing thyself and your station in the world. All it took was Trump with his transactional view of the world and love for bullying his own allies to trip up this delicate balance. And once he did it, the others who were going all along with the dance, now can’t unsee it. No wonder India received limited unequivocal support during Operation Sindoor, or with Trump’s tirade against its economy and its trade practices. India’s response in the past two weeks again seems to be high on optics, with multiple meetings with Russia and a quick, convenient thawing of ice with China, with a misguided aim to ‘teach’ Trump a lesson. All the bonhomie with ‘my friend’ Putin could have been less demonstrative so as not to alienate those who still view India as a reliable partner. And this love for China, so soon after its support to Pakistan during Operation Sindoor, is puzzling. Granted, India had gone overboard after Doklam in shunning China, but this quick and convenient pivot in its favour is hardly a good look or good strategy. Again, these moves seem to be somewhat motivated by a domestic political desire to show we can dump the U.S. and make them regret. These are illusions that no country with a $2500 per capita income should suffer. The U.S. stance on India seems to have only hardened. See Scott Bessent’s recent swipes on India and its profiteering from Russian oil. And he’s the reasonable one in that cabinet. China has already started putting words in India’s mouth in calling for Taiwan’s integration into China and terming the U.S. a bully. A possible US-China deal in the near future will only make things worse, and a repeat of a Doklam-like incident next summer after the recent overtures will be a huge embarrassment. These are all in the realm of possibility. On economic policy, the story isn’t too different. A clear-eyed analysis of what’s worked for India in the past three decades isn’t difficult. There were the first-generation reforms of the 1990s, which continued in some shape and form till the mid-2000s. This integrated India with the global economy when globalisation was gathering steam. This coming together of India dismantling its trade barriers and a broader global consensus on the benefits of cross-border trade was a happy coincidence. That India had a demographic dividend going for it during this time made sure this opportunity wasn’t lost for the lack of resources. After the initial burst of liberalisation, India didn’t follow it up with factor market reforms, more sensible farm laws, a modern labour policy or land reforms. Only incremental measures were taken on these topics. This incrementalism didn’t really hurt because of the boom in services led by export-focused IT and tech-enabled services. It is not like India made a choice between manufacturing and services. The lack of reforms to support manufacturing meant that there was never a risk of India becoming a manufacturing powerhouse. Services could grow because it was too late before the state could realise it could get in the way. The sector had taken off. That and the demographic dividend meant India could coast at 6+ per cent GDP growth for most of the past three decades. This engendered a strange sense of complacency. Over a period of time not only did India not continue with reform momentum but actually reversed the course in multiple areas. Newer regulators were created with skewed priorities, import duties were reintroduced or increased for several items, non-tariff barriers were brought in to protect domestic players in several sectors, government debt kept inching up, leading to active financial repression by the state - the list is long. Yet the overwhelming belief among policy makers has been that the large domestic market of India, its demographics and its relative openness when compared to China was enough for its trading partners to ignore such difficulties in doing business with it. This was again a case of being in a sweet spot that allowed India to get away with being a vocal champion of globalisation and free trade while regressing on these principles in practice. Knowing thyself would mean understanding that this privilege would be short-lived and being proactive in bringing down these barriers. Now that Trump has called it out and China is a worse offender on these counts, India will do well to ask itself what real reforms it can do to be seen as an open, vibrant economy for the rest of the world. I have a general theory about India’s GDP growth. India is too much of a democracy for any ruling political party to let its growth rate fall below 6 per cent for a sustained period. It knows it will be punished politically. And, India is not enough of a democracy where political parties can reach a consensus on key issues for its growth to be over 7 per cent for long. India can’t and shouldn’t be happy muddling its way through between 6-7 percent growth. Knowing thyself would help India to realise that domestic consumption can’t forever support the economy regardless of what happens to the global economy and its exports. So, the air of confidence about Trump tariffs only hurting the economy to the extent of shaving 30 to 60 bps from GDP growth percentage is good for optics, but it isn’t true. In the past 6 months, the central bank has ensured that there’s almost Rs 2.5 trillion of surplus liquidity in the system to help with credit supply that was squeezed for much of FY25. The repo rate cuts of 100 bps have been front-loaded to spur demand. And there was an almost Rs 1 trillion break given on income tax in the budget. Yet, credit growth for the system is weak at about 10 per cent, which is below the nominal GDP growth rate. There is a demand problem in the economy and this was apparent before Trump tariffs were hurting global trade and the Indian economy. The announcement of rationalising GST rate slabs that will mean a Rs 2 trillion tax break for consumers is a belated acknowledgement that domestic consumption needs more support. Although the logic of making this announcement from the Red Fort beats me. Consumers will postpone purchases of those high-value items whose GST rates are expected to go down. If the duration between announcement and actual implementation is going to be a quarter (which I expect in the most optimistic scenario), India Inc will see inventory pile up and a slowdown in sales in this and next quarter. The bounce back when the rate cuts happen doesn’t recover the lost demand fully. Perhaps the symbolism of kickstarting real reforms was important. But a more comprehensive set of reforms will be needed if there’s a real reckoning of where the global economic order is headed and what are the best options for India in this future. I will be happy if there’s real intent and political will to follow through on the Independence Day speech. There will be plenty of opportunities for bravado, talking big and hosting conferences with the theme of this being India’s century. But that time is not now. Knowing thyself means this is the time to act. India Policy Watch #2: From Stray Love to Responsible Pet OwnershipInsights on current policy issues in India—A Guest Post by artist-author-podcaster, Khyati Pathak.Last week, public outrage erupted over the Supreme Court's order to tackle the issue of stray dogs in Delhi NCR. Following protests by the “dog-lover” community, another bench of three judges heard the case and issued new pan-India guidelines. The practicality of the initial court order is questionable. It is safe to assume that the municipal bodies in the Delhi NCR region lack the manpower and resources to round up their estimated 10 lakh street dogs within an 8-12 week timeframe. The new order has leaned closer to the current Animal Birth Control Rules, 2023 (ABC Rules), which allow the release of stray animals after vaccination and sterilisation. The new order has also issued guidelines on feeding and allowed the release of street dogs which are not rabid and aggressive. While it is good that the new court order recognises the issue of aggressive and rabid dogs, it still does not address the root cause: under the ABC Rules 2001, which were further strengthened in 2023, municipalities cannot euthanise any dog unless it is terminally ill or injured. These rules need to be rationalised, considering that animal control is fundamentally a public health issue. We should not confuse it with an animal rights issue. With the new guidelines that allow the release of strays, there will be continued conflict between dog-lovers and the general public on determining if a particular street dog is aggressive. Our municipalities cannot fix potholes, and I don't expect them to be able to effectively vaccinate or sterilise the estimated 6 crore street dogs across India. There is a need to re-examine the policy, keeping public health and the safety of people at the centre.
The main argument by dog-lovers is that the stray dog population can be managed effectively through a trap, neuter, vaccine, and release program (TNR). They argue this is the humane and compassionate thing to do. I am tempted to ask.. humane towards whom and compassionate at what cost? It is true that vaccination and neutering of strays is an essential component of stray management. However, it is dishonest to say that this alone is sufficient. Neutering does not solve aggressive behaviour, especially when dogs are in a pack. I speak from some experience. In Gurgaon, three stray dogs had created a significant menace within our residential community. The alpha in the pack was particularly territorial and had attacked many kids without provocation. I became his regular target because I was responsible for walking my pet dog in the same area. Mind you, these were not neglected, hungry dogs. These well-fed dogs were provided food by a handful of “dog-lovers” who thought their duty ended with feeding dogs. One day, after a particularly intense attack that left me bruised, I decided to take my complaint to the RWA Manager. “Madam, all these dogs are vaccinated and neutered. We cannot do anything about them.” “But, Sir, they are attacking people. The nasty one has bitten kids. You know that.” “Madam, there is a lady who is an animal rights activist. She has filed a police case against us for trying to shoo away the dogs. My hands are tied in this matter.” And so the residents of a so-called gated community were left to deal with the menace alone. In the absence of the State, we are in a state of nature, where, in Hobbes’s words, life is “solitary, poor, nasty, brutish, and short.” In simple words, we had a mini jungle-raj in our little condo. I adapted to the situation by wielding the danda in my own hands (for my pet and my protection). In nature, matsya-nyaya prevails. The strong eat the weak, and I was not ready to be eaten! I applied all my gyan from years of watching Cesar Millan. I had to make it clear that I was the boss of this jungle. I walked with shoulders broad, chest out, leash in one hand and danda in another. While I managed to cope with the situation, this is unwarranted. People cannot be expected to fend for themselves on city streets. In any other country, a dog that has attacked and bitten people would be put down. This is not inhumane; it is simply common sense. But check out the Animal Birth Control (ABC) Rules, 2023. Once the dog is neutered and vaccinated, it has to be released back to its area. The municipality cannot relocate it, nor can it put down any dog that is not terminally ill or mortally wounded. You may ask, “What about aggressive dogs?”. Good question. All the dog-lovers will parrot a single line: vaccinate and sterilise. But not a single word on what should be done if a dog is attacking people. I am not blaming dogs. Dogs are just animals; they will act upon their natural instincts. But this kind of nonsensical approach of ignoring dog attacks and indiscriminate feeding has ensured the failure of the well-meaning TNR programme and the development of this antagonist sentiment against dogs. Here's how one animal welfare group speaks about the ABC rules:
So, it implies that the rights of dog-feeders are more than the safety of people who walk on the streets. Amazing! This is the tone of many animal welfare groups. (Many good organisations also do the vital work of rescuing and rehabilitating dogs.) Good luck solving stray overpopulation with these stray-pet-centric selfish laws. I will not call them humane or compassionate, because these laws reek of entitlement towards your preference of keeping your favourite stray pet in your locality without doing the hard work of actually taking responsibility for its behaviour, while also being insensitive to the people who will face the cost of the policy. Who pays the cost for these so-called humane laws?Municipal workers have the very difficult and dangerous task of capturing these dogs for vaccination, neutering, or monitoring. I have seen municipal workers bring in dogs in such an uncontrollable state that even the vets refuse to take them in, on account of the safety of their staff. Nobody should deal with that kind of danger on their job, not the municipal workers or the veterinary staff. Regular stray attack victims include small kids, night shift workers, unassuming pedestrians, and cyclists—basically, everyone who is physically vulnerable and has to travel outside the safety of a car. How are strays managed in other countries?By putting them in animal shelters. Now, this is a euphemism. No country in the world has shelters for 10 lakh strays. It is not practical, it is not sensible. Even in the most developed countries, shelters have limited space. TNR programmes are used, but temperamentally unsafe dogs are not released. When a dog comes to a shelter, efforts are made to find a home for it, but this may not be possible for all strays. Some may not have the right temperament to be adopted. There is limited time for each stray at the shelter. If the stray is not adopted by then, it has to be put down. This is the reality of controlling the stray population. This issue has aggravated in India since the Animal Birth Control Laws, 2001, which basically made it illegal for municipalities to put down any dog, even if aggressive. The argument that new dogs will occupy the territory if the existing ones are picked up does not hold. Dogs thrive where there is a food source, and that is generally a human in highly urbanised spaces like Delhi NCR. Love comes with ResponsibilityThere is an inconsistency in our cultural attitude towards stray animals. Many of us like to feed stray cows, cats and dogs, but most are reluctant to pay if the animal falls sick. Few will be ready to do the grunt work of physically caring for a stray animal. Pet owners are also often guilty of abandoning their pets when they are unable to care for them. Neutering pets is also not a common practice in India. These factors contribute to the stray population.
The answer is really quite straightforward. There should be a gradual move from stray-love to responsible pet ownership. The strays who cannot be adopted due to temperament issues must be put in a shelter. “Dog-lovers” can play a positive role in helping trap, neuter, and vaccinate strays and then volunteering to find suitable homes for them. They can also do community service by listening to community feedback on the aggressive ones and helping with their humane capture and proper rehabilitation (at their own cost). Bring awareness about responsible pet ownership. Encourage adoption rather than buying pets. Make it mandatory for pets to be neutered and implement microchip tracking so that lost pets can be traced back to their owners. Above all, people should realise that loving an animal involves a lot of responsibility—enough with the attitude of offloading the cost of your love on society. Impact on wild speciesStrays are an issue not just in Delhi, but everywhere in India. Here’s a report on how feral dogs are now endangering the already endangered Indian Wolf.  I heard a similar case from a volunteer at the Aravali Biodiversity Park in Gurgaon in 2018. “People who come for walks bring along bread and chapatis and feed dogs. This attracts more dogs to the park, who in turn destroy bird nests and other wild life in the park.” People should know that randomly feeding animals is not an entirely harmless act. In such cases, one must think. “Am I really being humane? To whom and at what cost?” (P.S.: Read a previous post on this issue here) India Policy Watch #3: Water → OilInsights on current policy issues in India—Pranay KotasthanePetrol and crude oil are in the news for more than one reason. On one hand, the US administration has accused Indian petroleum refiners of profiteering from Russian crude. On the other hand, the government's ethanol-bending programme is under the pump. A Public Interest Litigation (PIL) in the Supreme Court wants consumers to have the choice of opting for ethanol-free petrol. The current programme mandates using E20 petrol (containing 20 per cent ethanol) in all public and private petrol pumps. Forget the US Administration's allegations for a moment. From a domestic policy lens, the Indian government has acknowledged that buying oil from sanctioned nation-states like Russia (and earlier Iran) is financially beneficial—India spends less foreign exchange because it’s buying from countries the West is allergic to. Now, combine that with the fact that one-fifth of the domestic petrol demand has declined starting this year after E20 was mandated throughout the country. These developments should lead to a reduction in retail petrol prices. Right? Right? Of course not. For one, the retail petrol prices have remained high because the basic excise duties, cesses, and surcharges have become a vital source of revenue for our governments. The latter two, imposed by the union government, have the additional benefit that they fall outside the purview of the pool to be shared with states. It’s unlikely that governments will let go of this revenue source, except as token price reductions ahead of key elections. But things get more interesting. Ethanol is made from sugarcane molasses sourced from Indian farms. One would have thought it would be cheaper than the crude oil India imports. But the additional demand for sugarcane molasses has made ethanol costlier than refined petrol! Here’s what the Ministry has to say:
One might think that as the production of sugarcane catches up to fill the additional demand, the procurement price of ethanol might fall. But that would be missing the political economy at play. Sugarcane is a politically powerful crop important for large states such as Uttar Pradesh, Maharashtra, Karnataka, and Tamil Nadu. So, of course, the government fixes the price at which farmers sell the sugarcane. This price, called the Fair and Remunerative Price (FRP), has increased steadily over the years. So we should expect that as ethanol becomes more critical to India’s energy mix, increasing its procurement prices will become more politically salient. Just quit the hope that petrol prices will fall because of ethanol blending. Now think about the second-order effects. Sugarcane is a water-hungry crop. The demand for ethanol will drive up the demand for surface water and groundwater, eventually producing fuel for our vehicles. So we are essentially converting water into oil (reminded me of Ramar Pillai in the 1990s, who used to con people by claiming to have invented "herbal fuel" from a mixture of herbs and water). Considering this, the claim that ethanol blending is environmentally more sustainable deserves at least some more thought. Given this situation, it’s foolish to think that the retail price of petrol will drop. Instead, the best the government can do is roll the cesses and surcharges into an explicit carbon tax on fuel. This will internalise the costs of using water for making oil. The explicit carbon tax will also help India offset the damage caused by the European Carbon Border Adjustment mechanism (CBAM) to an extent. A carbon tax will also create a buoyant revenue source that can be earmarked for climate change mitigation and adaptation. Public policy, after all, is often about picking the second-best option. P.S. 1: The brouhaha over ethanol-blending and the ban on online real-money games have a common thread. In both cases, the government surprised on millions of citizens without making public any real impact assessment study, cost-benefit analysis, or explanatory memoranda. That’s poor form for a democracy in 2025. For example, the Australian social media restrictions for children bill comes with a detailed explanatory memorandum that outlines the government's background work and helps build support. However, currently, all we get is a ban handed down with some vague reasoning, press releases, and government diktats. P.S. 2: Speaking of “profiteering”, consider this New York Times story, which shows that SpaceX gets 84 per cent of its revenue from government contracts, has "paid little to no federal income taxes since its founding in 2002”, and this exemption will continue long into the future. Moreover, it uses this money to utilise Space, a global commons. But dare anyone call it profiteering? Hypocrisy is the norm in international relations, but deploying it needs a subtlety that the current US government lacks. HomeWorkReading and listening recommendations on public policy matters
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