Failed state

• Failed state is unable to project authority over its territory and peoples, and it cannot protect its national boundaries. 
• The governing capacity of a failed state is unable to fulfill the administrative and organizational tasks required to control people and resources and can provide only minimal public services. Its citizens no longer believe that their government is legitimate, and the state becomes illegitimate in the eyes of the international community.
• A failed state is composed of feeble and flawed institutions. Often, the executive barely functions, while the legislature, judiciary, bureaucracy, and armed forces have lost their capacity and professional independence. 
• A failed state suffers from crumbling infrastructures, faltering utility supplies and educational and health facilities, and deteriorating basic human-development indicators, such as infant mortality and literacy rates. 
• Failed states create an environment of flourishing corruption and negative growth rates, where honest economic activity cannot flourish.
• A strong state provides core guarantees to its citizens and others under its jurisdiction in the three interrelated realms of security, economics, and politics. State failure comes in degrees and is often a function of both the collapse of state institutions and societal collapse.
• A failed state cannot maintain a monopoly on the legitimate use of violence and minimize internal conflict. It cannot formulate or implement public policies to effectively build infrastructure and deliver services or effective and equitable economic policies. 
• It cannot provide for the representation and political empowerment of its citizens or protect civil liberties and fundamental human rights. State failure manifests itself when a state can no longer deliver physical security, a productive economic environment, and a stable political system for its people.
• The total collapse of the state marks the final, extreme phase of state failure, and very few states can be described as completely failed or collapsed. 
• Many states suffer from various degrees of weakness and are therefore potential candidates for failure. Weak states were failing with increasing frequency, most of them in Africa but also a handful in Asia and the Middle East, and failed states are known to be hospitable to dangerous warlords and groups that commit terrorist acts. 
• Somalia and Afghanistan under the Taliban regime, are examples of states failure completely.
• Understanding the dynamics of state failure and strengthening weak nation-states in the developing world assumes new urgency.
• 25 Most failed states in the world are:

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India qualifies many aspects of 'failed state' but not yet failed. But if you look from view point of poorest man it is definitely a failed state.

NPA's: Govt's all talk and no action

• Infrastructure and capital-intensive industries are imperative for development but too difficult a responsibility for the private sector to shoulder because of long gestation period and low returns.
• During financial year 2016-17, when demonetization disrupted banking activity, banking sector grew by just 1.7%, which was a 20-year low. 
• Most of the banks involved in NPA's are public sector entities with the perception that the liabilities of these banks are backed by a sovereign guarantee, that has prevented a run on these banks.
• The ratio of stressed assets to gross advances in the banking system has crossed the double-digit mark and few borrowers account for a large share of defaults. 
• As banks are grappling with the defaults, they tried to retrieve themselves from this mess by lending more to potential defaulters or converting part of their debt into equity which did not work. On the other hand, the deficits on the balance sheets of these firms became even larger. When banks decide to make a case for liquidation to recover at least a part of their loans, the net assets were not even a fraction of the value of their exposure, especially since resources have often been diverted out of the firms concerned.
• Bank NPAs are not a new issue, though the magnitude of the problem was revealed when Raghuram Rajan, the previous RBI Governor, imposed new guidelines on identifying NPAs. 
• Given poor shape of public sector banks the price at which they could be privatized is likely to be indefensible.
• The only way out is banks recapitalization by government and writing off NPAs and going forward diligently. Money lost once is generally irretrievable.
• The new bankruptcy law, forces a settlement must be reached within 180 days. These 12 large defaulters account for around a quarter of NPAs and quick resolution of these NPAs even with a discount, that would reduce government's recapitalization requirements. Little is likely to be recovered from absconding individuals, like Vijay Mallya of Kingfisher Airlines. 

The reform-induced failure of the government to mobilize adequate resources, through taxation or borrowing, to finance capital expenditure is the root cause of the current bank's crisis. Private sector firms borrowed high value banks funds and invested in infrastructure and capital intensive projects with long gestation where the profits have been volatile and difficult to come by, and firms have found themselves unable to service their debts. Today almost all infra and public utility companies are in red. Restructuring of debt etc works rarely and generally postpones collapse of firms and banks. Most important problem is inflation of project costs, corruption and siphoning of funds by promoters. It is well known that promoters take back their investment, albeit illegally, even before project construction takes off.

Jobless growth of India's GDP

• Today, India is facing a peculiar situation of 'jobless growth' and 'growthless jobs' as well, mainly due to defective economic policies and gross fiscal mismanagement.
• During the past three years, public sector, government’s headcount remained stagnant. State-run banks registered a job growth of just 0.5%. Private corporations have no better figures.
• Every year, 10-12 million young Indians join the labour force, 5 million people leave agriculture to join the non-agriculture sectors. In contrast job creation is few lakhs only during the past three years which are mostly replacement recruitment.
• India's GDP growth and new jobs creation in India have not been growing at the same rate. The creation of more and better jobs and livelihoods is imperative for policymakers. Focusing only on GDP growth is a wrong approach.
• About 550 jobs are disappearing everyday, an alarmist declaration of loss of one million jobs during past five years.
• The lack of lending by the banks may very well be one contributing factor. 
• Rise in unemployment is due to agriculture and SMEs, which contributes most employment in India, are the worst affected. The organised sector contributes only 1% of jobs.
• Big multinationals in India are highly capital-intensive, while the SMEs are four times more labour intensive than the large firms. But they are one of the least productive sectors and their real wages are very low. 
• India needs to protect sectors like farming, unorganized retail, micro and small enterprises. These sectors need support from the government not regulation. 
• The agricultural sector in India does absorb more than half the workforce, but a lot of it is disguised unemployment. 
• The view of Indian villages as the economic backbone of India is flawed and will never lead to the kind of mass employment that is desired in India. At best it minimizes agriculture labour migration to urban areas.
• Urbanization creates lots of jobs in developing economies.
• 92% of enterprises that created jobs were from the informal sector, and the biggest stumbling block for these was lack of formal credit. 
• India needs to free up its labour laws which are archaic, restrictive, and convoluted which incentivizes firms to stay small and remain in the informal sector. Firms, which can achieve economies of scale, are the need of the hour to create jobs for the masses in India.
• India needs to focus on primary and secondary education and skills development. A skilled worker has a better chance at finding higher paying employment.
• At present, the business environment is the toughest for small to medium enterprises. Improvement of 'ease of doing business' to firms of all sizes, to be set up and facilitate its smooth running. 
• Focus on infrastructure and tourism, on sustainable basis, will help creation of jobs at the unorganized level. 

My View:

Modi administration, in the name of reforms is actually destroying 'informal sector' which are mostly operated by less educated people employing semi skilled people. Modi's failed demonetization and hurriedly rolled out mangled GST have destroyed informal sector, agriculture, construction and tiny industries, while achieving nothing. Winning elections is all about hammering of selective narratives rather than sound public policies. Aside improving 'ease of doing business', promoting manufacturing, preserving agriculture at profitable levels, encouraging small businesses & industries, services, infrastructure, tourism are the keys for providing employment to masses. Banks must be financially healthy and support informal sector so that our economy grows and provide employment to our aspiring youth. Trophy projects, white  elephants and icons are not the indicators of development. It is all round life style improvement of poorest people, which is called 'development'.