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Wednesday, January 24, 2018

Announcements

Positions at the Finance Research Group, IGIDR

The Finance Research Group at the Indira Gandhi Institute of Development Research (IGIDR), Mumbai is looking for researchers interested in financial regulation.

IGIDR is a PhD and Masters granting research institution set up in Bombay in 1989, and funded by the Reserve Bank of India. The Finance Research Group is a group of researchers (economists, lawyers and data scientists) working on the economics, policy and regulation of financial markets, household finance, firm financing and the land market.

The person will be required to support research in law and economics on a full-time basis. The position will involve working with persons from various disciplines. It will require working with data-sets, analyses and designing policy and regulatory interventions. It will provide exposure to cutting edge research in finance. Ideal candidates are persons having a degree or experience in law, finance, economics or public policy.

Specifically, we are recruiting researchers to work in the following areas:

Policy research in payments


The legal framework of the payments and settlement systems, Indian and global, clearing processes in payments systems of different kinds, optimal competition policy in payments, policy issues and market barriers in payment systems, and how to design policy to ensure a vibrant fintech ecosystem.

The work profile will include studying contemporary policy
developments, developing a point of view on the required reforms, writing policy papers and blog articles, running policy roundtables, etc.

Impact of interventions in financial markets


Our research program on financial markets will involve studying the impact of changes in regulations on market quality, evaluation of proposed regulations, and development of a cost-benefit analysis of the same.

The office functions on free and open source softwares like Linux, LaTeX, R and others. Previous experience in Linux is not required. However, if appointed, the candidate will be required to learn and use this software. The candidate must be willing to adapt to technology and work long hours.

Contact us


Please get in touch with Jyoti Manke at careersatFRG@gmail.com

Monday, January 15, 2018

Interesting readings

Fixing Aadhaar: Security developers' task is to trim chances of data breach by Sunil Abraham in Business Standard, January 10, 2018.

The next level of credit analysis by Ajay Shah in Business Standard, January 8, 2018.

Financial Services: Ready for the Cloud? by Lim May-Ann in NIPFP YouTube Channel, January 8, 2018.

The China model: A Chinese Empire Reborn by Edward Wong in The New York Times, January 5, 2018.

The President Who Doesn't Read by David A. Graham in The Atlantic, January 5, 2018.

Where Are Indian Institutions Going Wrong? by Nikhil Govind in The Wire, January 3, 2018.

A great look into transparency, accountability, media and national security: The Biggest Secret by James Risen in The Intercept, January 3, 2018. Also see.

A Diary From a Gulag Meets Evil With Lightness by Eva Sohlman and Neil MacFarquhar in The New York Times, January 3, 2018.

It took the kidnapping, rape, and death of a white woman to bring down the KKK by Laura Smith in Timeline, January 2, 2018.

Climbers Set Off to Be First to Summit World's Most Notorious Mountain in Winter by Sarah Gibbens in National Geographic, December 29, 2017. An earlier story on the same team: Scaling the World’s Most Lethal Mountain, in the Dead of Winter by Michael Powell in The New York Times, May 9, 2017.

What happens when you dial 100? by Rudraneil Sengupta in Mint, December 28, 2017.

America and the Great Abdication by Richard Haass in The Atlantic, December 28, 2017.

The internet is broken by David Baker in Wired, December 19, 2017.

The End of the Social Era Can't Come Soon Enough by Nick Bilton in Vanity Fair, November 23, 2017.

Thursday, January 11, 2018

Disclosure of default: The present SEBI disclosure regulation is adequate

by Ajay Shah and Bhargavi Zaveri.

There is much economic sense in achieving rapid disclosure about default. Volume 1 of the report of the Bankruptcy Legislative Reforms Committee (BLRC) articulates a clean strategy for disclosure about default (Section 4.3.5). SEBI and RBI are at the early stages of implementing this. Many people who are used to opacity about default are surprised at the new concept of immediate disclosure of default. We argue that economic logic and the existing SEBI regulations about disclosure (the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, or "LODR") are consistent with immediate dislosure about default by listed issuers. LODR does not require modification in order to achieve the desired outcome. The lack of disclosure that is presently prevalent reflects an endemic state of violation of the LODR. Executive action by SEBI, to enforce against a few violations, will deliver the required change in the behaviour of listed issuers, on disclosure.

How does the credit market benefit from the disclosure of default?


A firm in distress is a melting ice cube. Every day of delay harms recovery rates. The central idea of the bankruptcy code (and the resolution corporation proposed under the FRDI Bill) is to rapidly resolve the problem. Speed in resolution reduces the bankruptcy cost that is ultimately borne by society.

When a default takes place, if it is rapidly known to the community of bidders, they will gear up to toss bids into the Insolvency Resolution Process (IRP). Reducing delays in disclosure of default thus reduces the delays (or increases the quality of the work done by bidders) in the IRP, and improves recovery rates. Thus, rapid disclosure of default is a tool for obtaining a well functioning bankruptcy process.

How does micro-prudential regulation benefit from the disclosure of default?


Micro-prudential regulation involves ensuring that financial firms, such as banks or insurance companies, recognise losses and hold adequate equity capital after taking losses into account. Financial firms have an incentive to hide bad news. Disclosure of default helps to block evergreening, and thus works in favour of micro-prudential regulators. RBI and IRDA will thus benefit when there is immediate disclosure of default.

How do capital markets benefit from a disclosure framework?


Speculative trading discovers prices on financial markets. Every market participant combines hard information with a process of analysis and formation of a speculative view about the future. The interests of society are best served if the maximal hard information is made available, on an equal footing, to all speculators.

This guides the regulation of disclosure. Exchanges coerce issuers to disclosure a comprehensive array of information that helps speculators peer into the future and form a view about the fair value of each security.

The push for better disclosure could come from any of these three channels: From a government agency such as IBBI which is tasked with building a healthy credit market, from micro-prudential regulators such as RBI and IRDA and from the financial markets regulator, SEBI. In India today, the natural way forward seems to run through SEBI, which shapes the listing agreement between a firm and the exchange. Through this, listed borrowers and listed lenders can be coerced to disclose defaults. Hence, in the remainder of this article, we focus on securities law and its impact on disclosure of defaults.

The firm, not the security


Corporate finance involves multiple securities that stand at different levels of seniority in the waterfall. Information about all aspects of the corporate financial structure is required for the valuation of any of these securities.

Another way to think about this is through derivatives pricing. All securities issued by a firm (e.g. equity, debt of various kinds) constitute derivatives that have, as the underlying, the value of the firm. Facts about the firm are thus relevant for pricing all these derivatives.

Hence, while a lot of real world rules about disclosure flow from each security that is listed, disclosure rules should be a rulebook that kicks in when an issuer has one or more listed security in the public domain.

Materiality of defaults


The LODR governs the disclosure of information by listed issuers, that is, issuers that have a single listed security. The essence of LODR is a principles-based perspective on what should be disclosed: Disclosure obligations under the LODR are triggered for all information that is 'material'. What constitutes material information is left to the judgement of the issuer's board.

The LODR lists the following indicative criteria for determining the materiality of any given piece of information:

  1. if the event or information is not disclosed, it is likely to result in the discontinuity or alteration of an event or information already available publicly;
  2. if the event or information is not disclosed, it is likely to result in a significant market reaction if the said omission were to come to light at a later date;
  3. even where neither of the abovementioned conditions are satisfied, an event or information may be treated as material, if in the opinion of the board of directors of the issuer, such event or information is material.

This covers all the issues associated with default: A listed company should disclose any default, a listed bank should disclose when a large borrower defaults, etc.

A default on a loan to a bank or financial institution is, by itself, a material event for the valuation of all securities issued by a listed issuer.

As an example, consider a company financed by equity and one bond issue. Default by the company to any one bondholder is a very important event for the shareholder, for this raises the possibility of large losses for the residual claim (equity). It is also a very important event for every holder of the bond (including to the bondholders who were actually paid on time). Hence, the default by the company to any one bondholder, should be disclosed. The LODR explicitly recognises this and makes specific provisions for the expected as well as immediate disclosure of default on bonds. For instance, it mandates a listed entity to inform the stock exchange of any action that will affect the payment of interest on or the redemption, of debt securities. A listed entity is required to similarly inform the stock exchange of an expected default in the timely payment of interest or redemption amount in respect of debt securities. Notices of board meetings that propose an alteration of the date for payment, or amount, of interest or redemption on bonds, are required to be given to exchanges atleast 11 days prior to the date of the meeting.

Suppose the company were, instead, financed by equity and one loan. The same logic holds. Default by the company on the loan is an important event for the shareholder. Suppose the same firm had issued debt securities as well, a default on a loan is equally important for the bond holders. It is also equally material for all other stakeholders, such as the firm's vendors and employees, as it may show signs of impending or ongoing financial stress. Hence, such default should be disclosed as soon as it occurs.

Additionally, the LODR deems certain information to be material, and mandates its disclosure, notwithstanding the judgement of the issuer's board. It lists information "deemed" to be material in Schedule III. However, Regulation 30(12) clarifies that the list is inclusive and where the listed entity has information, which has not been indicated in Schedule III, but which may have a material effect on it, the listed entity is required to make an adequate disclosure of such information. Listed issuers are required to have in place a policy for determining the materiality of information for the purpose of disclosure.

Definitional issues relating to 'default'


In India, the concept of default has often been conflated with the RBI mandated prudential norms on income recognition, asset classification and provisioning for banks and financial institutions. While RBI's prudential norms classify an asset as a NPA only after the expiry of atleast 90 days from the due date, the price discovery process in the financial market happens independently of the prudential norms.

The Insolvency and Bankruptcy Code, 2016 (IBC) has dispensed with this conceptual confusion by defining default as the non-payment of the whole or any part of the debt when due and payable. It allows the enforcement of creditor rights on the occurence of a default. The IBC has, thus, already made a paradigm shift in how we think about default and the timing of enforcement of creditor rights in India. The same standard should be applied for the purpose of default disclosures as well.

Information overload?


It is possible to disclose too much. As an example, suppose an Indian software services company loses one customer. Should this be disclosed to the public security-holder? The answer depends on the size of the customer. Material information should be disclosed. As an example, Nielsen has a contract of $2.25 billion with TCS: events of contract renewal or contract disruption for this contract are large when compared with the size of TCS which had consolidated revenues of about $19 billion in 2016-17, to merit disclosure.

This takes us to the question: What is material information? It is neither feasible nor sensible for a regulation to pinpoint every fact that must be disclosed. LODR is principles based and should remain principles based. These details should evolve through jurisprudence.

A good way to think about what is `material' information is to compare the stock price impact against normal security price fluctuations. As an example, suppose the share price of a company has a daily standard deviation of 3%. Suppose the revelation of default generates a share price impact of 1.5%. This is a pretty big piece of news, by the standards of the ordinary price fluctuations experienced by the security. Hence, this news should be disclosed. We suggest that what is material to the price of a security is news that is likely to have an impact upon the price of above half the standard deviation of daily returns. This quantifiable construct can be used by practitioners and prosecutors when translating the principles-based LODR into rules for living and acting when faced with events in the real world.

Fixing enforcement


Why do we have poor disclosure of default in India? This is not a failure of regulations: the LODR is quite fine on the principles. Defaults are material events and thus should be disclosed. This is a failure on the executive side. The materiality thresholds under LODR are being pervasively ignored, and SEBI has not punished violators. Sound enforcement of the LODR against firms who have failed to comply with the disclosure of material debt defaults, should get the job done.

Is there a conflict with banking secrecy?


In the past, the fiduciary obligations of banks towards their consumers has been used to avoid disclosing the identity of defaulters. However, contractual obligations of banking secrecy are consistent with disclosures as long as such disclosures are mandated by law. For instance, confidentiality obligations in standard contracts between banks and their clients, commonly exempt disclosure obligations under law. Similarly, even where the confidentiality obligation is imposed by statute, such as the State Bank of India Act, 1955, specific exemptions are carved out for information that is mandated to be disclosed by law. The LODR is law, and hence disclosures that flow from LODR are consistent with banking secrecy.

Conclusion


A sound credit market requires rapid disclosure of default. A sound capital market requires rapid disclosure of default. Rapid disclosure of default plays in favour of micro-prudential regulation. In India, so far as concerns the capital markets, the principles-based LODR is in place, and the text of LODR is sound. The gap is in enforcement. Enforcement of the existing LODR will deliver sound disclosure of defaults by listed companies and important defaults faced by listed lenders.

Anticipating India’s New Personal Insolvency and Bankruptcy Regime

by Adam Feibelman.

The Insolvency and Bankruptcy Code has been in force for commercial debtors for over a year, and it has already been employed in over two thousand cases, including some cases that involve large non-performing loans clogging the banking system. These cases have generated numerous important questions of law and policy, and thus the IBC has become a regular and important topic of news, discussion, and commentary within the country.

Meanwhile, there has been hardly any public discussion or commentary about the personal insolvency and bankruptcy provisions of the Code. While the provisions for personal debtors have not gone into effect, the nearly complete lack of attention to portions of the Code covering personal debtors is puzzling. The Insolvency and Bankruptcy Board of India (IBBI) has given clear indications that it is planning to notify those provisions in the relatively new future. Those provisions will introduce a new and complex system of legal tools for citizens across India’s financial spectrum and their lenders, dramatically expanding the global scope of personal bankruptcy and insolvency law by over 1.3 billion people. It is surprising and unsettling that fundamental questions about the purpose and likely impact of these provisions remain largely unaddressed in public discourse.

My working paper, Anticipating the Function and Impact of India’s New Personal Insolvency and Bankruptcy Regime, aims to contribute to discussion of the new personal insolvency and bankruptcy regime by describing it in some detail; analyzing the goals of policymakers who drafted and enacted the regime; assessing the design of the regime in light of those goals; and anticipating the function and impact of the law as enacted.

Provisions of the IBC for Personal Debtors

The Code’s provisions for personal debtors represent a unique combination of approaches from other jurisdictions with some distinct features that harmonize it with the provisions for commercial debtors and others that are designed specifically for the Indian context. The Code provides a “fresh start” chapter for debtors with relatively low income (less than 60,000 rupees), few assets (less than 20,000 “non-excluded” assets), low levels of debt (less than 35,000 rupees), and who do not own their own home. Excluded assets include tools, equipment, books, and vehicles of personal or business use; basic household goods, furniture, and equipment; certain personal ornaments of religious significance; life insurance policies or pension plans; and a dwelling unit up to a value to be determined by the Board. The fresh start chapter simply discharges the debtor’s unsecured debts; it does not require that debtors give up any assets or income to unsecured creditors. Thus, it can be thought of as analogous to a loan waiver regime. It is extremely difficult to anticipate how many individuals in the country who have some debt would be eligible under this chapter, but it could cover significant numbers of borrowers from micro-finance institutions and informal lenders.

Those ineligible for the fresh start chapter will be eligible to file under the Code’s insolvency chapter, which requires debtors to propose a plan of repayment to their creditors and then complete the plan to be entitled to a discharge of their remaining unsecured debt. Unlike the fresh start chapter, creditors can file an application to initiate an involuntary insolvency case for their debtors; they can do so if their debtors default on a payment and fail to timely respond to a demand for payment. In any event, three-fourths of creditors must vote to approve a debtor’s repayment plan, which must provide a minimum budget to the debtor and allow the debtor to retain excluded assets. If creditors fail to approve a debtor’s repayment plan or if the debtor fails to complete an approved plan, the debtor is then eligible for bankruptcy under the Code, which can be initiated by either the debtor or any of the debtor’s creditors. The bankruptcy provisions require the debtor to give unsecured creditors his or her non-excluded assets and then allow for the discharge of the balance of unsecured debts. For the most part, none of the chapters of the Code disrupt secured creditors rights.

Policymakers' Goals

There is relatively little in the public record about the precise goals that policymakers had in mind in designing and adopting the personal insolvency and bankruptcy provisions of the Code. An initial interim report of the Bankruptcy Law Reforms Committee that was charged by the Indian Parliament to propose and draft the new Code briefly noted the need for changes to the personal insolvency laws to address the financial distress of micro, small, and medium enterprises, most of which are sole proprietorships or benefit from personal financial guarantees. The Committee did include broadly applicable provisions for personal insolvency and bankruptcy in its draft legislation, but its final report did not explain the underlying motivation for its work in this area or the social or economic need for the new provisions. It noted only "the importance of such borrowers in the economy," and that, under the preexisting framework, creditors often had difficulty recovering from individuals and often resorted to coercive debt collection, which compounded the social costs of indebtedness. It appears that, to the extent that policymakers considered non-business debtors in drafting and enacting the Code, their primary goal was to promote increased consumer lending in the economy and, secondarily, to provide some degree of protection to individuals in financial distress, especially from aggressive debt collection.

Thus, unlike the provisions for corporate debtors under the new Code, the provisions for personal insolvency and bankruptcy do not appear to have been driven by acute economic or financial conditions. This is noteworthy because countries that have adopted or reformed their consumer insolvency regimes in recent decades have tended to do so in the wake of consumer financial crises or dramatically expanding consumer financial markets. Countries across Europe and elsewhere -- including Hong Kong, South Korea, Israel, and Indonesia -- have adopted or reformed their personal insolvency regimes under such circumstances in the last two decades. While the amount of consumer debt in India has increased significantly in recent decades, and instances of household over-indebtedness appear to be growing, it has not reached levels that suggest systemic vulnerability or a looming threat of household financial crisis. Aside from the ongoing financial travails of farmers in certain regions, a spike in financial distress in some sectors due to the recent demonetization, and a generally acknowledged problem of aggressive debt collection practices across the country, there does not appear to be an emerging crisis of intractable over-indebtedness among individuals and households in India.

Anticipating Function and Impact

The IBC appears to represent a rare instance of a country adopting or modernizing a personal insolvency or bankruptcy regime at a relatively early stage in the development of a consumer financial market, before one is acutely necessary. Doing so avoids costs of responding too late, after consumer financial markets have over-heated. It may also have a beneficial effect on the development of those markets in the first place. Especially since the recent global financial crisis of 2008-10, scholars and policymakers around the globe have begun to appreciate that a personal insolvency or bankruptcy regime is an important component of the institutional framework for consumer credit markets. If properly designed and operated, such a regime can help promote a stable market for consumer credit, making creditors more willing to lend and individuals more willing to borrow, disciplining both, reducing the social costs of consumer financial distress and perhaps the amount of household over-indebtedness in the economy as well.

But such potentially beneficial effects likely depend on a system that improves or accelerates creditors’ insolvency state returns, or at least makes their losses relatively predictable, and that effectively insures individuals against the risk of over-indebtedness without creating incentives for them to act opportunistically or recklessly. It is not clear how well the provisions for personal insolvency and bankruptcy under the Code as enacted will serve these functions, and there are some causes for concern. Certain aspects of the institutional design may exacerbate inter-creditor conflicts, for example, by enabling individual creditors to easily initiate a case and by requiring majority votes among creditors to approve repayment plans. The regime’s reliance on negotiated repayment plans may also limit the predictability of outcomes.

While the fresh start process for individuals with low incomes, few assets, and relatively little debt, is designed to provide a robust insurance function, the insolvency provisions that apply to all other debtors provide much more limited protection for individual debtors. To the extent that there is an effort to target fresh start relief to debtors who need it most, i.e., those who genuinely cannot repay a significant amount of their debt, it is done rather bluntly through the narrow eligibility requirements for the fresh start provisions. The insurance function of insolvency or bankruptcy law can be particularly important to debtors, including those with business-related debts, who have income and assets to protect or who have significant amounts of debt, most of whom would ineligible for a fresh start. The bankruptcy chapter of the new Code promises to provide some meaningful debt relief to such debtors, but they must first go through the insolvency process, which requires a plan of repayment subject to creditor approval, during which the debtor is allotted only a minimum budget, and which formally ensures only a minimum level of relief or protection. Added to which, it is likely that large segments of the population of individual debtors covered by the law will not have sufficient information about the law to utilize it, will face logistical challenges even if they do have sufficient information, or will be deterred by stigma or other reputational concerns.

It is possible, therefore, that a significant portion of debtors in financial distress will not voluntarily use the new insolvency and bankruptcy regime and that it will primarily be employed as a debt collection tool for creditors. If so, the scope of the insurance function of the new system may not end up providing sufficient relief to individual debtors who become mired in debt, may not promote risk-taking entrepreneurial activity, and may not provide a meaningful safety valve to developing consumer financial markets.

Time to Plan, Prepare

To be sure, these concerns are highly speculative, and the last year of activity under the new IBC for commercial debtors has shown that it is too easy to make dire predictions about the challenges facing the new law. Yet, the stakeholders of the new personal insolvency and bankruptcy regime have the relative luxury of some time to prepare for the operation of that part of the Code. Hopefully, policymakers have begun to anticipate some of the potential macroeconomic effects of a newly available, robust regime for personal insolvencies and bankruptcies and consumer lenders have begun thinking seriously about how they might be affected by the new law. Ideally, policymakers are also considering how to disseminate information to individuals and households about the personal insolvency and bankruptcy provisions of the Code that will soon become available so that they can make informed decisions about whether, when, and how to employ it.

 

Adam Feibelman is a Professor of Law at Tulane University, he has been a visiting scholar at National Law School of India University, Bangalore, and the Center for Law and Policy Research.

Tuesday, January 09, 2018

India's Visa Policy Reforms

by Natasha Agarwal.

In 2016, global travel and tourism contributed US$7.6 trillion to world GDP and supported 292 million jobs worldwide (WTTC, 2017). Undeniably, the sector benefits the economy. It generates employment opportunities and export revenues, creates sectoral linkages, and stimulates infrastructure development. However, to fully reap the benefits from international tourism, countries have to make it easier for travellers to visit. Travellers perceive visa formalities as a travel cost – direct in terms of monetary, and indirect in terms of time spent in waiting in lines, complexity of the process – which exceeding a threshold, can put them off a particular destination or lead them to choosing alternative destinations with less hassle (UNWTO, 2016).

Countries are, therefore, increasingly focussing on visa policies and procedures which in recent years have resulted in some notable progress. In 2015, 61 per cent of the world's population required a traditional visa from the embassy prior to departure, down from 77 per cent in 2008 (UNWTO, 2016). Moreover, between 2010 and 2015, a total of 54 destinations significantly facilitated the visa process for citizens of 30 or more countries by changing their visa policies from "traditional visa" to either "eVisa", "visa on arrival" or "no visa required" (UNWTO, 2016). Ranked at 50, India was identified as one of the 54 destinations that has carried out substantial visa policy reforms.

India's eVisa programme

On 1st January 2010, India introduced a visa on arrival programme. This was replaced by an eVisa programme on 27th November 2014. On 1st March 2016, the visa on arrival programme was re-introduced for nationals from Japan only.

India's eVisa programme allows foreign travellers to apply for their Indian visa online. Once the application is approved, travellers receive an Electronic Travel Authorization (ETA) by an email. The ETA permits their travel to India which has to be within the period mentioned on the ETA. On arrival at the port of entry where the eVisa facility is available, travellers have to present their printed ETA to the immigration authorities who would then stamp the travellers passport thereby permitting entry into the country. Travellers can then travel within India up until the expiry date of the stamped visa in their passport.

Since inception, the program has been reviewed and modified frequently. It is now available to citizens of over 150 countries. The fees are based on principle of reciprocity and categorised into four slaps: 0, 25, 48, and 60 US dollars. There is a bank charge of 2.5%. eVisa’s are categorised into three groups: e-tourist, e-business and e-medical. Double entry is permitted on an e-tourist and e-business visa and triple entry is permitted on an e-medical visa. All three are issued for a period of 60 days, and can be availed up to two times in a calendar year.

Despite these efforts, the data shows a lukewarm response. In year 1 (December 2014 – November 2015), only 5% of international travellers availed their Indian visa online. This fraction grew to 12% in year 2 (December 2015 – November 2016) and just 16% by year 3 (December 2016 – November 2017).

Limitations of the eVisa programme

What explains the low uptake of India's eVisa programme?

A closer examination reveals that the implementation of the programme has been poor.

eVisa's are available under three sub-categories: e-tourist, e-business and e-medical visas. The eVisa online application form lists all the activities which travellers can carry out under each of the three eVisa categories. In addition to choosing a primary purpose of visit, the online application form seems to suggest that travellers are permitted to undertake multiple activities within a group. Upon selecting the visa type on the application form, a pop-up window states "all the following activities are permitted, however select the primarily purpose from the following". This means that a traveller on an e-business visa whose selected primary objective is to, for example, recruit manpower, can undertake any other activity permitted on an e-business visa.

However, instruction number one on "Instructions for Applicant" on the official website states: "e-visa has 3 sub-categories, i.e. e-Tourist visa, e-Business visa and e-Medical visa. A foreigner will be permitted to club these categories (emphasis added)." The online application form therefore permits travellers to combine one activity from each of the three eVisa categories. When a combination of activities is chosen, it is not clear what category of visa will be issued.

Let's imagine a Mr. Smith, a national from one of the eVisa programme eligible countries. While filling his eVisa application form, Mr. Smith opts to primarily participate in a short-term yoga programme (activity listed under e-tourist visa category), attend a business meeting (activity listed under e-business visa category), and go through a short-term medical treatment (activity listed under e-medical visa category). India is liberal: Mr. Smith is not restricted to his chosen primary activity. Nonetheless, the question that arises is: since he has opted for one activity listed under each of the three visa categories, will he travel to India on an e-tourist visa and/or an e-medical visa and/or an e-business visa? Surely, the Indian government does not intend to issue multiple visas to Mr. Smith all in one go.

This is further complicated by the number of entries permitted: double entry on e-tourist and e-business visa, but triple-entry on an e-medical visa. For activities across multiple categories, it is not clear how many entries are permitted. Therefore, will Mr. Smith be given a double or triple entry permit?

An array of questions pertaining to re-entry requirements have also not been answered. For example, would travellers require a re-entry permit if they wish to leave and re-enter India within the 60-day eVisa validity period? If a re-entry permit is required, are there any requirements for issuing this permit, such as a last destination restriction? Do travellers have to re-enter only from the ports of entry at which the eVisa programme is available? Travellers have posed their queries with regards to alternative port for re-entry when travelling on eVisa’s especially when the re-entery is from India’s neighbouring country via land (see here and here).

The programme also has administrative glitches. For example, travellers have repeatedly blogged on the difficulties they experience while using the eVisa application form (see here, here and here). The difficulties of the payment gateway, and limited helpful response from the help desk have been highlighted. Despite the programme being in its third year, these difficulties continue to linger making it an unpleasant experience for travellers.

How can we do better?

Let's run through one problem at a time.

The first area is the permission to come into India under multiple categories. There are two ways to solve this problem.

  1. The first solution: change the rules and not permit clubbing activities across the three categories.

    This means that Mr. Smith can primarily choose to either participate in a yoga programme OR attend a business meeting OR a short-term medical treatment of self. For his chosen primary activity, the government would accordingly issue him the visa.

    This is easy to implement. The sentence "A foreigner will be permitted to club these categories." from instruction number one on "Instructions for Applicant" on the official website would need to be deleted. As a result, instruction number one would then read as following "e-visa has 3 sub-categories, i.e. e-Tourist visa, e-Business visa and e-Medical visa. An e-tourist visa, an e-business visa and e-medical would be issued for any activity chosen under the respective visa category." Consequently, the online eVisa application form would also need to incorporate this change, and restrict travellers to choose activities across categories.

    While this is not a great option - we are restricting what visitors can do while travelling, it removes the confusion that has come with clubbing categories.

  2. The second and better solution: travellers be permitted to club activities across the three eVisa categories.

    This solution is already in place. However, to avoid the current confusion associated with this solution given the existing premise of the programme, there are two alternatives:

    • Permit three entries under each of the three categories. Once this is done, it is even simpler to abolish the three categories, and just allow anyone to visit India with three entries in 60 days.

    • Permit three entries under each of the three categories. On the eVisa online application form, change e-tourist visa/e-business visa/e-medical visa to tourism purpose/business purpose/medicinal purpose. Accordingly, ETA would reflect the 'purpose of visit' along with the details of the purpose, and the number of entries would be changed to "triple" (see Figure 1 – changes in red). The eVisa stamp in the passport would only state that it is an eVisa, and 'number of entries permitted' would reflect 'triple' (see Figure 1 – changes in red).

      Abolishing the three categories altogether is lucrative. However, having three categories is useful as it facilitates tracking the number of applications within each category which in turn can be used to for drawing sectoral development strategies.

    • Figure 1: Proposed changes to ETA and eVisa stamp in passport marked in red. Photo courtesy: Traveller's Website

The second area for simplification is the problem of re-entry. This can be solved if the government says:

  1. Irrespective of travellers chosen activity across tourist, business and medical categories, the following is applicable:

    • Travellers can re-enter India without a re-entry permit within the 60-day eVisa validity period.

    • There are no last destination restrictions imposed on travellers when re-entering India on an eVisa.

    • Travellers on an eVisa can re-enter India through any port of entry, be it land, air or sea ports

A third improvement lies in greater flexibility for renewing an eVisa in India, capping the number of days a traveller can stay in India on an eVisa. This has been done by many countries e.g. Kenya where travellers can renew their eVisa for a further 90 days at the immigration headquarters in Nairobi, capping the maximum number of days on an eVisa at 6 months.

A fourth area for progress is on information access. The 'Frequently Asked Questions Relating to Tourist Visa' on the website of the Bureau of Immigration, Ministry of Home Affairs, needs an additional FAQ item stating:

  1. Travellers who wish to travel to India for a short period, can also avail their India visa through the eVisa programme. Please check the website of the programme (https://indianvisaonline.gov.in/evisa/tvoa.html) for eligibility and requirements.

  2. Travellers on an eVisa can carry out activities that spread tourism, medical and business categories. For a list of activities please visit the eVisa online application form.

These four initiatives would solve the flaws of the Indian eVisa program in the following ways. First, it would help in avoiding confusion at the border especially when travellers want to enter and exit India, a country incorporated in intraregional travel plans. Second, it would also help in avoiding policy glitches with respect to the number of entries permitted, and the type of visa issued when activities are chosen across tourism, business and medical categories. Third, it would enable travellers to undertake multiple activities without being held up for violating visa norms. Fourth, it would help rationalise benefits from availing eVisa's over the traditional embassy route visa especially for travellers from countries to whom the government, with effect from 1st April 2017, provides multiple entry tourist and business visa. This benefit becomes even more apparent when travellers incorporate India in their regional travel plans as travellers have blogged of their preference to avail a traditional visa rather than have to worry about the nitty-gritty missed details of the eVisa programme (see here). Fifth, it would help resolve the consequent administrative glitches especially those that are seen on the ETA and the eVisa stamp in the passport.

Conclusion

To encourage and reap socio-economic benefits from cross border movements of persons, addressing visa procedural bottlenecks can be as, rather even more, important than liberalising visa policies. As a matter of fact, UNTWO reports that communication around visa policies provided by destinations are among the simplest but least addressed areas of opportunity (UNWTO, 2016). While India’s efforts to liberalize the eVisa programme are to be lauded, it needs to ensure that the programme is free from procedural bottlenecks. Afterall, "easy and hassle-free availability of visas is one of the basic ingredients for attracting foreign tourists" (WTTC, 2012).

References

UNWTO, 2016 Visa Openness Report 2015.

WTTC, 2017 Travel and Tourism Global Economic Impact and Issues 2017.

WTTC, 2012 The Impact of Visa Facilitation on Job Creation in the G20 Economies.

 

Natasha Agarwal is an independent research economist affiliated with Research and Outcome Consortium (R&O).