#323 Emotional Integration
A Commentary on the Emotional Integration Committee Report, China's Weaponisation of Antitrust, An Analysis of Public Sector Bank Consolidation, and Rare Earth Firms Picking up Pace in the US
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Table of Contents
India Policy Watch #2: Are Mega Public Sector Banks Desirable?
Matsyanyaaya: China Doubles Down on Weaponising Antitrust Regulations
Global Policy Watch: The Fast Pace of Rare Earth Reindustrialisation in the US
India Policy Watch #1: The Emotional Integration of India
Insights on current policy issues in India
—Pranay Kotasthane
A Sixth Of Humanity: Independent India’s Development Odyssey, a book we discussed in an earlier edition, is a treasure trove of references to several hundred crucial government documents. One such document briefly mentioned in the book is the Report of the Committee on Emotional Integration (1962). The title is obviously intriguing, and so we at Puliyabaazi decided to dive deeper.
Government reports are a window into the thinking of the Indian State. And because the State took upon itself the task of being the primary troubleshooter in all aspects of society, such documents are also indicative of the firmly held belief in State action. They are often filled with immense confidence in the ability of the State to measure, plan, and orchestrate great things, while the role of markets beyond the State is conspicuous by its absence.
The Emotional Integration Committee (EIC) report is no exception. Formed by the Union Ministry of Education in 1961 under Dr Sampurnanand and with a past Congress President (Indira Gandhi) as one of its members, the high-level committee was tasked with identifying how education could ‘promote emotional integration in national life’.
This is a high-quality report—erudite, extensive, and methodical. And yet one can’t help but notice that some of its recommendations didn’t see the light of day even after sixty years of its publication. What follows is a commentary on the report.
The report emphasises that physical integration alone is insufficient for nation-building. It needs to be backed by another intentional process that takes into account the emotions of ordinary people. And to this end, it wants to suggest the role education can play.
The report begins by allaying fears of cultural imposition, by stating that ‘unity is not uniformity.’ And that integration doesn’t mean bringing about a ‘dull, colourness sameness in all respects’. It appreciates that Indians can hold several loyalties that reinforce each other—towards their language, state, religion, and the nation. It goes on to emphasise that integration is not a mere response to colonial subjugation, but that a certain sense of civilisational unity, characterised by tolerance and assimilation, existed well before British rule.
Amongst the impediments to integration, it highlights caste, communalism, regionalism, provincialism, linguism, lack of employment opportunities for youth, and the ‘complete absence of idealism.’
The discussion on caste-based reservations in education is fascinating. The Committee calls Caste an indefensible institution and wants to reject it in all forms. Equally, it finds that reservations are no solution to this problem. It says:
… what often appears as a conflict between different castes is at bottom only a struggle among the educated people for obtaining jobs and political power. This occurs in many countries but what is peculiar to India is that individual failure and frustration tend to be translated into caste terms and the result is the increase in tension and bitterness between the different sections of society.
The report foresaw the dangers of relying on reservations as the only means to support the backward classes. It instead recommended ‘an extended programme of financial assistance to students on considerations of means and merit’ and special tuition and assistance to bring students from disadvantaged backgrounds at par with other students. With regards to teacher appointments, it warned that the selection of teachers solely on caste-based appointments has led to the deterioration of standards and adversely affected the morale of universities. It says:
We would like to urge once again the need for an extended programme of financial assistance to students on considerations of means and merit. In such an event, the policy of reservation of seats in educational institutions for the backward classes should be given up. If it is difficult to end it at once, a phased programme covering five, or at the most ten, years should be worked out. Some States have adopted the policy of assisting students on the basis of means and merit and have found that its usefulness to the backward classes has meant no loss and brought them other advantages far greater than those under the old policy of reservation.
7.17 While there is no ambiguity about who constitute the scheduled castes and scheduled tribes, there are no firm criteria to determine the backward classes. The list of backward classes varies from State to State and the lists are also revised from time to time. Recently, the Home Ministry of the Government of India suggested to the States that economic criteria should be applied for the determination of backwardness. There is a growing scramble in many parts of the country on the part of certain sections of people to be included among the backward classes and political pressure is used to that end, Recently, in a State the reservation in admission to the universities was sharply stepped up in favour of an expanded list of backward classes. So omnibus has become the expression that it has been felt necessary to sub-divide the group into backward and ‘more backward’ (Mysore) and backward and ‘most backward’ (Madras).
7.18 Another expression of caste identification, we were told, is experienced in the selection of teachers. We consider this a serious matter and, in our opinion, it is absolutely necessary that in the interests of the students, only the best qualified men and women should be put in charge of their education. We note with deep regret that during the last three or four decades, in a few States, teachers were selected on the basis of caste, and this has Jed not only to a steady deterioration of standards but has affected adversely the morale of the universities. The disease has gone so deep that we do not expect a quick return to normalcy in such universities.
7.19 We would like to state it as our considered opinion that universities must make a determined effort to fight casteism and communalism in all their manifestations. Caste or communal hostels should not be permitted. Students should be enabled to mix freely. Where separate hostels have been built for Harijans out of funds set apart for their welfare we would urge that a certain percentage (not less than 25 per cent) of seats be set apart for non-Harijans. Otherwise, these hostels will perpetuate the segregation of Harijans and this will come in the way of their integration with the rest of the population.
Despite the report’s prescient diagnosis, it speaks poorly of India’s governance that we haven’t been able to change course even after sixty years. The Indian State continues to bend to the demands of the educated elite of all castes by expanding reservations.
Another particularly relevant chapter in the report is on Language and Script. Written in the immediate aftermath of the linguistic reorganisation of states and the secessionist demand for a Dravida Nadu, language was a core concern for the Committee members. It observes that the barrier to a common instruction in India was not just the diversity in our languages but also in our scripts:
India is often compared to Russia or to Switzerland or to Yugoslavia in the plurality of her languages but it is obvious that such a comparison is less than adequate, ignoring as it does the multiplicity of scripts which other countries are spared from and which adds to our linguistic problems. A country somewhat similar to us in this situation is Russia but there the cyrillic script is now used in all the Republics.
The Committee came up with its own detailed formula on the question of Hindi, English, and regional languages, which was different from the three-language formula that’s discussed frequently today:
Until fifth grade, the only compulsory language should be the regional language or the mother tongue. This would reduce the cognitive burden on kids. The school could optionally introduce another Indian language or English.
Between grades 6 and 8, in addition to the regional language, students in non-Hindi-speaking states should be introduced to the two link-languages, English and Hindi. Those in Hindi-speaking states should pick up another modern Indian language, or one of three classical languages—Sanskrit, Persian, and Arabic.
Having achieved some familiarity with the link languages, high school students would be given more flexibility in choosing languages.
With the benefit of hindsight, we know that language in schools has only become a much more contentious issue. Among other things, the potential to learn a mother tongue in a state with a different regional language has only declined. My parents studied in Marathi schools in Madhya Pradesh; such options are virtually non-existent today. What the report didn’t foresee was that emotional integration through languages would occur outside the realm of the school; through Bollywood, regional cinema, television, and commerce.
Finally, the report does discuss making primary education free and compulsory. There are even targets listed for educational enrollment to be achieved by 1975. However, there is no mention of policies to encourage budget schools to be run outside the State. It’s as if the State didn’t think of regulation as a legitimate option—it only believed in either producing education or financing it.
There are other interesting sections on Youth Programmes, Adult Education, Teachers, and Textbooks that I haven’t covered here.
But it was reassuring to note that many of the Committee’s concerns about emotional integration have been addressed, even if not in the way it envisaged.
India Policy Watch #1: Are Mega Public Sector Banks Desirable?
Insights on current policy issues in India
—RSJ
Between 2017 and 2020, Indian public sector banks (PSBs) underwent a period of consolidation. The five associate banks of State Bank of India (SBI) merged with the parent bank, and a total of ten other PSBs were consolidated into four large banks. In total, India transitioned from 27 PSBs to 12 large PSBs during that round of mergers.
Those were different times. The Indian banking system was sitting on a large pile of bad loans after throwing caution to the wind in the early part of the decade and lending to unviable infrastructure projects helmed by notoriously bad promoters. The Raghuram Rajan-led banking reforms meant much stronger provisioning and recognition norms for slippages on loan repayment and more transparent disclosures.
By the close of that decade, almost every PSB was put under RBI’s prompt and corrective action (PCA) framework, which prohibited any lending till the balance sheet strengthened. One of the lessons learnt from that episode was that the smaller PSBs could be prone to mismanagement and weaker governance, which the size of their balance sheet could ill-afford.
The amount of capital that the exchequer had to infuse into PSBs during that period was a wake-up call for the government. A round of consolidation could mean stronger balance sheets and a more easily governable count of banks. Almost five years later, I’d say that the consolidation move worked out well for everyone. Not a spectacular success, but we made modest gains in having a smaller but stronger set of banks.
Over the past month, there have been multiple news reports on the government contemplating another round of consolidation among PSBs. This week, the FM confirmed it during a banking conclave (from the Hindu):
“Ms. Sitharaman said the country needs big and world-class banks, and discussions are on with the Reserve Bank of India and other lenders in this regard. She said the “government is looking at this and work has already commenced. We are discussing with the RBI. We are discussing with banks”.
She asked lenders to deepen and widen credit flow to the industry, exuding confidence that GST rate cut-driven demand would unleash a virtuous investment cycle. She emphasised that infrastructure creation is the government’s main focus, and capital expenditure has increased fivefold in the last decade.”
There’s no distress in the banking system at this time, unlike the previous occasion, which is driving this intent. In contrast, PSBs are in possibly the best health they have ever been in their history. This time, the reasons appear to be different.
One, there is a view that’s had currency for a while that bigger banks are more resilient. That a larger balance sheet allows for easier absorption of cyclical shocks and one-off events. Also, there’s this view that a larger balance sheet will allow the PSBs to compete more effectively with their large private peers in supporting the diverse needs of customers, unlocking scale efficiencies and increasing productivity of the workforce.
Two, as the FM mentioned in her speech, infrastructure creation is a big area of focus in the medium-term future, and there’s a view that larger balance sheets of PSBs will be able to support long-gestation infrastructure projects more easily.
That apart, larger banks will have more risk appetite, which will allow them to go easy on credit flow to end customers, knowing they can absorb losses in case a lot of those loans go bad. For the government, increasing credit flow is a supply-side issue, and any structural measure that unblocks it is welcome. For the state, consolidation appears to be a structural solution to this problem.
Three, there is also some kind of China comparison and envy at play here. Since China has four of its state-run banks among the top 20 largest banks in the world in terms of balance sheet size, there’s a view that India should also aspire to have a couple of them as we plan to become a $10 trillion economy whenever. Large bank balance sheets will allow such banks to support India’s aspirations and also deal with other global banks on equal footing. So, the thinking goes.
There is no evidence around the world that bigger banks are run better. Some big banks do well, others don’t. And so is the case with smaller banks. The success of the last round of PSB consolidation in India isn’t because the banks became bigger. Banking is cyclical, and the PSBs have come through a tough cycle with significant capital support from the state. The provisioning norms have been strengthened, information sharing about stressed assets has improved through the Central Repository of Information on Large Credits (CRILC), and corporates have been waiting on the sidelines on capex.
This has meant new bad loan formation across the banking system has been lower than previous cycles. This is true for all banks, not just those who consolidated. Further, PSB banks are still recovering their written-off loans from their clients, which is reflected in their historic low net credit costs. There’s no clinching argument that consolidation has led to improved productivity or lower cost ratios. So, to attribute macro and sectoral tailwinds to consolidation and arrive at the conclusion that we should do more isn’t exactly sound.
Also, the idea of using large PSBs to fund infrastructure projects is fraught with temporal balance sheet risks. Banks take money from ordinary depositors who value the safety and liquidity (the ability to withdraw their funds anytime) offered by them. These liabilities of banks have a short duration because of the nature of the depositors. Banks aren’t the best vehicle to support infrastructure projects that have by their very nature long gestation periods and uneven chances of commercial success. That’s the reason on multiple occasions, there’s been support for the idea of a long-term infrastructure funding institution that raised deposits from long-term institutional customers without the risk of an asset-liability duration mismatch.
Actively creating larger banks with the intent of supporting such projects could increase the systemic risk quite substantially. Also, the idea of supporting credit flow by taking more calibrated risks on the back of a larger balance sheet is a misplaced notion. As we have seen on multiple occasions in the past few years, India isn’t constrained on the supply side of credit flow (barring when the RBI intentionally ran a very tight liquidity regime in 2024).
We have to unblock the demand end of credit through more jobs, real wage growth and improved sentiments among consumers about the future. This assumption that the supply is the problem and going about solving it is a classic case of not confronting where the real and more difficult problem lies on the demand side.
China is a good example of this. Even with four really large banks that rank among the biggest banks globally, they haven’t been able to stimulate domestic demand. The size of Chinese banks shouldn’t blind us to the health of those banks that have funded multiple long gestation ‘projects to nowhere’.
Lastly, there is a need for reforms in PSBs management, governance and ownership structure. The short-term nature of the appointment of its CEO (typically a 2-3 year term), the composition of its board that’s hardly independent, the task of “nation building” that they often get saddled with that belies commercial sense, and the hierarchy and tenure-driven talent management approach are areas that need urgent change.
The PSBs have become better managed in the recent past despite these constraints. Notwithstanding their recent uptick in performance, the PSBs have continued to lose market share, fallen behind on technology and digital adoption, and (most) still run a sub-one per cent RoA (return on assets). Consolidation isn’t going to help with these metrics.
It can be an eventual outcome determined by these PSBs independently as they become more efficient, professional and well-managed through such reforms. Otherwise, we might end up with large, lugubrious banks that find it difficult to change and adapt in a sector where there’s significant patient foreign capital coming and where nimbleness and speed are of the essence. There’s a greater risk here in consolidation than the likely gains that are being assumed.
Matsyanyaaya: China Doubles Down on Weaponising Antitrust Regulations
Big fish eating small fish = Foreign Policy in action
—Pranay Kotasthane
(This post first appeared on the new and shiny Blogs section of the Takshashila website)
October 2025 was all about another twist-and-turn in US-China relations. Specifically, the slew of export restrictions announced by China on October 9, and the subsequent climbdown by the US, mark a significant milestone in this dyadic competition.
While these export restrictions garnered much attention, little has been said about another instrument China has repeatedly deployed in recent years. And that instrument is the State Administration for Market Regulation (SAMR), which delays or conditionally approves merger and acquisition deals, even when both parties are foreign entities.
SAMR’s authority is triggered to review any M&A deal if the companies involved meet certain revenue thresholds in China, even if the companies are not Chinese. It allows Beijing to claim jurisdiction over a deal between, say, two American tech giants if they both sell a significant amount of products or services in China. Punishment for non-compliance can range from hefty fines to a complete ban on operating in the Chinese market. SAMR has repeatedly used its merger review process to extract concessions, protect domestic industries, force technology transfers to a third-party Chinese player, or signal political displeasure.
In the latest instance, just a day after the export restrictions, SAMR announced that it had launched investigations into Qualcomm’s acquisition of Autotalks, an Israeli firm. This small transaction, which was announced in 2023, fell below the deal threshold that triggers SAMR approvals. Nevertheless, SAMR announced this investigation just ahead of the Trump-Xi meeting. Next, we can expect Qualcomm to be fined when the next round of US-China tussle heats up.
The Economist carried a good review of these actions:
SAMR is shaping up to be one of China’s best-equipped regulators. It has widened its jurisdiction in recent years. Chinese firms fear its new willingness to crack down on local monopolies, as it did with Alibaba, an e-commerce giant, in 2021. It is also undertaking more probes of small transactions abroad, such as Qualcomm’s deal in Israel, which was hardly noticed when first announced in 2023… The probe into Qualcomm is dual-pronged, too. Its acquisition target, Autotalks, makes intelligent-transport systems that connect cars with their surroundings. The connected-car industry is one that China seeks to dominate, along with electric vehicles and autonomous driving. Qualcomm is a leading competitor in connected-car technology; Chinese technocrats may want to slow the build-up in its capabilities. Outsiders may never know what goes on in China’s highest trade-war councils, but it is increasingly clear that antitrust probes are part of their arsenal. [The Economist, October 14]
The information about these investigations is selectively released by SAMR, and only in Mandarin. I couldn’t find all the investigations in one place on the Mandarin version of its official website. Information is selectively released as news reports.
However, from what I could find, nearly 30 per cent of the cases concluded by SAMR were where both parties are foreign players.
The recent list of notable investigations that it has taken up is here:
Qualcomm - Autotalks
Intel - Tower
Qualcomm - NXP
Nvidia - Mellanox
DuPont - Rogers Corp
Maxlinear - Silicon Motion Technology
Broadcom - VMWare, and
Microsoft - Activision
The extensive list suggests that China is deploying antitrust regulations as a geopolitical tool. Many countries have such extra-territorial anti-monopoly rules, but what makes China’s leverage powerful is its market size. No company wants to lose out on the Chinese market even if it means agreeing to SAMR’s unreasonable demands. This is another instance of China’s unfair exploitation of a global system.
Further reading:
Lingling Wei and Asa Fitch, ‘China’s New Tech Weapon: Dragging Its Feet on Global Merger Approvals’, The Wall Street Journal
Angela Huyue Zhang, ‘Chinese Antitrust Exceptionalism: How The Rise of China Challenges Global Regulation’
Global Policy Watch: Rare Earth Industry Build-up in the US
Global issues relevant to India
—Pranay Kotasthane
Smitten by China’s rare earth export controls, new projects and techniques are being approved and productised in the US at a rapid pace. Every new week comes with new project announcements. This post compiles a few developments.
Reuters reported that a Yttrium shortage is imminent because of the export controls China announced in April, which continue to remain in place despite the Trump-Xi “G2.” Global Yttrium prices have risen 4400%(!) since January, and stand at $270/kg, while prices within China are $7/kg. This only means some smart exporter in China is making a killing by rerouting the exports through third countries or illegal channels. Nevertheless, this spike in prices allows other companies to get into the game. The same report ends on a hopeful note:
That could soon change thanks to ReElement Technologies, based in Indiana, which plans to start producing yttrium oxide at a rate of 200 tons per year, or about 16 tons a month, by December, before rising to 400 tons per year by March, CEO Ryan Jensen told Reuters. [Report]
A German company, Vacuumschmelze, announced the completion of a rare earth magnet facility in South Carolina. Although this facility relies on sourcing rare earth oxides from other locations, it is the first time in 25 years that rare earth magnet production has taken place in the US.
Vulcan Elements completed a facility with 10,000 metric tons production capacity after just 18 months, bolstered by a ten-year offtake agreement with General Motors. This agreement enabled Vulcan to raise $335 million via banks and secure a $620 million direct loan from the Pentagon (Office of Strategic Capital), plus additional support, including a $50 million commitment from the Commerce Department and a large tax credit.
American company REAlloys and Japan’s JOGMEC entered into an MoU through which JOGMEC will license its magnet processing technology to REAlloys, which has mines in Canada. REAlloys, in turn, is guaranteeing Japan access to its scandium and yttrium output from Hoidas Lake. There is a structured offtake arrangement in this deal too.
A Belgian firm, Solvay, will begin supplying an American magnet-making firm, Noveon Magnetics, with rare earth oxides recycled from electronic waste, starting in 2026.
Flash Metals USA will be productising a new technique to recycle critical minerals from electronic waste, starting in the first quarter of 2026. This technique, known as Flash Joule Heating, is more environmentally friendly than the alternatives.
These developments suggest that the US industry is well-positioned to develop alternatives to Chinese rare earth elements and products. I foresee that with these alternatives emerging, China’s strategic leverage for light rare earths will erode pretty quickly. Especially because these elements are extensively used across industries in permanent magnets that go into motors used in commercial appliances.
However, reducing the dependence on heavy rare earths such as Dysprosium and Terbium, which are used mainly for defence applications in small quantities, will be far tougher. Defence firms will have to find other pathways.
HomeWork
Reading and listening recommendations on public policy matters
[Podcast] In the book Why Nations Fail, the authors quote Simon Kuznets’ remark that ‘there are four sorts of countries: developed, underdeveloped, Japan, and
Argentina.’ So, in the latest Puliyabaazi, we discuss Argentina’s economic trajectory and what it means for India.
[Paper] If there’s one paper you want to read to understand the semiconductor industry, let it be this one. From Moore’s Law to Market Rivalry: The Economic Forces That Shape the Semiconductor Manufacturing Industry
[Article] Here’s an interesting critique of the caste census, by the well-known Amedkarite, Anand Teltumbde.
[Post] Another round of conversations on proportional representation has taken off after the Bihar election results. Check out our earlier post on why this argument warrants caution.
[Post] A helpful post on Terbium: the rarest of the rare earths.
Great read on the emotional integration document, thanks!
Wonder the document's authors thoughts back then, about how Universities sprang up in India before school, and their stance whether this was a detrimental/optimistic strategy
Thanks for sharing this; it realy makes me think about how complex emotional integration is, like finding that perfect flow state in Pilates. Do you think the challenges of achieving it have shifted much since that 1962 report?