Sunday, 3 November 2013

Don’t allow 1984 to be whitewashed
Yet another anniversary dawns. Of the cataclysmic events of October-November 1984, when the assassination of a Prime Minister set off the cold-blooded, targetted retaliatory butchering of thousands of innocent Sikhs over three days. 
Yet again political parties will play their set games over the killings, even as the community agonises over the fact that the guilty have not been brought to book. The Bharatiya Janata Party (BJP) will raise the issue and the Congress will ask about the Gujarat riots of 2002.
There will be some non-political voices who will ask about both. And there will be another set of non-political voices which will be dismissive, and scornfully so, about 1984 being raked up. Yes, yes, 1984 is condemnable, it shouldn’t have happened; but can we now get on with asking questions about 2002, they will say impatiently. This section also wants to know why one should talk about 1984 whenever 2002 is mentioned.
But there is a very good reason for talking about 1984, especially in the context of 2002. Because there is a pernicious attempt being made to downplay 1984, make it fade away from public memory even as no effort is being spared to ensure that 2002 never does. This is not to argue that 2002 should be allowed to be forgotten. Neither 1984 nor 2002 should be allowed to be forgotten. The memories of both need to be preserved if only to remind Indians of the kind of diabolically violent politics that the two mainstream parties have both indulged in, with equal measure. 
What is worse is the attempt to draw artificial distinctions between 1984 and 2002; to somehow show that 1984 was not as vicious as 2002; that it was handled better; that Congress leaders have expressed regret for it and that Narendra Modi has not. Is it a coincidence that such distinctions started when it was found that the attacks on Narendra Modi for the 2002 riots were being blunted by lack of justice for the victims of 1984? 
No double standard is too odious in order to whitewash 1984. No fact too important to be airbrushed away.
Over 3000 people were killed in 1984, more than double of those killed in 2002. In 1984, only Sikhs died; in 2002 both Hindus and Muslims died (though admittedly Muslims died in larger numbers). And yet 2002 is a pogrom; 1984 is not!
Yes, Modi’s failure to check the 2002 riots is a bigger black mark than Gandhi’s failure to stop the 1984 massacre. Modi had been in office for six months when Godhra and the subsequent riots happened. He should have had that much political and administrative savvy to ensure that the bodies of the Godhra victims were not taken in a procession. The 1984 killings happened within hours of Gandhi being sworn in and, remember, this was immediately after his mother – the Prime Minister – was assassinated. A supposedly capable home minister – no less a person than P. V. Narasimha Rao – was in charge.
But what of Gandhi’s actions and words after the events?
Why are we supposed to accept that Gandhi’s famous `when a big tree falls, the earth is bound to shake’ speech is not as insensitive as Modi’s equally famous kriya-pratikriya (action-reaction) speech?
Take also the Congress advertisement campaign ahead of the December 1984 elections, which seems to have faded from public memory. These ads, carried in all the major newspapers, clearly identified Sikhs as the `other’.  One in the series was about whether you could trust your taxi driver – the sketch that accompanied it was that of a Sikh.
The ads and the speech came more than a month after Mrs Gandhi’s assassination. By that time reason should have got the better of emotions. Let us be charitable and say that Gandhi spoke without thinking when he gave that analogy of a big tree. But were those ads also cleared without thinking? He was firmly in charge of the party and the government at the time they were put out. Could it have been done without his knowledge? Could he not have nixed them?
Much is made of the fact that Gandhi felt deeply about the 1984 killings. Yes, he did express his anguish in his first address to the nation. In 1998, Sonia Gandhi did the same about both Operation Bluestar and the 1984 massacre during a visit to the Golden Temple. Manmohan Singh said sorry on the floor of Parliament. Modi has steadfastly refused to do so. Worse, he even inducted people like Maya Kodnani (now facing death for her role in the 2002 riots) into his council of ministers.
What the whitewashers of 1984 would probably like us to forget is that Gandhi made two of those accused of instigating the 1984 killings ministers in his government. One was a cabinet minister, the other a minister of state. And remember these Congress biggies were repeatedly given tickets by the Congress party – even after Sonia Gandhi took over. How are teary-eyed commiserations with riot victims compatible with rewarding those responsible for their plight? Going by this logic, all that Modi has to do is shed a few tears, say sorry, bring on expressions of anguish to his face when talking about 2002 and then merrily go on shielding and rewarding people who perhaps should be behind bars.
The impatient rejoinder this attracts is that courts have not held these Congress leaders guilty. So why not wait till the courts hold Modi and others who led the 2002 rioters guilty? How can they, comes the prompt response, when the police refused to register FIRs, witnesses are browbeaten, people who speak up harassed and even Supreme Court appointed panels suppress facts to protect him?
These are very valid points. But why is it so easy to assert this about 2002 and deny it about 1984? Why are we expected to believe that in the case of 2002, police refusing to file FIRs shows a sinister conspiracy, but in the case of 1984 it means particular incidents never happened at all?
What is perhaps more galling is the attempt to deny the Sikhs their hurt over 1984. Those enraged by the 2002 riots are incensed by the Sikhs protesting the acquittal of Sajjan Kumar by a Delhi court in a case related to the 1984 killings. That is apparently a communal attitude and a sign that the Sikhs want Narendra Modi as Prime Minister! This from the very sections who criticise the rabid Hindutva types for adopting a if-you-are-not-with-us-you-are-with-the-Congress attitude.
The focus on 2002 is needed, we are also told, because the riots stemmed from an ideology of antagonism towards Muslims. The Congress isn’t anti-Sikh; the sangh parivar is anti-Muslim. Yes, there is a strong anti-Islam strain in the sangh ideology; the Congress is not antagonistic to any one community. But will it make Sikh families feel better to know that they were not the targets of a hate mentality, but only of momentarily inflamed passions (never mind that these passions were fanned by senior party leaders)?  Will this lessen the pain of seeing the killers of their relatives go scot free?
One can understand – even accept – the Congress and the BJP indulging in one-upmanship over the two riots. They are political parties competing with each other for power. This jousting over riots is par for the course.
But when the non-political thinking classes start drawing distinctions between two horrendous hate crimes presided over by the two main parties with the sole purpose of showing that one is worse than the other, it is worrying and dangerous. Because this sends out a message that one kind of violence is acceptable, another is not. And once this point of view gains currency, the very people it is directed against will start using it to their benefit.
So today, please remember and feel angry about 1984. And in February-March next year, please remember and be angry about 2002.

Address the micro to deal with the macro

So Reserve Bank of India governor, Raghuram G Rajan, didn’t surprise anyone with his credit policy announcements today. Everyone was expecting the policy rate to be hiked and that is what he did. Now there will be endless debate on whether this will affect growth and whether the central bank should be so focussed on fighting inflation as it clearly is under his watch.
Coincidentally, the World Bank-International Finance Corporation’s joint publication, Doing Business 2014 also released today. And once again, as it happens every year, India figures somewhere at the bottom. This year, it ranks 134. (This is lower than last year’s ranking of 131, but this could well be because more countries have been added to the list). Even among the eight South Asian countries, India ranks sixth, with its rank much below the regional average of 121.
What’s the connection between the credit policy and the Doing Business report? On the face of it, not very much. The credit policy is about macro issues – inflation, growth, current account deficits. The Doing Business report is about extremely micro issues like business regulations, registering property, construction permits and the like.
But getting the micro issues right can sometimes help address the macro issues as well. The central bank has to do a tightrope walk between growth and inflation, but it can be no one’s case that both are its headache alone. The policy environment also needs to address these issues. It is very clear that high inflation is driven largely by food inflation and that this, in turn, is mainly due to supply side constraints - constraints which are just not being addressed even though it is very obvious what they are and how they can be overcome.
Similarly, it is also amply clear that it is not high inflation alone that is dampening growth. Growth is also being affected by lack of investments – companies are just not spending money on new projects or expansion of existing projects. The high cost of money, because of a hawkish monetary policy, is just one reason for the poor investment climate. The other is the difficult operating environment. Growth cannot come in a difficult business environment.
This is where the Doing Business report becomes relevant. The report looks at how countries have performed on 10 indicators – starting a business; dealing with construction permits; getting electricity; registering property; getting credit; protecting investors; paying taxes; trading across borders; enforcing contracts; and resolving insolvency. These indicators broadly cover all the areas that make doing business easy or difficult. Unfortunately, India does not fare well in many of these areas. There are only two areas where its record is creditable. One is getting credit, where it ranks 28 and the second is protecting investors where it ranks 34. Interestingly, these are both areas that are overseen by strong regulators working with a large measure of independence – the Reserve Bank and the Securities and Exchange Board of India. 
But it trails even some of its South Asian neighbours, which are much smaller economies, on most of the other indicators.  It is the worst performer in South Asia in three indicators. These are starting a business (it ranks 179 globally), dealing with construction permits (182) on this score and enforcing contracts (186 in the global ranking). The only other country to trail in three indicators is Afghanistan! Worse, India’s ranking is much below the regional average for South Asia, which is 86 in starting a business, 114 in dealing with construction permits and 137 in enforcing contracts.
Reforms in most of these are not ideological issues and do not require political consensus or legislative changes that could become hostage to political stand-offs. They just require a realisation on the part of policy makers and implementers at all levels – national, state and local government – that the problem of economic revival and robustness is not just that of the central bank or the Union finance ministry alone. Each of them will have to address the non-political, non-controversial issues like clearances, permissions, infrastructure that fall within their respective purviews.
In the wake of the credit policy, there will be renewed demands for the government to make some big announcements or make some grand gestures to perk up investor interest. The focus will perhaps be on easing caps and restrictions on foreign investment or announcing some big infrastructure projects. But there will be little point in ending restrictive conditions on FDI in retail if getting licences to set up a store is going to be extremely complicated.
It will not be possible to reform all the areas that the Doing Business report highlights overnight. Even if the reforms are fast-tracked, the benefits to the macro economy may not come overnight. But in the obsession with the macro, we should not lose sight of the micro.

Scams, FIRs and business sentiment

Is India Inc. under unprecedented attack? And is this going to dampen business sentiment?
India Inc. would certainly expect the nation to believe so. Days after the Central Bureau of Investigation (CBI) named industrialist Kumar Mangalam Birla in its first information report (FIR) in the coal blocks allocation scam, the Supreme Court has asked the investigative agency to look into undue favours shown to top corporate houses. There are reports that the CBI is planning to name more businessmen in fresh FIRs.
Corporate bigwigs have been careful not to comment on the Supreme Court order but have come down heavily on the government and the CBI in the Birla FIR case. This is going to affect business sentiment and kill investments, they have warned. One can understand such alarmist statements from them – after all they will come out in strong defence of one of their own.
But it’s different – and worrying – when ministers also start holding out such veiled threats. Five key economic ministers berated the CBI for its action, with oil minister Veerappa Moily even invoking the sceptre of Aurangzeb, no less.
Almost exactly two years back – on 10 October 2011 – then law minister Salman Khurshid said much the same thing, when corporate big shots were put in judicial custody for alleged corruption in the 2G scam case. “If you lock up businessmen, will investment come?” he said in an interview to the Indian Express.
Commerce and industry minister Anand Sharma said he couldn’t “fathom how a case of impropriety can be made against Birla, an iconic industrialist respected all over the world”. It is equally difficult to fathom how Sharma arrived at the conclusion that iconic, respected people cannot commit improprieties. There are far too many examples in the recent past of businesses logging dizzying growth and their promoters becoming respected icons of their respective industries only to have these companies implode.
This article is not implying that Birla is among these fallen icons or that he is guilty of impropriety in Coalgate. Nor is it giving him or his company a certificate of good conduct. This article is not about Birla or Coalgate. It is about the rather shady nexus that has come to mark the business-politics interface.
The statements made by ministers are flawed for two reasons.
One, they only serve to reinforce the impression that the government is batting for big business houses and treating them with kid gloves – the bigger the business, the softer the gloves. It has given a handle to all opponents of India’s liberalisation process, who have always argued that this is benefiting only a few big industrialists. To that extent, the ministers speaking out like they did at a time their government is headed for elections on a pro-poor and inclusive growth agenda is only proof of utter political incompetence.
Two, if a country’s investment climate is going to be affected by companies being investigated for alleged wrong-doing, and if ministers are going to warn that India could end up going the Russia way “where investors are not prepared to go and billionaires are put behind the bars” then it is a very sad reflection of the way business is done in the country. (Someone should point out to Moily that Birla and other iconic industrialists may not exactly be flattered by the Russia reference.) It is an admission that the Indian businesses do not function in a transparent rule-based system. Who is that an indictment of?
Just look at some of the issues that the Supreme Court has asked the CBI to probe, based on intercepts of corporate lobbyist Niira Radia’s phone.
*  supply of low floor buses by Tata Motors to the Tamil Nadu government.
* allotment of coal blocks to Anil Ambani’s group and iron ore mines to Tata Steel
* kickbacks in the aviation sector
* favours shown by a former director general of hydrocarbons to Reliance Industries Ltd.
Some of the biggest names of India Inc. will come under the scanner (of course, they could well come clean). If, as Firstpost editor R. Jagannathan has argued, the FIR against Birla was designed to ensure that the Coalgate investigation doesn’t reach the Prime Minister, could it be that the panicky statements of ministers are designed to put off closer scrutiny of a slew of dodgy policy decisions that have not yet come to light?
There are a host of reasons why India is a bad place for business. Infrastructure sucks, money is expensive, permissions don’t come through, decisions are not taken, rules are not transparent. Addressing these issues will provide a strong foundation for healthy businesses and a robust economy. But this does not get the kind of attention that is showered on possible action against one corporate house. Ministers, instead, indulge in turf wars, squabble over clearances, green-light economically ruinous policies, introduce opacity into policies and create any number of rent-seeking opportunities. In fact, they do everything possible to make India a difficult investment destination. Corporate India would like the more fundamental issues to be addressed, but it is quite comfortable in operating in a shadowy environment, so long as it can get away with it.
So, yes, India’s investment climate will be affected if investigating agencies and the courts try to clean up this messy operating environment. Companies that have got used to prospering by managing the system will take time to adjust to an environment where they will have to play by a different set of more transparent rules. They will try to scuttle any move to a more transparent system by creating a scare about investments drying up.
India’s liberalisation saga till now has been more pro-large business than pro-market (the latter is what it should be). Economists championing an open economy – including present Reserve Bank governor Raghuram Rajan - have lamented this time and again. It is often said that it requires a crisis for India to reform. Perhaps the unravelling of a series of scams and sweetheart deals will be the crisis that India needs to reform its business environment. 
So if the current churn is going to bring a directional shift in economic policy making – from pro-business houses to pro- free markets, then it needs to be welcomed. There will be some short term pain. But the gains that will come will be far more sustainable and provide a stronger foundation for the economy.

A flawed case for social engineering

Will compelling private schools to ensure that 25 percent of their students must be from the economically weaker groups affect the quality of education in these schools? It most certainly will, private schools have always maintained. In the absence of hard evidence, they haven’t been able to back up their claims. But then, nor have those who rubbished these gloomy prophecies as elitist claptrap been able to irrefutably disprove them.
Well, there’s good news for the latter and, therefore, bad news for the former. A recent study by a University of California San Diego professor, Karthik Muralidharan, junks the theory that the reservation proviso could bring down the grades of general category students in private schools. This is alarmist misinformation by a small fraction of snobby schools in the major metros, Muralidharan scoffed at a talk he gave in the capital last week. He feels the much-maligned Clause 12 of the Right to Education Act – which mandates the reservation – is actually a “rare example” of a policy that improves equity and efficiency. It could also be the biggest school inclusion programme in the world, he believes, given the huge numbers involved in India. 
Muralidharan’s assertion isn’t an ideological one; it is based on evidence from the Andhra Pradesh School Choice project. The project was initiated to find answers to two questions. One, are private schools more or less effective than government schools regardless of the social and economic background of the students? (It is often argued that private schools are able to show better student performance because these students come from relatively better off homes than those who go to government schools). Two, how will the intake of economically weaker students under Clause 12 affect the students who are already in the private schools? 
The four-year project, which started in 2008, was conducted in 180 villages in five districts of Andhra Pradesh by the Azim Premji Foundation, as part of a memorandum of understanding between the state government and the World Bank. In all these villages, students in government schools were offered vouchers which would allow them to study in a private school of their choice in the village. 
The vouchers covered school fees, books and stationery as well as uniforms and shoes but not the cost of transport to private schools that were not in the village. Nor did it compensate for the loss of mid-day meals that are provided in government schools. Then, a lottery first chose 90 villages that were to be treatment or voucher villages. The other 90 villages that did not get selected for vouchers became the control villages. Within the voucher villages, another lottery chose students who had applied for vouchers. A total of 1,980 households out of the 3,097 that applied for the voucher got it. Of these, 1,210 accepted the vouchers and enrolled their children in private schools at the start of the project. Private schools that participated in the programme were not allowed to cherry-pick students; they had to accept the students who won vouchers and chose to study there. The rest of the households who had applied for but did not get the vouchers were the control group, whose children continued in government schools. Independent tests then looked at learning outcomes of students after two years and four years. Since both sets of students were from identical socio-economic backgrounds, any differences in learning outcomes, the thesis went, would be because of the change in schooling. 
Most of the results were predictable, of course. The voucher students who went to private schools did better than the non-voucher students. The study reaches this conclusion in a somewhat roundabout way. On the face of it, there was not much difference in scores on two main subjects – Telugu and maths. So it did appear that private schools were not more effective, and that differences were because of family background. 
But then it was found that private schools had less qualified, less experienced and lower paid teachers than government schools. They, however, had better attendance than their government school counterparts. Private schools also had longer days and years and more teachers. And though they spent lesser time teaching Telugu and maths, they spent more time in teaching English, social studies and Hindi (this was taught as a third language, which government schools did not). What’s more, the similar scores in Telugu and maths were achieved despite private schools spending less time teaching them than government schools did. So clearly, private schools were giving more bang for the buck, since the per-child cost is one-third that of government schools. 
The survey, however, knocks the bottom out of the argument of many private schools that Clause 12 will adversely affect the performance of students already in private schools because of lower-performing scholarship students. The study found no effect at all. It then looked at whether the number of scholarship students was a factor – the more the number of such students, the greater the negative effect. That too drew a blank. 
Going by these findings, Muralidharan – who thinks Clause 12 is not a bad idea – suggests that schools should not be allowed to cherry-pick from students hailing from lower income backgrounds. This, he argues, could happen if compliance with the proviso is seen as something that schools should be doing at their individual level. Instead, he says, it should become a `system-level’ issue, with the provision being implemented in a coordinated way at the city, block or district level. He suggests a system of private schools providing audited enrolment and fee data to the government; low income parents listing their preference for private or government schools; and a lottery system to allocate schools to children from low income families. 
Muralidharan could be treading on thin ice here. The method he suggests could be quite complicated when it comes to actual implementation, given the huge numbers – of students and schools – involved. It also places too much faith in the efficiency of government systems. Efficiency levels vary widely from the centre to the state to local governments, between states, within states and between local bodies as well. 
But the problem with his thesis is that he thinks Clause 12 is the right way to ensure equity in education. That is just not true. Forcing equity like this may work in a few individual cases; it cannot be a national-level government policy. It is not just an issue of whether elite schools want to take children from lower income backgrounds. Parents who pay a bomb to send their children to these schools do so because of their exclusivity. It may sound snobbish but people are entitled to their snootiness. The state cannot force social engineering; it will backfire. In any case, the elite schools will simply bribe their way out of any lottery or other system that is put in place. They won’t find it difficult to do so; the very people who will be implementing or overseeing this system – the politicians and bureaucrats – send their children to these elite schools because they do not want them to mix with the hoi polloi. 
So, instead of looking at how to fix a few elite schools which cater to a very small minority of school going children, why not look at expanding the education market? If the idea is to ensure that all children get access to a basic minimum quality of education, a better way would be to make it easier for private schools to come up, within a broad regulatory framework with reasonable rules. Also, it might be better to design a proper school voucher programme which will allow parents to choose between government and private schools. This could go hand-in-hand with changing the way government schools function so that they compete with private schools for the voucher students. There will be no need for complicated lotteries which will invariably be rigged, given the kind of cronyism that prevails in India today.

Sunday, 29 September 2013

Why Kejriwal’s AAP is looking like old wine in new bottle

So, the Aam Aadmi Party (AAP) is all set to make an impressive debut in electoral politics, if the latest opinion polls are to be believed. We’ll have to wait till November-end to know. 
If the polls are correct, Arvind Kejriwal and his team will deserve kudos. Delhi has always been the fiefdom of the Congress and the BJP (and its earlier avatar, the Jana Sangh) and both need to be given a good jolt. But what after that? That’s a question the AAP cannot ignore.
Ever since the AAP came into existence a year ago, Arvind Kejriwal has been promising that the party will usher in a new kind of politics. That has also been the running theme in all interactions that party leaders have had with the public. They have been fanning across the city since August, meeting small groups of people in public spaces. In all of them, brandishing the broom – the party’s symbol which they say they asked for – the leaders vow to sweep out all that is bad in Indian politics and bring in what they insist will be an entirely new kind of politics, no matter how long it takes and regardless of how the party fares in elections.
Unfortunately, that is exactly where the AAP promise flounders. There is little evidence till now that the `new’ political style and culture that AAP promises is anything more than the way the party is managed and the behaviour of its elected representatives. So, the party has a transparent and democratic organisational structure; only candidates with a clean reputation are chosen in a very transparent manner; elected representatives will not use red beacons on their vehicles or live in sprawling government bungalows and be surrounded by a phalanx of security personnel. The kerfuffle over a key member, sociologist Yogendra Yadav, being sacked from the University Grants Commission (UGC) is at variance with these lofty ideals, but more on that later. 
A new political culture cannot just be about the way a party is organised or functions. Nor can it be limited to symbolic gestures like shunning red beacons. It also has to be about the way a party engages with the voters. (Actually, AAP is not the only non-traditional party to have a strong ethics code in place. Several new do-gooder parties that emerged on the political landscape after 2007 are doing the same – fielding squeaky clean candidates, taking donations only by cheque, putting up lists of donors on their websites. It’s just that the AAP has managed to grab national attention, thanks to the India Against Corruption Movement, in a way that the others did not.) 
When one talks about old-style politics, the association is always with caste-religion-community based politics and economically ruinous populism. A new kind of political culture should entail a movement away from such divisive and fiscally imprudent politics. Instead, the AAP has only continued down the same path, down to some well-known Muslim figures joining the party at a public function. At that do, Kejriwal admitted that there were already a large number of Muslims working for the party. He then gave a somewhat unconvincing explanation that this special function was organised to highlight the politics of hate that was taking centrestage. Couldn’t this be done in any other way than putting an AAP cap on top of a skull cap that one of those who joined wore? How is this kind of tokenism any different from what mainstream parties do? 
Take also the pamphlets that the AAP candidate have been distributing in their areas. The promises they make include waiving of water bills and providing 700 litres of water a day to every family free of charge, halving of electricity bills and regularisation of unauthorised colonies. Where is the new paradigm in this? A couple of months back, the Congress government in Delhi regularised a host of unauthorised colonies and is now tom-tomming it on FM radio ad spots. The BJP, which has been out of power for 15 years, has also been promising cheaper power bills.
Nor is the AAP lagging in making tall promises. One of the ads it has placed on the back of autorickshaws laments the lack of security for women in the capital and promises – hold your breath – an exclusive commando force for women! 
And now the issue of Yadav’s expulsion from the UGC. This is very clearly a vengeful and stupid move by the UPA government. But the idiocy and meanness of the human resource development ministry does not diminish the fact that Yadav is also not entirely in the clear. He had been appointed to the UGC as an academician, which is what all commission members are. When he joined the AAP, he should have quit the UGC. Yadav says he had offered to resign last year and that the UGC told him to stay on and that his removal has been done not by the UGC but the ministry. But this is a kind of hair-splitting that does not speak well of the leading light of a party taking the moral high ground all the time. If he had insisted on stepping down from the UGC when he formally joined the AAP, that would have been something completely different from the way normal politicians behave. 
Right now, the popular disenchantment with the mainstream parties is so overwhelming that the AAP is getting away with mere marketing gimmicks, passing off the same old model as a radically different product. There is, of course, the matter of whether the public really wants a different political discourse. There’s no getting away from the fact that people are not really concerned with their elected representatives framing and legislating sensible policies. All they want is for them to do favours – recommend a child to a school here, stop the demolition of an illegal construction there, swing something somewhere else. Corruption too is not as big an issue as it is being made out to be. It is an issue only if people see that the politicians are concentrating only on filling their personal coffers without addressing their problems. Let’s face it: honest people don’t get elected; `effective’ people do. If they are also honest, that’s an added bonus. 
The AAP has probably realised this and that is why it is not departing from old-style paternalistic, sops-driven politics. Right now, its only USP is the `added bonus’ – people with clean reputations. But if these people don’t deliver on the things the public wants, disillusionment will soon set in. And then the AAP will be just another party. Is it prepared for that?

The Lost Heroes of Economic Freedom

First published in Forbes India:
When the history of India is written, no future historian should pity us that in a country where great saints have lived, there was not a single Indian to point out the absurdity of the ‘permit-licence-quota raj’.” So said C Rajagopalachari (Rajaji) when asked why he persisted in criticising Nehru’s economic policies when no one heeded him. G Narayanaswamy, a close associate, recounts this anecdote while penning a piece on him in Profiles in Courage: Dissent on Indian Socialism.
As the debate over two economic models—a welfarist-socialist one and a market-oriented one—gets increasingly cacophonous, it is worthwhile to remember a time when such energetic pow-wows were near-absent. When the predominantly left-of-centre intellectual climate—which dominated every field from academia to films—obscured any contrarian view.
And yet a few voices in that wilderness refused to be stifled, forcefully and cogently arguing for a liberal economic order and warning of the dangers that the Nehruvian model posed not just to the economy but to the polity as well (a prediction that came true in 1975). Today, as the economic punditry space bursts with numerous illustrious advocates for an open economy, there is danger of those older voices being forgotten.
Perhaps the least well known of these (outside the rarefied world of economists, that is) is that of BR Shenoy. Shenoy’s many treatises provided the intellectual underpinning to the battle against development economics and centralised planning.
His solitary dissent note to the memorandum of the panel of economists on the Second Five-Year Plan (of which he was a member) is a must-read critique of deficit financing and the dangers of over-ambitious plans. “Controls and physical allocations are not a necessary adjunct to planning... There are great advantages in allowing freedom to the economy, and to the price system in the use and distribution of the needs of production,” he wrote.
Shenoy stands out because he was from the academic world, which did not put up a strong enough opposition to the Nehruvian socialist world-view. There were right-of-centre economists but few who consistently attacked the economic path that India was taking the way Shenoy did. A later generation of economists—Jagdish Bhagwati and Meghnad Desai, among them—was vocal in its criticism but they were largely based abroad and their influence increased only after India liberalised its economy in 1991.
In the overwhelmingly socialist-inclined political space, it was the founding triumvirate of the Swatantra Party—Rajaji, Minoo Masani and NG Ranga—who ceaselessly championed an alternative economic model. Rajaji, the legend goes, was the one who said the ‘licence-permit-quota raj’ had replaced the British raj. The Jana Sangh (the predecessor of the Bharatiya Janata Party) was also in favour of an open economy but its economic ideology was overshadowed by its cultural conservatism and jingoistic nationalism.
It was Nehru’s increasingly statist policies that brought the three Congressmen together, with the Nagpur session of the Congress in 1959 (advocating joint co-operative farming, considered a euphemism for collectivisation of agriculture) triggering the final break with the party and the launch of the Swatantra Party. For 15 years, it presented a trenchant and principled opposition to government micro-management of the economy, deficit financing and high levels of taxation. An impressive showing in the 1967 elections was followed by crushing defeat in 1971. The party disbanded in 1974, by which time Rajaji had died and Ranga inexplicably rejoined the Congress. It was left to Masani to keep the Swatantra ideology alive till his death in 1998.
And then there was the Forum of Free Enterprise (FFE), set up in 1956, which single-mindedly debunked myths about socialism in the popular mind and countered the anti-private sector calumny of the socialists. The Forum was the brainchild of AD Shroff—one of the authors of the Bombay Plan of 1944 and a non-official delegate to the Bretton Woods conference—who had been opposing Nehru’s socialist views since the mid-1930s. With consumer activist MR Pai heading the secretariat for 20 years, the Forum provided a platform to an array of voices through writings, lectures and essay competitions.
Though better known for his annual analysis of the Union budget, eminent lawyer Nani Palkhivala (who was FFE president for 32 years) needs also to be remembered for his 1965 book, The Highest Taxed Nation, which made the very points that tax reformers of the early 1990s did. In the courts, he not only defended personal freedoms but also economic freedom, challenging bank nationalisation and a newsprint control order in the 1970s.
All these people were reviled by the establishment and subject to slander campaigns, the most common being that they were American agents. The Swatantra Party was labelled a businessman’s party (though the majority of industrialists did not fund it). A central minister told Shroff that Nehru wanted him to disband the FFE. But these voices refused to pipe down.
Were these the only dissenters? Certainly not. There were people like Freddie Mehta, Hannan Ezekiel, DR Pendse and Jay Dubashi (who later became an ideologue for the BJP), to name just a few. But it was natural for them to speak out against socialism since they were associated with private industry. The first three worked for the Tata group and Dubashi was director of the Economic and Scientific Research Foundation under the Federation of Indian Chambers of Commerce and Industry.
Eyebrows will be raised that IG Patel, Manu Shroff and several illustrious economists from the Bombay school do not find a mention here. But not all of them were vociferous or outspoken in the way the others were. Patel and Shroff worked for the government and though they may have slipped in some liberal ideas into economic policy, they were not open dissenters or radical reformers.
That’s why it is necessary to doff our hats to these brave voices which ensured that India will not be pitied in the way Rajaji had worried about.

Sure, poverty fell, but no thanks to UPA’s NREGA

First published in
As the country heads closer and closer to elections, there will be a slow and steady release of facts, figures and sundry survey reports showing 10 years of United Progressive Alliance (UPA) rule in good light. In end-June, the National Sample Survey Organisation’s Employment and Unemployment in India, 2011-12 indicated an uptick on the employment front between 2009-10 (when the last survey was done) and 2011-12 (though a lot of questions remained unanswered, as this story in Forbes India shows). And now the latest poverty estimates released by the Planning Commission yesterday show that poverty decline between 2004-05 and 2010-11 has been faster than between 1993-94 and 2004-05.
Critics – especially political opponents – would be quick to pick holes in this. First, they would probably latch on to this interview that former member of the National Statistical Commission, Amitabh Kundu, gave to The Indian Express. In this, Kundu has argued that if the survey had covered 2012-13, the poverty estimates would not have been that satisfying. So it looks as if the 2011-12 survey was done only to show the UPA in good light. 
This question was raised in the case of the employment figures as well and the current and former chief statisticians refuted the conspiracy theory of statistical skulduggery. Large sample surveys are done by the NSSO every five years. After the 61st round in 2004-05, there was a 66th round in 2009-10. But since that was a bad economic and agricultural year, it was decided that the results would not be comparable with 2004-05 and so it was decided to conduct another survey in 2011-12, after just two years (when the next survey would actually have been due in 2015). This decision was taken even before the results of the 2009-10 survey were out. 
Next, the sceptics will mock the poverty reduction achievements on the grounds that the estimates follow the Suresh Tendulkar poverty line, which is laughably low. But this too deserves to be junked. When the Tendulkar poverty line was adopted in 2009, it actually showed a higher incidence of rural poverty than the earlier Lakdawala formula did. Secondly, when the controversy over the Tendulkar formula first broke in 2010 – and critics (notably from the anti-growth and anti-reforms brigade) insisted the formula was flawed, an exercise was done to show poverty estimates using both formulas. The rate of poverty reduction between 1993-94 and 2004-05 was shown to be slightly higher under the Lakdawala formula (0.77 percentage points) than the Tendulkar formula (0.73 percentage points). So clearly, the Tendulkar formula does not underestimate poverty. 
If the left and the BJP really want to get after the UPA government on poverty, it should be on how this reduction was achieved. The Congress and the intellectual gurus of its welfarist approach will no doubt crow that this is the result of the so-called inclusive growth agenda followed by the UPA since 2004. Specifically, they are going to credit the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) with the achievement. But as economist Surjit Bhalla points out in his column in The Indian Express today, this cannot be true. Using the NSSO data, Bhalla points out that MNREGA accounts for a small share of casual employment. Casual work as a percentage of total rural employment, he shows, was only 1.6 percent in 2009-10 and 2.1 percent in 2011-12. And within casual work, MGNREGA accounted for just 36.4 percent and 37.1 percent in 2009-10 and 2011-12 respectively. So MGNREGA, he argues, accounts for just 0.65 percent of total rural employment. 
He also debunks the theory that MGNREGA has helped increase rural wages. MGNREGA wages, he shows, rose by only 25 percent between 2009-10 and 2011-12, while non-MGNREGA casual work wages rose by 39 percent. 
And then comes Bhalla’s most damning indictment. The decline in poverty between 2009-10 and 2011-12 was by 13.1 percentage points; MGNREGA accounted for only 1 percentage point of this reduction. The left will not take up this line of argument because it would not like to junk a welfarist scheme, not matter how bad an idea it is. The BJP too is not averse to supporting bad economic ideas (witness its lack of opposition to the food security bill). 
But the real arraignment of the UPA’s so-called dole-oriented approach to inclusiveness is in these figures, not in junking the Tendulkar line.

Why Congress can’t tell opponents not to politicise Food Security Ordinance

Critics of the National Food Security Ordinance (NFSO) have been rapped on the knuckles twice in two days by prominent Congress leaders. 
Yesterday, Digvijaya Singh told Congress bete noire, Narendra Modi, to stop playing politics over the food security law. In response to Modi’s barbs about the ordinance being a meaningless piece of paper, Singh said the main purpose of the ordinance was to ensure that food reached the poor and “it would be good if Modi did not politicise it”. 
Today, Finance Minister P. Chidambaram, while addressing a press conference on the state of the economy, called the ordinance “the most important legislative measure of UPA-2”. With a piously stern expression on his face, he said, “I know that there are people who mock at the ordinance. I feel sorry for them. Nothing is more important than food security.”
Singh’s advice to Modi is not entirely misplaced. After all, the BJP’s opposition to the food security law is not a principled one, centred on the rejection of an inherently flawed rights-based entitlements approach. Political parties are united in championing bad laws and the food security law was no different. The BJP knew the vote-pulling power of this law and simply wanted to deny Congress the credit for legislating it. Even as the party stalled Parliament during the last session, BJP leaders were constantly making public statements that they wanted the National Food Security Bill passed.
But the Congress asking people not to politicise the NFSO is amusing at best and galling at the worst. The right to food legislation has been about nothing but politics from the start. Riding high on the so-called success of the National Rural Employment Guarantee Act (NREGA), the UPA-1 had promised a right to food in the 2009 election campaign and got set to work on this soon after it came to power. (This much one will have to concede to the Congress – it doesn’t make entirely empty poll promises.) 
Is ramming through an economically unsound law not playing politics? That too, with issues as serious as poverty and hunger? It is no one’s case that people in India are not going hungry, though the government surveys have themselves shown that the number is declining. But if people don’t have access to food it is not because there is no food – India has far more than its needs for its buffer stocks – but because people don’t have purchasing power. Legislating a right to food does not address this problem, which is at the root of food insecurity. There has been enough evidence that the food security law is going to play havoc with government finances. The deleterious domino effect this will have on the economy, which already appears to be in free-fall mode, has been pointed out time and again. Economist Surjit Bhalla has pointed out that the Bill will cost 3 per cent of GDP in the first year alone. Bhalla will no doubt be dismissed as a free market fundamentalist, but equally alarmist caution has been voiced from economists who are part of the government establishment. But the Congress leadership has not paid heed. Is that not playing politics? 
Chairman of the Commission on Agricultural Costs and Prices, Ashok Gulati, has pointed out the deleterious effect of the food security law on agriculture and the entire food economy in a paper, National Food Security Bill: Challenges and Options, (co-authored with Jyoti Gujral and T. Nandakumar). Those concerns too have been ignored. Is that not playing politics? 
And yet all these critics of the food security bill – the majority of whom are economic right-wingers, but social and political centrists – are dismissed with just one damning indictment: they are not pro-poor. Never mind that they have far more sound suggestions to pull people out of poverty and ensure food security. 
The target of Chidambaram’s admonishment was Modi, but it could well have been directed at all these critics of the food security law. Because in the binary world that the Congress seeks to push public discourse into, if you are a trenchant critic of the party, then you are a rank majoritarian communalist enamoured of Modi. And if you are not an ardent supporter of the food security ordinance, then you are an unfeeling soul who wants the millions of the poor to starve to death.

Bite this: Survey proves cash transfer critics wrong

Cash transfers to the poor, so the cynics would have us believe, are a bad idea because they will be misused. Men will divert money for food, education and health to alcohol and tobacco consumption. Don’t think, they say, that giving money to the woman in the household will check this. She doesn’t take decisions in the family and she won’t have the power to check the man. But a survey based on two pilot projects on cash transfers in nine Madhya Pradesh villages from June 2011 to January 2012, jointly conducted by trade union body SEWA Bharat and UNICEF, rebuts almost every charge that the cash transfer pessimists throw at this alternative method of delivering welfare benefits to the poor. 
Bite this. Cash transfers did not increase spending on the ‘private bads’ in the project villages. On the contrary, ‘good’ spending increased across a range of expenditure heads – education, health, food and sanitation.
And chew on this. The proportion of underweight children came down; incidence of illnesses came down; the number of children working as wage labour fell; wage labour among adults too declined and self-employment increased; and indebtedness reduced. 
“Cash has a transformative effect by unlocking constraints to development,” Guy Standing, of the School of Oriental and African Studies, University of London, who led the survey said while presenting the preliminary findings at a conference in New Delhi.
The first pilot, Madhya Pradesh Unconditional Cash Transfer (MPUCT), covered eight villages, while the second, Tribal Village Unconditional Cash Transfer (TVUC), was conducted in one tribal village. In both pilots, the behaviour of the beneficiaries was compared to that of people in other villages (12 in the case of the first pilot and one in the case of the second) who did not get any cash handouts. The cash transfers were unconditional and universal. That is, every single person (a total of 6,000) in the pilot villages around Indore were given monthly cash grants – Rs 300 per adult and Rs 150 per child – without any conditions about how they were to spend it. They were free to use it in any way they wished. “Conditions,” noted Renana Jhabvala, president of SEWA Bharat (part of the SEWA family), “lead to corruption and harassment.” 
Freed from any nanny-like supervision, people who got cash handouts showed they could be quite responsible in spending it. Education got top priority, with those in the cash transfer villages spending 40 percent more on schooling than non-cash transfer villages. Though only 40.2 percent of households in the cash transfer villages had a school within one km distance of their homes, the children spent less time in commuting as compared to those in non-cash transfer villages, where 48.3 percent of households had a school within 1 km distance. The fact that those in the cash transfer villages were spending more on transport to send their children to school is evident from the 10 percent difference in transport spend between the two sets of villages. That is probably why, though there was no significant difference in enrolment in cash transfer and non-cash transfer villages in the baseline study, the final evaluation study showed a 11 percent increase in enrolment in the former set of villages. There was also an increase in spending on uniforms, books and stationery. 
People also started spending more on foods higher in the value chain, with 52.6 percent buying more fresh vegetables and 63.9 per cent buying more milk than before. In the tribal villages, households reporting sufficiency of food increased from 51 percent to 82 percent between the baseline and final evaluation survey. With better nutrition and better basic living standards (31 percent of cash transfer villages spent on changing their toilets, and more people switched to electricity and gas for lighting and cooking), health indicators also went up. In the cash transfer villages, 47.4 percent households reported no illnesses in three months prior to the survey against only 34. 6 percent in the non-cash transfer villages. 
With women getting money in their individual capacities, there was a 33 percent increase in them getting medical treatment for illnesses. Women also took medicines more regularly, whereas earlier there were spikes in medicine intake depending on the availability of money. More importantly, the physically disabled in homes got better treatment. The survey showed 48 per cent disabled individuals in the cash transfer villages was hospitalised for treatment against only 2 per cent in the non-cash transfer villages. There was also an increase in resort to private healthcare, showing that cash grants gave people more choice. 
Another criticism against cash transfers as an income support measure is that it discourages people from working. (It’s another matter that they don’t subject the National Rural Employment Guarantee Scheme to the same criticism.) The survey showed that wage labour accounted for 40 percent employment in cash transfer villages against over 50 per cent in non-cash transfer villages. The proportion of self-employment was higher in the former against the latter. Many families, the survey showed, used cash grants to buy tools (ranging from sewing machines to seeds and fertilisers) or livestock to increase production. 
Does this mean that the debate over cash transfers has been definitively decided in its favour? Not quite. These findings need some caveats. As NC Saxena, member of the National Advisory Council, pointed out at the conference, the cash transfer in the project was an additional sum that people got and was not a substitute for subsidised government schemes. So it gave people extra cash, which made it easier for them to make choices. Would that same effect have been possible if the cash transfer had been accompanied by a withdrawal of a public service, whether it is ration shops or government clinics or schools? 
The area around Indore was also more prosperous and developed, increasing the chances of positive findings. Sonalde Desai of the National Council of Applied Economic Research, who gave the expert response on the findings, noted that the survey results should take into account the bias factor in the perception-based responses – people would tend to paint a rosy picture when quizzed on the benefits of any cash support. 
But the value of the pilots and the survey is that this is the first-ever attempt to cut through the ideology-driven posturing on cash transfers and pave the way for policy making based on hard empirical evidence. And that is a big, big step forward.
I subsequently wrote a more detailed piece on this for Forbes India. Here is the link to that.

Tuesday, 28 May 2013

Two Roads For The Country

What if India had followed Masani's and Rajaji's vision rather than Nehru's?
Today is the death anniversary of two noteworthy Indians. They started off as ideological comrades but later became antagonists, each representing two opposing economic worldviews.
Their anniversaries too will be observed in contrasting ways - one with pomp and publicity, the other in obscurity. There's a certain irony in that.
Jawaharlal Nehru will be feted at various functions and the United Progressive Alliance (UPA) government will pledge itself to his ideals, never mind that the country has turned its back on his eponymous model of development, which was heavily biased towards state intervention in the economy. This shift away from socialism — half-hearted though it is — would not have pleased Nehru had he been alive, even though his name has been constantly invoked by the Congress to show continuity with his policies.
There will be no public functions to mark the 15th death anniversary of Minoo Masani, co-founder of the erstwhile Swatantra Party, even though since 1991 the country has been travelling the road he tirelessly championed for 40 years along with another political stalwart, C Rajagopalachari or Rajaji - that of a liberal, market-oriented economy. But Masani, too, would shudder to have his name linked with all that is happening today, in the name of the model he advocated.
Nehru and Masani forged a deep friendship when they were both in the Congress, strengthened by their common love for socialism and admiration for the Soviet Union. Masani was one of the founders of the Congress Socialist Party within the Indian National Congress, in the early 1930s. Soon, disillusioned by Stalinist excesses in the Soviet Union, he became one of India's foremost and forceful critics of communism.
In 1947, he articulated the idea of a mixed economy, with three sectors - a small sector of nationalised industries (which would be decided by an independent commission), a larger sector of new public enterprises in areas where what he called 'free enterprise' was unable to venture into, and a third, largest sector of free enterprises. "Such a programme of state plus free enterprise is, in fact, the only practicable programme that the government in India can possibly adopt in the coming is important that it is done, not sullenly for lack of anything better, but with enthusiasm and drive," he wrote in a paper detailing the idea.
After Independence, his nuanced approach would bring him in direct conflict with Nehru and what he called the latter's zeal to foist the Soviet pattern of state capitalism. Since the only non-socialist alternative to the Congress in the 1950s was the Jan Sangh, with a strong Hindu bias, Masani teamed up with Rajaji and farmers' leader, NG Ranga, to form India's first conservative-liberal Swatantra Party in 1959. Through the party's short life and after its demise, Masani never tired of pointing out that state involvement in industry, trade and commerce would result in the neglect of its primary responsibilities of maintaining law and order and the provision of drinking water facilities, primary healthcare, primary education and physical infrastructure.
He also relentlessly pointed to the lurking dangers of the licence-permit-quota raj that Nehru and later Indira Gandhi promoted. Nehru apologists argue that his model was vilified because of the distortions that his daughter introduced in the 1970s. But Masani and Rajaji always warned that the model was susceptible to such distortion.
So when, in 1991, India took its first steps towards a freer economy, Masani should have felt vindicated. Though he was glad, he also had a sense of foreboding. The government, he noted, took the path of liberalisation out of compulsion and not conviction and he fretted that this would not be sustained. He was clearly quite prescient.
State meddling in the economy continues; in the name of helping the poor, the government continues to artificially suppress prices and distort markets rather than working seriously for a shift towards targeted subsidies; inefficient public sector undertakings continue to be cosseted; inspector raj continues to throttle small and medium enterprises. Despite what the critics of liberalisation might say, India is not a market economy in the true sense of the word.
While Masani, were he alive, would have been pained by this, what would have horrified him is the prevailing rampant corruption - the result of a pernicious cronyism that marks the relationship between government and private business. What would devastate him is that this is happening in the name of liberalisation.
Crony capitalism is not the post-1991 phenomenon that those railing against what they dub 'neo-liberal economic policies' make it out to be. Though a strong supporter of private capital, Masani took a dim view of most Indian entrepreneurs of his time who, he believed, took the easy way out by bribing ministers and bureaucrats instead of facing up to competition. Naturally, he blamed the controls-driven system for fostering this. Masani would have been the first to speak up against the shenanigans in the telecom, coal and airlines sectors.
As economic liberalisation increasingly comes under attack for fostering oligopolies and sowing the seeds of plutocracy, there are not enough voices pointing out that the mess the country is in is a direct result of the state continuing to have the power to make or mar fortunes of entrepreneurs, that the country needs more economic and governance reforms to strike at the root of corruption. Masani would have been that voice.
Minoo Masani, the country misses you.
The writer is a senior journalist and author.

Monday, 27 May 2013

It’s time planners did some jugaad on rural public transport

On the face of it, the Supreme Court order of May 15 directing all states to ensure that jugaad vehicles  do not ply unless they are registered with the regional transport authorities and have third party insurance needs to be welcomed.
Jugaad vehicles are those makeshift, rickety contraptions powered by irrigation pump motors that pass for public transport in many rural areas of north India. It doesn’t require a Supreme Court order to make one realise that these are extremely risky to the life and limb of its passengers. The Court’s order will have the effect of getting them off the roads.
That’s great from the point of view of public safety, but has anyone spared a thought for those who willingly clamber on to these? Why would people knowingly get into patently obvious death-traps? They do so only because there are no alternatives for them. Affordable public transport  is practically non-existent in the areas where the jugaads operate.
The jugaad passengers are those at the bottom of the pyramid, who may not possess even a cycle. The jugaad offers the only means of getting from point A to point B, and those points will be from home to work and back. Not getting on to a jugaad could mean having to forsake a day’s wage. As for the risk of injury or death, that is to be left to fate. The Supreme Court order will leave them stranded.
Is this article, then, a plea to let these death traps stay? Not at all. It merely seeks to question the practicality of implementation of the Supreme Court order, given the complete lack of alternatives in rural areas.
It is not as if these jugaad vehicles were off the official radar till now. In July 2007, the Union Roads Ministry had sent out a circular to all states that jugaads fall under the definition of ‘motor vehicle’ in the Motor Vehicles Act, 1988. Therefore, they would need to be registered, get a number plate and insurance. Getting registered would mean adhering to certain quality standards, which the jugaads would not have been able to do.
If, therefore, in 2013, the Supreme Court has to issue another directive to states, it shows that governments have not been able to deal with the ‘menace’, as the Court termed these vehicles, in these past six years.  Action has been taken against them, but they are soon back on the roads after greasing a few palms.
The continued existence of jugaads is nothing but a damning indictment of the state of rural public transport. According to the report of the Working Group on Road Transport for the Twelfth Plan, less than one-third of the nearly six lakh inhabited villages are serviced by the State Road Transport Undertakings. Is there any discussion at all on this, with the kind of urgency and seriousness that urban public transport gets (it is another matter that despite all the attention, urban public transport is also in a mess)?
Servicing the rural market will be difficult, since it will not be as lucrative as the urban one. But rural India is changing – rising income levels and growing opportunities mean that people are mobile and want mobility solutions. It is up to both politicians and administrators to work out solutions to this difficult market. Otherwise, people will be compelled to take whatever sub-optimal solution is on hand.
One only has to look at a somewhat similar situation in Delhi, where the public transport system is in shambles. There are around 5,000 buses on the road, far short of the required 11,000. (Incidentally, this 11,000 requirement was set by the Supreme Court in 2001; Delhi’s population has multiplied since then.) For the middle class, the gap is filled by ‘chartered buses’ (private tourist buses meant to be hired by a group of people from one point to another, but which pick up and drop passengers just like public buses).
For the lower income group, the only option to an unreliable public bus service is an illegal one. Delhi’s transport department started a Gramin Seva, meant for Delhi’s rural areas which do not offer profitable routes for a full-fledged bus service. The nine-seater Gramin Seva vehicles are now, however, a common sight on Delhi’s arterial roads, catering to the low-income population, in complete violation of their permit conditions. They are dangerously overcrowded and are driven recklessly.
The only saving grace is that these are branded vehicles and not a cannibalised set of wheels like the jugaads. There is no dearth of passengers for the Gramin Seva because the section it caters to cannot afford auto-rickshaws or chartered buses. There is the Metro, but the reach is not as extensive as that of the Gramin Seva. Action is taken against these vehicles but a mixture of political clout and bribes ensure that they are back on the road again.
Delhi’s school children are also transported in extremely unsafe conditions. They are crammed into Maruti vans, with children sitting on the front seat with the driver without seat belts. Or they travel in cycle rickshaws where a wooden seat which juts out on both sides of the rickshaw is attached. These are children of middle class parents who would be willing to pay for a reliable bus service if it were available. The Maruti vans are routinely challaned but they too get back on the roads the very next day. The demand ensures that they do.
If, in the capital city, limited choice makes it impossible to enforce safe transport standards, one can imagine the situation in far-flung rural areas, where there is no choice worth the name.
Maybe, because of the sanctity of the Supreme Court order, state governments will take jugaad vehicles off rural roads. But if they don’t take steps simultaneously to address the unmet demand for rural public transport, things will be back to square one. The Indian jugaad spirit will only replace the current lot of vehicles with some other means of transport, which could be more unsafe. They will continue till another Supreme Court order some years down the line.
So long as there is demand to ensure that earnings more than make up for the bribes paid, such services – whether Gramin Sevas in Delhi or jugaads in the rural areas – will continue.
That is the bitter truth.

A history lesson on India Inc for Manish Tewari

Information and broadcasting minister Manish Tewari has sent out a word of advice for Corporate India through the media. Be careful of whom you support, he is supposed to have said while addressing journalists in Mumbai, according to this report in the Economic Times.
He also gave our industrialists a lesson in history. Remember Europe in the 1930s, he warned. The leader European businessmen supported wholeheartedly then “caused a lot of harm and destruction all over the world.” He left the leader unnamed but the Economic Times rightly identifies him as Hitler. And we all know who the Indian `One Who Tewari Did Not Name’ is. The Economic Times identifies him as well.
But why does Tewari have to go back eighty-odd years? And to a different continent, at that? Why not look within the country and go back just forty-odd years? Specifically, India in the 1970s?
Tewari was only ten years old during a certain dark chapter in India’s democracy and so he may not have any memories of this period. The history books he would have studied in school also would not have dealt with those events, so a lesson for him in recent Indian history is in order.
India was then ruled by the Congress Party and Mrs Indira Gandhi was the undisputed supremo of the party and the government. Buoyed by the stupendous mandate that she had got in the 1971 elections, Mrs Gandhi went about systematically destroying every autonomous institution that the founding fathers of the Constitution had created. The mess that the country now finds itself in has its roots in that period, when the notions of committed bureaucracy and committed judiciary were used to pack the civil and police service and the judiciary with loyalists. Loyalists not to the country, but to the Congress Party and by default Indira Gandhi and by further default a certain Sanjay Gandhi.
The arrogant disdain for democratic processes kept escalating, finally culminating in the declaration of Emergency in 1975. The Congress likes to paint the ‘One Whom Tewari Did Not Name’ as a dictator, but he will only be India’s second. Just as it has been the trend-setter in the case of dynastic politics, it is the Congress again which has the dubious honour of giving India its first dictator. India is Indira and Indira is India, we were told. (Before people turn apoplectic at the thought of equating Mrs Gandhi with a certain maut ka saudagar, I concede that there were no killings on the scale of the 2002 riots during her time.)
But the real point about this history lesson relates to the businessmen and entrepreneurs to whom Tewari dished out advice. As Mrs Gandhi went about making a mockery of India’s democracy, India Inc. of those days did not utter a squeak in protest. Worse, they went all out to back the Congress Party and Mrs Gandhi. When it was believed that she would resign following the Allahabad High Court setting aside her election in 1971 for electoral malpractices, a delegation of Indian businessmen went to her and pleaded that she stay. These were not small-time businessmen. They were respected industrialists, led by none other than K. K. Birla.
Why should we think these industrialists were better than those who, thirty years later, hugged the One Tewari Did Not Name and called him king of kings (disgustingly servile as that was)?
There’s only one thing that’s clear from all this. Industrialists and businesspersons aren’t bothered about the ideology of the party or leader in power. All they want is a stable business environment, tax sops and other freebies and if they can indulge in some crony capitalism, well, that’s icing on the cake. They are not even interested in parties or persons who espouse their cause if they are not in power. What else can explain the fact that the Swatantra Party, which kept championing the cause of free markets, hardly got any funding from business houses? Businessmen preferred to pay fat bribes to ministers and bureaucrats in return for assured licences and pour money into Congress coffers to ensure favourable competition-killing policies.
In the 2006 West Bengal assembly elections, it was well known that a significant section of businessmen in the state were hoping that the Left Front would return to power because Mamata Banerjee was not seen as a very credible leader. In fact, there’s talk now that during the next election, they will once again back the Left Front.
Nor are they unduly bothered by things like genocide. The only thing that worries them about riots is how it disrupts their supply chains and affects their business operations. Forget Gujarat, Indian businessmen have no qualms about setting up manufacturing bases in China, never mind a certain problem called Tibet.
This apparently cold-blooded attitude is not unique to Indian businessmen. The change in the United States attitude to China in the seventies and its silence over human rights violations in that country is dictated by the agenda of American businesses. So is its support of tinpot dictators everywhere from South America to West Asia. China will never be faced with an economic blockade, something other dictatorships with less attractive markets are subjected to.
So if you want India Inc. to stop singing the praises of the ‘One You Did Not Name’, Mr Tewari, just get your government to take away his USP. In the remaining months that your government is in power, get it to create an environment that is investment-friendly (no, that does not mean encouraging cronyism), end the policy paralysis, take policy and other measures to set right the infrastructure sector. Get the economy back on track and deliver results. When you do that, India Inc. will come running back into the Congress fold.

Amartya Sen, jholawalas, and the wrongs of rights-based laws

That Nobel Laureate Amartya Sen has once again thrown his weight behind the Food Security Bill, lambasting the opposition for not allowing Parliament to pass the legislation, isn’t surprising. The venerable economist has been a champion of the rights-based entitlements approach for long.
This piece is not going to get into whether Sen is right or wrong about the National Food Security Bill 2011. This article, which links to other articles on the subject, effectively demolishes his argument.
The rights-based approach was discussed at the recent annual meeting of the Asian Development Bank (ADB) in Greater Noida, where an ADB policy report, Empowerment and Public Service Delivery in Developing Asia and the Pacific, was released. Sen was part of the panel that discussed this report, which admits that its basic foundation is his “influential work on freedom, participation and agency”.
The report makes the point that despite tremendous economic progress made by Asian countries, they haven’t done very much in reducing poverty, malnutrition, improving health and education indices, among other things. This, it says, is largely because of inefficient delivery of public services. There’s little to dispute in these purely factual statements.
So how is this to be addressed? Being heavily influenced by Sen’s work, the report naturally tends to lean towards the rights-based approach to empowering people to demand better public services. But it also discusses community participation in service delivery, participatory monitoring of service providers (social audits, citizen’s report cards, grievance redressal mechanisms etc) and public-private partnerships.
Fortunately, it also highlights the problem with a rights-based approach, which Sen and other defenders of this approach almost never seem to talk about.
One, there’s the problem of resources. Two, the lack of institutional channels to enable citizens to claim their rights. Indeed, there’s little point in saying I am entitled to 100 days of work, or education for my child, or a certain quantity of foodgrain, or basic housing (another right that’s in the works) without adequate systems to ensure that I get them. Saying that these are justiciable rights also doesn’t mean much when I don’t have the time or resources to knock on the doors of overcrowded courts manned by overburdened judges.
Take the flagship National Rural Employment Guarantee Act (NREGA). According to the latest Comptroller and Auditor General’s report on the scheme, employment was not provided to job seekers within 15 days of their requesting it. Yet, they were not paid an unemployment dole, which they should have been.
Or take the Right to Education Act, which has come into force since 2010. Can the government really claim that this has been a resounding success? Far from improving access of children to schools, the Act actually runs the danger of reducing access by laying down a slew of impractical stipulations that even low-cost private schools have to comply with or face closure.
That is the basic flaw in any rights-based approach to welfare entitlements – their implementation is hugely problematic.
Assuming, for argument’s sake, that this is a good approach, why not, then, use this to enforce existing Fundamental Rights in the Constitution? Why not ensure the right to “practise any profession, or to carry on any occupation, trade or business” as enshrined in Article 19 (g)?
Why are self-employed people like street vendors, hawkers, rickshaw pullers and the like subject to a plethora of restrictions that make it near-impossible for them to earn a decent living and perhaps move up beyond the poverty line?
A cap on the number of cycle-rickshaws in Delhi has made rickshaw-pullers (for whom there is great demand in the suburbs) vulnerable to not just rapacious owners of rickshaws but also policemen and transport department officials. Street vendors too have their goods being routinely confiscated. If these people are freed from the licence-permit raj, there would probably be no need for NREGA or a Food Security Act in their present form.  That will make for a truly inclusive growth model (unlike the cronyism that we are seeing currently, which merely benefit a few corporate fat cats).
Similarly, if low-cost private schools were allowed to function freely, the problem of access to schooling at least in urban areas will be solved to a large extent.
Why not also restore the right to property as a fundamental right? This will allow poor people who may have land to use it as an income generating resource in whatever way they deem fit.
Let us also concede, again for argument’s sake, that the state alone will – and can – provide essential services to the poor. The record of its doing so is, well, poor. Ration shops routinely claim they haven’t got supplies, making a mockery of the public distribution system. Government hospitals claim they don’t have medicines. Teacher absenteeism in government schools is high.
If, as the report says, the government has to be made accountable, legislating a right to education, or food, or health is not going to solve the problem. As the report itself concedes, this has to be accompanied by changes in the way the government machinery works. Only one right is necessary to ensure that – the Right to Information (RTI).
The RTI movement in India gathered steam after it was used in Madhya Pradesh and Rajasthan to successfully get details about the working of fair price shops. If a below poverty line ration card holder can use RTI to find out why he hasn’t been getting his monthly quota of rice, wheat and sugar, that will do far more to make the system accountable than any food security legislation can. Because as the working of the NREGA shows, the mere enactment of an Act will not ensure that a poor person does get 100 days of work or 25 kg of foodgrain. It is an RTI which will tell him why he hasn’t. The RTI Act is already in place, but its implementation is patchy and there are constant attempts to dilute it.
Sen and his band of jholawallas would be better advised to focus on ensuring that rights like those to livelihood or information are enforced and implemented properly, than insisting that a plethora of meaningless rights are legislated.