Don’t allow 1984 to be whitewashed

http://www.firstpost.com/politics/not-just-2002-dont-whitewash-culpability-of-congress-in-1984-riots-1203581.html

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

www.firstpost.com/economy/ease-of-doing-business-in-india-worsens-world-bank-rbi-on-same-page-1200811.html

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

www.firstpost.com/business/cbi-case-against-km-birla-corporate-india-should-not-cry-wolf-1183133.html

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

http://www.firstpost.com/india/rte-in-pvt-schools-how-govts-social-engineering-may-backfire-1177635.html

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.

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

First published in Firstpost.com: http://www.firstpost.com/politics/why-kejriwals-aap-is-looking-like-old-wine-in-new-bottle-1122347.html

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: http://forbesindia.com/article/independence-special-2013/the-lost-heroes-of-economic-freedom/35917/1

 

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 Firstpost.com: http://www.firstpost.com/economy/sure-poverty-fell-but-no-thanks-to-upas-nrega-981421.html
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.