governance, political economy, institutional development and economic regulation

India’s elite bureaucrats – unshakably resilient

June 19, 2018

 

Mughals

The great Mughals (16th to 18th century) found it more difficult to manage their extended zenanas than to conquer fractious Hindustani kingdoms. The insidious politicking and power struggles of the women in purdah are well known. Less well appreciated are the strength, stability and support that the zenana afforded to the emperor, as a secure haven of peace and a source of experienced, sound, well-meaning advice. Ira Mukhoty exquisitely documents this aspect of the zenana in her new book -Daughters of the Sun.

zenana

The IAS is the metaphorical “zenana” for leaders of modern India

What the zenana was to the Great Mughals, the Indian Administrative Service (IAS) is to our political leaders at the Centre and in the states. Curiously, even the numbers match. Both the IAS and Emperor Akbar’s zenana — the largest — are around 5000 strong.

The only difference is that, unlike the zenana, the IAS is predominantly male. But this is changing. Like the zenana it is recruited on merit through intense competition. Once recruited, a minimum basic standard of life and respect is assured. But progress onto meaningful positions of power depends on both merit and political convenience. Bad political choices can end careers prematurely. Good ones can lead to a rapid rise.

IAS

Expectedly, disruptions to the existing architecture initiated by the emperor caused great trauma then, with fervent attempts made to subvert the change, as now. Not all disruptions end well either. But that is no argument for not trying to imbue knowledge competition into the workplace, as the Narendra Modi government proposes via the lateral entry of 10 joint secretaries.

Why change?

Modern workplaces have specific needs. Of these, IAS officers have only two characteristics which others may lack. First, they are the culled outcome of the UPSC exam which selects just 0.1 per cent of those who apply. This ensures that genetically they have the required level of raw intellect. Second, they have an accelerated and time-bound promotion career path. This ensures that they will always be ahead of those in other cadres. Even seniority, within a cohort of officers, is based on their score in the UPSC exam and the Mussoorie training academy. These embedded entitlements bestow upon an IAS officer ritual status, attracts respect, and often abject compliance. But an impartial, permanent civil service, as a source for leadership level advice, is an anachronism, for three reasons.

The IAS has no “skin in the game”

First, politicians today need bureaucratic advisers who have “skin in the game” — they prosper with a politician — zenana style — and go down with the politician they support. The need for “trust” and “faith” in the support senior staff around a minister is poorly aligned with the old civil service architecture of impartiality, seniority and permanence.

Quick to learn, but no deep personal knowledge or insight

Second, the explosive force of the knowledge economy and the range of new sovereign interventions call for total immersion for extended periods in a chosen area of work. This is alien to the way the IAS is managed and trained for general management purposes. To head an engineering department, it is not enough to have an engineering degree before joining the IAS. Most useful skills are non-academic and acquired on the job. Only a practising engineer can credibly navigate a politician through the likely cost-benefit of options. Our achievements in space technology, missiles and atomic energy are out of sync with the quality of our roads or public medical care. Both of the latter work areas are managed by an IAS officer at the top. And it shows.

Deep skills do not come cheap, nor do they remain captive

Urjit

Third, skilled help does not come cheap. The pervasive private sector provides the demand for top-level skills where the government can never hope to compete for talent. Only saints would give up private sector options and choose to work in the government, except for short periods, such as to round off one’s CV, enlarge networks and gain face time at the leadership levels. Facilitating short-term contracts in the government for skilled professionals is a good way of achieving the required skill infusion into the administration.

Short term hires should come and go with the government

Expectedly, the contractual top-level hires will be selected only where both ideologies and objectives match. This makes sense for both sides. The entrants and the government know that without an inside track with the political leadership, they would simply run out of time before achieving anything. In public policy, academic credentials have to burnish with zenana brownie points like loyalty and a complete alignment of objectives.

What does short term hire mean for the reservation policy?

Mayawati

This flags BSP supremo Bhen Mayawati’s concern of how to ensure that brilliant Scheduled Caste and Scheduled Tribe candidates do get a fair chance. At present, there is no caste quota for promotions in the Government of India for the elite services. The quota applies only at the time of recruitment. Currently, only two per cent of all joint secretary-level positions have been advertised for lateral entry. But in future, if lateral entries increase to, say, 25 per cent of all positions, the caste quota issue will need to be managed head on.

UPSC selection is not aligned with the hiring practices for short term experts 

Would the UPSC be a safer choice than an in-house government selection committee? Not necessarily. We have seen in the case of the appointment of judges, compromised selection is not the preserve of the government alone. But there should be a permanent selection committee comprising the secretary of the requesting department; two private sector or NGO subject specialists, and the secretaries of the UPSC and the department of personnel and training.

But safeguards to ensure merit and transparency must be built into the process

Lastly, the process adopted for lateral contractual positions must be differentiated from the existing process for internal appointments. Advertisements for contractual positions must specify the required mix of minimum educational requirements and particular work experience, along with the exact job description. Transfer from one specific position to another, during the contract, must not be allowed, to avoid gaming and to protect the incumbent.

Alas, has this come too late?

time

The Narendra Modi government’s move to open the doors for external, top-level skills is extremely welcome. But, as in the case of Air India’s disinvestment, its timing, at the fag end of the government’s tenure, loads the dice against persons of outstanding talent applying for this opportunity. Even the best house help is risk averse and abhors untimely disruptions.

Adapted from the authors opinion piece in The Asian Age, June 18, 2018 http://www.asianage.com/opinion/oped/180618/govts-lateral-hiring-great-idea-bad-timing.html

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BJP, Book Review, bureaucracy, India

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India’s geopolitical choices till 2040

June 17, 2018

Trump

Every passing day, America plays the truculent, ageing diva on the wane, whilst China exudes a quiet, confident gravitas. Their chosen global roles, however, do not reflect the fundamentals of either country.

America is one of the few developed countries with a robust economy, relative to its overwhelming size. It grew smartly at an average of 2.5 per cent over 1990 to 2016 (versus world growth 2.8 per cent). In Europe and Japan, ageing and poor economic policies are slowing down the revival process, post the 2008 slowdown. But America, thanks to its ‘open-doors’ policy for talent, its zeal for innovation and a super-educational architecture, has rebounded –– even though President Trump continues to play to the injured sentiments of middle America, which sees growth and jobs as a zero sum game.  But psychologically, America is shrinking into a smaller island of prosperity than it needs to be. The mood of the nation is to cut its losses overseas, lock the doors and count its millions. This is akin to voluntary national euthanasia.

China Russia

China, despite much less going for it physically, is psychologically expansive in its ambitions – eager to fill the gaps opened up by a receding America. In 2016, GDP at US$ 9.5 trillion (constant $ 2010) was roughly where America was in 1990. Despite high levels of inequality, which concentrates the incremental growth and wealth at the top, President Xi enjoys enviable domestic support. The average Chinese is gung-ho about occupying centre stage in global affairs.  Strategic allocation of its surplus for investments overseas has created an alternative variety of quasi sovereign international finance which, to put it bluntly, seeks to “immizerise”- to twist Professor Bhagwati’s signature concept-  the beneficiary nations who accept its cheap loans.

China investment

Inability to repay the loans followed by benevolent ever-greening of the loans, will bind the beneficiary nations into a long-term, largely one-sided financial relationship, reducing once independent nations to vassals. The Chinese will try and stretch out this symbiotic arrangement till they either supersede or take control of the United Nations and related institutional arrangements for management of international affairs. China might become the largest economy by 2030, and by 2040 indentured nations will have little choice except to bow to Chinese dominance, much like an addict wanting her next shot at any cost. It is unclear, however, if China will have the staying power to continue to splurge cash on winning friends till then.

Their game plan is not very different from what America itself followed post-1945. Financing the reconstruction of Europe and Japan bound these countries to America, creating a politico-economic group which represented 66 per cent of world GDP in 1960. Back then, America itself accounted for a heady 40 per cent of world GDP.

G7

This set of “friends of America” (FOA) still account for around 58 per cent of world GDP. But America’s share has shrivelled to around 18 per cent of world GDP. This is the core of President Trump’s angst. Whilst the FOA group has grown significantly since 1960, under American protection, they continue to be free riders when it comes to spending big bucks on global security. Indeed, avoiding large outlays on defence expenditure has enabled these economies to divert resources for growth and social welfare.

The truant behaviour by POTUS at the Quebec G7 meet should be viewed in this context. One can even make the argument that the trade wars are not so much directed at China but at America’s own allies – a wakeup call to start paying the bills for global domination. America is set to become an international wallflower after a half century of global domination.

China grew spectacularly at just under 10 per cent per year over 1990-2016. But to achieve somewhere close to the critical mass – 30 per cent of world GDP- needed for global domination, it will need to grow for twenty more years at 4 per cent above the rate of world growth. But unlike America, it does not yet have a set of permanent allies, who could pump up the group share.

SCO

India is a likely candidate for such friendship. Russia and India share traditional bonds which have deepened through the purchase, by India, of defence equipment. A bloc comprising China, India, Russia and Iran (CIRI) can pump up China’s economic heft to around 45 per cent of world GDP by 2040. China and India, respectively, would account for around 30 and 10 per cent of world GDP.

Admittedly, CIRI would be a grouping of convenience. The Friends of America group, in comparison, are glued together by history, culture, religion & race (other than Japan) and the liberal democratic State architecture.

It is unclear which way India should turn. India will be an easy fit into the FOA group because of shared liberal democratic values; history and language. India could bring to that group the demographic energy, at a scale they lack. But it is in the CIRI group, that India could play the more substantive role, including by providing much needed soft power to pull-in other nascent liberal democracies. In neither group is India likely to be the decisive partner over the next 20 years, which hurts our ego.

switzerland

A third pragmatic option is to play Switzerland on an international scale. Remain a neutral, trusted adviser to both groups – neither antagonistic nor subservient to either whilst remaining focused on shared economic growth domestically. International credibility to chart this principled course would depend upon developing a domestic eco-system reflecting these principles. This course suits Indian aspirations for leadership best. But are we, ourselves, ready to live by an elevated moral and human code?

Also available at https://blogs.timesofindia.indiatimes.com/opinion-india/indias-geo-political-choices-till-2040/

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Economy, India, politics, world affairs

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Pranab da mimics Atal ji

June 10, 2018

 

Paranab RSS

The brouhaha over Mr Pranab Mukherjee’s visit to Nagpur, as the chief guest at a valedictory function of the Rashtriya Swayamsevak Sangh (RSS), foregrounds the stunted nature of politics in India.

Politics is about reaching out

First, consider the absurdity of the prevailing schoolboy notion of “team” spirit extending to a ban on supping with one’s political opponents or with those whose ideology is distant from one’s own. This downgrades politicians to being nothing more than groupies of one or the other party – much like football fans.  Amusingly, ever more rigorous behavioural tests of allegiance are demanded, as parties themselves, become ideologically indistinguishable.

The “sameness” of post ideology politics

After all, other than the fuzzy social concept of Hindutva, there is little to distinguish between the BJP and the Congress. Even Hindutva – at least the soft Vajpayee version – is associated with no discrimination across caste or religion. This naturally includes no mollycoddling of Muslims or Christian but also rules out targeted pogroms against them. The constitution makes Sikhs, Buddhists and Jains, honorary Hindus, even though, these are distinct religious minorities. The erstwhile Karnataka government proposed this year that Lingayats be listed as a minority religion within the Hindu pantheon.

None of this aligns with the hard Hindutva line of “nationalising” Hinduism to the exclusion of all other religions. Indian Muslims often retain their caste consciousness, as do Sikhs, even though neither religion envisages caste divisions. For Baba sahib Ambedkar, caste and not religion, was the biggest social cleavage. And he was right.

Who, amongst the opposition, is not a Hindu?

opposition

Hard Hindutva remains untested as a political instrument to consolidate Hindu votes. Who amongst the opposition – Mamta Banerjee, Captain Amarinder Singh, Bhen Mayawati, Akhilesh Yadav, Lalu Prasad Yadav, Rahul Gandhi, Naveen Patnaik, Chandrababu Naidu, K. C. Rao, E.K. Palaniswami or P.Vijayan, is not a Hindu, albeit of the “soft” inclusive, Hindutva kind?

Standing tall, like Atal ji, means leaving the comfort of one’s corner 

Atal ji

Second, it is odd that, on the one hand, the “secular” camp bemoans the absence of “tall” leaders, like Atal ji, who were widely acceptable, aroused respect rather than antagonism and who could be relied upon to do the right thing by the nation. Yet, they take strong exception to Pranab da emulating the Vajpayee brand of inclusiveness, by reaching out to the RSS. Pranab da did not go to Nagpur in the naïve hope of converting the RSS into a peacenik. The purpose was to show to the current lot of political leaders, that it is possible to stand firm, on what one believes, even in the midst of political opponents. After all, our diplomats do this almost daily, when they serve on committees and in nations, where the mood may be inimical to India. By participating, one shows the public, the strength of one’s conviction and the rationale thereof. Opponents may remain opponents. But at the fringe, citizens get the opportunity to rethink role models, possibly resulting in a softening of hard positions, much like a glacier crumbling at the edges, in the face of climate change.

Demonising one’s opponent is unhelpful, listening and participating is better

Third, demonization of opponents is reminiscent of what fundamentalists do. Those who espouse a secular, liberal agenda must surely shun the fundamentalist’s tool kit. Prime Minister Modi was widely criticised by the secular crowd, for not donning a skull-cap, publicly offered to him by a delegation of Muslims in Gujarat. This was an extreme case of political symbolism, marking out Mr Modi, as being different from the average leader, who has no qualms paying lip-service to minority sentiment. The hosting of Iftaar parties, by those, not keeping the fast, is a prime example of superficial secularism.

Owisi

Asaduddin Owaisi, an MP from Hyderabad and President of the All India Majlis-e-Ittehadul Muslimeen, claims Pranab da’s Nagpur visit has “finished” the Congress. The implication is that Muslims will no longer feel “protected” by the Congress. This is entirely possible. But it could signal progress of sorts. Minorities voting for parties which advance their modern professional or business identities, rather than feeding-off their traditional identities, would be encouraging. If the Hindu vote is splintered today, why must minority votes remain transferable en-bloc, like pocket boroughs?

May Pranab da’s tribe multiply

We need more leaders like Pranab da, who are unafraid to grow a common ground between the uber Right RSS and mainstream, secular Indians. Even the Bharatiya Janata Party (BJP) should rethink its arcane electoral arithmetic, based on uniting the Hindus against the rest. The “Hindus” have never been a monolithic group. Caste and regional identities have always mattered more than the fact of being part of a family of Hindu religions. That is why Hinduism, despite all its warts – like the caste system – remains an attractive, forward looking religion, which assimilates rather than divides. Nationalising Hinduism, as the RSS is trying to do, will be as disastrously limiting, as the nationalisation of the private sector by Indira Gandhi, was for India.

Looking for repeat orders is better than one-off customers 

The BJP came as a whiff of fresh air in 2014, after a decade of more-of-the- same rule by the United Progressive Alliance. The last four years have seen some economic progress. The BJP should feel confident of citizen support based on results. It clearly overreached whilst setting targets, quite forgetting, that high aggregate targets do not matter to the average voter. Much as in commerce, repeat orders, are an outcome of a rewarding, initial customer experience. Would you buy a Patanjali product the second time, merely because their turnover is increasing rapidly or because the initial customer experience pleased you? Voters are no different. Indivisible security and shared growth remain key touchstones of State credibility. The government must strive to achieve these.

 

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BJP, elections, Hindu leaders, India, Indira Gandhi, politics, RSS, Secularism, social liberals

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Follow the money to tackle the fiscal perfect storm

June 6, 2018

Piyush Goyal 2

Piyush Goyal, the interim finance minister, will need to be a lucky general if he is to overcome the triple challenge of widening trade and fiscal deficits and lacklustre private investment.

Exports – India’s achilles heel

Despite our comparative advantage of cheap, skilled labour and entrepreneurial zeal, export pessimism is endemic — unlike in China. Last year we imported goods worth $460 billion, while exports were just $303 billion, leaving a trade gap of $157 billion. We try and cope with the trade deficit by mimicking the American economy — minus the pull of its global currency. We maintain a strong, stable rupee and high interest rates to encourage inward financial flows of capital to plug the deficit in the external account and protect our foreign reserves.

Our saviors – inward remittances from Indians in the Gulf

Gulf workers

We are blessed that our valiant expatriates in the Gulf states regularly repatriate their foreign earnings to finance their families struggling to survive in India. Net inward remittances — around $70 billion per year — cover around one-half of our trade deficit. The inward flow of foreign direct investment and “hot money” flowing into our equity and debt markets provide the residual foreign exchange for imports.

Aping America’s strategy to manage its external account, is out of context

A chronic trade deficit forces us into economic contortions. One such is high interest rates to generate demand for the rupee, never mind that it permanently disadvantages exports and makes domestic production uncompetitive, versus imports. A new monetary policy announcement is due later this week. If the Reserve Bank of India increases base interest rates, it will be in line with its inflation targeting, rupee strengthening and external account stabilisation objectives.

High interest rates can kill our nascent economic recovery

The consequences for the domestic economy will be harshly adverse. Cheap money and a realistic exchange rate is what drove the Chinese juggernaut for years. Admittedly, it can also create bubbles. But private investment is at risk. The emerging political uncertainty and the yet to be completed corporate insolvency processes — affecting 15 per cent of bank assets — are investment dampners. Higher interest rates could well be the straw that breaks the donkey’s back. Public investment is always a poor substitute for private investment. It comes with the enormous risk of misallocating capital hugely, including for political ends.

A circle of wealth excluding the poor?

Political economy considerations also conspire to maintain the inward financial flows of “hot money”, which boosts stock market valuations. Over the last two months, foreign portfolio investors have sold a net amount of around $3 billion of Indian assets roiling our thin domestic stock and debt markets — eroding the wealth of 40 million equity holders. But it matters little for over 200 million other families, who continue to squirrel away their meagre savings into interest-bearing bank or post office savings accounts, or in gold.

Look beyond tax revenue to fund burgeoning expenditure

HAL

The Central government is constantly walking on a razor’s edge to achieve fiscal deficit targets – which is necessary to avoid stoking inflation. It is a tough call to choose between allowing oil spikes to pass through to consumer prices at the cost of stoking inflation and consumer anger, or to absorb the price increase within the general government finances, at the risk of blowing the fiscal deficit targets. The win-win solution is to find a source of additional non-debt financing, till the full benefits of GST kick in over the next five years. One option is to monetise the public investments made thus far in industrial entities, infrastructure and land.

Find a non-tax source to replace the cushion provided earlier by low oil prices

Ashok

During 2015-18, the government reduced the fiscal deficit by one per cent of GDP because of the availability of additional revenues of Rs 2 trillion from cheap oil. The government should target raising Rs 4 trillion over 2018-20 by monetising public assets, including the sale of equity in public sector undertakings. These capital inflows can help keep the fiscal deficit within three per cent of GDP. This is not easy. Embedded vested interests, which benefit from such investments, would create hurdles. Political capital will have to be spent.

Sell our “crown jewels” and monetise completed publicly financed projects 

NALCO

The disinvestment ministry was notionally empowered last year to discharge a limited mandate with respect to managing government equity in PSUs. But disinvestment remains a programme of simply selling government equity, when the stock market is high, to plug the fiscal hole and keep the fiscal deficit in check. 2017-18 was a landmark year. The government sold equity worth Rs 1 trillion due to very adroit management and with help from deep-pocket publicly-owned entities like ONGC, which bought into HPCL and other institutional investors who generated the demand pull. This was a one-off. The target this year is 20 per cent less at Rs 800 billion.

Air India is a high-profile disinvestment, which can stem the annual loss borne by the government. The 2016-17 loss was Rs 58 billion. Not enough to break the budget but unnecessary, and hence wasteful. No bids were received for it. Blame the flight of international capital to “risk-free” investments. Blame our fragile domestic political environment prior to the general election. But also blame low appetite within the administrative departments to let go of the PSUs that they control.

Don’t mimic the UPA – discipline departments which fight to retain PSU assets 

Air India

It is astonishing how quickly political capital can fade. Prime Minister Narendra Modi’s signature theme was that his writ runs in the Central government. But the foot-dragging in the Air India disinvestment case seems to illustrate that this might have changed. Admittedly, Air India is an iconic brand. For long, you felt you were home once you boarded Air India — remember that familiar smell of curry? Selling it, specially to a foreign investor, is like the British selling Jaguar-Land Rover to the Tata Group. Pragmatic but heart rending. We have yet to become business-like about our crown jewels, as the British have. We sell our assets past their expiry dates and then wonder why we got peanuts.

Focus, diligence and smart choices can make a difference

Success in navigating through this perfect storm will depend on avoiding the bureaucratic gut instinct for “tax terrorism”; monetising public assets in mission mode; monitoring expenditure closely and ensuring fiscal discipline, while absorbing the oil price increase and providing for higher farm gate prices — two politically inescapable imperatives. If the finance minister is lucky, oil prices will subside; America’s tempestuous and unpredictable President will lapse into hubris and the domestic political landscape will change for the better. But don’t wait for it to happen.

Adapted from the authors opinion piece in The Asian Age, June 6, 2018 http://www.asianage.com/opinion/columnists/060618/a-fiscal-storm-looms-dont-wait-for-godot.html

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Oil shock: Entry point for reform

May 25, 2018

POTUS Saudi

The latest oil shock — an increase from $69 (average Indian import price) to $80 per barrel (Brent) this week — is courtesy the American President, Donald Trump, who unilaterally pulled the United States out of the 2015 deal between Iran and the UN’s Permanent Five (US, UK, Russia, France, China) plus Germany. This spooked the global financial markets, which justifiably fear renewed trade sanctions on Iran. Pulling out Iran’s 5 per cent contribution to world oil production has consequences. The nuclear deal which had earlier ended sanctions boosted world supply reducing oil price for India from $84.2 in 2014-15 to $46.2 in 2015-16. New sanctions may reverse the trend.

Who has POTUS benefited?

The gainers are the oil producers. The US President has imposed the supply constraint that Opec finds difficult. Saudi Arabia, Iran’s Sunni bête noir, is in clover. The 42 per cent increase in prices over last year, relieves fiscal stress; is wonderful for the long-awaited listing of Aramaco, its national oil company, and avoids the unpleasantness of having to tax its citizens or reducing their benefits.  Other countries in the Gulf, Venezuela and Russia will also benefit. America’s shale oil producers, for instance, are busily removing the covers on their drills.

Who suffers the collateral economic damage?

The big losers are China and India. For India, higher prices mean a bigger trade deficit and more stress on our foreign exchange reserves. Another outcome is rupee depreciation. Foreign hot money is pulling out to “safe haven” destinations also in expectation of an increase in US interest rates. The hot money bleed made the rupee slide by around six per cent to more than Rs 68 against the US dollar from around Rs 64 earlier. But it is still overvalued and needs to go down to Rs 70.

The risks for India

The oil shock poses two risks for India. First, the fear that it will increase the current account deficit (CAD) — the difference between international receipts and payments, from trade and income flows — beyond the acceptable level of two per cent of GDP.

Second, it poses a conundrum of navigating conflicting objectives — preserve the market-based retail oil price mechanism whilst graduating the price shock for consumers and containing inflation.

Moody had revised India’s credit rating upwards last year. Standard and Poor had not. Enhanced imbalance on the external account and missing the fiscal deficit target for 2018-19 will invite a review of India’s sovereign risk.

How serious is the risk for the CAD – red flagged at max. 2% of GDP 

At $80 a barrel, our additional spend on oil imports could be around $9 billion this fiscal, net of the increased earnings from oil product exports. But the threat to keeping the CAD below the target of two per cent of GDP is over-hyped.

The oil shock has a silver lining. With more robust fiscal balances in the Gulf, investment and jobs will increase for Indian workers, who generously remit all their earnings. Inward remittances, higher than $69 billion last year, will dilute the impact on CAD. More petro-dollars to spend, can boost our exports to the Gulf.

Second, the accompanying six per cent depreciation of the Indian rupee will make our price-sensitive exports much more competitive. Last year exports grew by 12.1 per cent to $300 billion. A three per cent growth in exports this year would generate the additional spend needed on oil imports of $9 billion.

Third, a weaker rupee discourages imports generally. Last year total imports increased by 21 per cent. Making domestic producers more competitive is in India’s interest. The risk of breaching the CAD cap is minimal.

imports

The risk of balooning the fiscal deficit

Transport minister Nitin Gadkari had recently opined that subsidizing oil consumers is not aligned with a market economy. Not quite right,sir. It is in a market economy that the question of subsidy arises – of course subsidy must be tightly targeted, which ours is not.

In an old, Soviet-style economy, there are no subsidies because the government sets the retail price for the production units which it also owns. In our context, this is analogous to directing ONGC to absorb the cost. This is best avoided.

Preserve oil PSU commercial autonomy

Last year, ONGC assisted in achieving the disinvestment target by buying the government’s shareholding in HPCL. Whilst even such nudging to support the government is undesirable. But far worse is to dilute ONGC board’s commercial autonomy for pricing products. More importantly administered pricing distorts markets and discouraged private sector investments and operations – both highly desirable in oil.

Three better options exist : They need professional effort and political capital 

Slash frivolous budget allocations for current year

swaach

Three options present themselves. First, intrusive Budget scrutiny can do the trick. A fiscal “surgical strike” slashing frivolous expenditure, which has crept in, can generate the Rs 0.6 trillion to sanitise consumers from a price increase. This is just six per cent of the Rs 10 trillion, which the Central government spends on schemes without including wages, pensions, interest or capital expenditure.

Pass through the price increase to customers @ 50 paise per litre per month  

Second, it is not desirable to entirely sanitise customers from the oil shock. This will kill the liberalised “marked to market” regime for retail prices of oil products, introduced last year.

It is also environmentally irresponsible not to have a price signal to induce lower consumption of petroleum products and incentivise users to switch to more efficient end-use equipment — cars, motorcycles, water pump and generators. Mr Gadkari is right. A portion of the oil shock should be passed through.

pollution

Invoke the GST style federalized decision mechanism for states to cut VAT equal to the windfall gains for price increase.

But state governments must be cajoled to give up the windfall gain accruing to them because VAT (their tax) is an ad valorem rate and not a specific rate as is Central excise or Customs. TERI, a New Delhi think-tank is modeling a revenue neutral taUse x realignment which would be useful. Government would do well to consult widely rather than go about taking decisions in secret as it tends to do.

Fiscal deficit 2018-19 target of 3.3% of GDP is unreal – last year we were 3.5%

Piyush Goyal

Lastly, Budget 2018-19 projects a fiscal deficit of 3.3 per cent of GDP versus 3.5 per cent in 2017-18. The target is not credible. Capitalisation of stressed public sector banks; agriculture minimum support price revisions; and the new flagship “Ayushman Bharat” medical insurance scheme will surely push the deficit beyond the target. The N.K. Singh committee report on Fiscal Responsibility and Budget Management “blessed” variations in fiscal deficit capped at 4 per cent of GDP. Following this lead can provide an additional Rs 1.3 trillion to the Finance Minister, Piyush Goyal, part of this could be used for absorbing oil price increase. But stoking inflation is a real risk here.

Oil at $100+ soon?

A further increase to the 2011-2014 level of $100+ a barrel is unlikely. Oil producers, like Venezuela, need to cash into the high price. Sanctions on Iran, now seem likely since the POTUS-Kim Jong – peace talks have collapsed and POTUS needs to look muscular.

POTUS

But even if imposed, sanctions will not bite till six months after they are imposed. If oil spikes nevertheless, a temporary adjustment loan, from the IMF, can dilute this external shock, which can otherwise jeopardise our plans for mitigating carbon emissions to meet targets to 2020.

The continued supply of Iranian oil, but denominated in rupees, like the Russian trade earlier, is also possible. The United States may accept such necessary but limited “exceptions” for Iran as a humanitarian response “needed by the Iranian people” to survive.

Economic stress creates reform entry points because the urgency becomes publicly visible. 1991 was an extreme event. The 2018 shock is low intensity in comparison. But it can help to push the needed third generation of reforms — deep fiscal austerity, energy security and PSU autonomy.

Adapted from the author’s opinion piece in The Asian Age, May 25, 2018 http://www.asianage.com/opinion/columnists/250518/oil-shock-entry-point-for-deepening-reform.html

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Budget, Economy, Energy, Environment, India, Tax

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Book Review: Paying the price for aid

May 23, 2018

AID

Three themes undergird the author’s exhaustive narrative of the politics around foreign aid in India between 1950 and 1975, during the early years of the Cold War — the people who made key decisions; the domestic context and, finally, the geopolitical incentives that shaped donor responses.

The deal makers

Indian officials come across as being surprisingly entrepreneurial in securing aid. Mercifully, unlike more recently, the political and bureaucratic manoeuvring was almost never for personal gain, other than managerial satisfaction at seeing pet projects fructify.

Homi J Bhabha lobbied for civilian atomic power at a time when hydro and coal-based power was the norm. P C Mahalanobis, a physicist turned statistician, institutionalised centralised planning as a scientific prerequisite for development. C Subramaniam as minister for food ushered in higher agricultural productivity via the Green Revolution. Morarji Desai as finance minister and later prime minister promoted private Indian industry and trade, an outlier view, supported by G D Birla. B K Nehru — India’s economic ambassador to the US; John Mathai and later C D Deshmukh as finance minister, economist I G Patel and L K Jha as ambassador in Washington were more inclined to look to markets, international trade, the private sector and the criticality of macro-economic stability, all of which aligned more with the United States as a development model.

Jawaharlal Nehru and later Indira Gandhi as prime minister; Krishna Menon as defence minister, Sarvepalli Radhakrishnan and later D P Dhar, ambassadors to Moscow; Gulazarilal Nanda, deputy chairperson of the Planning Commission; K D Malaviya, petroleum minister; P N Haksar, principal secretary to Prime Minister Indira Gandhi and later deputy chairperson of the Planning Commission and T N Kaul as foreign secretary were the top decision makers who leant towards the Soviet Union.

The domestic context

But individuals became important only because they seized the moment in a given context. Nehru was opposed to be seen begging for aid. It did not fit with his ideology of non-alignment. But India needed lots of aid. With overt political alignment unacceptable, the second-best option for officials was to conspire and reassure donors, that India’s and their interests were aligned.

America feeds India

The establishment of the Peoples Republic of China in 1949 spurred America to save India from Communism. American aid funded technical assistance, community development, large irrigation and flood control projects like the Damodar Valley Corporation and credit lines for the import of machinery by private industries. The PL-480 programme, starting in 1960, provided desperately needed food grains against deferred payments in rupees. The accumulated amount equalled 40 per cent of the money supply by 1974. The US government generously wrote the largest cheque ever, of $2.05 billion, converting two thirds of the outstanding balance into a grant for India.

But disjointed Geopolitical compulsions act as spoilers

But the Indo-American relationship was an uneasy fit. The 1954 treaty of mutual security between the US and Pakistan was an early spoiler. India’s denial of an endorsement for US military action in Korea and later, in Vietnam, rankled. By 1969, interest in India waned, as President Nixon focused on resetting relations with China. In 1966, India accounted for one-eighth of total American aid. By 1975 it had dwindled to one-eightieth.

Soviet Union industrializes India hoping to strengthen Indian Socialism

Soviet aid comprised projects to build industrial capacity. This fitted Indian objectives of backward area development via the creation of model public sector factories in the “core” areas according to the 1956 Industrial Policy. By the 1970s, Indian industry had caught up, whilst the Soviet Union had fallen behind in technology and run out of revolutionary fervour. Meanwhile, enhanced multilateral, soft credit from the World Bank under Robert McNamara introduced new options to source industrial equipment commercially and competitively.

The West – aligned with fPakistan, wary of China and needing its buying power –  fails to provide arms to India 

The United Kingdom, the ex-colonial power, was best placed to meet India’s defence needs. But it was unwilling to supply arms against rupee payments. Military aid from the US for India was a non-starter, given that Pakistan was a close ally. The 1965 Indo-Pakistan war did not help. In 1971 the US-China détente prompted Henry Kissinger, secretary of state, to convey that America would not come to India’s assistance, against a Chinese attack, in response to India’s military action in Bangladesh. In comparison, the Soviets were generous – supplying military assets more modern that those supplied to China; readily accepting technology transfer and payment in Indian rupees. Consequently, the Indo-Soviet defence partnership has endured.

An informative, closely referenced read for diligent students of South Asian political economy, the author posits that India paid a price for foreign aid, which subverted indigenous institutions of collective decision-making, like the Planning Commission and the Cabinet. This assessment seems overblown. Institutions evolve and adapt. Their efficiency must be measured from real outcomes, not the stated objectives or the rigidity of the institutional framework.

The race towards assured mutual destruction in South Asia was fueled by competitive arms aid but civilian aid strengthened India

However, unregulated military aid has sparked off an arms race and contributes massively to the regional welfare loss from insecurity and high defence spend. But just as surely, civilian aid cushioned the negative impact of natural and economic shocks, boosted infrastructure and enhanced human development — all of which helped preserve the integrity of India’s nascent democracy. Individual, institutional or national egos were bruised in the process. In hindsight, that is a small price to pay, for what is today a sustainable and increasingly equitable, growing economy.

Adapted from the authors book review in Business Standard, May 23, 2018 http://www.business-standard.com/article/beyond-business/paying-the-price-for-foreign-aid-118052200013_1.html

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Book Review, bureaucracy, Business, Democracy, Economy, India

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What Karnataka foretells

May 19, 2018

File picture shows Prime Minister Narendra Modi drinking green tea during a tea ceremony in Tokyo.

The tea leaves, following the Karnataka elections, are as muddied as they were before it — a hung House, a history of unstable coalitions and in your face examples of money power and shabby politics all around.

Modi government a bell-weather for fiscal management

The BJP not getting a majority has spooked the financial markets. Frankly, it matters little which party or parties have a majority as long as it or they live through the five-year term, thereby allowing the outstanding administrators which Karnataka has to go about their jobs and for business to plan ahead. The Narendra Modi government is a bellwether for markets simply because it has demonstrated vastly superior capacity to get the rusty levers of government working.

Only Janata (S) gains from the mess

The only real gainer in Karnataka is a regional party — the Janata Dal (Secular) under the leadership of H.D. Deve Gowda, a former Prime Minister of India (June 1996 to April 1997) and his son H.D. Kumaraswamy. The latter was chief minister of Karnataka (February 2006 to October 2007), courtesy a power-sharing agreement with the BJP after the JD(S) walked out of a similar arrangement with the Congress in 2004. The record does not inspire confidence in its commitment to political stability.

Germany lived for six months without an elected government, why not Karnataka?

Having said that, Karnataka is not a backward state where political stability is critical for survival. Germany took nearly half a year to form a coalition government after inconclusive elections in September 2017 without any adverse economic consequences. Karnataka, like Germany, has a high capacity to absorb the absence of elected government. It is above the median, amongst Indian states, in its socio-economic indicators. It is one of the four major national hubs for the tech. industry. Services account for 60 per cent of the state’s domestic product. Per capita income is 20 per cent higher than the national average.

Yogendra Yadav, a veteran political analyst, has rightly said that the hung Assembly in Karnataka is a routine affair. It acquires significance only because of what it might foretell about political economy responses at the national level. Shorn of all jargon, the question is — will the BJP continue its reformist economic agenda or will it be abandoned for more populist measures, in the run-up to the spate of Assembly elections and the national election in 2019?

BJP’s desperation for power a self goal

Mr B.S. Yeddyurappa, the state BJP leader, on being invited by the governor, Mr Vajubhai Vala, to take charge as chief minister, quickly declared that farm loans, possibly amounting to `250 billion, are waived, even before he could prove his majority. This could be a panic attack, foretelling that the BJP may not find the numbers to cobble up a majority. If it does not, the unseemly political manoeuvring to gain power will be a self-goal.

Will Modi’s reforms take root?

The two biggest reforms that have been initiated by the Narendra Modi government are incentivising formalisation of the economy via the Goods and Services Tax and using the Insolvency and Bankruptcy Act to end the long festering, toxic ecosystem of Indian banks, which spawns stressed assets. Both actions increase tax revenues, reduce the pressure on public financial resources and control black money. These are signature reforms with significant economic gains. Imposing penalties on businessmen, who misuse or default on bank loans, has enormous popular support. Neither is likely to be abandoned by the Modi government.

The next two important achievements have been taming inflation whilst playing a careful sherpa to economic growth. Low international oil prices helped finance minister Arun Jaitley to liberalise the petroleum retail price regime whilst simultaneously raising additional revenues to reduce the fiscal deficit from 4.4 per cent of GDP in 2013-14 — the final year of the UPA — down to 3.5 per cent by 2016-17, where it has remained in 2017-18. Further reductions are tough. Inflation is likely to edge up to five per cent this fiscal driven by the oil price increase, whilst the fiscal deficit shall increase to four per cent of GDP.

Piyush Goyal a hard taskmaster – will not let tax revenue slip

Image result for free photos Piyush Goyal

It is unlikely that the new, interim finance minister, Piyush Goyal, will countenance any further deviation from the path of fiscal consolidation, lest it erode India’s credit rating. He is likely to keep inflation in check by adjusting Central taxes on petroleum to avoid the full impact of the oil price spike passing through into retail prices. But this revenue sacrifice will need correspondingly higher collections of income-tax and GST — a task that the present finance secretary Hasmukh Adhia is adept at. Monetising existing infrastructure assets, to get additional fiscal resources this year, will be an extension of what Mr Goyal was already doing as railway minister.

The blessings of a cheaper Rupee

It is not all doom and gloom. The rupee exchange rate has adjusted to more realistic levels as foreign investors reallocate their “hot” money to higher return jurisdictions. This is a blessing. Letting go of the fetish of a strong rupee can boost exports; contain imports; make domestic production more competitive and induce additional flows of long-term foreign direct investment into projects. Higher international oil prices also mean more net inward remittances from our citizens working in the Gulf countries, which will balance the external account.

Focus on budget announcements for liberalising agriculture

Quickly implementing the progressive announcements of Budget 2018-19 for agro-processing, liberalisation of domestic agricultural markets and agricultural exports — which has not been in the news since — can illustrate that the government walks the talk on a sustainable doubling of farmer incomes.

Pursue enhanced health care capacity 

Investing more in primary health via well-equipped “wellness centres” and insuring the poor against the ruinous costs of hospitalisation, via Ayushman Bharat, are powerful, scaled-up initiatives, which should be foregrounded.

Actions speak louder than words

If the BJP has a long-term economic vision for India, it needs to shun acting in a purely transactional manner in the near term, with an eye to squishing out all political opposition. It has taken the lead at the national level in ensuring probity. Doing the same in the states can show that the BJP rubber is meeting the road.

Adapted from the authors opinion piece in The Asian Age, May 19, 2018 http://www.asianage.com/opinion/columnists/190518/what-ktaka-foretells-not-all-gloom-doom.html

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Resurrecting ghosts is bad politics

May 9, 2018

AMU

One wonders whether Muhammad Ali Jinnah would have been disappointed or elated at a band of misguided, ultra-right Hindus, objecting to his portrait hanging in the students’ union office of the Aligarh Muslim University. Disappointment, at becoming a hate object, would fit well. the elegant, urbane man with a taste for fine suits, that Jinnah once was. Elation would align with the politician, who fueled the creation of Pakistan and who could now turn around and say – see, I told you so.

Zero-sum world view, led to partition

After all, it is a belief in the irreconcilable co-existence of Hindus and Muslims in one country, which led to the creation of Pakistan. The breaking away of Bangladesh from Pakistan, should have put an end to the unfortunate idea that only an Islamic state can assure a secure future for Muslims. Wars between Pakistan and India have deepened the distrust of the larger “Hindu” nation across the border. To be fair, we in India, have also not done a good job of forging a national identity, so compelling, that other social allegiances – religion and caste, fade in comparison.

It is true that professional, social relationships and regional affiliations – culture, language and food – often paper over the underlying segmentation of caste and religion. But seven decades of hotly contested electoral democracy has fed on and deepened the fissures, rather than cemented the gaps. In India we tend to avoid head-on collisions, preferring to skirt around intractable problems and hope that time will solve them.

Our history bears this out. Consider that a deeply traditional society was assumed to have magically evolved, on the eve of Independence, into a rational, scientific and liberal society, resonating with the personal beliefs of a microscopic, western educated elite, which was dominant in the transition from colony to independence.

If Jinnah’s vision, etched out in the constitutional assembly of Pakistan in 1947, of a Pakistan, which would not make a distinction between citizens on religion, sounds hollow, so too does our avowed adherence to secularism – the constitutional roots of which remain shallow.

India bends to avoid breaking

India is a “soft” state. The rule of law is not absolute. It has a time dimension. It is considered administratively wise to allow it to be bent, in the expectation that, with time and changed circumstance, the weight of institutional rigidity would bring it back to its rightful place. Inevitably, such flexibility in the application of the rule of law allows free play to mala-fide interests and dilutes the credibility of State actions.

Democracy can deepen divides

Democracy has unexpectedly, sharpened religious polarization. The good news is that it has also deepened caste polarization. Baba Saheb Ambedkar’s pessimism about Dalits getting justice via democratic institutions, without suitable tweaks and safeguards for positive discrimination, resonate much deeper today, than they did in the rosy-tinted period post-Independence.

Dalit empowerment has created a conundrum for traditional Hindu society. It upends the gentlemanly agreement between Dalit and upper caste political elites, to co-exist without upending the basic power structures which bind down the ordinary Dalit. For example, grooms must not ride a horse to their wedding in emulation of a custom, which was the traditional prerogative of prosperous upper caste people or display and fire into the air in celebration, at Dalit weddings.

Everyone is relatively better off

Admittedly these are mere, distant pinpricks when viewed from above. The helicopter view of Indian society remains positive and progressive. Urbanization evens the score for Dalits. The enormous expansion of the service sector has created jobs which are skill based, caste-neutral and anonymous. Similarly, exports offer opportunities for good jobs in handicrafts, textiles, leather, metalwork, carpentry – areas where Dalit and Muslim communities dominate.

Communalism, casteism and low development feed off each other

Luckily for us, much of the religious and caste angst is in the backward areas of the north and central India, where human development indicators are low and per capita incomes are below the median level. In 2007-08 India’s median Human Development Index (HDI) was 0.47. The states of Bihar, Jharkhand, Orissa, Chhattisgarh, Madhya Pradesh and Uttar Pradesh, comprising 41 percent of the total population, were well below the median.

Curiously, Pakistan in 2010, with an HDI of 0.53 was worse off that the border Indian state of Punjab at 0.61 (2008) but better than Rajasthan at 0.43 (2008). Bangladesh, in 2010, with an HDI of 0.55 was better than the Indian state on their border – West Bengal at 0.49 (2008). Cross territory comparisons are notoriously misleading. But it is startling than even several decades after political separation, the cross-border differences in South Asia are less stark than those within the country. India has made significant strides in improving human development outcomes since 2008 and achieved an HDI of 0.62 in 2015 with focused attention on backward regions. The Modi governments program of targeting around 15 percent of the total number of 640 districts for accelerated support, will further even out the spatial distribution of development and income.

In 2014 the Modi government came to power on the back of an impressive record of achievement at the state level in BJP rules states. A host of development initiatives have been unleashed, which seek to sustain macroeconomic stability, raise incomes, roll out infrastructure and reverse the ravages of environmentally unsustainable development. There are more successes than misses. This is solid ground on which to go to the people in the general elections of 2019.  It is unwise to fall into the temptation of maximizing political gains by departing from the narrative of achievement.

Also available at the TOI Blogs May 9, 2018   https://blogs.timesofindia.indiatimes.com/opinion-india/resurrecting-ghosts-is-bad-politics/

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So, you want “good” jobs.

May 6, 2018

toyota

Growth with jobs is the new Eldorado. At its core, the raging debate around job creation in India is really about how far India has traveled down the conventional path of industrialized development and its proxy — long-term employment, with defined benefits and social security. This metric of economic performance is anachronistic in the post-industrial ecosystem.

Long term, formal employment is declining even in the developed economies. The future of work is casual, possibly off-site, with skill sets and job descriptions that are constantly adapting to technology and re-schooling a necessity even for the middle aged. We may never ever reach the copybook stage of industrial age employment. India, unlike China, is largely informal and ineffectively regulated for work standards and safeguards. Out of a workforce of around 427 million, formal employment is just 14 per cent at 60 million.

Mind you, there are 972 million people more than 15 years of age who could work. But the lack of opportunity in the workplace and cultural constraints keep 56 per cent of then (a vast majority of them being women) at home. This probably explains our penchant to get to a higher level of formalized employment, say 60 per cent of the workforce, and thereby resemble a developed economy.

Statistical jousts around employment

The ongoing statistical debate between government economists (of the Niti Aayog and those in the Prime Minister’s Economic Advisory Council) and external experts (from CMIE, for example) revolves around the number of jobs created since 2014 as an index of economic performance. The CMIE data, based on quarterly surveys, shows that net-job creation in 2017, over the previous year, was just 1.4 million, primarily due to large job losses of seven million among young adults (aged 15-24) and three million among veterans (aged 65 or above) significantly diluted the positive impact of an addition of 12 million jobs in the age group of 25 to 64.

The government appears disinclined to trust large surveys. It prefers to rely on the monthly payroll data. There is the inexplicable issue of just 12 per cent of women, of 15 years and above, being part of the workforce in the CMIE survey data. Gallingly, 21 per cent of Saudi Arabian women work. Can it be that 88 per cent of Indian women above 15 years actually do not wish to work? Compared to such quirks in the CMIE survey data, there is a comfortable certainty about the payroll data. The only problem is — payroll data is unlikely to provide the granularity required across a largely informal economy.

Even if one is disinclined to believe the outlier estimation by economist Surjit Bhalla, of an addition of 15 million jobs in 2017, the good news is that data from the Employees Provident Fund Organisation (EPFO) shows an addition of three million jobs during the six months till February 2018 — an encouraging growth of 10 per cent per annum over the 60 million employee accounts. It is unclear, however, if these are all new jobs. The digital outreach, increased tax oversight and the GST implementation are all encouraging formalisation of operations, including payments to existing informal workers. Payroll data from the New Pension Scheme for government employees shows a similar happy trend, with an addition of 0.4 million employees to the base of around 5 million employee accounts.

It remains unclear where this statistical jousting is leading to, except to the scoring of political brownie points with the relevant political constituencies.

Workers under threat – too many, chasing too few jobs

headload

For the large mass of workers, a “formal” sector “good” job in the classic industrial sense of the term is becoming increasingly unlikely. Humans are under threat. Karl Marx was on the button, two centuries ago, when he intuited that it is humans who add value in the economy. We still do. But we became so good at extracting value from human effort that we have marginalized ourselves.  Machines today, substitute for all but the most advanced cognitive human skills. Once machine learning becomes deeper and autonomous of human effort, technology czars like Ellon Musk, presciently point to a dystopic, machine versus man future for the planet.

We do not have to imagine what it will be like in in 2050. Even today, deepening levels of worker anxiety about retaining a job affects large swathes of the developed economies. Indians and others in the developing world are already well acquainted with this syndrome. We hesitate to take medical leave even when we are sick. And if you think that happens only in the informal sector, think again. Even politicians and senior government officials fear being nudged out, merely by not being visible.

Low levels of formal employment require enhanced government intervention. As work becomes intermittent or irregular, even for skilled employees, the potential loss of income must be cushioned by social protection schemes to keep individuals and families afloat.

Listen to the Jholawallahs

Dreze Aruna

The NREGA program is a basic form of such cushioning, which benefits around 20 million manual workers. Jean Dreze is right when he asserts that access to work is more than just another way of putting public money into needy private hands. Aruna Roy has the same message. Collectives have a dynamic, which empowers the marginalised. They provide institutionalized support for challenging traditional, arbitrary and often illegal entitlements. They also establish a new and healthy tradition of direct democracy.

The early noughties presented a future which looked impossibly bright and full of possibilities, girded by shining bands of opportunity crisscrossing the globe. That vision has now dimmed. The environmental, cultural and institutional limits of globalization are now visible. We would do well, however, not to be blindsided by the inevitable ratcheting down of global aspirations. It could turn out to be a hard landing for the overly ambitious.

Adapted from the author’s opinion piece in The Asian Age, May 5, 2018 http://www.asianage.com/opinion/columnists/050518/jobs-nature-of-work-it-may-be-time-to-rethink-basics.html

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Are Marwaris taking over our heritage monuments?

May 1, 2018

Red fort

Someone else, better equipped and trained should do this routinely

Somebody needs to fund heritage preservation. Why not the Marwaris and Banias? After all they funded the National Movement for Independence. But try telling India’s die hard, Left Liberal crowd that a person in desperate need of a public toilet, does not care, whether the plaque above it gives credit to a public-sector company or a private entity. An especially abled person, with a yen for travel, couldn’t give two-hoots who paid for the ramp that makes heritage monuments accessible on her wheel chair.

None of this will wash with those who hold public management of “national” monuments and public sector white elephants dear to their heart. They would rather see them collapse, gradually, than hand them over to the private sector for making them user friendly.

Our heritage, our identity

Last year, in September, the government launched, what should have been an innocuous and much needed initiative to seek non-state (private) interest in providing better facilities at our heritage sites in exchange for on-site advertising. This is explicitly not a revenue generating partnership. No additional fee or charge, unless approved specifically by the government, is to be imposed by the non-state partner.

ex-IAS, Minister Alphons, off to a good start

Things moved surprisingly fast after ex-IAS KJ Alphons got elected to the Rajya Sabha from the BJP and joined the government as minister for tourism. Thirty-one entities have been shortlisted to “adopt” 95 monuments and sites across India.

These entities called “Monument Mitra (friends)” are required to prepare a vision document detailing what needs to be done to improve the visitor experience and how they would go about doing it, as a part of their corporate social responsibility (CSR).

The good news is that, this time around the public-sector has been spared the near compulsory burden of footing the bill. Most of the interested entities are private companies except NBCC (India) ltd. – a construction PSU for the Old Fort, New Delhi and the State Bank of India Foundation for the Jantar Mantar complex, New Delhi.

Dalmia Bharat Ltd for the Red Fort

But the selection which grabbed the headlines was the one signed with Dalmia Bharat Limited for the Red Fort in Delhi. Left Liberal sentiment was outraged at this seeming mortgage of India’s iconic heritage fort, to the Dalmia’s – an old Calcutta/Delhi based family business.

It is unclear, why the Dalmias are interested in the project, except to generate goodwill with the government and amongst citizens in their home city. The potential for getting a free Dalmia promo in the national TV reportage of the annual Independence Day spectacle at the Red Fort on August 15, might have also been a motivator.

Keeping art and heritage “aficionados” out of the process, generates suspicion

The vision document or the MOU, spelling out what the company intends to do has not been publicly shared. The Committees reviewing the expressions of interest; the vision documents and approving the MOUs consist only of the relevant government departments, to the exclusion of non-state actors, particularly from the extended arts, architecture and culture community in Delhi.

As expected, exclusion breeds unnecessary suspicion and distrust. The Modi government seems to shy away from the active participation of non- state actors in decision making. The previous government of Sonia Gandhi-Manmohan Singh went overboard in the other direction, possibly to deflect any blame from itself. A healthy balance between the two extremes would help.

The Dalmias – hard nosed businessmen, far from the sensibilities of culture.

Ramkrishna Dalmia, a Marwari from Rohtak, was the founder of the Dalmia group. Thomas Timberg notes in – “The Marwaris” that, like all entrepreneurs of the early 1900s he made his money from speculation in silver and then went on to become one of the three largest Indian industrialists along with Tata and Birla. But unlike the other two groups, the fortunes of the Dalmia’s have waned.

Dalmia Bharat Cement is a listed company with a market cap of just around Rs 220 billion – around one half of the smallest 100 top listed BSE companies. Its CSR focus is on energy conservation, rural development and solar power applications. Providing and managing visitor facilities for a significant historical monument is a significant departure from its main line of business. Of course, that is no reason to dismiss the effort outright. But it does raise doubts about their ability to perform, to satisfaction, even if the intent is genuine.

Not too many private takers for cultural spend

Government argues that corporates are not exactly lining up to spend scarce money on historical monuments. They must make do with those who are interested, even if they will have a steep learning curve. Mechanisms for technical support to the Monument Mitra and oversight of their activities, are being put in place. Cultural czars however, thumb their noses at such amateurish attempts to break into the rarified world of culture, art and heritage architecture.

To be fair to the government, not all selections, have the same problem. The well-known Aga Khan Trust – which restored Humayun’s Tomb in New Delhi, has been selected for the Aga Khan Palace in Pune; The premier hotel chain ITC and a GMR entity (builders of the Delhi airport) have been selected for the Taj Mahal and so on.
Dalmia Bharat Limited – a cement manufacturer and infrastructure developer – is an outlier for the Red Fort. One wonders why the government does not share the rationale on which the decision was made with interested citizens. This would allay fears.

Marwaris

Suspicion of the Bania (India’s mercantile caste) is deeply imbedded in the Indian psyche, possibly anachronistically. Even the Marwaris and Banias might have moved on from the rapacious image that Left Liberals have of them. We shall know soon enough. By Independence Day, August 15, 2018.

Also available at TOI Blogs https://blogs.timesofindia.indiatimes.com/opinion-india/are-marwaris-taking-over-our-national-heritage/

 

 

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