governance, political economy, institutional development and economic regulation

Archive for May, 2014

PM Modi’s second governance test

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Success attracts its own supporters. Narendra bhai epitomizes the success of merit and dedication. It is not surprising therefore, that supporters, including erstwhile critics, both national and international, are thronging his doorstep for a darshan.

There are visible signs that the public adulation has not gone to his head. He has shot down an attempt to curry favor with him by BJP governments, by revising the textbooks with a chapter devoted to him as a role model. This is very welcome and good news.

But a big governance test will confront him over the next two months.

Can he support the Finance Minister deliver a “realistic” budget which does not fudge either revenue receipt or expenditure- two favourite tricks of budget managers to fool the public, adopted by the UPA2 in its last budget? Second, can he reduce the fiscal deficit below the level of 4.9% in 2012-13; the last “normal year” data available. The Fiscal Responsibility and Budget Management Act 2003 targeted a maximum Fiscal Deficit level of 2% by 2006. We never achieved that level. The best was 2.7% in 2007.  A plan to reach close to this over the next 3 years, by reducing it by 0.5% point every year is sorely needed.

Growth fundamentalists will shout that this is retrogressive. His advisors eager to “kick start” the economy and show dramatic results will advise him to throw fiscal caution to the winds and spend his way out of the economic downturn. But none of the growth fundamentalists can guarantee that “kick starting” growth by public spending actually adds jobs for the poor. Indeed the evidence is adding up to quite the reverse conclusion. Public spending windfalls (as in the Common Wealth Games), line the pockets of the top 1% of Indians, whose business margins soar and of shareholders, whose equity capital appreciates (on which there is no tax at all!). But the impact on jobs is likely to be lagged or minimal.

Narendra bhai’s best bet is to listen to his RBI Governor who is the protector of the poor and the salaried middle class, against the ravages of inflation. The PM should let the RBI Governor set inflation management targets and measures, without restraint. This approach is not sexy, stodgy and reminiscent of IMF style fiscal fundamentalism.

But the short term strategy of boosting the stock market and growth numbers through massive public spending, would be dangerously negligent for an economy, like India, where over 60% of the people are poor, unskilled and live mostly in rural areas and are unable to access jobs in the market economy. For 40% of the people living in urban areas, who are poor, inflation is a bigger calamity, because wages are stickier than prices.

Unearthing black money is being considered as a revenue earning measure, which could painlessly increase the spending power of the government. It also sounds like a “win-win” solution since it responds to the high moral objectives of good governance.

But Narendra bhai, must consider that, Black Money is the lubricant, which keeps the economy ticking today. There are more than 300,000 new, unsold flats clogging the inventory of builders and investors because growth prospects are uncertain. Much of the real estate boom was driven by Black Money fueled speculation, betting on high growth to keep the Ponzi scheme going. But the boom in construction activities did create jobs. A war on black money will directly impact any revival of the listless real-estate market, the economy and jobs. Timing is everything in successful governance reforms. Black money has many negative consequences. But the time to become like Denmark is in a boom, not during a bust.

There are no short cuts to fiscal stability. Cutting back on the governments wasteful recurrent expenditure (which comprises 80% of total expenditure); enlarging the tax base and better tax collection are key priorities.

In this context, good governance, would dictate that tough, unpopular decisions need to feed into the 2014-15 budget:

(1)    Target a real reduction in revenue (current) expenditure of 10% over the previous year. Over 50% of the current expenditure comprises interest payments and subsidies. Salaries account for only 8%. As a result, the wage bill is rarely targeted. But just by restructuring Railways into a corporation and the Postal Service into a bank and a corporation, nearly 50% of the wage bill can be taken off the public payroll. Other benefits from corporatization would also accrue.  

(2)    A majority of central government officials, including in the ministries of coal, power, steel, mines, oil and gas, chemical, fertilizers, civil aviation and telecom spend their time, second guessing, remotely managing or monitoring Public Sector Enterprises. This is a wholly unnecessary job. Transfer the lot of them to the concerned PSE. This will automatically reduce the size of most ministries. Appoint professionals to the Boards of these PSEs, instead of the “shoo-ins” we have today. PSEs are not the “jagirs” of the concerned administrative ministry. “Shoo-ins” are popular today, as Directors of PSEs, because the concerned Minister and the PSE management are comfortable with them. But they do nothing for improving the efficiency of the PSEs.

(3)    A second, large chunk of central government employees spend their time administering development schemes implemented by the state governments, but funded either wholly or partly. by the center (central sector schemes). These are wasteful tasks. Hand the task of monitoring such schemes over to NGOs. Send the concerned ministry officials to these NGOs on deputation and get them off the government’s payroll.

(4)    Cut back the long chain of command in Ministries. Today a file passes through at least five levels of scrutiny (i) Section Officer(ii)Under Secretary(iii) Deputy Secretary-Director(iv) Additional Secy.-Special Secy.(v) Secretary. This is way too long. The Secretary should be at most the third level dealing with a file and not the fifth.

(5)    Filter all incomplete and new projects for their private employment and poverty reduction potential. Fund only the ones with the best “social and economic returns” and review what to do with the “politically sensitive” but wasteful, other projects. Bridges to nowhere and empty but beautifully carpeted roads, are “pork”, not development.

(6)    Finally, target fitting the “core” ministries (External Affairs, Defence, Home, Finance, Power, Coal, Mines, Transport, Agriculture, Industrial and Urban Development, Social welfare and Women and Child development), into the space available in the glorious North and South Blocks, which was meant for them. Make space for them, by shifting the PMO into the Rashtrapati Bhawan complex, which is conspicuously vacant. Lease the vacated Bhawans, along Rajpath, to the private sector to earn additional revenue. This will also spare us the drab view of Soviet era, building blocks.

This is the nit-picky governance agenda which the UPA never attempted. A bloated central government, with lots of fingers pointing at each other, is not compatible with Narendra bhai’s ambition and our expectation of effective governance.

Achieving the Fiscal Deficit target for 2014-15 of 0.5% point below the 4.9% actual deficit in 2013-14 by reducing the current expenditure of the central government, is the PMs second test in governance.  

PM Modi fails first governance test

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Good intentions do not a good government make. As many as 8 out of 44 Modi ministers have serious criminal charges against them (Association for Democratic Reform report, May 27, 2014). The existing laws do not bar such citizens from either becoming MPs, or ministers thereafter. However, the test of a government committed to good governance is if they are bold enough to push the frontiers of public probity. This opportunity has been missed.

Admittedly, our judicial system does not help with its in-built opportunities for process delay. Our law holds that no one is guilty unless convicted. This is based on the principle of Natural Justice which allows an accused to plead her case before conviction. It is a much needed protection for innocent victims, wrongly accused; sloppily investigated against by the police; complicitly prosecuted by our civil prosecution architecture and usually, wilfully charged by the lower judiciary. Politicians too, can be victims of such a system especially when they are out of power, as BJP and supporters were for long.

However, there is a difference between legal eligibility to be an MP and the minimum requirements to be a minister. An MP becomes a minister only if the PM selects her. Modi, who enjoys a gargantuan majority in the Lok Sabha, was under no compulsion to elevate MPs, charged with serious criminal offences, to ministership.

Consider the degrees of political freedom available to him today. He has the fire power to keep Advani hanging. He has ignored the claims of Murli Manohar Joshi- a powerful BJP satrap. He only needs to pay lip service to the BJP party President, who may soon be his acolyte: Amit Shah. This illustrates his leverage with the party and the RSS.

It is unconscionable, in this context, for him to have made the eight MPs charged with serious crimes into ministers. Imagine the shock to his good governance image if any of these is convicted and then, by law, has to resign. Nothing illegal here. But good governance is mostly about the ability to claim the high moral ground, as Modi has done and then walk the talk. He has not done so.

Viewed in the larger context of distancing himself from Godhra and breaking fresh ground for rapprochement with the minorities, he has done himself a disservice by appointing as minister, an MP, who is associated with the sorry episode of the Muzzafarnagar hate crimes of 2014.  The MP does not have a serious criminal charge against him. But perception matters. The MP, who has little else to commend himself, seems to have been “rewarded” for being the BJP front man in Muzzafarnagar.

All the eight ministers have obviously been put in place with an eye on forthcoming state elections; Ram Vilas Paswan (the Dalit face of the NDA in Bihar); Upendra Kushwaha, a BJP ally from Bihar; Uma Bharti (the Hindutva face of the BJP in UP); Maneka Gandhi the Punjabi face of the BJP in UP Terai; Vijay Kumar Singh from Ghaziabad, UP; Nitin Gadkari and Gopinath Munde from Maharshtra and Dr. Harsh Vardhan in Delhi.

Pursuing good governance is like being on an escalator. There is no escape from constantly elevating yourself and pushing the envelope. Modi elected to ride the good governance escalator. Now, there is no escape from being judged on the elevated standards he has set from himself.

Admittedly, no previous government, in the recent past, has sacrificed the political returns from rewarding politically convenient appointments but remaining committed to creating a political environment for good governance. But then, we did not vote for Modi to get more of the same. We voted for Modi because we thought he was different.

Earlier, in 2004 we voted for Manmohan Singh because we thought he was different. We were wrong in his case.

But please Mr. PM, do not prove us and yourself, wrong. There is more riding on you and your government, than the blossoming of saffron pan-India. Your decade as PM can only be useful if you leave behind a political system which respects and uphold, by personal example, the Rule of Law and the principles of good governance.

Every ministerial appointment made on a purely political calculus sacrifices merit, fair play, efficiency, effectiveness and sustainability. These are preconditions for inclusive growth.

(Photo credit: dailymail.co.uk)

The new Modi fan club

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Hindus, across caste lines, believe that the Modi Sarkar will usher in better times. But there is disquiet amongst the Muslims, in particular, but also amongst Christians. Both religions are of foreign origin and linked to religious regimes located elsewhere. They fear the whip-lash of a possible “India for Hindus” sentiment akin to the “Africa for Africans” sentiment in the 1970s, leading to the exodus of non-Africans. Also a consolidation of Hindu votes can make minorities less politically relevant as a vote bank.

Such fears are understandable. The potential for anti-foreign religious mania builds on the traditional Indian geo-political stance of self-determination and against “domination” by external actors. Nehru, a romantic, shunned geo-political alliances and grew the idea of “non-alignment”. Indira Gandhi, was more practical and whipped up phobia against the “invisible” hand of the West in geo-politics and leaned towards the obliging Soviets.

The BJP view on geo-politics is no different from that of the Congress in the recent past or indeed that of the Chinese; to do everything which builds the domestic economy and secures the country’s interests. However, there is one variation in the BJP strategy, which finds no place in that of the “secular” Congress.

Just as Amma’s geo-political stance is determined by how it affects Tamil interests (in the context of Sri Lanka), the BJP is likely to boldly pursue the cause and interests of Hindus overseas. Is this horribly unsecular?

Those who think so, must consider who else would weigh-in when Hindus are denied human rights in religious States like Pakistan or the Middle East? India is where Hinduism has developed and it is extremely odd that the Indian government should shy away from this duty. Should not a “secular” BJP be similarly proactive in protecting the rights of persecuted Christians in Egypt or South Sudan for instance, or allegedly persecuted Muslims in France or the US?

Whilst siding with a generic commitment to the Human Rights doctrine, the BJP rightfully believes that it is for States (much stronger than India in economic and political clout), which ascribe to these religions, to do this front line job. These nations do so in any case, even in the context of alleged human rights violations of Indian Muslims and Christians. In contrast the Hindus have no one, except India, to bat for them.

“Secularism” has acquired a shrill, hollow, politicized tone in India, which is at variance with our global interests. This is not to say that India should change the Constitution and become a Hindu State. Far from it. Secularism, in so far as the relationship between the State its citizens is concerned, should become even more sanitized of religious dogma to reassure Indian minorities.

The State must disengage totally from all religions, starting with religious rituals at State functions. Multi religious prayers and the construction of temples, mosques or churches in government buildings, especially the defence forces and police establishments, must be shunned. Warships should be launched, not by breaking coconuts on their hulls, but by a secular ritual. At state funerals, a clear distinction must be drawn between the role of the State, the party and the family concerned. The State must withdraw from the function, once religious rituals take over. The display of calendars with gods, goddesses and religious symbols must be banned in public offices and a code of religious conduct introduced for public servants.   

The romantic notion that the State can “adopt” all religions and yet remain secular, is fanciful and lies at the root of competition between religious denominations, for privileges, government funds and political power.

Has Indian “secular double-speak” been conclusively defeated in the 2014 elections? Unfortunately no. The political cleavages between Hindus and Muslims remain as deep as ever. Caste based politics has been papered over but remains a potent political instrument at the sub-national level. 

The BJP remains essentially a Hindu party. The real political conundrum facing it, is whether proactive outreach to secular Muslims and secular Christians, is likely to compromise its appeal to its new pan-Hindu, caste rainbow, voter base?

The longtime BJP supporter; Punjabi refugees from the Partition (now on the demographic wane); the Banias; Pandits and Thakurs of North India and a smattering of in-between castes, no longer constitute the bulk of BJP supporters. The baton has passed to aspiring youth frustrated by the lack of decent jobs; shoddy public facilities and a poor quality of life. These voters increasingly gel along classic, class lines. Kejriwal shrewdly tapped into their frustration but did not have the mind space to lead them. Modi has stepped into this breach and scaled up the strategy nationally.

But one major problem the BJP faces is that it’s “traditional Indian” image does not square with the aspirations of the modern Indian woman. This antediluvian caricature of ‘Indianess” and the role and relative status of a woman, is derived mostly from the BJP’s base in the North, where the status of women is the worst. Under Modi’s leadership, hopefully, the more enlightened, gender neutral cultural norms of Hindus in the West, South and the East of India shall prevail.

After all, unlike other leaders of his generation, Modi encouraged Jashodabehn to get educated and self-actualise, just as he was trying to do. But now the battle is done. Both Modi and Jashodabehn have voluntarily sacrificed their marriage and it is time to acknowledge their unbreakable bond of friendship and mutual respect. Jashodabehn is Modi’s biggest fan. She should not be discouraged from being so publicly.

Finally what of the poor, all 700 million of them, who earn less than US$2 per day. Modi was one of them and they are his primary constituency, irrespective of religion or caste. This must reflect in the government’s policy on reservations and positive affirmation in general, through a poverty criterion.  

There are three things the poor fear most of all; (1) insecurity, (2) inflation and (3) financial shock. They are the least prepared and the most exposed to all three. The Modi agenda already assures that social protection schemes, started by previous governments, will be made more effective, not shut down. If he can kick start domestic manufacturing by systematically cutting red tape and encouraging babus to deliver; boost infrastructure construction through public finance; incentivise tourism and private investment, the poor can be assured of a steady supply of decent jobs.  We need to generate 10 million a year.

One hopes that the false pride, associated with an appreciating exchange rate or hollow but unsettling jingoism, will not scuttle the sustained development of an internationally competitive, Indian economy. Modi is a practical man and a master strategist. He shall not be found wanting. Ache din aa gaye hain.

 

Modi governance milestone 1: No “tainted” MP to be a Minister

 

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The Modi led “near national” government has been voted in on the basis of its perceived capacity for good governance. Good governance is an amorphous concept. But one essential component is access to timely justice. Punishing people for the crimes they commit, at the earliest, through due process, becomes a key measure to make commitment to the Rule of Law credible.

India is a terrible laggard in this regard. Criminal cases drag on for years with the perpetrators, if they are rich, either out on bail or ensconced in jail with all comforts and privileges.

The Association of Democratic Reforms (ADR) has done stellar work in informing citizens about the criminality of Lok Sabha candidates, using the information submitted by the candidates themselves at the time of filing their nominations.  It is tragic that whilst the Election Commission does not highlight such information for the public, it is left to NGOs to cull and present it to citizens.

ADR has reported on 8163 out of the 8236 candidates who contested the 2014 elections. Of these 889 declared that they had serious criminal cases pending against them, including murder, attempt to murder, assault on women and hate crimes. Sadly the proportion of such candidates increased from 8% in 2009 to 11% in 2014.

21% of the candidates the Bharatiya Janta Party (BJP) put up, belong to this category. Nine parties fielded a lower proportion of “tainted” candidates: Amma’s AIDMK (8%), Didi’s Trinamool Congress (10%), Aam Admi Party (10%), Biju Janta Dal (10%), CPI (12%), Congress (13%), DMK (14%), Bhenji’s BSP (15%) and the CPI (M) (16%)

ADR has yet to report on how many “tainted” candidates have won from each party. But 21% of the 521 studied by ADR had serious criminal cases against them as compared to 15% in 2009. Unless candidates are convicted of serious criminal crimes, they remain eligible for becoming MPs. There is little Modi can do about that till the law is changed.

But there is one major way in which Modi can herald the era of good governance in India to which he and his party are committed. He can declare that no BJP MP shall be made a minister if there is a serious criminal case pending against her. The data is a bit fuzzy here. What is a criminal case? Is it the filing of a First Information Report; completion of investigation report by the police; presentation of charge sheet by the prosecution in court or the framing of charges by the court? But this is a technicality and can be used to massage the data.

Good governance is as much about changing the reality as it about shaping perception. Modi is the proclaimed master of perception and should rightly be concerned that his government starts off on the right foot.  

The World Justice Project which tracks the health of the Rule of Law worldwide, in its Index 2014, ranks the criminal justice system in India at 48 out of 99 countries; better than China (rank 51) or Malaysia (rank 53) but lower than Brazil (rank 37) or Sri Lanka (rank 38). More importantly on the factor of “timeliness and effectiveness” India does worse that all these countries, except Brazil.

Improving the criminal justice system, to developed country standards, is a time consuming effort involving change in practices; incentives for judges to conclude cases; better investigation practices and capacity and more motivated prosecution. These are deep procedural and bureaucratic reforms which should be started, but are unlikely to kick in with results by 2019.

In the meantime, the problem of sitting MPs with unresolved criminal cases needs to be deal with pronto if Modi’s promise of good governance is to be implemented. Modi and his team are not one to let the grass grow under their feet.  So here are three initiatives to deal with the problem:

  1. An all-party committee of the Lok Sabha should review the cases of all MPs with pending criminal cases to identify those with serious charges against them.
  2. Modi to request the new Chief Justice of India to constitute a fast track court specially mandated to decide all such cases by June 2015.  
  3. In the meantime, all MPs with serious criminal cases against them to be embargoed from getting Ministerial berths in his government.

The electorate dealt harshly, in 2014, with parties which claim to align with good governance norms but fail to take effective action, when mandated to rule. Across India, the electorate has rewarded parties with strong leaders and a record of effective governance (BJP, BJD, AIDMK, TMC) and punished those which are ideological without being pragmatic (AAP, CPM) or enabled but self-serving (Congress and Alkali Dal). This is not the moment to disappoint them with false integrity.

Making public commitments on the manner in which Ministers are going to be appointed is unprecedented. It takes away some discretion from the PM. But good governance is also about tying your hands publicly to do the right thing and burning your bridges, lest one is tempted to retreat into half-truths. Best to start now.    

 

Saffron India

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The saffron deluge has taken everyone by surprise, like an early monsoon. The Modi storm carried away with it, anyone who rode with him and demolished all others, barring regional stalwarts like Amma, Naveen Patnaik and Didi.

Is this the end of caste as a political weapon? With Bhenji (Dalit supremo), Netaji (Ahir supremo-UP), Lallu (Ahir supremo-Bihar), Ajit Singh (Jat supremo-UP) all biting the dust and even Haryana going saffron, are voters taking caste out of national politics? Could this be stretched to say saffron can make the country less divisive- top downwards? Is there a hope that the next step could be to take caste out of state level politics? Well that clearly is Modi’s dream. But there are limits to Hindu integration and virtues in dissonance.

The democratic problem with an overwhelming mandate is that it reduces the opposition to a redundancy. In the extant case, saffron still has to contend with the Rajya Sabha where the NDA does not have a majority. More importantly, the recent Indian experience with huge majority governments has not been conducive for reforms. Of course coalitions are not a panacea for reforms either. The United Front coalitions of 1996 to 1998 were superbly ineffective. But the Janta Party wasted its massive 1977 win and Rajiv Gandhi frittered away the overwhelming sympathy vote in 1984. In comparison, significant economic reform happened only under the Narasimha Rao led coalition government in 1991; the Vajpayee led NDA government of 2000 and the Manmohan Singh led UPA I of 2004. There does seem to be a positive link between coalitions and economic reform. Possibly huge majorities induce comfort. The lack of competition douses the fire in the belly till ones time is up and it is too late.

Modi is not unused to huge mandates. After all he has led Gujarat for over ten years now. But it would be wise to pursue the idea of a “cabinet” of Chief Ministers and to engage proactively with the opposition. The last few years have seen rising inter-party acrimony making Parliament dysfunctional. To keep engaging, when not compelled to do so, is the best route to rebuild a national consensus on development priorities.

Modi is a man in a hurry, with an agenda to complete and too little time to do it in. It is consequently unlikely that he will let the baton slip. He would do well to use the UK-Tony Blair and Malaysia precedent and constitute small, vertically integrated, fully empowered, politico-technocratic teams with specific, measurable and time bound results expected from them. His secretariat is unlikely to be the laid back, free-wheeling entity it had become under Manmohan Singh, which reported to everyone but the PM. The expectation is that Modi will come to office with a pre-formulated agenda and a team to implement it doggedly.

Is the hoary city of Delhi likely to seduce him into somnolence? Again, very unlikely, given the cultural gulf tween the macho man from Mehsana and the pleasures on offer from the glitterati of Lutyens. His “quasi married” status is likely to generate many hours of speculation of who, if anyone, is likely to share 7 RCR with him.

The world will be waiting however, for any slip up on his management of the Muslim community. Whilst Modi seeks to treat all Indians the same and goes out of his way to say so, the fact is that to reverse the “selective appeasement” of the past will take time and fiscal space. Neither is available to him. This is where proxies and symbols can help to reassure minorities that he is their protector too. One important symbol will be his choice of the Home Minister, who whilst enjoying the full confidence of the PM, must be trusted by all segments of India.

Theorists will make much of the need for Modi to build or re-build institutions. This is very time consuming and effort intensive. Many of these (cabinet system; inner party democracy; the bureaucracy; federalism; the judiciary) were systematically destroyed during the long period of Indira Gandhi’s rule. Institutions do matter, particularly in a democracy, because they provide permanence in a politically unstable system. But in India we carry everything to extremes. No institution can atrophy and yet remain productive.

The central bureaucracy is one such institution. From the very beginning, it was merit oriented only at the point of entry. Even in that limited way, it did not respond to the socio-economic disabilities specific segments of India faced in getting in. This opaque, small, mostly male club can be transformed by introducing real competition at the top. This is from where the fish rots. All babu posts of Joint Secretary and above must be filled through open competition. It must be the PM (not the concerned Minister or the Department of Personnel) who must select the candidate, out of a short list of two, recommended by the UPSC. Each appointment must have a minimum tenure of three years with no job hopping allowed, even if more attractive lateral options become available.  

One new tradition, which must be reversed, is the “in your face” security apparatus. Modi was the highest security risk even before he became the PM. Now his security needs to significantly enhanced. But this challenge should be used as an opportunity to upgrade the security apparatus, rely on technology, intelligence and rapid response, rather than on a glut of gun totting men. It is only when the PM makes his security “invisible” that it will stop being the status symbol, it is today.

It will not be easy to rein in “privilege”, which is the life blood of an elitist, patrimonial State. But much of the rot we face today can be traced to this one, ubiquitous norm. Who better to try, than one who, like Bill Clinton, made it to the very top purely on merit?

What is Mr. Modi thinking?

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Modi can’t stop thinking. It was whilst wandering in the Himalayas, as a young adult, that he decided to make the RSS his karm bhoomi, developed his vision of what he wanted to do and how. Should he revisit those grassy slopes and rugged peaks again to refresh his mind? Kedarnath is waiting.

But this is unlikely. Those times are long gone; subsumed by the mechanics of leading a juggernaut. He will be the first of India’s popularly elected CEOs, having managed both a party and a state. Being a CEO, it is unlikely that he will be looking to conceive a game plan. He will bring one with him with all the homework done.

The only thing which could occupy his mind would be his strategy for managing less than a majority verdict on May 16. Should that happen, BJP stalwarts, existing and potential allies would all prefer him out and a weaker BJP PM. After all, the winner takes all in our system and that does not suit anyone, except the winner. Yes the BJP has won and by corollary so has the RSS but the real winner is Modi…..and no one likes that, least of all his own colleagues.

His biggest card to remain in control, if BJP is in a minority, would be to propose that lacking a mandate, they should not form a government.

This aligns with the party’s stand in the Delhi elections and is sufficiently high minded to have wide appeal. Without Modi’s consent and cooperation, the BJP/RSS have no hope of being able to form a minority government with someone else as PM, even if potential allies are available on this condition only. This leaves only two option for the party; Modi as PM even in a coalition government or for the BJP to opt out.

There is very little down side for the BJP in opting out. The rag-tag government, which could be formed with the congress and others, or the impossible but gender responsive trio of Amma, Mayawati and Didi, who between them may have numbers similar to the Congress (sub 100), is sure to collapse, Janta Dal/United Front style.

Conversely, for the BJP, forming a minority government is fraught with the danger of failing to live up to the lavish promises they have made and the even higher expectations they have aroused. In many ways their conundrum would be similar, to what the AAP faced in Delhi. How does one explain the inability to rule when offered the chance, even with ones hands tied behind ones back?

Does this compulsion to form a government, weaken Modi’s bargaining power to remain in control? Certainly not. Modi has become so much the face of the BJP and the RSS, that a BJP government without him is inconceivable.   

Of course adopting this hard stand would fast forward, what must be Modi’s long term plan. To soar as an independent eagle watchful, above the fray, swift as lightning in action but unfettered by “earthly” concerns, ties and social commitments. After all, it is not for nothing that the Gods reside where the eagles soar.

If the unfortunate scenario, of less than a majority mandate to rule, fructifies, which way Modi jumps will be determined by the real circumference of his chest and the extent to which he has learnt from the Gir Lion, he is so justifiably proud of. I suspect he will not be found wanting.    

 

What now Mr. Kejriwal?

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What was Kejriwal thinking on his flight back from Varanasi yesterday? Did he reflect on how difficult it is in a competitive environment to get a second chance? Where would he have been, had he not frittered away his government in Delhi for a notional presence pan-India?

Maybe he was caught up in the colorful, marketing jargon, which is so popular today, to explain the “why” and the “how “of politics in a four second TV byte. Maybe he believes that he has launched a Unilever style product-shampoo in a sachet-affordable even by the aam admi and that this will be the basis of a pan Indian political empire. A top down campaign, with credibility in Delhi, translating into votes everywhere in 2019 (?) or maybe even 2024? Maybe he pondered over how to leverage himself as a brand better- an anti-corruption crusader; a karamyogi who has sacrificed a brilliant career for public service; a Gandhi (Mahatma) incarnate; a 21st century social reformer?

Possibly he does not think in the self-serving calculus of electoral gain and loss and seeks only to elevate the level at which politics is played by opening a door for decent folk, who otherwise would never have sullied their manicured toenails in the keechad of politics where the lotus blooms and the Congress mucks about.

Alternatively, he may think that a pan India campaign could surely lay a solid ground for the Delhi elections when they are held. His entire national team, which must number now close to 20,000, could descend on Delhi (RSS style) and escort every AAP voter to their booth….if they haven’t already been captured by the RSS or a desperate Congress?

Maybe he actually thinks he will win in Varanasi-that niggling (what if) last thought that smuggles its way in, just as you have drunk the “nimbu pani” and eaten the “veg” sandwich and are drifting off to snooze land, your “jhadu topi” slanted over his eyes, to screen the bright sunshine out and your seat fully reclined.

Possibly he was working out strategies to convince the Delhi voter that voting AAP is not the same as pushing the NOTA button. That this time they would be there to stay and work, not run about like a consultant, signing contracts everywhere, but executing none satisfactorily.

Is it time, Mr. Kejriwal to merge into the great Indian political mela? Is it time to build alliances with like- minded parties? The left is your natural abode. For all your talk of supporting the private sector you are a quintessential public sector man. This happens often with those, like you, who know how rapacious and self-serving small business can be. You forget that the rapaciousness of the Indian Bania is not built into her genes. It is an outcome of surviving for centuries on their own with no one else to protect them or their assets, but themselves and in the face of a grasping State which seeks only to marginalize them in the name of modernity.

Business is often a “winner takes all” game and inevitably results in huge concentration of wealth in a few hands. This is why inequality has grown significantly all over the world as business has flourished. This will not set well with your fuzzy, socialism and “equity” over growth, orientation. Be clear for once. The aam admi can never hope to have an equitable share in the wealth generated, if private business is to grow the economy. The problem is that only private business can grow the economy. But whilst growth is inherently iniquitous there are ways to induce a modicum of equity by providing opportunities to everyone. There is no option to rapid growth……to borrow from Churchill’s take on Democracy. Your fuzzy philosophy and panchayat penchant will not be able to accept this hard fact. That is why common cause with the Left is best.

Of course no one wants to side with a loser. In fact mere association with the tired shibboleths of the Left, are enough to put any voter off. But then you will not find gold plated options for getting into government every day. Possibly you and your supporters could revitalize the tired, old, men and women of the Left with your youthful energy. You share many of the virtues of the Left; austerity; financial integrity; a mass contact strategy; cadre based functioning; inner party democracy, a concern for visible equity.

Alternatively you could also align with the BJP/RSS who also share these virtues. Both you and Modi appeal to the same, young, aspirational voter who has remained an “outsider”. But of course you do not align with anyone. Good luck Mr. Kejriwal.

 

Modi.gov

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The Modi government is being formed on the back of a mandate for honest and effective governance. Fortunately, it inherits a raft of incomplete social and economic equity initiatives from the UPA II. These need to be continued, deepened and tweaked to deliver more bang for the buck.

But every government craves the opportunity to distinguish itself from their predecessors. The Vajpayee government is remembered for the inter-city state highways it built, state enterprise privatization, albeit stymied half way through and the blot of Godhra.

Clearly, everyone wants a full stop to future Godhras. But the mere absence of organized violence is rarely memorable even though it is immensely difficult to achieve in a tinderbox political environment. What then are the “headline” opportunities that Modi.gov could grab?

Infrastructure, coal and defence present themselves instantly. The former two, to build an enabling India. The last, to deter the many “spoilers” of an Indian development story.

Within infrastructure, the real opportunity is in the railways. China now exports railway projects and technology and we are, reportedly, keen to learn from them. But the truth is that we have not served our cause well over the last two decades. The last memorable Railway Minister was Madhavrao Sindhia; not just for his dashing, good looks but for ushering in the era of “fast Shatabdi trains” in 1988.

What has held railways back since then is the “fiefdom” the Ministry became for coalition partners interested only in distributing goodies. Should not the railways them be privatized to nip its politicisation in the bud? Certainly not. Out of all the infrastructure sectors, railway privatization is the trickiest. Secondly, as we have learnt from the power sector, it makes little sense to privatize a sector, in which tariff setting is highly politicized, before it is stabilised.

The Rakesh Mohan committee on railways (2001) laid down a blue print for the sustained financial viability of a railway system performing on par with international standards of efficiency. More than a decade since, the situation has only degraded further: antiquated track and rolling stock; poor customer orientation; declining service and safety standards; distorted tariffs which are either not remunerative or are not competitive with air and road options.  

The target should be to restore, the low proportion of freight and passenger traffic presently carried by railways, to more economically and environmentally efficient levels with a push towards rapid electrification of rail tracks.

Convert the Railway Ministry into a set of publicly owned companies with core expertise in production of rolling stock; freight or passenger traffic with self-owned rolling stock and track and facility maintenance. These companies should be Board managed and have only an arms-length relationship with their administrative Ministry, which should be the Ministry of Transport. Corporatisation will distance railways from being the “freebie-bag” it has become. This has happened, in the case of National Thermal Power Corporation and POWERGRID, both power sector publicly owned companies, where sound technical and financial decisions are taken by professionals.

Coal, whilst actually being one step ahead of railways, since Coal India is already corporatized, seems even more degraded. The next step should be to privatize it and closely review the vast unused or sparsely developed mining areas which have been allotted to these companies. This could be the Maggie Thatcher moment for Modi.

Abolish the largely discredited Ministry of Coal, as an independent entity; merge it along with oil and gas into a Ministry of Extractive Energy Sources. Appoint a savvy, industry friendly, politician; a Sharad Pawar clone, to restore positive energy into the fractured government-energy industry relationship and watch this sector take off.

Defence is the third big area, which India has pussy footed around for too long. Revamping the structure of our defence forces to be lean and mean with less tail and more teeth; modernization of weaponry, aircraft and warships; minimum levels of usable ammunition stocks and efficient procurement processes; integration of operations across the three services and para-military units; compensating defence personnel handsomely, for putting their life on the line, and re-integrating then productively in civilian life, post retirement, should be near term goals. Opening up defence production to the private sector, including foreign investors can kick start a dormant, defence industry led, domestic supply chain, mini, revolution.

The ideal Minister to manage this mini revolution would be the personable and upright, economist, writer and investigative journalist; Arun Shourie, who displayed nerves of steel as Minister Disinvestment in the NDA and navigated both, the political perils of rapid economic decision making and the roving eye of the CAG, with equal dexterity and success.

The Modi.gov reform and restore agenda is likely to be fairly full. The challenge is to isolate the few lead stories which could be the bell weather for its commitment and credibility to work in national interest; its ability to kick start the economy and generate productive jobs for the educated unemployed.  

Railways, defence and coal are not low hanging fruit. All three have deeply embedded elite interests; the risk of failure is high and the likely adverse fall-out significant. Reforming them is not for the faint hearted. But that is precisely why they are good choices to announce ones arrival. The one that succeeds at reforming the three would have bent and strung Shiva’s bow.   

Hate and its adherents

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Hate is a powerful emotion. A sense of rejection, powerlessness, consistent negative discrimination or perceived persecution; any of these can invoke it. In India it is a common, albeit not a publicly expressed sentiment. But it lurks very close to the surface.

Who hates whom, is an easily answered question. But why the poor do not hate the rich remains a puzzle.

Whilst income inequality between the lowest income earner in the middle class (defined as a family of five earning more than Rs. 20,000/- per month) and the very wealthy is high and rising, what binds the rich and the middle class together is common aspirations.

My flat may be just a studio space and not a mansion. I may have only a cooler and not central air conditioning. I may travel by “reserved sleeper” rather than private jet. I may drive a scooter (with a Jaguar or a Mercedes logo on the front wheel cover) and not a Bentley. My family’s weekend outing may be to India Gate and not Chiang Mai but I empathize and fantasize with and emulate the very rich. We go to similar schools, read the same magazines and watch the same shows and movies. We wear the same clothes and have similar tastes and habits even if we do not have similar expense accounts. The “imitation rich” fit seamlessly, if sometime tenuously, into the world of the “real rich”.

In contrast the divide between the poor and the “rich and the middle” is deep and unbridgeable. Functional illiteracy is the killer, as is the absence of family safety nets for ill health, accidental death, fire or joblessness, which are often the involuntary entry points into a downward spiral of hopelessness or hate. The Naxalites earlier and the Maoists now, seek to politicize this incipient hatred of the poor for the oppressive rich.

But neither have succeeded. Blame it on our passive culture; the stickiness of traditional identities or on democracy which lets a murky light of hope shine through. Credit it to our bureaucracy and judiciary which, albeit creaky, still manage to crank out basic justice and fair play.  But the most potent reason why the poor do not hate the rich is because they have been skilfully taught not to.

They have been manipulated by the Indian elite, across caste, religion and region, to sublimate their incipient hate for the empowered rich into hate for the “other poor” who belong to a different caste, religion or region. This zero sum game appeals instantly. More for “them” means less for “me” and vice versa

Much of the notional “plurality” of Indian politics (regional; caste or religion based political parties) derives from this cynical use of “traditional identities” by politicians as electoral instruments to create “vote banks”. The result is an “empowered” group of elites in each caste; religion and region and in the many sub groups that coexist. In this three dimensional matrix Dalit/Christians/from the North are differentiated from Dalit/Muslims from the North. Ahirs, Kurmis and Jats view Dalits and each other, as competitors for state largesse. Sunni Muslims out maneuver Shias.  Bengal cannot see eye to eye with Tamil Nadu and Kashmir remains in splendid isolation.

Meanwhile, the elites of each of these groups share business interests; frequently co-habit; enjoy bonhomie and populate a common power network of amazing reach and strength. It is this trans caste, religion and region elite which has been the real gainers of Indian democracy, whilst studiously keeping at bay the real question- what is in it for the poor, of which around 70% (over 800 million people) earn less than US$ 2 per day.

The AAP has come closest to spontaneously mobilizing the disempowered. But post their “death wish” renunciation of power in Delhi their appeal has shrunk. It is now down to primarily the urban poor, who were justifiably impressed by the instant reduction in petty corruption and harassment, which had become the hallmark of State interaction with the disempowered in Delhi. But AAP is very far from being a party of national revival.

The Congress certainly has the latent potential. But it is constrained by the suffocating management control of the party, by the Nehru scions. Whilst they may deride Modi for sublimating the BJP in his own image, right down to his signature “white lotus”, one detects traces of envy. He has pipped them to the post, in their own game of “family takes all”.

This leaves the BJP as the only national party with some element of inner party democracy. However, their natural bias is towards the North and the West regions and within that to industry and trade. Also the direct linkage with the RSS does not help. A national party cannot be aligned to any one culture or religion and the BJP needs to travel a long road in that direction.

Modi shall be PM on Modi day- May 16, 2014. His incentive would be to remain PM till 2024. For someone, as savvy as him, surely the path to political longevity cannot lie through sectarian strife or caste wars. Yes, growth, jobs and better public services will be on his agenda but so must Kejriwal style, visible outreach and responsive security for the poor.   

 

 

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