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Archive for August, 2015

Indian angst

Abandoned Faujis

abandoned faujis

Delhi. Fauji veterans agitate, unsuccessfully thus far, for implementing the One Rank One Pension principle. This is a promise, unadvisedly made to them, by both the previous and the present government. They boycott the celebrations commemorating the 1965 war. Even those who fought to win that war stay away effectively devaluing the event. An unintended and unfortunate outcome is that scores of disciplined ex-soldiers and one prominent fauji brat get on-the-job training, on how to enter politics to safeguard your rights.

Mandal revisited

Patel

Ahmedabad. An angry, young man clad in faux fauji combat fatigues, conducts a caste maha-panchayat of half a million Patels. The occasion is the demand for inclusion in the list of backward castes, eligible for affirmative action (reservation) as a fast track route to a government job or admission into schools and colleges. The young leader’s social media profile has him posing with a gun in hand-very much like Bihar’s notorious upper-caste Ranvir Sena or the face-book friendly young militants in Kashmir today.

Life on the edge

Mumbai, the city of dreams, a sordid, family drama unfolds of a possible filicide; secret serial marriages and shady doings, so bizarre that it could only happen in star crossed Bollywood.

The Proletariat strikes back

strike

Across India, labour unions prepare for a general strike of all workers on September 2 to express their rage. The cause- dissent against dilution of the regulatory ambit of the labour laws; opposition to privatization of State Owned Enterprises and Foreign Direct Investment in Railways, Insurance and Defence; support for regularization of contract workers and the demand for better social protection measures.

Were all these happening in the 1970s it would be pretty commonplace in that decade of social unrest and hartals. But this is 2015, with a stable BJP government in place and more than half way through the first quarter, of what was once touted, as the India Millennium.

Have we than gone horribly wrong already even before we have begun? or is there a grand design behind this ripple of disquiet?

Has the OROP been deliberately allowed to fester so that it can be settled, with a flourish, just prior to the Bihar elections with the personal intervention of the PM, making the fauji vote thereby indebted to him?

Is the Patel agitation merely a manufactured storm? Is it calculated to subside with strong and reassuring intervention from Delhi to help the floundering Chief Minister Anandiben, thereby reinforcing the “strong leader” image of the PM?

Is the impending general strike and the prospect of extended labour unrest; lost jobs and forgone income, meant to scare voters in Bihar into opting for stability and the BJP, rather than taking a punt at the alternative politics of the rag-tag combination of Nitish Kumar, Lalluji and Arvind Kejriwal?

Truth is stranger than fiction, so none of these scenarios can be summarily discounted. But one thing is clear. The government needs to tighten its boot straps if it is to be an instrument of economic and social change.

Four priorities emerge:

Legally correct but bi-partisan

First, the rule of law must prevail in spirit. This is not yet visible. Using the letter of the law for one’s own ends is not the same as the rule of law prevailing. The golden rule is to err on the side of administrative effectiveness, simplicity and comprehensive reading of the law. Delhi presents an opportunity. The electoral mandate of the Delhi government is unquestionable. Respecting it and developing a positive functional relationship with it is in the long term interest of democratic governance. After all in every harmonious family-as the Speaker Mahajan of the Lok Sabha views Delhi to be- the youngest – even a rebellious, member’s foibles are accommodated.

Where are the tough economic reforms?

Second, clear signals for undertaking tough economic reform are a must. This is a government which garnered far reaching support on the basis of its reformist credentials. The government agenda is long on “win-win” options but not so impressive where there is no option to causing some pain. Initiatives crying out for attention are- (a) restructure electricity utility debt to make them financially viable; use the energy and commodity price decline to move to a “hands off” regulatory regime for energy prices; (b) make State Owned Entities/Public Sector Banks autonomous. Delink them from the control of their administrative ministries. (c) Enhance government effectiveness by boosting the availability of specialized, functional skills at decision making levels. The absence of even a game plan towards these objectives is worrying.

Make one, keep one-the mantra for government employees

Third, make jobs not skills. People learn better on-the-job. Medium, Small and Micro Enterprises (MSME) are ideal for maximizing the jobs per unit of capital. Facilitate them by- (a) Ensuring metered supply of 24X7 electricity on priority feeders (b) Supply electricity at the actual cost of grid supply (c) Provide incentives for such businesses to meet environmental standards. Forge a compact with state governments to make the rural development, panchayati raj, labour and industries department staff focused on employment and migration at the Development Block level. Encourage monitoring using rapid survey techniques. Remember what is monitored gets done. Reward Blocks which excel at growing employment in MSME. These measures fit well with the financial inclusion and social protection initiatives already underway.

Junk the colonial district management architecture

Fourth, change from the bottom-upwards is always the prudent way to start. End a relic of colonial rule, under which the District Magistrate is mandated to exercise oversight of the police via judicial powers under the Criminal Procedure Code. It is high time that the Police Commissioner system, already functioning in metros, is extended to all districts. The district level civilian administration would consequently be free to focus on development- for which they are best trained and equipped. This simultaneously empowers Police Officers and makes them squarely responsible for maintaining law and order- an unpardonably ambiguous mandate today. It also kick starts the process of modernizing the somewhat creaky, colonial legacy of district level general management- often the missing link in speedy implementation today.

The calendar from now to 2019 is chock a block with state assembly elections starting with Bihar later this year. The die has already been cast, the major populist decisions have been taken, including special aid for Bihar and Smart Cities. Now the outcome will depend on smart vote management- an area where the BJP excels. Time to strategize on improving the knotty fundamentals of growth and development with decisions kicking-in as soon as the votes are cast in November.

Soothe gussa fauji pensioners

OROP

photo credit: ex-servicemenwelfare.blogspot.com

Ex-servicemen are angry that their attractively titled demand — one rank, one pension — is not being implemented by the government. OROP as a “brand” is a huge communication success, hitting all the right buttons — simplicity, easy comprehension and being evocative of equity.

It is not surprising therefore that Prime Minister Narendra Modi adopted it in his election campaign. The United Progressive Alliance, caught napping, made a notional budgetary provision in February 2014, but did not survive the general election to be held accountable for its implementation. This pledge was repeated by Prime Minister Modi from the ramparts of the Red Fort on August 15. But fauji pensioners were not impressed.

Top babus, secretaries to the government and generals retire at a fixed apex pay since the Fifth Pay Commission (1996). Their pension increases to reflect all future revisions in apex pay. Those retiring below the apex pay have to make do with pension revisions at 50 per cent of the minimum of the revised pay scale, even if they retired at the maximum of the pay scale. Hence the inequity. Babu and fauji apex level officers thereby invite the charge of being self-serving.

A bit of history here. The armed forces have traditionally enjoyed an “edge” in the compensation they get versus civilians. The logic for the premium is accepted and remains rock solid even today.

Till 1973, fauji pay was reviewed separately. The 1970s were bad times for all government servants. Faux socialism required that government salaries be stagnated in the name of removing poverty. But the axe fell most heavily on Army pensioners via the Third Pay Commission, 1973. The result was that the payout ratio (the proportion of last pay to pension) for fauji and civil pensioners was made the same — 50 per cent — by reducing the fauji payout and increasing the civilian payout.

Real basic pay under the Fourth Pay Commission (1986) doubled, but inflation adjustment was only partial. The Fifth Pay Commission (1996) doubled the basic pay and provided for 100 per cent inflation indexing including for pensions. This fixed the earlier problem of pension not keeping pace with inflation. The Sixth Pay Commission (2006) tripled real pay. Whilst this was necessary, it stoked the angst of pensioners, other than the creamy layer, because pension adjustments lag behind salary revisions. With every pay commission, pensioners fall further behind. Only faujis have led the agitation for OROP, possibly because of the high regard the public has for them versus a less than rosy public perception of other government employees.

Kohima

The principle that fauji salaries must have an edge over civilian salaries has been consistently accepted. Suitable salary scales exist to illustrate this “edge” of around 10 to 15 per cent of basic pay. But in a classic case of maintaining the form whilst subverting the spirit, the benefits of the designed “edge” are only notional and not real. Here is why.

First, the sharply pyramidal structure of the armed forces limits the potential for promotion. In comparison, the civilian cadres are much less sharply tapered. Since pay is still effectively linked to position or rank, this means that civilians’ pay outgrows the notional salary “edge” over the first 16 years of their service. Thereafter, they lead not lag the fauji pay.

Second, stringent health requirements also ensure that faujis retire much earlier than civilians. Estimates suggests that 60 per cent of fauji officers retire by the age of 54. A soldier retires at the age of 35, while other ranks retire by the age of 45. In comparison, all civilians carry on earning promotions and pay enhancements till the age of 60.

Shorter service spans and fewer promotion avenues ensure that at retirement faujis have a basic salary which is around 40 per cent lower than a civilian who started service at the same time at an equivalent grade. To provide an equated pension to a fauji, the pension payout ratio has to be at least 75 per cent, as it was till the Third Pay Commission slashed it to 50 per cent.

The other options to safeguard the “edge” are to increase the salary scales of faujis significantly above civilian pay or to proliferate the number of senior positions — as it happens for civilians — to safeguard promotion prospects and income. Neither is an optimal solution to deliver more bang for the buck. Both require complex negotiations between losers and gainers within the armed forces.

The fact remains that OROP, as a principle, is flawed. It is not consistent with the principle of efficiency and it violates the principle of contracts. Pension is a stream of future payment for past services. Pay is a dynamic concept which changes as markets and job requirements change. Pay must reflect current market conditions. Pension is like a fixed annuity, albeit indexed to inflation to protect pensioners. Increasing the base pension amount as pay increases, as envisaged in OROP, is indefensible.

What then is the way out of the Jantar Mantar logjam, where the agitating faujis vent their gussa?

Good practice suggests that huge changes in pay be avoided since they lead to intergenerational inequity — future employees get paid much more, even in inflation indexed terms, for doing the same job. But such pay changes are sometimes necessary to correct a long neglected problem. Interim solutions can be one way to smoothen the transition. This is the way to go.

The government can restore the pre-1973 pension payout of 75 per cent but only for those faujis who retired between 1973 and 1995 when pension was not 100 per cent inflation indexed. This will significantly soothe the gussa of faujis whilst creating no untoward precedents for civilians.

The cost is around Rs 10,000 crore per year (back of the envelope estimates) or 7 per cent of the annual defence revenue budget for a period of four years.

Righting a wrong is costly but best done whilst the cost is bearable. Giving fauji pensioners short-shrift, whilst feting them publicly is inconsistent. Let January 26, 2016 be when the President of India soothes the gussa of 1.6 million fauji veterans.

Adapted from the authors article in Asian Age August 23, 2015: http://www.asianage.com/columnists/soothe-gussa-fauji-pensioners-476

Albert Pinto’s Gussa Redux

anger

Photo credit: http://www.avaxnews.net

The defining feature of India today is bottled up, seething anger. It erupts unexpectedly anywhere — in the plush drawing rooms of the rich, on our choked roads, in crowded, middle-class colonies over parking rights or in the ramshackle dwellings of the poor, over imagined insults and petty money disputes.

Saeed Akhtar Mirza’s 1981 celebrated film — Albert Pinto Ko Gussa Kyoon Aata Hai (What makes Albert Pinto angry?) starring the blessedly talented Naseerudin Shah, explores the roots of societal anger. It concludes that, contrary to modern liberal belief, it is difficult for individuals to go from zero to hero overnight. Society functions best when individual expectations align with the pace of social change.

Political pundits have forever advised politicians not to raise expectations too far beyond what can be realised or delivered, precisely to avoid such a backlash of sullen resentment or angry outrage. Yet, this has never stopped politicians from continuing to make rash promises.

Contrast this with the behaviour of bureaucrats, who are usually conservative with promises and targets. This could be because they have little to gain from aiming high. With no upside, why take a risk? Is risk aversion holding governor Raghuram Rajan of the Reserve Bank of India from lowering interest rates and thereby risking inflation? This could be one, albeit implausible, explanation.

Alternatively, maybe, the RBI governor and his team have watched Albert Pinto… carefully and remember that nothing can be worse than creating expectations and not meeting them. This government was voted in on the plank of restoring fiscal stability and providing jobs. Inflation can totally disrupt both objectives.

The political problem, of course, is the 10 million young people, who join the workforce every year. They voted the government into power and are now looking for the jobs they were promised. Telling them now that they lack a job because they lack skills, is a Kafkaesque googly that could result in a Pinto-type outburst on a massive scale. Hence the political pressure to kick start growth.

But what is the surety that lowering interest rates alone will result in more jobs. The world is finally flat — at least in terms of prospects for economic growth. In this dull market, with large inventories and surplus manufacturing capacity, new manufacturing jobs can only be created by ramping up protection for domestic industries. This option, as anyone who has driven an Ambassador car will know, has disastrous long-term consequences for productivity and competitiveness.

A better option to increase the competitiveness of Indian exports and provide protection to domestic manufacturing, would be to depreciate the INR as China and other competitors have done. But here again the ghost of potential inflation lurks via higher landed cost for petroleum and edible oil. The possible flight of foreign capital threatens the stock market and the external account. The higher cost of servicing the foreign debt of businesses is also a downer.

In any event whilst the macro-economic variables are tweaked, direct, rapidly deployed interventions for growth and employment are needed to meet expectations. Three “win-win” options stand out which are reasonably non-inflationary; targeted at jobs and quickly implementable.

First, get a grip on administrative reform and focus on tangible outputs and outcomes. The determination to get the Goods and Services Tax (GST) implemented by April 1, 2016 shows the way, as does the focus on ramping up highways construction and making Indian Railways more efficient.

Second, the steps being taken to increase domestic coal production via the transparent allocation of mines and gas production via price incentives for exploration in difficult fields, are necessary foundational work, albeit with medium term benefits.

More immediately, the Union government needs to restructure the accumulated loss of Rs 2 lakh crores of the electricity distribution utilities, as was done previously-albeit at a much smaller scale- in 2001. This is the only way to reactivate the demand side and realise the downstream benefits of enjoying, for the first time, an idling surplus generation capacity. But the 24×7 “electricity for all” mission can only be sustainable if it is linked to reasonable cost recovery for the utility and the complete stoppage of theft. This is one subsidy hole which is completely avoidable.

Third, an interim option to whip up “employment”, in these troubled times, is to offer a two-year National Service Mission for all young citizens of ages 19 to 25. One million young adults, each paid a stipend of Rs 6,000 per month by the government, could be offered this opportunity with a relatively nominal annual outlay of Rs 14,000 crore. For the young, this interim employment could be a “holding plan” while they look for a job. For the government, it buys time to create the environment for incremental private employment.

To weed out the rich, the poorly motivated and the faint-hearted, these young men and women would need to work in the 6,000 rural development blocks which dot the country and acquire skills on-the-job, in forestry, agriculture, irrigation, civil engineering, policing, security, public health, sanitation and education. They would function as management trainees and be placed according to their aptitude, education and skills. Trainee doctors are already required to do such service.

If the scheme were to be presented as just an opportunity for the unemployed and the poor to earn some money, it would end up being a less useful replica of its cousin, the Mahatma Gandhi National Rural Employment Guarantee Act. To brand the mission appropriately, it must attract the educated young across the social and economic spectrum.

To profile it as an option for high achievers it should be made compulsory for all aspirants to public office — budding politicians, potential judges and future civil servants — to start by experiencing life at the bottom of the public service ladder even before they fight an election or take the entrance exams.

Considerable social benefits are possible by bringing together the young from disparate groups in a competitive environment over extended periods. The resulting cohort networks of “desh sevaks” would be unique. Unlike educational or social networks these would cut across class, regional and religious rigidities and narrow the gap between “people like us” and “others”.

The first step in anger management is to feel equally responsible for the situation one is caught in. Albert Pinto and his ilk might have been less disillusioned and less angry had they had the chance to be a “desh sevak”.

Adapted from the authors article in the Asian Age August 13, 2015: http://www.asianage.com/columnists/albert-pinto-s-anger-redux-856

“Brave heart” Indian migrants

migrants

photo credit: http://www.tumblr.com

Who can say it better than Amitav Ghosh, the celebrated author of the Ibis trilogy, the master of evocative words and beguiling stories, when it comes to documenting the life of migrating Indians.

Bihar, Uttar Pradesh and Bengal (including Bangladesh) continue to supply cheap labour to the rest of India today, just as they did in colonial times to British plantations in Guyana, Fiji and Mauritius. Does domestic migration serve public interest beyond the individual benefits it provides?

The merger of cultures

Let’s consider what happens when stereotypes migrate and coverge physically. A single Tamil child of young, upwardly mobile, working parents in Chennai; reared by a Bengali nanny; driven around by a Bihari driver; taught by a Maharashtrian; living in a house built by masons and carpenters from UP who eats wheat grown in Punjab, cannot but be truly Indian.

Into the consciousness of that child are woven, the stories and hopes of the rest of India. It is unlikely, therefore, that she would be content with just her Tamil identity. Of course the danger is that she could become the domestic equivalent of the ABCD (American Born Confused Desi). But any change has to start by perturbing the status quo.

Strict “isolationists” would of course bemoan the demise of “pure” Tamil culture. They will quail at “bhel-puri” coupons being tacked onto tickets for a Bharatnatyam recital or retreat in horror from Bhangra rap at a jana vasam- south Indian baraat. But cultural cross-overs are the stuff that nations are built upon.

A national identity

The national identity project is not new. But in recent times it has been undermined by politicians who benefit from nurturing regional, cultural and religious silos rather than working actively to dilute them. This trend is now pretty much irreversible.

But the hope is that with economic development, traditional identities-caste, religious or regional- will lose the urgency and prominence they have today. This happened before when the gains from more modern identities outweighed the limited and circumscribed benefits from traditional roles. Economic migration is a powerful lever for achieving this goal.

Migration- a great Indian tradition

Indian teachers, soldiers and merchants were willing to brave the “polluting” effect of crossing the seas even in the 19th century, so long as the professional prospects (think the legendary mathematician Ramanujam), the pay (Indian shippies), or the profit (Gujrati traders) provided sufficient incentive. The cost of “ritual purification” on their re-entry into India was trifling and the priests inventive and ever willing to oblige for a small fee. This practice of embracing multiple identities simultaneously, is the essence of any developed, open-access country. We need to go back to the future and against the stifling silos reinforced on us by colonialism.

30% of resident Indians do not live and work where they were born (2001 census). More Indians are born in the Northern and Eastern states than are the jobs available in such states. Given this asymmetry between population distribution and the availability of jobs, at least one half of the 10 million youngsters who come of age every year, will need to migrate for employment mostly to the western, southern, richer northern states and further abroad.

Prime Minister Modi’s persistent wooing of the Indian diaspora can be seen from this perspective. Assuming responsibility for their woes (visas, quasi-citizenship rights, immigration hassles) is a master stroke to play to the sentiments of their families and friends in India. Why not extend the same strategy to the labour surplus states?

Soacialising the migrant

There are no facilities today to socialize domestic migrants into the environment where they go. The assumption is that they would be socialized by friends or their employers. A more blithe assumption is that being Indians they don’t need socialization. Nothing could be further than the truth.

Ghettos-ethnic, religious or regional are a fact of urban life. These are insulated and largely self-regulated. They perpetuate traditional identities rather than facilitate the development of new ones. If domestic migration has positive externalities- like helping develop a national identity or making labour markets more liquid- it is time we financed this public good. In a poorly targeted way we do so already by keeping railway fares much below the cost. Why not target support better to these brave hearts?

The time is right to launch this public program aimed at documenting, understanding and alleviating the challenges of domestic migrations. Marketed correctly, this could be of huge interest in Bihar and Uttar Pradesh- two large states which go to the polls within the next two years.

There are two key, low hanging fruit to be harvested:

First, provide a digital friend (e-saathi) to the migrant. Migratory workers should be able to access a National Travel Support Service (NTS). This could be a toll-free number they can call nationally and seek advice from a digital friend on travel, accommodation, labour markets, wage rates and emergency response.

The NTA could be administered by the Ministry of Labour and Employment since a large part of its work, albeit not exclusively, would be across state government borders. Ideally, management would be outsourced to a non-state or private agent. Over time it would become networked with local NGOs who work with migrant labour and provide a basic social safety net.

The political attractiveness is obvious, not least because it is a pro-labour step. It would be most helpful for migrants in the informal sector, like in construction. It could extend a welcome helping hand, directly to one fourth of Indians who migrate, including for work.

Second, a safe, transit home for poor migrants. Domestic migration is often also a consequence of social persecution of marginal communities at home. Trail blazers, who marry inter-religion or inter-caste are forced to leave. For the poorest migrants, the biggest problem is finding a safe shelter till they can get a job and move on. For NGOs who want to help this segment, the problem is finding the land to provide a shelter at a location where work can be found nearby.

In the past, the Rail Yatri Niwas was a boon to the travelling middle class. These provided reasonably priced accommodation close to the railway station. Since then private hospitality facilities have exploded for this segment of travelers. It is time now to shift to serve the poor by leasing small land segments out to NGOs who wish to manage the socialization of poor, urban migrants. This intervention in the “real sector” will give a face and teeth to the virtual friend.

Cynics will dismiss this proposal as yet another mirage created by the smoke and mirrors of digital India. Other critics will rile that it is just another election gimmick. But pause and consider that the most practical public interventions are those which align with political economy and use the available entry points to enhance the public interest. This is one such win-win example. The families of poor migrants are unlikely to forget who helped to keep their migratory kith and kin safe, whilst simultaneously serving the public interest of social protection for the poorest.

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