governance, political economy, institutional development and economic regulation

Archive for March, 2017

Basic income transfer- Modi’s next big thing?

poor woman

Irrespective of its economic virtues, demonetisation — an aggressive, unprecedented initiative of Prime Minister Narendra Modi, brought rich dividends for the BJP in the Uttar Pradesh election. Above all, voters were impressed with his determination to punish those who have become fat on black money. That the move also “punished” those who had no black money — via extended inconvenience, loss of business or employment — was collateral damage.

An incredible 41 per cent of voters gave a thumping majority to the BJP, including possibly those who were collateral fodder or the target — proving, yet again, that in politics, good intentions trump technically appropriate action.

The next frontier

So what can the Prime Minister do next to shock and awe the Opposition and win minds and hearts across India? Elections loom in Karnataka in 2018, currently ruled by the Congress, and national general election is in 2019. The chosen programme must be elegant not clunky; effective not merely palliative; quickly deliverable and fiscally prudent.

The Union government currently uses clunky, partially- or fully-funded schemes, implemented by the state governments, to establish its human face. There were 1,500 such schemes, which the Modi government has pruned to around 657. Most are massively inefficient. Arvind Virmani, a former chief economic adviser, claims they follow the one-third rule. Only one-third for the targeted beneficiary, one-third for administrative expenditure and one-third for corruption.

Mind you, it is expensive to provide access to public services and goods even via a cash support mechanism. Prof. Abhijit Banerjee of MIT assesses the average administrative cost, across countries, of cash support programmes at 50 per cent of the amount delivered.

A universal, unconditional income transfer in cash to all citizens is the most efficient option. But it suffers from bad optics. The same amount of money is given to a beggar as to a real estate baron. But Sudipto Mundle of NIPFP argues that select exclusions are possible without massively retarding efficiency. The most obvious exclusion is anyone in urban areas. The average income in urban areas is consistently higher than in rural areas, where 80 per cent of the poor live.

Substitution or additional support

Others, like Jean Drèze, are sceptical about the cash transfers, specially for food support. We know food prices spike during drought. During such extreme events, the transferred income would be insufficient to buy the targeted amount of food. Those living at the edge cannot afford to be caught in such a situation.

Clearly, basic income transfer is not a substitute for all other existing social support mechanisms in education, health and social protection, but it can substitute those mechanisms which are the most wasteful and poorly targeted.

Reform wasteful, leaky de-merit schemes 

The Economic Survey 2017, lead-authored by Arvind Subramanian, chief economic adviser, does signal service by evidencing the problem of misallocation of fiscal resources in the existing schemes. The share of the districts, where 40 per cent of the nation’s poor live, in allocation for anti-poverty schemes, like the mid-day meal scheme is just 20 per cent and just 24 per cent in the Swachh Bharat Mission. Such misallocation is wasteful.

SEWA pilot shows the way in MP

SEWA

A pilot done by SEWA in four villages in Madhya Pradesh, over a period of two years, covering 6,000 people along the universal coverage principle, transferred Rs 3,600 per year to each adult, with lower amounts to children. The results are impressive. The most significant outcome is that even four years later, many of the initial achievements with respect to the enhanced decision-making role of women; sustainable income from assets — mainly livestock — and the continued productive use of income remained strongly in place. Similar pilots are being done in Africa. But the caveat is that pilots involve significant handholding and oversight without which, as in Ghana, sustainable income enhancement is negligible. This cautions that even with a universal basic income scheme the role of handholding will remain.

A first for India

India could become the first country in the world to use a “qualified-universal” basic income transfer to end poverty. The real problem is how to find the money. Arvind Panagariya, the Prime Minister’s key economic adviser and vice-chairperson of the Niti Aayog, however, highlights the fiscal requirement. At just Rs 10,000 per year per person the cost is equivalent to the government’s entire revenue of 10 per cent of GDP.

Use second best options – sequential implementation; finance the poverty gap

But there are viable second-best options. First, smaller amounts could be transferred. The poverty gap has been estimated at around Rs 3,500 per poor person per year as in the SEWA pilot. The Economic Survey records that an annual transfer of Rs 3,240 to every female would cost one per cent of GDP. The cost can be reduced further by a quasi-universal scheme focused on females only in rural areas, with girl children getting less and women getting more, as in the SEWA pilot.

Subsidy reform is overdue. The Prime Minister had also adopted the approach of “subsidy tyaag” the voluntary giving up of subsidy by those who were well-off. It is also possible to make it administratively more difficult to access demerit subsidies like on cooking gas; fertiliser and income-tax exemptions with the target of eliminating them altogether.

In the meantime, a “quasi-universal” basic income transfer scheme can be started by allocating just Rs 75,000 crores (just 0.3 per cent of anticipated GDP in 2017-18) to one-third of the poorest districts. The programme can be expanded to other districts by allocating just two-fifths of the incremental revenues, especially if growth trends upwards beyond eight per cent per year.

PM should grasp the moment

Prime Minister Modi is not one to be hesitant about funding innovative ideas in the public interest. The quasi-universal basic income scheme is one door that he should consider walking through, specially if he is confident that India shall grow at above eight per cent.

Adapted from the author’s article in the Asian Age, March 31, 2017  http://www.asianage.com/opinion/columnists/310317/basic-income-transfer-modis-next-big-thing.html

poor children

Three constitutional safeguards against Theocracy

Hindu

The Rashtriya Swayamsevak Sangh “foot soldiers”- ostensibly till now a cultural “Hindu” organisation. Saffron is their colour. 

Utopian secularists are in convulsions at a “yogi” becoming chief minister of Uttar Pradesh. Of course, they have cause to worry. It does not help that Adityanath Yogi, as he now calls himself, has a history of political activism. Can he change his spots and rule equitably? Only time will tell.

The fear factor prevails 

Muslim

Secular Hindus – a minority themselves, and the religious minorities – particularly the Muslims- rightly fear even an implicitly theocratic state. The constitution specifies a secular State via an amendment in 1976. But there are no specific safeguards.

But all those who don’t subscribe to the Hindutva theology are bound to be fearful. And mere hope is not sufficient reassurance. The real question is why do we not have institutional safeguards to avoid an adverse outcome? Why are constraints on theocracy not specifically provided for by our Constitution and enshrined into workable instruments in our laws?

We kicked the communal “football” down the road in 1947

First cabinet

Pandit Nehru’s first cabinet had two Muslims and a Sikh as lip service to pluralism. But raw decision making power – in finance or in internal security, has never been out of Hindu hands – quite naturally, since close to 80 percent of India is Hindu.  

We should have known better. We have reached the natural culmination of where we have been headed since the formal adoption of a democratic architecture.  There have been early signs. But these were ignored because they largely never affected the elite. That one-fifth of Indians remain wretchedly poor shows that democracy has managed inclusion very badly. The status of women is another example where democracy has failed to translate into equity.

But the good news is that, in both cases, we have learnt and gradually built in safeguards to ensure inclusiveness. The political representation of the Scheduled Castes and Tribes has helped. Assured political representation for women in legislatures is an ongoing exercise.

Oddly, the Yogi, as CM, is a step forward towards reconciliation 

Odd as it may seem, we should welcome that the BJP has chosen pick Adityanath, the practising head of a mutt in Gorakhpur, as its chief minister. It would have been strategically better for the BJP to fudge and appoint a backward caste leader and continued to play the “game” of “political correctness”. That the BJP chose not to do so serves to highlight the existing yawning legislative gap between principle and practice. After all, the problems of Indian democracy can never be resolved unless we all speak and act from the heart, within the limits of the law.

Lets shed false pretences and bare our souls

sahibs

Much of the angst against Adityanath is drawn from the colonial “brown sahib” culture of political correctness. This culture privileges convention and process versus the outcomes of law. Examples abound. Brown sahibs believe that due process must be adhered to. Never mind that, in doing so, a poor applicant or litigant can get beggared into giving up the fight.  In the Brown Sahib’s logic, principles are not iron-clad concepts which produce and are validated by outcomes. They merely prescribe and often justify the process – rarely the outcome. Consider how shallow is our application of the principle of “right to be heard” in our law or the right to vote or the right to property.

Our constitution relies on good intentions, not iron clad safeguards

Our democratic architecture is inadequately developed to factor in the reality of India, with its multiple cleavages. If implicitly elitist rule has been possible over the last 70 years, it should not surprise us, if tomorrow brings implicitly theocratic rule. So for those of you who are uncomfortable with a Hindu yogi, a Muslim maulvi, a Sikh granthi or a Christian priest in a CM’s chair, here are three changes we need to introduce in our political architecture.

Mandate plurality in the cabinet

First, it is the privilege of the winning party or coalition to select any member of the legislature as CM. Can we not simply legislate that a religious head should never be selected as CM? Possibly not, because this would be a violation of the fundamental right to representation of a religious group. More practically, there is no watertight way of defining who is a “religious head”. Consider that Sadhvi Uma Bharti led the BJP to a three-fourths majority in 2003 in Madhya Pradesh and became CM. Unfortunately, she had to resign soon after, because an arrest warrant was issued against her on a 10-year old charge of inciting a riot. This setback also robbed analysts of a case study on how religious activists wield political power. The outcomes may well have surprised cynics. But it is best to explicitly provide for safeguards to curtail the potential for even an “implicitly” theocratic State.

One option, applicable at the national level and in large heterogenous states (not Sikkim or in the Northeast), would be to prescribe that the CM, the home minister and the finance minister can never be from the same religion or caste.  These are the three core positions in the Cabinet. This would automatically require political parties to create a rainbow leadership and not a narrow gender, caste or religion-based party cadre. Of course, it will still be possible to co-opt “nominal” members of the appropriate profile. So we need to do more than just introduce end-of-the-pipe restrictions post-election.

Second, the Cabinet must reflect the gender, caste and religious profile of the relevant jurisdiction. This is necessary for adequate plural representation at the decision-making level.

Mandate plurality in candidates nominated for elected office by political parties

Third, we must change the basis on which parties fight and win elections. Registered political parties must be required — by law — to nominate a rainbow of candidates, reflecting the gender, caste and religious demographics at three levels of government — local bodies, state or nation. This is necessary to ensure that the election rhetoric itself changes; votes are not sought on narrow or sectarian grounds and parties develop a pluralist voter base.

Three constitutional amendments to ensure political plurality

All three changes require specific changes to the Constitution so that “plurality” gets embedded in Parliament and in the executive.

It is over-the-top to believe that India or Uttar Pradesh can become a “theocratic” state just by having a “religious head” as its chief executive. As long as the Constitution remains liberal and non-discriminatory; the law is derived from the Constitution and the judiciary remains empowered, plurality and inclusiveness will remain enshrined in law. But additional safeguards are necessary to deliver inclusive policies and action on the ground. The BJP juggernaut is best placed, by using its massive majority, to display good faith by initiating these constitutional changes well before 2019.

nationalist muslims

Adapted from the author’s article in the Asian Age, March 22, 2017 http://www.asianage.com/opinion/columnists/220317/are-safeguards-possible-to-prevent-theocracy.html

 

 

 

Change UP to change India

victory 2

When it comes to winning elections, the sophistication and efficiency of the BJP political machinery is unmatched. Of course, Prime Minister Narendra Modi’s charisma provides the base, which the party leverages, to ensure that their individual candidates win. So what does this historic win — pulling in an unprecedented 77 per cent of the seats up for grabs in the UP Legislative Assembly — mean for the nation. And specifically, is UP the tail which can wag the dog? PM Modi knows it can. This is why he has set five years from now 2022 as the milestone for changing India – not 2019 when the next general election is due.

UP the sleeping giant

The taj

UP has a rich past and a glorious future. It is the present which needs some looking after.

Uttar Pradesh accounts for around 12 per cent of India’s GDP but has 17 per cent of its population. If you sometimes wonder why India doesn’t grow more than it does or why the existing growth is not well-distributed, look no further. UP is to blame for both negative outcomes. It pulls down national metrics on per capita income and growth. It also makes us look bad on social inclusion. Nearly a quarter of all Muslims and the poor (based on the government’s poverty headcount metric) live in UP. The state’s poverty level, at just under 30 per cent, is the second highest in the country, after Assam.

UP – the key to ending poverty

child poor

If the BJP can halve poverty in Uttar Pradesh, bringing it down from 30 to 15 per cent (same as the existing levels of poverty in Rajasthan, Gujarat and Maharashtra), the national poverty ratio will fall by a massive 10 percentage points, from 22 per cent to 12 per cent. Reducing the levels of poverty in UP also has high positive externalities — particularly political. There are sizable communities of migrant workers from UP in Kolkata, Mumbai and Delhi, through whom the message of “achche din” can travel to these metros, generating a “feel good” tsunami.  Consider that if the BJP can make Uttar Pradesh grow at the average rate of national GDP, it would increase the rate of growth of the national GDP by 0.5 percentage points. This additional income, even if it is proportionately distributed across the population of the poor, would reduce poverty to single digits in UP.

Why the BJP is uniquely place to take up the challenge

BJP leaders

Cynics could ask how can we be sure that the BJP will extract the potential? Others think the BJP will face headwinds while picking a chief minister, thereby risk displeasing sections of the winning rainbow coalition. The squabbling in New Delhi in 2014 is evidence that even the BJP is not immune to internal sabotage by disgruntled cadres. The BJP works best when it functions in a vertically-integrated manner — much like the Communist Party of China. Significant decisions are all made at the very top. Targets are determined for lower level formations at the state and municipal levels. These are then vigorously followed up and performance measured against targets. Now that UP is directly controlled by the BJP, the Narendra Modi performance juggernaut can be rolled out uniformly across the state.

So here are three focused ways in which the BJP can be different.

Give UP back to real-time management by it’s bureaucracy

UP officers

UP has many Durga Shakti Nagpals – officers who seek to serve. The present Cabinet Secretary, the Chief Election Commissioner and the PMs Principal Secretary are all UP cadre officers. But two decades of “populist” rule post “mandal” in the 1990s have diminished the excellence, which was the hall mark of UP administration.

First, today UP is a state which is resource poor and deficient in entrepreneurship. Out of the 100 top companies listed by market capitalisation on the Bombay Stock Exchange, only one company — Dabur India — is headquartered in UP. The Annual Survey of Industries 2014-15 lists only six per cent of the total number of factories and industrial workers, and just five per cent of industrial capital in UP. This illustrates that government efforts remain crucial, unlike in more developed states, where private sector initiatives can substitute for government efforts. The Modi magic, of revitalising the bureaucracy through direct interaction and consultation, as is now being practised at the Centre, must be institutionalised. This “direct contact” pattern of administration at the Centre has significantly reduced the earlier proliferation of corruption and silo-based operations. Mr Modi must return Uttar Pradesh to the real-time management of its bureaucracy, who have been sidelined and broken in spirit for too long.
The State in UP has become moribund. It must be reinvented, and used as an instrument for social change.

Make UP the international “laboratory” for agri growth

farmer

Second, agriculture is the heartbeat of Uttar Pradesh. Poor rural infrastructure and lawlessness have constrained additional investment in agriculture. Eighty per cent of the poor also live in rural areas. Agriculture based on “per drop more crop”; large scale diversification to non-cereal crops and commercialisation of agriculture outside the subsidy regime format of minimum support prices; cheap fertiliser and energy can pay rich dividends. The new land leasing arrangements should be led by UP, just as Rajasthan has taken the lead in amending outdated labour laws. More urgently, crop yield is not uniform across the four sub-regions. Average agricultural productivity can be increased by 10 per cent by simply pushing up productivity in the lagging central and eastern sub-regions (which account for around one-half of total foodgrain production in UP) to the levels prevailing in the state’s western region, adjoining Delhi and Haryana.

Invest in UP’s infrastructure

gadkari 2

Finally, UP has the worst road infrastructure in North India. Power cuts are rampant, even in Noida, which is a satellite township that adjoins Delhi. A proposal to build a regional air hub to service Agra has been gathering dust because the political alignment between the Union government in New Delhi and the state government in Lucknow was not favourable since 2002. If Delhi plans to link Myanmar and Southeast Asia by road with Afghanistan and beyond, over 700 km of this highway must pass through UP. Some of transport minister Nitin Gadkari’s expertise in getting infrastructure going could be usefully applied to UP.

2017 election results are a gift – use it well

The BJP is known for its executive and managerial abilities; its disciplined cadre; its capacity to ramp up domestic and foreign investment and to link investment to results. Uttar Pradesh is likely to give it the biggest bang for every buck it spends, simply as the desire to do better in UP is matched only by the utter frustration of its citizens over their stagnating future prospects. If UP booms, India will follow. This is one chance that we simply must not lose.

bangles

Bangles in Firozabad, brassware in Moradabad, rich textiles in Varanasi, the juciest mangos from orchards across the state, Nimish – the flavoured forth from early morning milking of cows, Mughal delicacies from Lucknow and Rampur, ancient monuments at every turn and a culture bred by centuries of civilised life – UP has it all, except transformational leadership- will Modi be the one? 2022 will tell.

Adapted from the authors article in Asian Age  March 13, 2017 http://www.asianage.com/opinion/columnists/130317/if-bjp-can-uplift-up-all-of-india-will-gain.html

 

Bulk up to beat the competition

Hulk

Scaling up is the name of the game in politics and in business. The BJP secured enviable gains in the early 2017 municipal elections in Maharashtra and Odisha. A win in the Goa state election is likely. A possible, albeit messy, near-win in Uttar Pradesh and potential inroads into Karnataka, Tamil Nadu and West Bengal portend that the Narendra Modi juggernaut is rolling out a massive, vertically integrated consolidation of party votes across the three levels of government.

Big, deep pockets business is in

In business, too, big is beautiful. Government banks and oil companies are being merged into competitively-sized entities. Reliance, India’s second biggest company by market capitalisation, after Tata Consultancy Services, still rankles at the loss of the top position due to faltering gas production. It is now hitting back at the fragmented competition in telecom, targeting an aggressive 50 per cent share by 2021.

ONGC

Bigger publicly owned enterprises and bigger government is the inevitable option if private investment response is weak 

The government sector too is expected to grow. Some of this is dictated by the compulsions of the faltering international economy. Private capital is risk averse when returns are dodgy. Public capital then is the only option. India is terribly under-capitalised in network and social infrastructure. We spend less than one half of what we should to get rid of the infrastructure constraints on growth and security. The government’s budget needs to expand by at least one-fourth to accommodate the necessary capital spend. FY 2017-18 is not budgeted to be different from the past. There is not enough time before the 2019 general election for grounding project plans into reality. Jobs will consequently be funded by public finance.

Citizen anxiety at being left out in the cold

anxious citizens

Should citizens and consumers then be apprehensive about the drive to consolidate and grow across government and business? Not really. Dominance is a systemic outcome of competition. Institutional safeguards can ensure that dominance is not misused to dilute citizen and consumer interests. The scale of operations should be a matter of choice, not compulsion, or the outcome of regulatory nudges. Citizens should rather be concerned that decent jobs won’t come unless businesses and government grow to scales dictated by market parameters.

Multiparty politics only means larger ballot boxes

ballot

The political architecture is similarly fragmented. A loose law allows a mind-boggling 1,452 political parties to be “registered” by the Election Commission under the Representation of the People Act 1951. Only 54 parties are recognised at the state level and just six are national parties. Recognition has stricter norms linked to voter share and elected candidates. Believe it or not, the commission’s powers to de-register moribund parties are not explicit.

Multi-party politics has become a fetish, far beyond its usefulness to the average voter. Tightening up on representational norms is possible without diluting the basic freedom to choose one’s political party. Just gearing up the disclosure, internal governance and accounting requirements, to the levels required for companies, can reduce the number of registered parties.

Smart regulation can weed out frivolous parties

Enforcing regulatory compliance can deter frivolous registration and ensure responsible representation. This is illustrated by the experience of companies. Of the 16 million commercial entities operating in India, just one million are registered under the Companies Act 2013, despite the benefits which accrue from registration. It is not as if only large commercial entities choose to get registered. 66 per cent of companies are very small with an authorised share capital below Rs 1 million or just $15,000. But the widespread reluctance to register is because of the accompanying higher levels of disclosure required. Political parties would respond similarly. Only the most serious ones would remain registered if regulatory requirements were increased in the public interest.

Political consolidation as a public good.

Why should we think of political consolidation as a public good? Our fractured and divisive social architecture provides ready opportunities for exploitation of the cleavages for narrow political purposes. We must make it difficult for parties. which cater solely to narrow agendas. Social inclusion fundamentalists would rebel against any institutional constraint on the freedom of a political party to represent even marginal views. But look at the trade-offs. Caste and religion find no place, in our Constitution, as legitimate grounds for political mobilisation. Introducing institutional mechanisms which encourage broad-banding of political platforms is therefore legitimate.

Mandate rainbow nominations for inclusive politics

symbols

One way to ensure such broad-banding across castes and religions is to mandate that parties must replicate the prevailing rainbow of castes and religions while nominating candidates in specific jurisdictions. Savvy political parties are already doing so. The BJP broadened its appeal to dalit and backward caste voters in Uttar Pradesh (2017). A quarter of Bahujan Samaj Party candidates are Muslims to demonstrate Mayawati’s good faith while seeking Muslim support. The Samajwadi Party’s tieup with the Congress broadens its appeal to dalits and upper castes — both long-time supporters of the Congress.

In a fragmented political market, institutional compulsions to broaden the electoral base can be an effective catalyst for consolidation. This would be a welcome change from the minimalist strategy of securing the largest number of votes polled by splintering your opponent’s vote share below your own.

Leave room to grow 

Limiting governmental and private sector dominance by constraining their ability to grow has negative social and economic outcomes. We barred Facebook from giving free access to a limited Internet space in 2016 due to the misplaced fear of deep pockets-driven future dominance. E-commerce — similarly driven by deep pockets — has somehow bucked the tendency to protect incumbents. Institutional reform to regulate big institutions is overdue. Smart laws and empowered regulators can sift destructive dominance from scaling up for efficiency enhancement. Bulking up is the international trend. We cannot but conform.

shoes

Adapted from the author’s article in Asian Age, March 9, 2017 http://www.asianage.com/opinion/columnists/090317/in-politics-like-in-biz-bulk-up-to-beat-rivals.html

New social compact : wooing the underdogs

voting

Do Indian voters remain deeply aligned with caste, clan and community (read religious) interests, as reported in the ongoing state elections? Possibly, yes, they do. Continued allegiance to traditional identities makes sense, if new ones never had the chance to take root.

Industrial work was one such silo-buster, as is urbanisation. Both, have had a limited impact on India’s social profile. Large, organised industry employs barely 10 million people, or just two per cent of the workforce. The impact of urbanisation is still far too recent to induce a change in social behaviour. Migration by men, for work in the urban, informal sector, has done a lot to contribute to the urban sprawl. But it doesn’t let new urban identities take root, as families remain village bound.

Modi – disrupting the status quo

No surprise then, if the 657 political parties (many are moribund) that are registered with the Election Commission vie for existing group interests as vote banks. There are only two examples in the past three decades which go against this grain of vote bank politics. The BJP came to power at the national level in 2014 by disrupting traditional identity-based vote banks. In a powerful outreach to young, aspirational India, Prime Minister Narendra Modi provided the instant hope of jobs through a government which worked for them, not against them. This enlarged support beyond the BJP’s traditional vote banks — upper caste and bania groups.

tea-3

Modi exults in the hard work and determination that enabled him to overcome his humble origins  – chaiwala (tea server) – in status quoist India. Mayawati – BSP and Mamata Banerjee – Trinamool Congress are female avatars of Modi.

It helped that Narendra Modi is himself from a backward caste. His is a rags-to-riches story. More important, he flaunts his humble origins and makes a virtue of his struggle to make good. More conventionally, he publicly dons the mantle of the selfless “sevak”. Anybody in the audience could be him, if they only had the gumption to succeed.

AAP – the new “Left”  

aap-uk

The Aam Aadmi Party had similarly disrupted traditional identity politics in December 2014. It fashioned a winning alliance of the urban poor and neo-middle class against the corruption of elites in the Delhi state election. This anti-establishment, anti-corruption model is now facing a test, for its resilience and appeal, in the rural settings of Punjab and the BJP stronghold of Goa — both of which are “rich” states.

Its a tough world out these

wire

Like the Congress during the post-Independence period, Mr Modi’s BJP is shaping a new India. It is an India that recognises today’s harsh international realities. First, unlike the rosy expectations of the 1950s, foreign aid, as an instrument of change, is dead. Economies need to fund their own development, by borrowing from the market or collaborating with foreign investors. This requires governments to bend before those who have the surplus capital; ship up to strengthen their own economies or continue to lag. Second, the consensus of the 1980s, that markets could substitute for the State’s inefficiency, is less credible, particularly after 2008. Strong states seem inevitable, albeit exercising judicious restraint while regulating markets.

A Nobel for the Communist Party of China?

china-politburo

For lifting more people out of multi-dimensional poverty that ever before; for adapting ideology to market realities and for standing true to their national objectives, the Nobel goes to ……. 

China has been the most successful economy, post 1990. It deserves a Nobel Prize for overcoming massive poverty and low levels of human development to become the factory of the world. It accounted for 1.5 per cent of world GDP in 1990 — the same as India. Since then it has cornered more than a fifth of growth in world GDP. By 2015 it accounted for 15 per cent of world GDP and has liberated nearly 300 million people — almost as many as the population of the United States — from poverty.

The Chinese story is of a single-party-managed mega-nation. By mixing market principles of merit and competition with the political energy of a proactive state, it has fashioned a massive politico-industrial machine. China has little patience with the effete romance of liberal idealism. Theirs is the classic hunter’s approach to life — smart strategy matters more than social ideology for filling your belly and remaining stronger than your adversary. This approach resonates in a world where persistent vulnerability to poverty; falling real income and increasingly skewed income distribution clouds even the rich world.

Where is the leadership in India?

tamil-nadu

Reverence for the absent trumps concern for the living, for gathering votes, in mystical India

Mr Modi’s world is that of realpolitik. Performance and outcomes matter the most. In contrast, the other national parties seem dated. The Congress — once a people’s movement, albeit led by professionals — is dormant. The Left is trapped in ideological echo chambers, seemingly unaware that organised, permanent workers are a diminishing vote bank. That economic forces have moved value addition beyond the spatially focused, integrated work areas, of the industrial age. The Lohia movements of the late 1970s rallied the backward castes into regional parties. But these lack vision, credibility or sustainability, beyond their narrow vote banks. The dalits have been transactional in their support for parties, although Mayawati has tried to substitute the Congress with a rainbow-style coalition. Muslims remain boxed into a defensive stance, perpetually seeking the status quo rather than transformation.

Where then do we turn to for leadership in India? The BJP is a clear and credible option. The mantra is that the government must focus on economic inclusion and social inclusion will follow. To take a practical example — higher government revenues from a more efficient tax regime can enable transfer of universal basic income to the poor and marginalised. This neatly avoids the clunky and inefficient option of physically providing cheap goods and services to the poor and caste or community-based support for the marginalised. It may also reduce corruption significantly by around one per cent of GDP.

A new social compact – trade entitlements for opportunity

taxi

The existing social compact between citizens and the State should be reworked. Will citizens be ready to give up their entitlements and de facto freedoms, in return for the State providing more economic benefits — security, macroeconomic stability, jobs, infrastructure and access to healthcare? With money and smartphones in their pockets, people — including the poor — will be able to shape their own societies, without being clouded by the past seven centuries of civilisational shibboleths dumped on them. Can Mr Modi get past the elites who benefit directly from the status quo? 2019 will tell.

Adapted from the authors article in Asian Age March 2, 2017 http://www.asianage.com/opinion/columnists/020317/can-modi-revise-social-compact-2019-will-tell.html

 

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