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Archive for the ‘Democracy’ Category

Modi: Unassailable at three

Modi parliament 2014

Modi enters Parliament for the first time in 2014 in a characteristic “Indian” manner – prostrating himself at the steps of this very British institution. Stooping to assimilate is the Indian way. Photo courtesy Indian Express 

Three years ago, when Modi’s BJP entered Parliament in May 2014, with a never before majority, the “realtors of Raisina Hill” (policy wonks and public intellectuals in Delhi) were full of doubt about whether a country bumpkin from Gujarat could navigate the gilded and suave avenues of Lutyen’s Delhi –  that part of the city, designed by the British for themselves in the 1930s, where todays rich and powerful elite lives and conspires in self-interest.

Modi does a pincer on Dehi elites

True to his Gujarati heritage and much like Gujarati emigrants to the west have done for ages, Modi made no effort to integrate or ingratiate himself into the elite. He cut his own lonely, furrow going around the established elite. Over time the furrow deepened into a moat which effectively encircled and confined Delhi’s elite to gossiping amongst themselves. Admittedly, his was an easier task than what confronted Gujarati emigrants overseas. But the tactic employed was the same. First, entrench yourself in the eco-ystem – get a job or start a small business; next, deepen your control on resources – build up capital and develop local relationships and finally look for gaps to fill – do what the lazy locals will never do.

Patels

The Patels – intrepid survivors in foreign lands – a smooth blend of modernity and tradition that makes them outstanding achievers and harmonious assimilators. 

There were initial hiccups. The BJP – essentially a north Indian, middle class party till then – first tried the babu approach of distinguishing itself from the previous government by rejecting even the good things the UPA had done – like NREGA and Aadhar. But Gujarati pragmatism and performance orientation won. The approach changed to building on what existed and exponentially expanding the scale and ambition of projects and policies, to shock and awe the public into abject Modi bhakts (followers). Nothing it seemed was impossible.

Modi’s ratings better than the BJPs

Three years on, the mood within the party is upbeat – not surprising after the massive electoral victories in Uttar Pradesh and then in the Delhi municipal elections. In sharp contrast to Trump, Modi’s popularity ratings beat those of his party. The inanities of the BJP’s rant on protecting cows rather than Dalits or projecting Hindu populism rather than political equality and security for the minorities is attributed by the common person to vested interests in the party – vigilantes who use the party’s hard line as a business or “God men” who use the saffron they wear to encroach on government land. Prime Minister Modi stands tall above this desperate fray for the crumbs of political power.

Sour grapes?

Detractors and cynics say it is hype which is keeping Modi in the stratosphere.  This is lazy analysis. There are three reasons why Modi has embedded himself into the public mind as the harbinger of a better future.

India’s Bill Clinton – responsive, charismatic peoples’ person

First, being of humble origins he feels the pulse of the people and responds to it. Demonetization was a temporary set-back for the economy and cost workers their wages or their jobs. But, they saw it as a plan to punish the corrupt and applauded the effort. Modi did not just rest on the laurel of public acclaim. He has successfully pushed the tax bureaucracy to unearth black money and investigate shady deals. Is this sufficient to end corruption? Clearly not. But it is sufficient to establish Modi’s credibility as having the gumption to take on the corrupt, rich and make them pay for their sins.

Neither Right, Left nor Liberal – for Modi, transactions matter, not ideology

Second, the expansion of social insurance schemes for the poor; progressive expansion of crop insurance; the 200 million Jan Dhan accounts opened; the switch to the direct transfer of benefits for the poor to their accounts; kick -starting the moribund highways program; the proposals to reform agriculture by legalizing the leasing out of land; freedom for farmers to market produce outside the clunky and corrupt, public sector Agricultural Marketing System; the boost in coal production by whipping the public sector Coal India; making Indian Rail more efficient with better services; the improved functioning of government offices – all serve to illustrate positive change.

Stellar stabiliser of the economy

Lastly, the Modi government’s biggest achievement has been to stabilize the economy. Wasteful public spending has been restrained by fiscal discipline; the growth momentum has been maintained and consumer price inflation kept low within the targeted 5 percent per year. New institutional mechanisms are in place now, with the Reserve Bank of India specifically charged to deal with the bad loans of public sector banks amounting to over 12 percent of their average assets.

But there are still promises to keep…

Critics of the government point to the unfulfilled promises on new jobs and the linked poor performance of industry and exports; lack of performance on the promised recovery of black money stored overseas and the continuing civil unrest at home in Kashmir and in the tribal belt, even though the BJP is now in power, directly or in an alliance, in these states. To be sure domestic violence – not least the violence injected by self-proclaimed vigilante groups- is worrisome.  The poor performance in exports is partly a function of a strong Rupee which makes exports uncompetitive but keeps imports, particularly oil, cheap – thereby restraining inflation.  High domestic interest rates protect small savings, particularly of pensioners; restrain the creation of yet another realty driven bubble economy and dissuades gold-plated, bank financed, industrial investment.

Talking freely with people, sharing and learning can build long term credibility

Modi in varanasi

Prime Minister Modi greets the people of Varanasi, Uttar Pradesh – his parliamentary constituency

Trade-offs between economic priorities are always contentious. The key is to evidence why government acts in a certain way and who benefits. Mere rhetoric will not do. It is here that the Modi government falters because of its irrational stand against spelling out how the outcomes of its policies benefit minorities. Consider that, ironically, Modi’s BJP has probably helped more poor Muslims and Dalits, than ever before, via financial inclusion, higher allocations for NREGA and the new crop and social insurance schemes. Yet, the government does not highlight this. Nor does it share granular data, whilst defending its track record on inclusion, which many regard as its Achilles heel. Talking with, not at the people, in an evidenced manner, about one’s achievements, especially when it can silence critics, is good. Try it.

A version of this blog is also available at http://blogs.timesofindia.indiatimes.com/opinion-india/modi-unassailable-at-three/

 

Delhi voters slap AAP on the face

modi kejriwal

The Lion of Delhi, Arvind Kejriwal, has been bearded in his den. The BJP’s massive victory in all three municipalities in Delhi — North, South and East — has left everyone flummoxed. However, it wasn’t all one way. The AAP held onto their seats as per the outcomes of the 2014 Lok Sabha polls in the South MCD. But it lost seat share in both the North and East MCD to the Congress. In both areas, it seems there was a “ghar-wapsi” (homecoming) of traditional Congress supporters, who had fallen prey to the AAP’s promise of transformation in the 2015 Assembly election.

Delhi State merely a jagir of the Union Government

anil baijal

Anil Baijal, Lieutenant Governor – the invisible satrap of Delhi

The forceful return of the BJP can only be attributed to the TINA (there is no alternative) factor. The confrontational politics of the AAP, which burnt its boats and utterly failed to establish a harmonious working relationship with the Centre, proved costly. Delhi is a Union territory, but with a twist — like Puducherry. Both have a Legislative Assembly that elects a chief minister. But it’s biggest asset — land — is directly controlled by the Union government, as is the police force and the civil service. The lieutenant-governor is the de facto ruler of Delhi state, and he plays to the tune of the Centre, which appoints him. Not all the hugs and shared parathas between the former L-G Najeeb Jung and Arvind Kejriwal could bridge this basic gap in political alignment. The new L-G, Anil Baijal, also follows the same route, an inevitable outcome of the fractured institutional arrangements in Delhi. Only if the same party rules the Centre, state and municipalities can this alignment be matched. This is not possible till 2020, when the next Delhi Assembly elections will be held.

Kejriwal can save AAP in Delhi by stepping down as CM

manish sisodia

Can things change even before 2020, if Arvind Kejriwal resigns, admitting he has lost the mandate to rule? This might be a canny move, and put him on the high moral ground. Ajay Maken, the face of the Congress in Delhi, has already resigned, even though his party made some gains in contrast to the 2014 Lok Sabha and 2015 Assembly results. The AAP has ambitions in Gujarat. The outcome of the recent Punjab polls should have taught Mr Kejriwal a lesson — that being an itinerant leader is only possible if one’s family is part of the political elite and has spent almost a lifetime in politics. A good showing in Gujarat would be a good base for enlarging the AAP footprint into the metros in Karnataka and Maharashtra. Left to himself, Manish Sisodia is a diligent leader with balance and the tenacity to show results, on the ground, in Delhi. More roads and flyovers built at less than the budgeted cost; more mohalla clinics and better services in the slums of Delhi is a painstaking job for an executive, not a charismatic dreamer.

Modi is the king of referenda politics

The Delhi municipal elections reinforce that charisma and shock and awe tactics work wonders. Like everywhere else, since 2014, these elections were fought in the name of Narendra Modi versus Arvind Kejriwal. In a costly tactical error, the AAP sought this face-off as a referendum. Clearly, Arvind Kejriwal has much distance to travel before he can be measured in the same metric as Prime Minister Modi.

Amit Shah is a one-man school for electoral management

The Modi-Amit Shah duo’s trademark electoral tactics of “placing” the right man to lead the Delhi BJP has paid off yet again. Manoj Tiwari, a Bihari actor, has a natural entry point into the significant voter pockets of recently-domiciled Puravanchalis — slang for immigrants from UP and Bihar. An outsider to the more traditional set of Delhi BJP powerbrokers, Mr Tiwari was also the least likely to invite backstabbing, unlike the hapless BJP late-entrant candidate Kiran Bedi, who lost the 2015 Delhi state elections. In any case, Mr Shah’s style of watertight oversight, now honed over half a dozen polls, precludes any dissent within the BJP now.

“dhili” Congress unravelled in Delhi

Compare this targeted “placement strategy” of the BJP with the Congress, which failed to rally its troops behind Delhi leader Ajay Maken. Arvinder Lovely, a Sikh leader, deserted the party for better pickings with the BJP. Manoj Tiwari’s counterpart in the Congress is Sheila Dikshit and her son Sandeep Dikshit. They have familial links to the Purabaia community via the late Uma Shanker Dikshit, Ms Dikshit’s father-in-law, who was a venerated UP politician of the independence movement era. Ms  Dikshit, Delhi’s chief minister for 15 years, from 1998 to 2013, was sidelined, possibly due to infighting between her and Mr Maken.

AAP – resource thin and exhausted post Punjab disappointment

AAP workers

If disjointed leadership cost the Congress dearly, the AAP suffered from electoral exhaustion; a dwindling bench strength and failing credibility. Arvind Kejriwal held out the ultimate bait — a promise to abolish property tax — to win over the middle class. This was the final nail in the coffin of responsible politics. Property tax is the primary source of revenue for all municipalities. Its abolition would spell financial ruin and even worse services than at present. In comparison, the BJP brings to the table the coffers of the Union government. The NDMC area, which is managed directly by the Central government, is a lush, green oasis for the gilded elite — the Lutyens people — in sharp contrast to the dusty, filthy Delhi, the rest of the national capital’s residents live in. The prospect of resembling the NDMC  area was a mouth-watering possibility that few voters would pass up.

Can Modi reproduce the well being of the NDMC area in the rest of Delhi by 2019?

NDMC2

Delhi has voted for the Modi magic to rub-off on them. The denizens of other metros may contest this, but Delhi best illustrates the diligent, aspirational and yet conflicted India — riven by caste, religious, regional and class cleavages. It is a ready crucible for implementing the PM’s vision of a prosperous, equal opportunity-oriented, highly skilled, healthy and sustainable India. Mr Modi is unlikely to disappoint.

Adapted fro the authors article in The Asian Age April 27, 2017 http://www.asianage.com/opinion/columnists/270417/delhi-gives-kejriwal-a-slap-in-the-face.html

 

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

 

 

 

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

 

Budget 2017 – say what you mean

professor

Some pictures may be worth a thousand words. But when the two are put together, as in a video, they evoke deep emotions and convey subliminal messages. Watch the master of the spoken word — Barack Obama, in his January 2016 address on the mundane subject of gun control in the United States and you will see what I mean. It is unfortunate, that despite the best talent in branding and outreach we fail to use words which convey our intent unambiguously.

Poor namkaran begets poor results

Consider the name of the government department, which is supposed to privatise the public sector. It was created in 1999 under the BJP-led NDA regime and helmed by finance minister Arun Jaitley. Even way back then, it was clear it would not take root. Mandated to raise capital through privatisation — it ended up being named, hypocritically, the department of disinvestment. “Divestment” would have been more proximate to the intent. But the fuzzy name, matched the lack of sustained resolve for a big-bang approach to privatising the public sector. It muddled along till, mysteriously, in April 2016, it was cumbersomely renamed as the department of investment and public asset management (DIPAM). It does nothing of the sort. Its core mandate remains to sell the industrial Central public sector. Public sector investment and asset management continue to be the mandate of every line ministry, for the state-owned enterprises (SOE) under them. No wonder then that the Central public sector not only lingers but grows.

In 2015, there were 235 operating SOEs. But an additional 63 were coming online. One-third of the operational SOE made a loss of Rs 27,000 crore in 2015. The data for 2016 is yet to be publicly shared. But there are unlikely to be surprises here. Named badly at birth, the department lingers on much like the loss-making SOEs.

Clever acronyms can mislead

bhim

Consider also the new government-sponsored payments app named Bharat Interface for Money (BHIM) created by the National Payments Corporation. The app was ostensibly named after Babasaheb Bhimrao Ambedkar — the learned dalit leader and constitutionalist. A payments app named after Babasaheb is quaint just as launching a human rights initiative in his name would resonate. The app is more likely to be associated with the brute power of the legendary Bhim from the Mahabharat conveying that the app is safe and impregnable. Yes, security is one important feature of an app. But it must also be nimble, adaptable, scalable, efficient and convenient to use. Bhim of the Mahabharat was none of these. Legend has it he was pretty resource-intensive — gobbling up nearly as much as all his four other siblings and was difficult to discipline, much like an invincible Robocop. “Killer app” is how kids term an outstanding app. But slang shouldn’t be taken literally to name government initiatives.

Words without momentum

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Prime Minister Narendra Modi, in his New Year’s Eve address to the nation, fell into the same rhetorical trap of belting out a preachy sermon but chose the wrong words. He stressed purity, pain and renunciation as key processes for exorcising evil — in this case black money and corruption-fed terrorism, Naxalism and Maoism.

Left unanswered was who should feel the pain more and make sacrifices — the honest many or the dishonest few? Also, conflating Maoism and Naxalism with terrorism, drugs and loss of human rights is okay if you are a right-wing, conservative American. But in India, these misguided socio-economic movements are the consequences of state failure in providing a basic level of welfare to the poorest of the poor. One cannot simultaneously romance the poor for their virtues — fortitude and honesty; finger the rich for their vices — dishonesty in evading tax, wallowing in luxury in big city bungalows — and yet denounce social movements which seek to give voice to the marginalised, however unpalatable their senseless violence may be.

BJP – get your mojo back

The BJP came to power in 2014 as the voice of reform and growth. It has traditionally been private sector-friendly. This resonated with an India fed up with populism and ersatz socialism, unemployment, poverty and a low quality of life. Touting the cause of the poor by pulling down the rich was never meant to be the BJP’s trademark. The Communist parties and the Congress fight from that shrinking corner of the electoral base. The poor versus rich genie will now be difficult to put back into the bottle. This will be particularly so if growth disappoints and economic stability suffers — both of which are near-term probabilities.

A strong government can trample over many citizens’ rights so long as it can stuff the mouth of citizens with money — as in China. But no money, no jobs and no rights are the fertile grounds on which violence, Naxalism and Maoism thrive.

Keep the narrative simple, not simplistic

Multiple objectives in public governance are a recipe for disaster. One hopes that in the waning days of this fiscal the government will shed some of the fluff it has accumulated. Focusing on infrastructure, macro-stability and private sector-led growth is the only option for creating sustainable jobs and reducing poverty. If an all-out fight against corruption is a must, because of electoral promises, let it begin where corruption breeds. This is in the public and not in the private sector.

A trishul for action

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Three initiatives are overdue. First, make the funding of political parties open to public scrutiny. This is a far more important political reform than having simultaneous elections. Second, exorcise the public sector of corruption before terrorising the private sector. The bribe-giver is the victim of an unresponsive governance system. It is the bribe-taker who is delinquent. It is public sector banks, public service departments, the police and the lower judiciary which need to be “purified”, not the voting public. Third, restore the credibility of regulatory institutions by respecting Chinese walls purposefully built between them and the government. The Reserve Bank of India seems to be the latest victim of executive activism in the demonetisation snafu. Let’s ring the curtain down on disruptive, executive muscularity.

Adapted from the author’s article in Asian Age January 11, 2017 http://www.asianage.com/opinion/columnists/110117/to-create-new-india-3-initiatives-overdue.html

Book review: Tharoor, An era of darkness

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Shashi Tharoor’s latest book originated in a debate at Oxford on whether Britain should pay reparations to its erstwhile colonies. The YouTube clip of Tharoor systematically demolishing the opposition, his brilliance evident in the thrust and parry of debate, has been watched by more than three million viewers. But the author says he felt a “moral urgency” in informing the “layman and students” in India and in Britain, about the “horrors” of colonialism and hence this book.

The book is conveniently divided into eight chapters. Unusually, each is virtually self contained though each focuses on specific topics, as for example, the extent of the loot; dividing, rather than unifying India; subverting Indian diversity in ersatz modern British institutions; the policy of divide and rule; the absence of enlightened despotism et al. Whilst this stratagem of comprehensive rendition adds to the length, it facilitates selective, speed reading. There are also 295 helpful references to other works—both Indian and foreign, a veritable treasure trove.

The Raj – long on loot short on local benefits?

The author deploys the familiar nationalist tactic of talking up the wealth and virtues of pre-British India, while playing down the inadequacies of much of post-independence India, to book-end the “horrors” of the Raj. The benefits from the Raj are dismissed as few and that too, unintended, barring the development of a pan-India modern press and media; development of canal irrigation; scattered electrification of towns; and of course -the railways. Oddly, the planning and building of regulated, urban settlements for the British, expanded versions of which, subsequently, also became the refuge of India’s political, business and professional elite and in less oppulent versions for India’s middle class, goes unacknowledged.

The “loot” neither began nor ended with the Raj 

The litany of colonial woes is expectedly long. Nothing attracts instant attention more than stories of loot and rape inserted early on in a book. The British drained 8 per cent of India’s GDP as per Paul Baran’s 1957 estimate. Annual outflows are separately estimated by William Digby at 4.2 billion British pounds during the 19th century. Extrapolating this trend onto the first half of the 20th century, the additional outflow was 2 billion British pounds. Huge as this cumulative sum seems, consider that Indians themselves are estimated to have amassed $500 billion of illegal wealth abroad in less than seven decades of India’s independence as per the CBI in 2012. Consider also, that against the less than 10,000 British subjects employed in India, the Report of the Indian States Committee of 1929 lists a total of 562 princely states, each with a retinue of vast numbers of relatives of the ruling family living off the state treasury. There is no corresponding account of how much these effete rulers and their families cost the ordinary Indian.

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Indian Maharajas delighted in maintaining humongous households and extravagant habits – and why not, since the aam admi paid for it all.

Yes, the British used India as a source of capital and raw material for their industries, which stilted Indian industrial development. Yes, they helmed organised commerce in India via the Managing Agencies. But just as surely, Jamshedji Tata’s dream of establishing a modern steel mill saw fruition because British India guaranteed the off-take of steel and built the railway to link the steel mill with raw materials and markets, thereby making it India’s first Public Private Partnership.

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Jamshedpur, 1912: The first steel ingot is rolled 

The author cites the regulations forcing Indian mills to produce only British Specification Steel as a low stratagem to make them uncompetitive. But it could also be viewed as the first step towards internationalising standards in Indian industry. Not producing to international standards was our failing till we liberalised industry and opened our markets to competition in 1991.

The Raj was neither elightened nor did it serve a moral purpose

Of course, the British, as a colonial community, were rapacious, openly racist and self-serving. But the evidence is thin that they were any worse than the long line of Indian rulers that preceded them. Admittedly, it mattered where you lived. The princely states of south and west India were generally better managed and more progressive than those in north and eastern India.

Colonial consequences: The death of institutionalised privilege & rise of the new middle class

Tharoor’s view that neither the political unity of India nor the adoption of democratic norms was a direct outcome of the pan-India political architecture of the Raj is inadequately backed up with evidence. The mere fact that Arabs refer to all Indians as “Hindi” is hardly evidence that pre-British India was already integrated. By this logic, all those living south of the Vindhyas are “Madrasis” because that is what ignorant North Indians called them and all of Arabia is one because we refer to people from there as “Arabs”.

The author ignores the greatest accomplishments of the Raj—the decimation of the old order of inherited privileges and rights; kindling of the spirit of democracy and incubation of the great Indian middle class via government jobs in the railways, the army and in civil governance.

Prime Minister Indira Gandhi, by abolishing privy purses in 1971, ended what the British began—the consigning of India’s numerous Maharajas to the dustbin of history. By institutionalising the common law and opening up vacancies—admittedly too few—at the very top, the Raj inspired millions of young, ordinary Indians to aspire to be literate and professionally qualified. That three generations of Indians had to serve as clerks to British superiors, not necessarily more accomplished than themselves, is a regrettable but possibly an inevitable consequence of gradual transition.

The Indian Constitution – equity, liberty and inclusion

The Indian Constitution is a direct outcome of the groundwork done over the previous four decades, since the Minto-Morley Reforms of 1909, to implement consultative democracy by including the professional middle class in the process. Ask any Dalit, backward caste, tribe or other minority and they will ascribe their liberation from traditional shackles to the modernist, reformist social and economic thinking which emerged, possibly as a nationalist response, to British rule.

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Babasaheb Ambedkar: Iconic messiah of dalit inclusion

It is not for nothing that Babasaheb Ambedkar wore a suit and a tie rather than a dhoti. For him the suit was a symbol of liberation from the oppressive rule of India’s traditional, upper caste elite and the Constitution was his guide to a more equitable future. Mayawati, Manmohan Singh and Prime Minister Modi are the organic outcomes of the much-needed, albeit self-serving, prising open, by the British, of India’s dormant, traditional cleavages—a black box of competing religions, castes and regions. Consolidation of these traditional identities at the national level via democratic institutions is what has changed the social landscape of India.

Sans the Raj – either a balkanised Hindustan or Red India

Tharoor speculates that if only the East India Company had not been as successful as it was, India would have found its own way to modernity. But what if we had remained hopelessly Balkanised instead? Why would we have not succumbed instead to the romance of Communism and gone the Chinese way? Would bloody revolution, social upheaval, the end of private enterprise, de-legalisation of religion and cultural diversity, unrelieved even by the constitutional promise of human rights and freedoms, have been better?

Contempt for the “box wallah” and the bania -Colonial hangover or the convenience of ersatz socialism? 

Tharoor speciously links our inward looking, anti-business attitude in the first four decades of independence till 1991, to our bad experience with the East India Company. This looks awfully like a red herring. It would be more instructive instead to examine the role played by our ineffective brand of ersatz intrusive socialism, used by the elite as a cloak, to retain domestic privilege. The ordinary Indian has looked westward for higher education and advancement, primarily because the professional choices at home have been too narrow and the glass ceilings too low.

Even the author accepts that the British Raj was more efficient than the domestic institutions it replaced. He is right that the rapacity of the Raj was exaggerated, precisely because its extractive capacity was greater than the loosely regulated Princely States. Consider the establishment of land records and the uniform and regular assessment and collection of revenue.

High taxes, yes but also efficient systems and records

Tharoor bemoans the high rates of taxes and the resultant penury for landowners since the burden of taxation fell on land and not trade. Yes, indeed. But that very system also bequeathed an embedded practice of recording individual property rights and updating transactions thereof, which is fundamental for development of private enterprise and for access to bank finance. The British left us with a treasure chest of land tenure, revenue and demographic data and an entire community of rule-bound “babus”. Better this than the institutional anarchy many other developing countries faced, post-independence.

Tharoor packs in masses of information and opinions around the British Empire in India. But it is all done in a grand, Quixotic style of tilting at windmills. The book is a hard-hitting, one-sided debate and caution is advised in succumbing to its mesmerising message, that the Gora (white man) is to blame.

Adapted from the authors book riview in Swarajyamas December 2016 http://swarajyamag.com/magazine/tilting-at-windmills

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Book Review: Ram Guha’s latest soup

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Ramchandra “Ram” Guha’s latest book- Democrats and Dissenters – a collection of sixteen essays – is a meandering but delightful read. Part one explains India. Part two is about the scholars who have helped Ram do so. The link between the two parts is a stretch unless part two is the marshalling of a scholastic framework used in part one. By this logic inverting the sequencing – reading part two before part one, helps.

Ram Guha’s thought leaders

In this pantheon of six scholars, Dharma Kumar (1928 to 2001) is the only woman. The Delhi School of Economics professor and economic historian is the archetypal “nurturer” – mentoring students; incubating research; being a role model for unselfconscious women’ s empowerment; a “liberal polemicist”; determined opponent to fundamentalism and to the politics designed to take advantage of such bigotry.

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Professor Dharma Kumar, Ram Guha’s “fellow radical” and the “last Liberal”

Possibly Dharma Kumar was the engaged academic, the one Ram decided never to became. Eulogising Dharma is his way of atoning for the consequential social loss.

Eric Hobsbawm’s (1917-2012) life-long commitment to Marxism illustrates the perils of sacrificing scholastic distance to wed ideology.  Guha builds on this theme in the chapter on the eight barriers to freedom of expression in India -ideologically committed writers being one.

The rooted, intellectual energy of the revered Kannada novelist U.R. Ananthamurthy (1932-2014) is implicitly contrasted with Hobsbawm’s dogmatic obsessions. Ananthamurthy, a Lohiaite had scant regard for identity obsessed Lohia descendants. His advocacy for sustainable development strikes a chord with Ram’s green roots, as does his dismay with Narendra Modi’s style of combative politics. For Ananthamurthy – and one suspects for Ram – building a “supple” India is far more important than building a “strong” India.

Benedict Anderson (1936 to 2015), an Irish scholar earned his spurs by deepening the study of nationalism in Latin America and Asia. His is the framework, Ram prefers, for nation building – “modern, contingent, forged out of struggle and contest…. replacing faith in God with faith in the nation …. never rooted in ancient history or in ties of blood or soil”. This is Guha’s elliptical manner of pointing out where Indian nationalists are going wrong.

Guha poses a provocative question – why are there so few right wing, conservative Indian intellectuals, other than in economics? R. Jagannathan, writing in the Times of India, has riposted that bench strength is not a good measure of intellectual vigor. Independent scholastic thought depends crucially on the availability of a supportive environment, which is rarely a feature of developing countries.

Guha’s gold standard for right wing conservatives is C. Rajagopalachari 1878-1972. Out of sync in the post-independence, ersatz socialist, Congress party, Rajaji left to found the Swatantra party in 1959. Rajaji defies conventional pigeon holing – a devout Hindu and a liberal, he presciently advocated against “big government” and the “megalomania of …. big projects”. His advice to the Hindu right wing Jan Sangh in 1968 was to go beyond mere toleration of the minorities. Guha’s view is somewhat similar – “a credible conservative intellectual tradition can only emerge outside the…. (reactionary) …. ecosystem of the Sangh Parivar”.

Andre Beteille is to sociology what Amartya Sen is to economics. More high praise for the sociologist comes by way of Ram labeling him the C. Rajagopalachari of our times. Devoted to field work related research; committed to no ideology or utopia other than his vocation; far removed from the convivial seductions of Delhi (much like Ram), Beteille embodies the ultimate scholar. Consider this understated gem from him, which speaks to the divide between Bharat and India: “While educated Indians are inclined to think and speak well of the village, they do not show much inclination for the company of villagers”

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Andre Beteille, sociologist extrodinaire and diligent practioner of evidence based analytics.

Roots and how to not abuse them

There is a long chapter on Ram’s book review of Sen’s, “The Argumentative Indian”. Ram objects to Sen imposing modern concepts like “constitutional secularism” or “judicially guaranteed multi-culturism” to the pre- modern practices of emperor Akbar’s court. Sen’s motives are progressive, in portraying medieval Muslim rule as not wholly anachronistic. But Ram apprehends unintended negative consequences from other revivalists, similarly departing from historical rigor, by sanctifying the past to further current political objectives.

A distant glorious past dictating the present is Guha’s worst nightmare as in Pakistan – a revivalist country so devoid of outstanding current accomplishments that it compulsively harkens back to medieval times for inspiration. Vignette one is Pakistani liberals being nostalgic over dinner for the “high noon of Muslim political power in the sub-continent”. Vignette two is the rewriting of Lahore’s history – casting over it “an Islamic glow” whilst ignoring past accretions to its culture by the Sikhs, the Hindus and the British.

“likes” and “unlikes”

Ram does not take kindly to the political philosophy of Hindutva. For him accepting majoritarianism means abandoning inclusion and secularism – fundamental principles that India, unlike Pakistan, was founded on. In a similar vein, he privileges democracy versus authoritarianism. This is the message Ram carries on his travels to China in 2008, to a conference on multi-culturism.  His host- a Professor Lin – whilst generally approving of Ram’s credentials as a proselytizing, liberal, gently remarks “If India were not so economically backward, it would persuade the world more easily about how it has nurtured democracy and diversity.

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India: Free to be desperately poor

The Congress party – makers of modern India or merely savvy rentiers

Ram is an intellectual- one who has much to be immodest about. But often the polemicist prevails.  How does one square his more than fulsome praise of the Congress party for making India “less divided, less violent, less hierarchical, less patriarchal, less intolerant, less unequal and less unfree” with his assessment of its progressive decline and its eminent death due to its conversion into a family business by Nehru’s “abysmally incompetent and self-seeking” successors.  He may yet have to eat his words as political Phoneixs rise routinely in India. Add to this that he flags the ill-judged, abandonment of the party’s liberal, secular credentials for perceived political gains in 1975-77, 1984, 1986 and 1992? Three of these figure in Ram’s list of the eight worst years for India. Consider also his assertion that India lacks a culture of actively preserving the constitutionally mandated freedom of expression and the acknowledgement that subversion of this right occurred as far back as 1951 via an amendment to Article 19 (2) inserting “public order” as an additional exception for curtailing this freedom. Put all this evidence together and you would be hard pressed to align it with Ram’s assessment of the largely benign impact of the long years of Congress rule.

Make peace not war

On the use of violence as an instrument of self-determination Ram’s conclusions are pragmatic and surprisingly conservative. He notes that in the past half century only two nations have been born from armed struggle – Eritrea and Bangladesh. He could have also included the most recent case of South Sudan in 2010. His advice to armed secessionists in Kashmir is sound. Learn from the failed insurrection in Sri Lanka. Emulate the Dravida movement of Tamil Nadu and the Mizos. Both abandoned entrenched isolationist ideologies seeking independence – the former in 1963 and the latter in 1966. Both are better off for it.

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The no-where people: Adivasis of Central India – caught between joining the rat race at the bottom or remaining at the top of a hunter-gatherer past.

The theme of alienation and marginalization continues into the essay on the Adivasi tribes of central India. Unlike tribal communities in the North East, the Adivasi do not dominate the region they inhabit. In no state are they in a numerical majority, despite the creation of Jharkhand and Chhattisgarh. Consequently, they remain politically disempowered.  Predictably the result has been the convenient “harvesting of souls”, earlier by Christian and Hindu missionaries and most recently by the Maoists – none of whom have the welfare of the Adivasi as their prime objective. Ram, ever the pragmatic peacenik, advocates that the government give Adivasi tribes the safeguards assured to them by the constitution and the Maoists learn from the evolution of the CPI, the CPI (M) and the Maoists in Nepal and reconcile themselves to electoral democracy – though he admits that this advice is likely to fall on deaf ears.

This book is mixed fare from the high priest of Indian liberal thought.

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Ram Guha, historian and creator of word symphonies.

What is sorely missing in this book is recognition that this “unnatural nation” has moved on, along the lines suggested by Professor Lin, to Ram, a decade ago. Even as revivalist conservative scholars dredge up past glories- somewhat futilely; right wing, conservative politics is creating the space – economic and political, for strengthening this great but “unlikely democracy” that is India. Meanwhile vigilant, liberal, alarmism – as by Dharma Kumar earlier and now by Amartya Sen and Ram, to flag deviations from this path, can only help.

Adapted from the authors book review in Swarajyamag, November 2016 http://swarajyamag.com/magazine/in-guhas-latest-book-the-polemicist-often-prevails-over-the-intellectual

 

A new “living wage” f0r Delhi

Populism, buttressed by dodgy economics, has become the fashion statement in politics. Last year, the Union government approved handsome “real” increases in government salary. There was little justification for doing so since the government salaries were already fully indexed to inflation and the largesse couldn’t have been justified as a reward for higher productivity.

The default justification was that more money in the hands of government employees would kick start a virtuous circle. Higher demand for goods and services would lead to expanded supply, more jobs and just possibly, more income for the rest of us.

AAP disrupts the cozy status quo in Delhi

This week, the Aam Aadmi Party government in Delhi, used similar tactics to grab eyeballs on Independence Day. Evoking the high moral stance of re-distribution of wealth and the economic principle of boosting demand as justification, the government declared massive increase in the minimum wage. In effect, it imposed a “living wage”, for workers in Delhi.

The impossible dream of “mandating” the end of poverty

Child searches for valuables in a garbage dump in New Delhi

The concept of a “living wage” — pegged significantly higher than the minimum wage — with an eye to decrease poverty has been used in over 100 urban jurisdictions in the United States since the late 1990s. It has also been used to set the national poverty level in India. But it is pegged at very low levels.

In Delhi, chief minister Arvind Kejriwal has proposed that the minimum wages of unskilled labour will be increased from Rs 9,500 to Rs 14,000, semi-skilled Rs 10,600 to Rs 15,500 and for skilled Rs 11,600 to Rs 17,000.

The hike seems unreasonable given that the minimum wage in Delhi is already 35 per cent higher than in neighbouring Uttar Pradesh and 72 per cent higher than in adjoining Haryana.

Delhi is rich but…

It is true that Delhi is relatively rich. Its per capita income of around Rs 18,300 per month is the highest among the states of India and the top 10 metros. Consequently, there is a case for setting the “living wage” in Delhi reasonably higher than in the neighbouring states, purely on the grounds of equity.

The real issue is whether a 47 per cent increase is warranted and how comprehensively should the “living wage” be applied? If it is applied just to the establishments governed by the Factories Act, then it is little more than populism. There are only around 8,000 such factories in land-hungry Delhi and employment in them is static.

If the intention is to enlarge the coverage of the “living/minimum wage” to all registered shops and establishments, which employ around 20 per cent (one million) of Delhi’s five million workers, then the economic consequences can be more substantial.

Mandated wages hurt business and make it shift out 

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Photo credit: blogs.ft.com

The negative impact will be felt in price-sensitive, low value-addition segments like clothing, food and household goods, where higher wages will hurt business profits. More importantly, will a similar “living wage” follow for the one million workers in the informal sector — household help in rich and middle class homes and in unlicensed small establishments? If so Delhi’s privileged elite and wannabes may have to look for a lifestyle change – let the ayah go and manage their own babies; cook for themselves or use an app to order in; make their own beds; wash and iron their own laundry and learn to use a vacuum cleaner. And what of the ubiquitous car drivers and guards who lounge around the front gate of Delhi homes? Will the well-off opt for Ola and Uber instead?

Poor enforcement can make mandated wage a sham

Mandated high minimum wages, far above the market rate, encounter three problems. First, enforcing payment of the mandated wages depends crucially on clean, clever and consistent regulation. In its absence, it encourages the petty but crippling, corruption of “inspector raj”. Enlarging the scope of inspector raj in Delhi, even as it is being diluted in Rajasthan and Telangana sends the wrong message to investment for increasing jobs and private sector growth in Delhi.

High wages result in loss of unskilled jobs

Second, studies from the US show that the benefits are not uniform across the entire spectrum of workers. On average, unskilled workers lose the most from a high minimum wage because employment declines even as a smaller number of workers, who remain employed, benefit from high wages. Mandated wages rarely benefit skilled workers. Governments tend to be conservative in fixing the differential for skills. Delhi provides only a premium of 21 per cent, or `80 per day between unskilled and skilled work. The market premium is already between 75 to 100 per cent. A mason gets twice the amount as his unskilled worker — often a woman, who does the manual work.

In-migration increases fiscal pressure to provide public services

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High, mandated wages attract in-migrants to cities. photo credit: http://www.rediff.com

Third, pegging a price for labour far above the market rate increases the fiscal burden. This happens directly when government salaries are needlessly enhanced. But it also hits the government budget indirectly, when applied to the private sector. Higher the mandated wage for unskilled work the more attractive it becomes for migrants. With open borders, no control on migration and the Delhi government committed, rightly so, to provide a basic quality of life for all — free water, free medical care, free education, cheap electricity, improved toilets and paved roads — the resulting fiscal impact can be crippling.

Immigrants reduce the market price of unskilled labour

One way of ensuring that market wage rates remain aligned with mandated wages and are not beggared by competition from in-migration, is to licence city workers, as in China. But it is difficult to do this effectively in a governance environment of pervasive corruption. Licensing is a one way street to inefficiency and corruption. If government land cannot be protected from encroachment by the mafia, there is little hope of implementing an equitable worker licensing regime. Railway stations are a good example. Try getting a licensed coolie to carry your bags at the stipulated rates and you are more likely to miss your train.

Test the viability first in government contracts

The high salary of unskilled government workers already provides a wage floor. But the incremental numbers employed are limited. The trend, since 1990s when the government adopted the practices of “new pubic management”, has been to outsource non-core services i.e. cleaning, canteen, security and office support. Worker productivity clearly increases under private management. But there is insufficient evidence that the wages paid to them reflect this higher productivity. The apprehension is that the workers will suffer from price competition to get government contracts.

This is a perverse and unintended outcome. Tightly regulating the private contracts that are funded by the government can ensure that the mandated wages are passed through to workers. And contractors do not corner the wage increase. This is how the financial viability of the enhanced wage rates should be tested before imposing them.

But there is little point in cultivating a small, handsomely paid labour “aristocracy”, as the CPI(M) did, whilst throttling investment and employment.

CPIM

Adapted from the author’s article in Asian Age August 19, 2016 http://www.asianage.com/columnists/how-viable-are-hiked-wage-rates-333

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