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Archive for the ‘technology’ Category

TRAI should junk net neutrality

Chairman TRAI

Telecom Regulatory Authority of India (TRAI), was once the gold standard for “light touch” regulation, in stark contrast to electricity regulators, who continue today, to be stuck in byzantine rate of return regulation and administering cross subsidy between classes of users.

TRAI loses industry focus

TRAI has changed since. Consider that on November 29 it recommended to the Department of Telecommunications (DOT) that rural users should get a limited amount of data for free, funded from the Universal Service Obligation Fund (USOF) managed by DOT. To the everlasting credit of DOT, this was shot down, as unnecessary and inconsistent with the basic objective of the USOF, which principally finances telecom infrastructure.

One third of the 250,000 gram-panchayats, targeted under Bharatnet, have been connected to broadband. Tenders have been finalized to connect an additional one half. But Bharatnet is still a work in progress. Diverting funds into revenue expenditure is unwise.

TRAI’s proposal would have taken telecom down the route of electricity regulation, where subsidies for agriculture and domestic users have proved intractable and sap the viability of the distribution utilities.

Intrusive regulation has become the norm for TRAI, suitably packaged as serving the interest of the “small” user. Regulatory experience shows that governments should steer clear of distorting business incentives by subsidizing one technology over another or by benefiting a set of users either at the expense of other users (cross subsidy) or at the expense of budgetary allocations (state subsidy).

Net neutrality has its adherents but is it backward looking

Net Neutrality

It is ironic that, way back in March 2015, Facebook had proposed a privately funded initiative to provide free access to limited or curated content, in collaboration with a Telecom Service Provider (TSP) to the same “small” users, whom TRAI now wants subsidized from public funds.

Curiously, this proposal was shot down by TRAI in February 2016 as violating “net neutrality”, cheered on by vocal, Indian “netizens”. Over 1 million netizens had jammed the servers of TRAI with outraged petitions against Facebook’s proposal. NASSCOM, which represents software and content providers, added its weight to the storm, thereby protecting the business interests of incumbent content providers.

Even IT gurus like Nandan Nilekani opposed the innovative intrusion into the cozy confines of Indian IT. Paying homage to “net neutrality” was, at the time, also justified by pointing to the elaborate systems, for protection of this concept, put in place by the Federal Communications Commission (FCC) in the United States.

United States FCC to roll back “over regulation” and restore net freedom

Ajit PaiToday, a marginally Republican FCC, incidentally helmed by Indian origin, Ajit Pai, is rolling back, what it calls stifling “over regulation” of the net in the name of restoring freedom for innovation. To be sure 22 million US “netizens” have howled in orchestrated protest, against a rule change, seemingly, in favour of business. In this charged debate, anything which is pro-business is anti-consumer. A zero-sum view of commerce which is a familiar story in India.

Closer home, the November 28 recommendations of TRAI on “net-neutrality”, expectedly, carry forward the bloated carcass of Obama style intrusive regulation. TRAI is right in asserting that neutral traffic management is a technical ideal – selective blocking, slowing down or degrading specific content even when line capacity is available is banned. No one contests that generic principle.

Competition is aso an effective tool for optimisation

The real regulatory choice today is between competition in transmission, as a compelling instrument to simulate what “net neutrality” was supposed to do versus continuing with intrusive oversight over quasi-monopolistic transmission providers. Relying on and enforcing competition, seems a more effective, hands-off option in our pervasive, low-oversight ecosystem.

Another reason why “net neutrality” as a principle stands compromised is that increasingly, the transmission needs of content vary. With new services coming online, we will need multiple transmission protocols. Consider that online text need not be continuously streamed without detracting from reader pleasure. But online heart surgery support can be fatal unless continuous streaming is ensured. The same applies to internet access for driverless vehicles. TRAI has recognized these difficulties and the possibility that the Internet of Things will transform the rules for optimum scheduling of transmission.

Regulation by exception is non-transparent

TRAI’s solution falls short of transparent regulation. It has provided for exceptions, on a case-by-case basis, from “net neutrality” norms – for emergencies and unspecified “specialized services”. The latter are distinguished from general services by their targeted appeal to a narrow set of users.

Is net neutrality obsolete?

A better option would have been to review whether “net neutrality” itself is not obsolete because it will become riddled with exceptions. It was an important principle in the 1990s, to ensure market access for fledgling innovators in content provision by prescribing a merit order for getting past monopolistic telecom transmission utilities. But today competition is rife, both in transmission and in content provision. Possibly, the need of the hour for TRAI was to seek pathways downsizing regulations to simply protecting access, to basic internet services, for small users. High value-added services anyway, provide sufficient revenue incentives, for TSPs to push availability.

Providing net access remains a challenge

A massive challenge for India, per TRAI data, is that only one half of Indian citizens are connected to the internet as compared to 81 percent in the US and 76 per cent in China. Competition has reduced the access charge to affordable levels. But the quality of services is low because of under- investment in infrastructure.

Internet Service providers need new pools of revenue

Heavy penalties for non-compliance with quality standards can improve the quality of service. But TSPs finances are already under stress. Spectrum cost is high. If government earnings from spectrum are not to be reduced and user charges are to remain low, TSPs need to find new pools of revenue to fund infrastructure development. Their business models need to go beyond being just “passive pipes” – the role which “net neutrality” forces on them.

Software and content providers are not necessarily winners either in a net neutral environment. Consider that, in 2015 Facebook got stymied in India. But which Indian “edge provider” (jargon for content providers) gained from that blocking action? Rapid growth of infrastructure is the best option to fuel demand for content. This is a better incentive for innovation than protectionist regulation.

“Minimum government, maximum governance” is a Modi mantra. TRAI appears not to have been copied.

Also available at TOI Blogs December 6, 2017 https://blogs.timesofindia.indiatimes.com/opinion-india/trai-should-junk-net-neutrality/

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Digital connectedness, Economy, India, technology

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Bad police work or “perfect” murders

Rajesh and Nupur Talwar were having an impromptu pre-birthday celebration for their daughter Aarushi, at their Noida residence on the evening of May 15, 2008. Their live-in, trusted house-help Hemraj was about, as usual. Some time before 6 am the next day, both Aarushi and Hemraj were dead — the victims of horrific violence inside the house. The Talwars say Hemraj killed Aarushi, but ascribe no motive for him to have done that. Also, they have no idea who killed Hemraj, or where. His bloodied body was found on the terrace, which was locked from outside. The key to it was never found.

Changing investigation agencies adds to the confusion on the ground

On May 23, 2008, the Uttar Pradesh police arrested Rajesh Talwar on suspicion of being the prime accused in the double murder. Unhappy with the way the UP police was conducting the investigation, the Talwars petitioned for the case to be transferred to the Central Bureau of Investigation. Policing is a state subject under the Constitution. Unless the state government agrees, the CBI has no jurisdiction in such cases. But then UP chief minister Mayawati had no hesitation in letting the CBI carry the ball forward.

The CBI steps in…but shambolic investigations continue

By May 31, 2008 the CBI was officially in charge. By July 11, 2008, the CBI filed a report in the designated CBI court that there was insufficient evidence against Rajesh Talwar, who was consequently released on bail. The next three years were spent trying to find out who did it. Over this period four different investigating officers handled the case. Finally, A.G.L. Kaul, DSP, filed a closure report on January 1, 2011, citing the lack of any conclusive evidence to indict anybody.

CBI court starts proceedings against the Talwars suo motto

To their credit, the Talwars contested the finding and urged further investigations. The CBI court decided to proceed with the case. But it summoned the Talwars as the accused. Courts do have this power. But more usually, this happens when the police seems dilatory in lodging a first information report, not when a closure report has been filed by the police after investigations. The Talwars, possibly shaken by being named as the accused, moved the Supreme Court for relief. But their petition was dismissed. The outcome, two years later, on November 25-26, 2013 was that the Talwars were convicted by a CBI court for the double murders.

Allahabad High Court strikes down the conviction due to insufficient evidence

The Talwars appealed against these convictions. The Allahabad high court has, on October 12, 2017, ruled in favour of the Talwars. It held that the lower court had erred in considering the chain of circumstantial evidence adduced as being conclusive since multiple conclusions could be drawn from the same facts. This is only temporary relief for the Talwars. The CBI has 90 days to appeal to the Supreme Court. But the CBI also has a credibility issue, particularly within the Supreme Court. In 2013 the CBI was described, by a justice of the Supreme Court as a “caged parrot” of the government of the day.

The legal battle may not be over

In our topsy-turvy, anything-is-possible, adversarial, judicial system, the better argued case inevitably wins. It seems a one-sided battle. The Talwars will fight for their continued liberty, the restoration of normalcy and social standing. The CBI will fight to improve its record of convictions and to show that crime does not pay. Sadly, no one is fighting for Hemraj or for the wife and kids he left behind. As for 13-year-old Aarushi, it is difficult to say how she may have wanted things to pan out.

Too many questions, not enough answers

But with shoddy initial investigations and doubtful evidence, that has already been questioned exhaustively in the high court’s order, what another appeal will achieve remains unclear. Once the investigation is compromised the benefit of doubt doctrine ensures that the criminals walk free. Consider, even the weapons used for the murders remain unidentified – a golf club, a khukri, surgical scalpels, a hammer have all been mentioned as possibilities. The motive for murder remains unestablished. It is not even conclusive whether the flat was  locked from inside or not – this is important because it either points the finger of suspicion on the Talwars or opens up the possibility of others being involved. Aarushi’s phone was found and returned some days later by a colony maid. It had been wiped clean of all data. Who took it, wiped it clean and then tossed it aside in the colony? Too many loose ends remain uninvestigated, And what about Aarushi’s new camera – presented to her on the night of the murder? Was it also clean of evidence? Who killed Hemraj? Why and where? There are no evidenced answers.

Poor institutional arrangements for bringing criminals to justice

It is also tragic that despite transferring the case from the allegedly, bumbling UP police — supposedly, more familiar with law and order rather than tricky, crime investigations — to the more savvy and efficient CBI, the results are so pathetic. Justice for Hemraj and Aarushi remains elusive even a decade after.

To be fair to the CBI, conventional crime is not its core mandate. Investigation of economic offences and corruption is its forte. Since 2008, terror-related crime investigations have already been hived off to the new National Investigation Agency (NIA), which can, seamlessly, also deal with crime having national consequences or cross-state crime networks.

Conventional crime is usually dealt by the state police. The deleterious trend of frequent transfer of cases to the CBI dates to the early 1980s. It enables forum shopping, scratch my back bargains and politicisation. It also discourages state police forces from developing their expertise and practices for investigating and prosecuting crime.

The double murder does not qualify for the CBI’s attention. Delhi records 598 murders and Uttar Pradesh 4,860 murders per year. The Aarushi-Hemraj case, however horrific, is a personal tragedy of only two families. The public outcomes are negligible. Its investigation could have remained with the UP police. Transferring the case to the CBI has only muddied things at the field level and encouraged finger-pointing. The then director of the CBI had this to say, in 2014, as part of a tribute to the untimely demise of A.G.L. Kaul, SP, CBI, the last investigating officer: “Despite the many lacunae and loopholes, due to the fact that the case had been handled initially by the UP Police, (Kaul) was able to obtain a conviction.”

Doubtful if India can be policed well from Delhi

Till recently, there was a tendency to centralise financial and administrative resources in the Union government on the grounds of higher efficiency and rectitude. This is self-defeating. The surest way of retaining power is to distribute it to where it can best be administered. The CBI must be honed to do its primary task — bringing moneyed crooks to justice.

Central police organisations are hopelessly outdated in their staffing pattern, skills and equipment. They need knowledge and technology to collect intelligence, investigate and prosecute. Boots on the ground look great in the Republic Day parade. But they are costly and ineffective in tackling 21st century criminals. Leaner, officer-oriented, specialised and mobile security agencies are really the way to go.

Adapted from the author’s article in The Asian Age October 17, 2017 http://www.asianage.com/opinion/columnists/171017/sloppy-cbi-police-work-gives-a-licence-to-kill.html

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crime, India, technology

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Privacy – an elite fantasy

privacy

Elite concerns are usually disconnected from the ground reality. For the 1 per cent of Indian who live privileged, cocooned lives, the judicial right to privacy created by the Supreme Court yesterday will add yet another layer with which they can insulate themselves from the “barbarians at the gate”. So, here is what the rich may now be able to do which they couldn’t earlier.

Is the right to euthanasia next?

First, they may now be able to refuse medical treatment and die in their beds, peacefully, instead of being compulsorily hooked up to tiresome, life-saving machines in hospitals. But try explaining this “right” to the millions of poor Indians for whom just getting admitted to hospitals is still a dream and refusing treatment would be unimaginable.

Deletable past lives

Second, the well-heeled may now be able to press for being judicially forgotten – all traces of their past lives and identities expunged, giving them a fresh start without having to flee to distant London or arid Dubai. Contrast this with the Herculean efforts the average Indian makes to become part of a database and have an officially recognized identity – a voter card, a passport, a PAN card, anything which proves that she exists.

LGBT sex may become legitimate

Third, those with alternative lifestyles – the Lesbian, Gay, Bisexual Transgender (LGBT) community might now hope to be free of the notoriously archaic Section 377 of the Indian Penal Code, which criminalizes everything other than straight sex. But would this give them the right to marry a partner of their choice; adopt children or be socially accepted?

Evidencing crime will become harder

Now ponder the downsides. Law enforcement agencies struggle to manage terrorism, Naxalism, urban mafiosi, drug pushers and armed rural gangsters even today. “Privacy” concerns will provide a legal shield to undermine information collection, crime detection and investigation. Nothing less than the over-the-top, draconian Armed Forces (Special Provisions) Act – used today only in the “disturbed” areas in Kashmir and parts of the North East – would be effective. Since gangsters can afford to hire the best lawyers, the violation of their fundamental right to privacy in the process of enforcing the law, will now become a favourite ploy to keep these worthies free to wreak havoc.

How intrusive is the Indian State anyway?

Will this fundamental to privacy help the 200 million slum dwellers or the unknown millions who sleep under the stars on urban streets? Is not our fear of the “big State” overblown? The India I know is under policed, under governed and under regulated. There is a plethora of agencies, laws and rules to bind down anyone and yet very few – mostly the timid, those mindful of their public image and the law respecting middle class get intimidated by the legal spaghetti. The rich buy their way out of any mess and the poor are so inured to danger and risk that it is second nature for them to live with uncertainty.

Biometric targeting of beneficiaries to be abandoned?

Take the case of Adhaar for verifying the identity of those using the Public Distribution System (PDS). Recent studies in Jharkhand by responsible social scientists – Jean Dreze and Reetika Khera – found that 15 percent of the eligible PDS beneficiaries were excluded because of technical glitches or access problems in using Aadhar as a test of identity. But 85 percent of the beneficiaries were targeted correctly. If the right to privacy eliminates the use of Adhaar, we will be back to what Rajiv Gandhi famously called the 25 percent approach to poverty reduction – where 75 percent of the funds are siphoned-off by intermediaries. How and why would a reversion to a system which has huge inclusion errors (ineligible people getting benefited) be any better?

Big data to be throttled?

Finally, consider how retrograde is the fight by “right to privacy” advocates against big data. It is big data – the billions of pieces of information on human behavior and preferences linked to specific human demographics, which enables algorithms to predict trends, thereby aligning products and services with customer needs. This is what makes big data commercially valuable. In price sensitive markets like India, telecom and e-commerce penetration is being driven by the potential to monetize big data. Putting brakes on this process means putting brakes on the rolling out of technology services which will become more expensive if the actual user is to pay for them.

India lost an opportunity in 2014 when facebook- Bharti Airtel wanted to roll out free internet services on mobiles. TRAI regulations ensured that this venture never took off, thereby slowing down internet access for all except the 300 million people in the upper most income segments who can afford it.

Tilting at windmills

Nandan Nilekani is now an evangelist against “digital colonialism” in the context of tech majors like Google and Amazon aggressively expanding their presence in India. We should be wary of tech industry insiders playing the “anti-foreign” card. Similar attempts were made by the infamous “Bombay Club” to scuttle the 1992 economic liberalization. Their contention was that liberalizing the domestic market was fine but Indian industry should continue to be protected from foreign competition. We are fortunate that the government of the day paid no heed to this self-serving agenda.

Keep India open for competition

India is a big economy with very shallow industrialization. We need to remain open to all economic actors – domestic and foreign who want to invest in India. It would be a huge mistake to emulate the xenophobia of the United States and draw up our bridges. Data is the new oil. Data security needs to be ensured, irrespective of whether data is stored in India, or overseas. But generating anti-foreign hysteria is not in our interest as we try to integrate into global supply chains and become a part of the global value creation eco-system.

It is easy enough to legislate rights. We have many notional rights. Creating a level playing field for all citizens to enjoy these rights, equally, is another matter altogether.

Also at http://blogs.timesofindia.indiatimes.com/opinion-india/privacy-an-elite-fantasy/

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Economy, India, Law and regulation, poverty, Public Institutions, technology

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Indian Railways: Slow and unsafe

suresh prabhu

It seems to be raining rail accidents these days, with two in swift succession. The hapless Suresh Prabhu is a good general but an unlucky one. He made sweeping changes in Indian railways (IR) since November 2014 when he became Minister. Most dramatic was his willingness to diminish his “empire” by merging the rail budget with the national budget. Similarly, far reaching was his delegation of financial powers for purchase and contracts away from the moribund Railway Board to the General Managers of the sixteen different railway systems which manage operations. Good management practise, yes. But more importantly it severed the ministerial potential for graft. Not many ministers have done similarly elsewhere.

Suresh Prabhu – a good but unlucky minister

Mr Prabhu has offered to resign owning up moral responsibility. Prime Minister Modi may have to let him go, reluctantly. Such is the dharma of politics. Having another accident on his watch would be unacceptable! Of course accidents are unlikely to stop merely by replacing the minister. Data collected by the National Crime Records Bureau records that in 2014 IR suffered 28,360 accidents or 78 accidents per day. So the chances of an accident happening, anytime, are high.

IR is low on transparency 

IR would have us believe otherwise. In a document titled “Transforming Railways, Transforming India” issued in 2016, reviewing achievements since 2014, the number of accidents over the period 2009-2014 is mentioned as an average of 135 per year which resulted in 693 deaths. The National Crime Record Bureau data puts the number of deaths from railway accidents in 2014 as 25,006, with an additional 3,882 people injured. The discrepancy between the IR and the NCRB database is due to creative use of data by IR, which reports only “consequential” accidents involving derailments or collisions. The NCRB data is comprehensive and based on the First Information Report filed with the police for all accidents connected with rail travel.

IR not to blame for 62 percent of accidents

To be sure, not all the 25,006 railway accidents in 2014 were due to the fault of IR. 62 percent of these accidents occurred due to “people” error – travellers walking negligently on railway tracks and getting run over or falling from over full trains. But even around 11,000 accidents  year is worrisome.

Rail still safer than road transport

To be fair to IR, their safety record should be compared with the other option available to travelers – road travel. The safety record of road travel is even worse. NCRB data for 2014 records 450,900 road accidents in that year with 141,526 deaths and 477,700 injured. The combined length of the National and State Highways, which carry the bulk of the traffic, is around 220,000 km or twice the length of rail track. The number of accidents however is 16 times more; the number of deaths is 6 times more and the number of injuries is 123 times more. Whilst the safety of road travel is a poor metric to use, it does provide a perspective of the objective conditions, in which IR operates.

Other than the likely moving out of Suresh Prabhu and the resignation of the the Chairman of the Railway Board, the other – more worrisome fall out – is going to be a typical short-term, defensive response of putting safety above all else. No private utility could have survived without doing as much, routinely. Consider,how tangled the Nuclear Power negotiations became when government legislated to put the onus of criminal and civil liability for accidents on the private sector suppliers of nuclear power equipment. But government service providers have more leeway in avoiding criminal action against them for safety lapses.

Safety or speed – a false binary

But the fact is that choosing between fast, modern trains and safe travel is a false binary. The populist, Luddite approach of slowing down the speed of trains, to avoid mishaps, is like asking car owners to go back to Ambassadors to reduce the risk of accidents by traveling slower. Technology allows you to travel both faster and safer. Air travel is for example both faster and safer than road travel. The Hyper Loop, when it arrives, is expected to boost both safety and speed at lower cost. The Indian Railways compete with other means of transport like road and air. It must provide the expected level of speed, convenience, comfort and safety which comparable transport options already embed. It has failed to do that, thereby losing marketshare to road transport over the last two decades.

Just as high-speed highways and the growing network of air routes has changed the way Indians travel, the Railways must also offer a bouquet of services to suit the differentiated needs of specific routes and category of customers. High-speed, premium railway transport on high-density routes radiating out from the hubs of Delhi, Mumbai, Kolkata and Chennai can transform travel by rail. Similarly, the rapid expansion of metro lines is a smart option to reduce the urban carbon footprint and road congestion.

Both speed and safety are a function of reliable track infrastructure adequately insulated for unregulated traffic ingress and suitable rolling stock. The planned high speed, dedicated, rail traffic corridors intend to achieve precisely these objectives – much like expressways do in highways.

Sans investment, neither safety nor speed is possible

None of this — speed, safety or security — is possible, unless we step up investment in Indian Railways. We cannot manage the 108,000 km of track and 11,000 trains which run daily, by jugaad, penny pinching, dodgy maintenance schedules and techniques, antiquated rolling stock, poorly trained and equipped personnel and management systems, which have not changed since the first train ran in 1853.

Corporatize IR for efficiency enhancement

Indian Railways must be corporatized so that it can shine like other public-sector companies like National Thermal Power Corporation, Indian Oil Corporation and Steel Authority of India. This is impossible as a government department because the administrative and financial rules are unsuited to the dynamics of running a business.

rail repair

Shun politics – Let IR become commercially viable

Railway tariff cannot be subject to politics. The same passenger who has no problem paying Re 1 per km for bus travel between cities pays just 28 paise per km of second class, rail travel and 45 paise per km in reserved sleeper class. Suburban rail travellers pay just 18 paise per km. This is an unsustainable and unnecessary subsidy, undeservedly enjoyed, mostly by the middle class. Rail tariff for non-AC travel must be increased to remunerative levels, thereby generating funds for improving the quality of services.

The spate of accidents has focused public attention on the need to restructure IR. What needs to be done is well known – using technology across the service delivery chain – track development and maintenance; signaling; rolling stock; communication; disaster relief and management systems. But none of this will happen unless Indian Railways is set free from the bureaucratic constraints which bind down its management cadres today. We can save lives, reduce the fiscal burden, improve rail services and make the economy more efficient by corporatizing IR.  Time to walk the talk on good economics also being good politics.

Adapted from the author’s article in The Asian Age, August 24, 2017 http://www.asianage.com/opinion/oped/240817/making-trains-safer-and-faster.html

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bureaucracy, corruption, Economy, India, Infrastructure, technology

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How to junk cash and when

cash-2

Going cashless is a good idea. For the government, the biggest gain is an easy audit trail to assess individuals and businesses to tax and to ferret out illegal transactions like the financing of crime, terror, smuggling and drugs. For individuals, plastic (payment cards) and e-money provides far greater security, despite the risk from cybercrime. Businesses also gain. Studies of consumer behaviour show that paying by card or e-money encourages you to spend more than you would otherwise.

So it is no surprise that Prime Minister Narendra Modi, a man in a rush, is pushing the country to abandon cash. But how far are we from the point where a cashless economy can kick in? A US study in California noted in 2012, that even in the case of those who state a preference for paying by card, there is a 49 percent probablity that they will settle payments less than $20 by cash. The probability drops to 8 percent  for payments above $20. In India the inverse is true. At least, 95 per cent of personal consumption related transactions in numbers (not volume) are in cash.

Access to bank accounts is key for going cashless 

bank-access

A 2015 World Bank survey established that increasing the number of banked adults in the economy is the most relevant intervention till one reaches the level of around 800 accounts per 1,000 adults. India stands at a ratio of 480 accounts per 1,000 adults. This is pretty far from the point after which increase in the number of bank accounts cease to matter. Nevertheless, the extension of banking services in India is impressive given the scale of poverty, illiteracy, gender discrimination and the sparse spread of bank branches, particularly in rural areas — just around 40,000 for six lakh villages and a population of 800 million or on average 1 bank branch per 20,000 people..

“Barefoot” banks

post

The high level of poverty in rural areas; low savings and consumption levels make rural branches uneconomic. So innovative mechanisms should be developed to provide “barefoot” banking to the poor. This is virtually impossible via our clunky and inefficient public sector banking system. The Reserve Bank of India revolutionised the licensing of payment banks earlier this year by bringing in a “year-around”, entrepreneur-driven approach of welcoming proposals for opening payment banks -which provide less than the full range of banking services- without inviting proposals for bank licensing through formal rounds, as previously. We need to pursue this approach and establish at least a “payment only” bank branch for every cluster of 5,000 adults. But inevitably this will take time.

e-money is a low cost, “quick win”, to digitise payments

A faster way of displacing cash payments is to scale up the use of e-money. Across economies which do not have universal financial access, over the period 2010 to 2015, the number of e-money accounts have grown at the rate of an astonishing 63 per cent per annum — more than triple the rate at which bank accounts have increased over. Mobile money accounts comprise 55 per cent of such e-money accounts. But, in India, e-money continues to languish at merely 10 per cent of transactions.

Getting merchants digitally ready for Point of Sale applications.    

A more serious missing link for ramping up cashless transactions is the relative scarcity of point of sale (POS) acceptability of cashless transactions. Easy access to POS ready merchants and vendors is key for building the credibility of plastic money as an alternative to cash.

card_swipe_machine

Photo courtesy: thehindu.com

This is a chicken and egg situation. Merchants do not see the value of accepting e-money payments unless enoigh people want to use them. Also, mechants lose interest on the deferred payments into their accounts. On top of this card providers charge merchants upto 3 percent of the transaction value for the service. All this pushes up the prices of customer purchase price of products. Customers in turn, try and dodge the servive tax and additional charges which comes with buying digitally. No wonder then that a mere 1.5 million commercial entities accept cashless transactions in India. Compare this with the 44.7 million registered micro, small and medium enterprises (comprising industrial and service related businesses) with an investment ranging from Rs 1 to 50 million, estimated in India by the 2006 SMSE survey. Bringing all these service providers into the POS net expands the market by an order of magnitude. Why not start by first “Carpet bombing” commercial entities in the 50 largest cities in India, with assistance and persuasion to say no to cash? Lets start by making cities cashless first and let the smaller towns and rural areas follow in an orderly manner.

Make cash transactions more expensive than digital ones

One cannot develop an entire ecosystem for junking cash by fiat alone. The incentive structure, which today privileges cash settlement because of its lower transaction cost, must be reviewed and reversed. The government started the RuPay debit card in 2014 with the hope that it would compete with the international biggies in the business — MasterCard and Visa – and make them look more seriously at the potential fortune which lies at the bottom of the pyramid — the small transactions end of the market.

India has 26 million credit cards and 712 million debit cards. But their use is low at just 12 times per debit card every year at an ATM and barely two transactions per year per debit card at a POS. The corresponding numbers are less than 1 transaction for a credit card at an ATM and 38 at a POS. In comparison in high income economies cards or e-money options are used to conduct around 280 transactions a year per person. We are a long way off from the frontier of cashless transactions. The good news is that we are better off than low and middle-income countries, which averaged just 22 cashless transactions per year per person.

pan

Plastic money becomes expensive to use if the individual transactions are small. Typically, micro-transactions of less than $5 (Rs 340) are not viable through plastic money and would need to be cross-subsidised. This is where e-money becomes the most appropriate vehicle to mop up the micro-transactions market which could account for as much as two-thirds of the total transactions. After all, cigarettes are still sold as singles in India; a paan (betel) costs just Rs 20 and a street meal is Rs 100.

Build the eco-system for expanding payments beyond traditional banks

If the government is serious about junking cash it must engage with commercial entities which have a large , diversified customer base to leverage for diversifying into the payments space. Phone carriers, progressive electricity utilities and the Railways are some options. They can quickly scale up the use of digital money by their customers in collaboration with e-pay platforms and provide some assurance to merchants against the risk of not realising the payments from the e-pay platform. Developing a “reward” based strategy to move 50 per cent of commercial transactions above Rs 500 to digital settlement by 2020 is a reasonable target.

There are some limitations which need to be overcome or gone around- the poor quality of electricity supply, dodgy net connectivity and the additional cost that needs to be borne to digitise small-value transactions via POS arrangements. Regional hackathons to find solutions to specific barriers can pay rich dividends. They can create an ecosystem of innovative thinkers focused on solving the problem. The future is digital. Engage millennials to figure out how to fast forward us there, out of turn.

Adapted from the authors article in the Asian Age November 28, 2016 http://www.asianage.com/opinion/columnists/281116/in-rush-to-go-digital-dont-junk-cash-yet.html

 

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banking, Economy, India, technology

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Is a machine kicking u out?

 

only-humans

Davenport and Kirby’s book “Only Humans Need Apply” Harper.2016 comes with a whiff of optimism and plenty of specific practical advice- based on real life cases- for professionals – scientists, radiologists, teachers, actuaries, financial analysts, lawyers and all “knowledge workers” who fear loss of jobs. This is where it is different from the previous, scarily sensational non-fiction on machines versus humans. The title is an inversion of Jerry Kaplan’s memorable “Humans Need Not Apply”.

Yes, computers are after your job.

loss-job

Yes, computers could be coming after your job. And yes, machines are very smart and becoming smarter. So ignoring them or trying to compete against them is a zero-sum game- the machine will win and you will lose. John Henry, a West Virginia driller learnt that in 1870. He competed against a steam powered drill. He won- only to die from over exertion soon after.

Dirty, dangerous, physically demanding and highly structured jobs like on an industrial production line have been doomed since the 1990s. The US lost more jobs to automation at home, than to outsourcing to India. This trend will worsen. Even “knowledge workers”, highly educated professionals – 25 to 50 percent of the workforce in advanced economies- will get flooded out via automation by 2040. McKinsey estimates automated systems will replace the equivalent of between 110 to 140 million human jobs, by as early as 2025.

Five ways to win the battle

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The way out is “augmentation”- keeping humans at the center whilst farming out work machines can do better, as opposed to “autonomy”- progressively substituting humans with machines. Steve Jobs illustrates – a human, “augmented” with a bicycle, becomes far more energy efficient that even a condor, the most energy efficient of all species. Augmentation is more than mere “complementarity” or co-existence with machines. It means actively collaborating with automation and artificial intelligence to sharpen our skills in areas where humans are most competitive.

Take apart your job into two components – structured tasks which can be codified and tasks which cannot – or at least not just yet. Focus on honing the latter. The former will be automated. You have five options to adapt to the future.

Step in: You can’t beat them so collaborate

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You can “step in” by learning how machines can offload your “dodo”, routinized tasks, thereby freeing up space for your core “human” skills. This presents the largest opportunities to partner machines, oversee them, point out errors they have made or help in improving them.

Step forward: Join the race to make computers better

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You could also “step forward” by acquiring the highly specialized quant skills, engineering knowledge and coding expertise needed to create newer and better machines. But the skill requirements would be of a very high level with the need for continuous upgrades.

Step up: Use computers to widen or deepen decision making skils

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“Step up” options involve honing the expertise to take unstructured decisions by integrating information from multiple sources. Warren Buffet defines one such which defies codification – what should a car driver do if the choice is either to mow down a child, who has strayed onto the road, or to plough into a car with four adult passengers? Complex, corporate “trade-offs” in business strategy are no different.

Step aside: Develope skills in managing human behaviour 

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Others may prefer to “step aside” or take up jobs machines cannot do, like explaining in plain language, to an irate Ben Bernanke, the erstwhile Chairman of the US Federal Reserve, why a computer assessed him as too risky for a mortgage refinance or building relationships in business.

Stepping narrow: Specialise in what computers can’t do.

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“Stepping narrow” is the fifth option. These are jobs so specialized and so restricted- like dealing with special kids or translating lost languages -that they lack the scale required to make automation efficient. In 1997 film maker Errol Morris featured four such narrow specialisations – a topiary gardener, a lion tamer, an authority on the colony behavior of naked mole rats and ironically Rodney Brooks – inventor of autonomous robots.

Computers are  like a horse or a car: They get you where u want to go

Is automation, Keynes’ leisure filled utopia, or a jobless dystopia, scarred by rising inequality and violence? Elon Musk thinks artificial intelligence is “our biggest existential threat”. Stephen Hawking warns that it “could spell the end of the human race”. Bill Gates wonders why “some people are not concerned”.  The authors are clearly not concerned. Nor are 52 percent of nearly two thousand experts polled by PEW. But the near term problem of managing the transition, particularly in poor countries like India, remains a public concern. The authors rightly debunk the option of universal income transfers, as short term palliatives –like NREGA in India – with potentially negative fiscal and work-ethic related unintended consequences.

Governments need to teach us differently for us to adapt

Governments need to reorient education. The focus on science, technology and quant skills is good for those who step in, up or forward. But one half of workers will be stepping aside or narrowly. Education policy does little to encourage these skills. Corporates should get incentives for generating “humans-only” work as Innovation for Jobs (i4j) is doing. International regulation of autonomous machines and artificial intelligence is critical, but absent. We need to collectively “trade off” the benefits from automation against the social cost of increasing joblessness and inequality. Such complex decisions should be a humans-only skill. Unfortunately, we have rarely made wise public choices. This skill needs to be augmented. A first step could be all those concerned reading this book.

Adapted from the authors book review in Business Standard weekend October 22, 2016 http://www.business-standard.com/article/specials/human-factors-in-the-automation-debate-116102101369_1.html

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