governance, political economy, institutional development and economic regulation

Posts tagged ‘Aadhar’

The price of democracy

beggar

Prof. Ashutosh Varshney of Brown University calls India an improbable democracy — poor, impossibly heterogeneous and multicultural, and ironically, only its colonial heritage keeps it going. So has our hubris cost us plenty?

Why we are not China

Forget comparing ourselves with China today. Are we at least on the same path? No, we are not. Assume a lag of a decade between China’s 1979 takeoff — Deng Xiaoping’s reforms — and India post-liberalisation in 1991. Second, assume that GDP growth is a decent proxy for national effort. Judging by the results, we have tried only one-third as hard as China to grow three decades into the reform process. Have we been tied down, like Gulliver, by democracy’s Lilliputian ropes?

Money or efficiency make the world go around

There are only two ways of increasing growth. Increase investment or increase the efficiency with which capital is used. The latter is tough but critical. Efficiency and stability invite foreign capital in, build supply chains and boost “federated” exports — many economies get a say and a share in the final product. Making the world your shareholder makes politicians more responsible — barring outliers like US President Donald Trump — and who knows, his unorthodoxy might well work for the United States.

Wasting scarce capital

Amravati

India is hugely capital starved. Sadly, it has not done well either in using capital efficiently. And it is not just the public sector alone which is wasteful. A generalised trend of wastefulness springs from poor monitoring systems available to the government, shareholders and citizens, none of which can easily check the data by triangulating information sources.

Over-designed public projects

Bengaluru airport has had charging points in its parking lot since 2008 for electric cars, which will not use them till 2030 – if then. You pay for casually over designed projects. The building of Amravati, the new capital of Andhra Pradesh, represents all that is wrong with our democracy with politicians free riding on tax payers.

Frank admissions of failure are as important as bragging about success

Finance secretary Hasmukh Adhia has admitted that the GST network has failed to provide end-to-end digitisation. We knew this. But speaking honestly and responsibly endeared him to the public. Unfortunately, no one is to be held accountable for this glitch.

Adhia

Cheap finance induces waste

Wasteful use of capital is hardwired into a system which prices capital cheaply. Most business folk will moan about the high cost of funds in India. But the fortunes, domestic and overseas troves of real estate barons and industrial tycoons were built on negative interest rates, with inflation boosting prices but diluting the real interest cost of a bank loan to zero over a 10-year period.

Four matras for democratic success 

Can we take remedial measures? The times are tough. But bad times never last. More important, are we primed to take advantage of the next uptick cycle in world economic growth? Possibly not. Here is a four-point mantra for getting there.

Efficient public services

online

First, the new national government, later this year or in early 2019, must tackle the long-ignored task of public sector reform. It is shocking that economic duality has widened since 1947. The average citizen and business is streets ahead of the government in the effective use of 21st century technology to make employees accountable. Can you imagine how the government would change if the bottom five per cent of employees were sacked every year for poor performance or if the courts disposed of cases quickly? Just focusing on achieving these two and keeping everything else on hold could retrieve democracy in India.

Make data accessible on citizen aspirations & preferences, government performance and business governance 

Second, know your citizens. Make all residents and citizens identifiable, traceable and accessible. Aadhaar is the answer. Make registration for Aadhaar painless and self-declaratory — the ability to cancel out duplicates is supposed to be built into the system — enhance its accuracy in identification; mask the private information better and multiply improved digital recognition equipment. Populate data for citizenship, electoral rights and public benefits, using Aadhaar as the base platform. Transfer all public benefits through bank accounts. Roster all government officials, below 40 years of age, irrespective of grade or cadre, to serve as field-level facilitators wherever they are posted, with specific mentoring targets, to help citizens access their benefits.

The BJP and some regional parties (Trinamul Congress, AIADMK, the Left parties) who have a cadre are ramping up to do this. Down this route lies the threat of democratic abdication. A citizen must be served by the government of the day, not tied to the apron strings of a particular party for accessing benefits.

Link official accountability with efficiency in use of capital 

Third, change public incentives and processes. Switch from lazy budgeting of inputs to specific outputs, achievable over two years and outcomes over five years. Form teams of specifically identified officials to programmes and projects; ensure that there are no transfers and the team remains intact for the next five to 10 years. This will ensure more responsible budgeting; development of job commitment and expertise and improve outcomes. China does not shuffle its officials about needlessly. They stay tied to specific tasks for long periods — many forever. We encourage our officials to forum-shop from one cushy position to another.

Stop fiddling with markets

markets

Fourth, walk the talk. Withdraw the government from being a market participant and it will work better. Markets are like forests. Naturalists like Pradeep Krishen say it is enough to fence barren land off from predators like goats to allow a forest to regenerate. Going with the grain of nature doubles results. Anything else is wasteful and inefficient.

Stop fiddling with markets and they will find their level. Focus on diluting, not alleviating, the pain of those who lose out from markets. Just that can consume all of the government. Do not dilute the bite of markets if you aim for efficiency. Equity initiatives must be front-loaded to enhance competitiveness, not installed at the end of pipe to shackle markets. Caste-based reservations for education, jobs or benefits are an end-of-the-pipe option. They gel perfectly with our real strategy of steady but inefficient, slow growth.

Democracy is not the reason for our woes. It is what we do with it that’s troubling. Democracy implies at least a 50 per cent chance of not getting re-elected. The great Mughals would not have approved of the risk profile. Neither, it seems, do our rulers today.

Adapted from the author’s opinion piece in The Asian Age, July 9, 2018 http://www.asianage.com/opinion/columnists/090718/price-of-democracy-a-4-point-growth-mantra.html

Well run, PM Modi

modi run

(photo credit: http://www.iosipa.com)

Reposted from the Asian Age May 25. 2015 < http://www.asianage.com/columnists/well-run-modi-690>

Should it worry us that Modi sarkar resembles the Ethiopian Haile Gebrselassie, the greatest long-distance runner ever and not Usain Bolt, the 100-metre thunderbolt from Jamaica?

Not really. The 100-metre dash, whilst spectacular and crowd pulling, is a good tactic for disaster mitigation but disastrous for managing a huge, diversified economy. The marathon analogy suits India better. It is a test of endurance, grit and determination. Outcomes are only visible towards the end of the 42 km race. Those in the lead for the first eight km rarely end up winning.

Other than physical fitness the marathon runner needs a disciplined mind, which restrains the urge to sprint till the last mile whilst maintaining a planned and steady pace all through. Also important is the ability to transcend the near continuous pain and stress, and remain focused on the goal.

Modi sarkar has expectedly followed the epic Bollywood masala — a marathon interspersed with sprints. Citizens have been kept entertained by a blitzkrieg of short-term Bolt spirits to simulate inclusive ascent on a rising elevator of well being, whilst working steadily behind the scenes towards medium-term goals.

The opening of 80 million small bank accounts; the launch of three social protection (pension and insurance) schemes; the attractively packaged, near weekly engagements with foreign governments on their soil and ours; pushing through the border realignment with Bangladesh; the quietening down of tension with China in Arunachal Pradesh; the relatively incident-free border with Pakistan; the warming relationship with Sri Lanka; the race to make India “cough-free” by substituting clean renewables with dirty fossil fuels; the quick response to natural disaster in Nepal and Bihar; the disciplining of the bureaucracy and the Bharatiya Janata Party’s political cadres; effective management of the sensitive relationship between the BJP and its regressive cultural font — the Rashtriya Swayamsevak Sangh; the visible dominance of the Prime Minister’s Office, which had wilted under the previous government; the productive alignments with Didi’s (Mamata Banerjee) government in West Bengal; Mufti Muhammad Sayeed’s People’s Democratic Party in Kashmir; the Telugu Desam Party in Andhra Pradesh; Amma (J. Jayalalithaa) in Tamil Nadu, are all signals of aggressive political outreach.

But behind the scenes, several half-marathons have also been initiated — the blistering pace of tendering and award of infrastructure projects with results expected over the next three years; the quick decisions on defence procurements; the swift auction of coal mines to resolve the fuel supply bottlenecks; the opening up of the defence sector to private investment and management; relaxation of foreign direct investment constraints in insurance — both major sources of good jobs and the quiet continuation of the previous government’s Aadhaar electronic platform as a primary mechanism for verifying identity so necessary for subsidy reform via direct cash transfers.

Prime Minister Narendra Modi has run the first leg of the marathon with exceptional skill. But this was the easy part. The next 16 km till 2017 is what will make or break his chances for re-election in 2019. Five key measures stand out.

First, with two big state-level elections coming up, the BJP will need to marry the compulsion for populism with fiscal rectitude, which has been the leitmotif of the first year of Arun Jaitley as the finance minister of India. Reigning in inflation is a continuous struggle in such circumstances. It is fitting that the Reserve Bank of India continues to focus on managing money supply and interest rates. The ministry of finance will have its hands full substituting for the erstwhile Planning Commission in allocation of funds and enhancing real-time, expenditure management systems and metrics to ensure “value for money” spent. Key indicators to watch will be achievement of the targeted reductions in revenue, current account and fiscal deficits.

Second, introduce a poverty and private jobs creation filter. Share the assessments publicly via a “dashboard” of proposed allocations to make the allocation process more transparent and participative. Direct democracy is of Mr Modi’s signature tune. This is also a great way of self-restraining crony capitalism and populism.

Third, cut loose the railways and the public sector companies and banks from the crippling constraints of ministerial intervention. Corporatise all production and service delivery entities as a first step to reform, followed by administrative autonomy and selective listing of stock. The creeping tendency, reminiscent of the “Indira Gandhi ‘commanding heights’ syndrome”, of falling back on the public sector for getting quick results is unfortunate. The international experience shows that poor investments are the outcome if public funds are plentiful. India cannot afford “bridges to nowhere”, even if they create jobs in the short term. This implies fixing the “broken” public-private partnership (PPP) model, not effectively junking it altogether with the government assuming all the risk, as is being considered currently.

Fourth, trim the flabby Union government. The UK model of agencification and administrative reform, tight budget constraints, monetisation of assets and the levy of user charges, fits the Indian context best. Look for “asymmetric reform”, rather than whole-of-government approaches. The Aadhaar unique ID experiment is a useful example of the benefits of strategic, but narrow reform. The “Namami Gange” Clean Ganga Mission is another example. If “cooperative federalism” is to be more than just an attractive slogan the Union government must be the pied-piper, which the state governments follow.

Fifth, fix the big institutional constraints to rapid development. The last thing we need is a clash of titans — Rajya Sabha versus the government — a replay of the dysfunctionality of the American political architecture; judiciary versus the executive. Are we really keen to tread the Pakistan route? Avoid proxy veto by the Union governors over elected state governments — a throwback to the ugly days of the Emergency in the 1970s. Implement the 74th Amendment (1992), which mandates decentralisation but remains ignored two decades later.

The final 16-km dash in 2018 and 2019 will be easy if the half marathons already initiated are run well, over the next two years. The trick is not to sacrifice public interest in an all-out attempt to win state elections in Bihar and Uttar Pradesh. The question remains: will the BJP’s marathon mind rule or its sprinter’s muscles dominate?

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