governance, political economy, institutional development and economic regulation

Posts tagged ‘Bangladesh’

Lion King – India roaring?

Lion

(photo credit: http://www.archives.financialexpress.com)

Prime Minister Narendra Modi’s adoption of the Asiatic Lion as the symbol of “Make in India” has triggered off a debate. The lion — Gujarat’s state animal till now — has become ubiquitous. The brilliant, public brand developer, Amitabh Kant has made the lion near synonymous with Incredible India, as Dalda once was for ghee (clarified fat).

The lion now appears in tri-colour ruffles; bedecked with flowers; impaled by pistons, wheels and gears; outlined in bright LED lights or most elegantly just in a steely grey profile. The message is clear — India is not a power you can mess with.

Of course, the truth about the lion — but not the lioness — is that it is the laziest big cat ever. It uses its overpowering muscle mass and speed to forage for food; overeats voraciously and then sleeps contentedly barely able to control its snoring. But just the sight of its mane; its magnificent rock cut nose and jawline; its arrogant gaze and its tawny coat can bring on the goosebumps, absorbing the viewer for hours on end. The lion is not king without a reason.

In comparison, the Bengal Tiger — India’s national animal — is a furtive large cat which slinks about in the dense undergrowth. Whilst magnificently graceful and elegantly clad in striking stripes, it relies on strategy and guile in making its kill. Lions are more transparent. They hunt in a pride and can even take down an elephant. The tiger is a solitary hunter and can even be done in by a pack of wild dogs.

Which of the two suits India’s image best? Today’s “muscular” India is closer to the lion than the tiger. For the longest time, through the 1970s, ’80s and till the 1997 financial crisis, East Asia was known for its fast growing “Tiger economies” — tightly managed, efficient, lithe and opportunistic.

India is far from that model. We are too big to emulate the East Asian steps or use the entry points available to them — FDI in electronics and automobiles from Japan and later China and external trade drive growth. We are too diverse to have a single model fit all requirements. The “Pride of Lions” model suits us best — group effort; selection of the fittest amongst the group to lead and a strategy which leverages our size and inherent strength rather than rely on our low levels of flexibility or the accompanying moderate speed.

Valmik Thapar — India’s best-known Tiger conservationist — suggests that adopting the elephant suits India best. In fact, the elephant is the state animal of three Indian states — Kerala, Karnataka and Jharkhand. But elephants can’t dance, jump or dunk. They do have prodigious memories and are very community minded. Elephants will mourn a dead member of the herd for considerable periods and are very human in their reactions to loss and their fondness for a drink when the Mahua fruit ripens.

But its ponderous pace reminds us of the bad old days of the Hindu rate of economic growth. Its high maintenance — a daily feed of 140 kg and water consumption of 120 litres is the kind of resource intensity we need to get away from.

Its proclivity for making false charges and trumpeting to scare off the enemy is too close to the regressive character of our political discourse today.

Its unfortunate tendency to defecate in large quantities at inconvenient locations is so similar to the India we are already used to, that it just cannot become a symbol of what we want to be. I suspect even Mr Thapar would agree.

In fact, most likely, his apparent willingness to forego the “national animal” status for the Tiger — his first love, in favour of the elephant, seems to be a red herring — a canny move to propose a substitute so impossible, that it can mire action in discussions for the next decade, thereby maintaining the status quo, which suits Mr Thapar best. This tactic is familiar to every well-trained bureaucrat and part of her arsenal of tactics for blocking change.

But move away from the tiger we must. Here are three key reasons for doing so. First, we would thereby enable its adoption by West Bengal, which currently has to make do with the unglamorous “fishing cat” as its state animal. This is unbecoming for a state where the mighty Sunderbans Tigers prowl. Also, Bengalis in India can never digest the fact that Bangladesh has unfairly appropriated the Royal Bengal Tiger as its national animal leaving them with just a cat. The recent Communist governments in West Bengal never bothered about this because for them all cats are the same. In any case, in the “man versus wildlife” debate, they are squarely on the side of man. Prior to them, the Congress government was a mere handmaiden of the Union government. Didi (chief minister, Mamata Banerjee) now needs to right this wrong.

Second, despite being the national animal and thereby enjoying the VVIP special security arrangements of Union government-funded tiger reserves, the tiger population in India has not stabilised. In contrast, Mr Thapar notes, the lion population in Gujarat has increased, thanks primarily to the proactive conservation efforts of the state government. The lesson is clear. If the tiger is to be saved, name it as the state animal of West Bengal, Uttar Pradesh, Madhya Pradesh and Rajasthan so that state governments develop a direct stake in its conservation.

Third, the question of naming the Indian elephant as our national animal does not arise. It is a beautiful animal and we don’t want to lose it by elevating it to this status.

But if the “national tag” is the kiss of death, what hope is there for the Asiatic Lion to survive its de facto national status? Here we have to pray that the “Lion” that we have as the Prime Minister, currently, will look after his own, just as he did in Gujarat.

In case Mr Modi does not deliver, we could always switch to naming rodents as our national animal and at least be done with them forever.

Reposted from the Asian Age June 6, 2015 http://wwv.asianage.com/columnists/king-industrial-jungle-282

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?

The MO-XI connect: going beyond the rice bowl.

sabarmati

(photo credit: narendramodi.in)

Later today when the Chinese supremo savours Khakra (a snack) and toasts PM Modi over a glass of aam-ras (the juice of raw mangoes), on the carefully grassed banks of the Sabarmati river, the symbolism of the location will not be lost on him.

What was till recently a sludge filled, trickle, has been transformed into a full water body. What was only a repository of nostalgia is now a kingdom of dreams and hope illustrating that India has shaken-off its somnolence of the past decade and is ready to Samba. The Sabarmati saga shows that we too can execute Chinese style development- large dams like-Narmada, regulating the water supply; city development projects, like the Sabarmati redevelopment scheme and more recently the ambitious Ganga re-development project. All this, in the face of stiff opposition from the usual bug-bears of large development: environmental fundamentalists who, rather academically, advocate strongly against channeling a river, or indeed doing anything which changes its natural flow.

As the bonhomie gets lubricated by Chaas (buttermilk) PM Modi must drive home the point that India has arrived, by politely refusing the expected Chinese offer of US$ 100 billion in financial support (to trump the Japanese offer of US$ 35 billion) for sundry projects. India is not up for sale to the highest bidder. Such bilateral support comes tied with numerous strings including the compulsory use of Chinese contractors. Japanese credit is the same. Whilst the terms of credit are deceptively attractive, there is no open international competition in the award of contracts. This loads the cost of the contract in present value terms far more than the discount on the interest rate offered.

The losers are usually the tax payers of the country providing the credit and the citizens of the country receiving the credit. The first because such “cheap” credit is funded out of the government budget of the donor country. The second because it is the citizens of the recipient country and users of such projects, who will bear the higher lifecycle cost of “gold plated” projects or the supply of low quality and shoddy goods. The winners are industry and business on both sides of the border, who gain by executing such projects. So expect to see an unholy alliance of Chinese and Indian business, loudly applauding the availability of such bilateral credit.

It doesn’t end there. Babus on both sides of the border will also raise a rousing cheer. The sole job and raison d’etre of our Department of Economic Affairs, within the Ministry of Finance, is to “negotiate” such bilateral credit lines. The Chinese (and the Japanese) have counterpart departments negotiating the supply of such credit. So that is another unholy alliance which undermines the financial autonomy of the country.

For many years, our babus have been used to touring the World Capitals with a begging bowl. None of them ever consider how incongruous it looks to assert our rightful place in the UN Security Council on the one hand, whilst simultaneously looking for some “rice” to fill the bowl.

It is time we changed that. The sustainable budget deficit of the Union Government is around US$ 400 billion. A lot of the existing debt is long term and the fiscal space available for new borrowings is limited. We should not fill the narrow window currently available with “nominally cheap but actually expensive” bilateral credit sources. It is just not worth the erosion of our international perception as a resilient stand-alone economy which seeks and gets credit on commercial terms. The key to financial strength is to spend only on projects which have high rates of economic and social returns and to avoid cost overruns. Money well spent is always rewarded by the financial markets through cheaper costs of borrowing.

Getting money cheap and then wasting 25% of it, which is the standard economic loss of non-competitive bids, does not impress financial markets as a viable strategy because it does not enhance our ability to service the credit.

If we need a bullet train or a super highway or high speed tracks linking our Five Big Metros then let us fund them through a mix of foreign commercial credit and foreign direct investment. That is the cheapest finance available today. Both sources also come with strict oversight on expenses and project management.

As the two supremos dip Bhakri (wheat flat bread) into the Kadhi (tangy sauce) Modi should move to the second agenda item and probe the extent to which the Chinese want to collaborate with India in international commercial ventures, in third countries between their companies and our own Navratnas (premier Indian State Owned Enterprises) and Indian private entrepreneurs. Both sides could learn from such collaboration.

Indian business communities in Africa and East Asia are hamstring by the crushing impact of Chinese competition. If collaboration can replace competition, both China and India benefit. After all, the best business venture is a monopoly, like a single toll bridge across a river. We should emulate the developed world, which advocates competition in overseas markets for their goods and services but hang on to quasi monopolies in their own domestic market.

More creatively, can we form an Indo-Chinese multi-national to promote renewable energy internationally? As a tangible target, what about announcing that by 2019, (1) both supremos would switch from the cars they drive in today, to electric cars and (2) their respective official homes and offices in New Delhi and in Beijing would be powered solely by Renewable Energy solutions manufactured through Indo-China cooperation.

As they scoop up the Kansar (a dessert) PM Modi should broach the third pillar of India-China partnership; a gas pipe line running from Turkmenistan/Iran through Pakistan to India and onto Southern China. Gas is critical to India’s energy plans. It is key to improve air quality in urban areas; provide a clean cooking fuel; power our city generators and reduce the incentive to use fire-wood as a fuel in our villages. Of all the commercial fuels, gas and hydro based energy have the most characteristics of a public good. Both generate the least negative externalities in energy supply. On the supply side, Iran is a traditional friend of both India and China. China has an increasingly dominant position in Pakistan which can facilitate safe passage for the pipeline. Their traditional policy of setting up Pakistan as a counter to India is now questionable in the face of Islamic terror and China’s own problems with Islamic communities in their North West. There is a commonality of interest in accessing gas from Iran. It should be pursued boldly using the plurilateral (Iran-Pakistan-India-Bangladesh-China) approach.

Great leaders are those who go beyond the narrow limits drawn by their babuish advisors. PM Modi and President Xi both have the mandate and the time to establish their credentials. They should start by making this point in Delhi.

Indian Blood is Expensive

Image

 

Indian diplomacy was at its worst last week. It conducted the PMs visit to the US as if he was attending a seminar on economics, in Neemrana. If India is a superpower (perennially waiting to happen), it came across, on the one hand, as a country sapped of all energy and squabbling about petty matters whilst on the other, punching way above its weight (as usual), by seeking to “inform” international debate on marco-economics, political strategy and social development. When will our politicians learn to control their babus egos? International agendas should be set by politicos to project a short, simple and credible message, not waffle on about everything under the Sun.  

Iran, in sharp contrast, showed real leadership and stole the thunder. The freshness of Iran’s approach to international rapprochement and the staleness of India’s squabbling with Pakistan couldn’t have been starker. The Pakistani perception of India and its leaders, aired on Pakistani television as bumbling compromisers, unable to live up to meaningful actions was true, but humiliating.

India used to be a Banyan tree spreading its roots. Today it has become a Baobab tree. Massive from the outside. Hollow from within. This is despite having the best technical talent and intellect in the world. Indians leave India to grow, get respect abroad (like Raghuran Rajan) and only then have the choice to return home to be recognized. The Indian private sector has similar constraints. Indians invest 1 % of GDP abroad (the real figure is higher but the IMF and the GOI do not share with us their assessment of investments abroad using havala) because of the ease in doing business, even in nearby Bangladesh, Myanmar and Srilanka.

Modi spoke on Sunday, from the ramparts of Rohini in Delhi, of “small” nations leaving India behind. It seems he was referring to East Asia, which overtook India in the late 1970s. He could as well have referred to our neighbours in South Asia and Myanmar, who have more recent successes. After Bangladesh, India is the poorest country in this region (World Bank definition of people with income below $2 per day). Srilanka, Nepal and Pakistan all do better than us. Both Srilanka and Bangladesh kept economic growth above 6% in the period 2009-2012 (World Bank Development Data). Even Nepal, managed to keep it above 5%, astoundingly despite (or perhaps because of) an undefined political architecture or credible government. In Pakistan, growth trended upwards from 1.6% in 2008 to 4.2% in 2012. Indian growth meanwhile declined to 3.2% in 2012. The manner in which Srilanka, Bangladesh and Myanmar have shaken off their erstwhile, crabbish lethargy of looking inwards is thrilling for business. We can learn from them.

External and internal conflict is a major growth retardant. The lengthy literature on the negative impact of conflict and violence on social capital and community well-being highlights the importance we need to give to the Rule of Law and Security. Sheikh Hasina in Bangladesh has met the extremist challenge upfront. Rajapaksa similarly tamed the Tigers in Srilanka. India’s inability to take strategic and bold steps to root out terrorism is attributed to our being a democracy and hence a soft State.  Nothing could be further from the truth.

If you are poor and marginalized, the Indian state would appear extremely hard and uncaring for your rights. Over 700 million people fall in this category. We are a country still enthralled with inherited social and ritual, class status. In this respect we are very similar to the UK and differ from our true team mate, the US. However, the US acts only in national interest. This is their ethos. You make it or break on your own. If we want to be taken seriously by the US (and the world) we have to first deal with what ails us within.

It is wrong to rush to the US to shake a few limp hands, limply. It is tragic to have leaders who represent no one, or to have those who drive from the back seat. It is unwise to degrade babudom into a quivering jelly of indecision even though we all know that both growth and social inclusion are based on selective but firm and effective state intervention. It is a crime to waste our intellectual and entrepreneurial talent overseas and be poorly served at home. It is unconscionable to spill Indian blood so casually but continue shaking hands with a Pakistani, puppet, Prime Minister. Yes, the nations of the world will applaud this conciliatory, rational approach. But what they respect, is America’s single minded determination to “hunt and gun down” the perpetrators of violence which spilt American blood in America.  Even tiny UK attacked Argentina (admittedly better known for its beef than its military prowess) in a display of the essence of sovereignty; the monopoly of the State over violence within its territory. The world fears China’s single minded, uncompromising pursuit of national interest. If we want to play with the big boys we have to emulate their tactics.

Any poor Indian looking to buy blood for an operation faces prohibitive prices and often scarcity. Why is the blood of our babus in uniform, so cheap then? Let’s value it better.  

 

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