governance, political economy, institutional development and economic regulation

Posts tagged ‘Bihar’

African “big men” in India

African heads of State will don Modi kurtas and party in New Delhi, October 27 to 29. The occasion is the third meeting of the Indo African Summit. It would be quite a sight to see Robert Mugabe, age 91, President of Zimbabwe for the last two decades, take a turn or two on the dance floor. But we may have to make do with the more agile President Jacob Zuma.

zuma

President Jacob Zuma of South Africa at his agile best

Hopefully, the parallel with ASEAN will not extend to Minister Sushma Swaraj having to sing at the concluding party, just to liven up the proceedings, along the lines of Madeline Albright, US Secretary of State in 1997, who crooned her version of “Don’t cry for me Argentina”.

swaraj

Minister Sushma Swaraj with members of parliment

Beyond the theatrics, it is tough to figure out what we want to achieve with the possibly forty heads of state or governments and many more senior politicians and officials from Africa who are expected to participate. Similar summits were held in 2008 and again in 2011.

Claim the 21st century for Africa and India

Demographics suggests that the second half of this century belongs to Africa and India. But to claim this “historical destiny” India and Africa have to do the right things. One such is to put the right institutions in place.

This “mirror” long term need is what binds India to African countries far more than the standard diplomatic fare; trade and investment, terrorism and security. These are merely the transactional outcomes of sound institutional development and better dealt with at specialized fora which already exist like the World Trade Organization, the United Nations and the Bretton Woods institutions and their offshoots.

Context is key for developing “best fit” institutions. Context varies enormously between India and Africa and even more so within Africa. But one common theme across most African countries is a rich endowment of natural resources (except Rwanda and Burundi) which distinguishes them from resource poor India.

In contrast, adherence to broad democratic norms is increasingly the preferred option across Africa. Swaziland and Lesotho remain the only kingdoms in sub-Saharan Africa. Yesterdays “dictators” are today’s leaders, who test their popularity in elections.

museveni

Presidents Yoweri Museveni of Uganda and Paul Kagame of Rwanda

India has been the world’s largest democracy since 1947. In Africa Senegal has similarly been a multi-party democracy since 1960 when it became independent. Senegal had its “Indira Gandhi moment” in the first decade of this century when then President Wade tried to unduly empower the executive through constitutional amendments. The democratic backlash was strong and he lost in elections to his own Prime Minister in 2012- President Small still leads today. Mauritius, Kenya, Tanzania, Zambia, and later South Africa, Botswana and Namibia also have stellar democratic records.

African public service structures have evolved unlike ours which have atrophied

The institutional architecture within which government functions is critical for achieving developmental goals. Within the broad institutional architecture the manner in which the civil service is structured is key. India has much to learn from select countries. South Africa, Ghana, Senegal, Mauritius, Kenya, Tanzania and Ethiopia for instance, have developed and maintained outstanding public service structures and traditions.

These bureaucracies have weathered far more tumultuous times than we in India have ever encountered in the post- World War II period. But they remained committed, motivated and deliver results- three characteristics that are iffy to apply across the board in India.

India presents a fascinating case study of asymmetric development. On the one hand we have scientists sending space expeditions to Mars. At the other end poor villagers still rely on traditional healers and “bangali” doctors- sometimes out of choice and habit but mostly out of compulsion since the public health service is so poor.

It is fashionable today to advocate the case for asymmetric development- getting reform in through the door wherever possible without attempting an across the board improvement in the civil service. India is a good example of how this does not work. Islands of excellence remain just that cordoned and insulated from the ills that afflict service areas not considered critical from the short term (sighted) point of view.

India manufactures or assembles more brands of cars, scooters and motorcycles in India than it is possible to remember. We pride ourselves on our in-house capacity for developing infrastructure. We have embarked on a “make in India” mission. Foreign students come to India to study management, medicine and engineering.

Yet, within the government, it is rare to find an official with the relevant technical qualifications, in a senior position with decision making powers. This is not to say that our top bureaucrats are not highly educated. Invariably they do have these credentials, in a general way. Many may even be a PhD. It doesn’t get better. But rarely is it that the academic qualifications and the experience overlap. This disregard for “technical excellence” as a driver of good public administration is at the root of our inability to apply the vast knowledge reserves we have built up to improving public services on the ground.

We should learn for countries in Africa which have done away with the hierarchical, cadre based, colonial administration systems they inherited and have moved on to a position based meritocracy. South Africa, Mauritius, Ghana, Senegal, Kenya and Tanzania are examples.

Our federal structure is an outstanding example of contextual decentralization

Whilst our Constitution is a Union of States rather than being a federation like the US Constitution, it is a dynamic yet robust instrument. It has been amended one hundred times since 1952 but it remains the driving force for growing the “Idea of India” as a single nation comprising unparalleled diversity in religion, ethnicity and culture.

Much of richness of the Indian public management experience derives from the significant levels of devolution to the thirty state governments. Around 40% of the Union government’s revenues are made available to state governments as their share of tax. An additional 15% of funds are transferred to state governments for executing national development schemes. State governments also have their own sources of revenue.

The size and character of states varies enormously in India. These range from the mammoth Uttar Pradesh (UP) with a population of 200 million (the next biggest state is Bihar with pop. 100 million) to tiny Sikkim population 600,000.

Uttar Pradesh is larger than the largest African nation-Nigeria-pop. 189 million, renowned for its oil rich economy, entrepreneurial people and pluralistic society.

Sikkim, sticking out like a “thumbs up” between Nepal and China in North Eastern India with streets neat as a pin and people, as disciplined as the Rwandans closely resembles the well governed, gorgeous, North Western African island nation of Cape Verde.

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Cape Verde

Africa manages regional co-operation exceedingly well

India should look closely at the cross country arrangements within Africa which facilitate development based on the comparative advantage of countries. Power pooling across the Southern Cone countries and West Africa is one such example. Access to sea routes for land locked countries like Zambia, Zimbabwe and Uganda via rail, road and pipelines provides good models for cost sharing across Indian states. Truth and reconciliation type negotiations are another African specialty.

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Presidents Bashir of Sudan and Salva Kiir of South Sudan- friendly foes.

The Indian institutional arrangements for regional integration have fallen into disuse and are ineffective. Water sharing arrangements are particularly dissatisfactory and legal disputes linger for years, increasing conflict and retarding development. Similarly implementing the Goods and Services tax- a single, value added tax, to replace state level taxes on the production and sale of products, to which all parties are agreed in principle, has become harder and more painful than extracting a tooth.

It may have been really useful to arrange sessions where state chief ministers could have interacted with heads of state depending on areas of mutual interest with their officials following up on the detailed areas of cooperation.

We are not China

aarti

aarti” evening prayers on the banks of the Holy Ganga

Finally how can we  differentiate ourselves from China whilst dealing with Africa? Clearly the worst option would be to emulate the muscular Chinese style of economic diplomacy. For one we just don’t have the firepower. For another the principle of comparative advantage advocates that everyone must play to their strengths.

China’s comparative advantage is cash-lots of it. But the Chinese model of development is not something which is easily replicated because of the size of its economy, the homogeneity of its population and its long history of splendid isolation. Also it is unlikely that exporting workers in droves to implement projects overseas is a sustainable or effective developmental strategy for the beneficiary countries.

Our comparative strength is that we are the “Constantinople of Parliamentary Democracy”. We straddle the democratic heritage of the West and the traditional Asian democratic principles. In doing so we have evolved a home spun democratic model. Like all jugaad (learning by doing) the ends of this model are a bit jagged.

parliament

The Indian parliament on high alert post a terrorist attack in 2001

Nevertheless, it is a model which works- both for economic growth and to uphold the human liberties of speech, association and property. Within this generic model of development lie gems of granular achievement at the state government and local level, which provide solutions to the universal development barriers of elite control, low initial capacity, nascent institutions and less than adequate rule of law mechanisms.

India must use the Summit to share these nuggets of experience which are at the heart of building institutional resilience for sustainable development in poor countries.

1542 words

Some more onions please

Onions comprise less than 1% by value of India’s agricultural production. The average Indian consumes less than 800 grams of the stuff per month. Onion is a seasonal fruit. Supply traditionally dips during July to September as only the stored winter crop, harvested around March, is available for consumption.

No dearth of onions

onions

photo credit: http://www.washingtonpost.com

India is the second largest producer of onions after China. We produce more than we need and export around 10% of production unless weather events adversely impact the crop. This year unseasonal rain, during harvesting, damaged the winter crop.

But demand is inelastic

Demand is relatively inelastic. Why don’t consumers say no when prices increase? First, onions are to palates in the North, Central and Western parts of India, what fish is to Bengal and curry patta and coconut is to the South. Food, chips even Uttapams taste better with onions. Onion, like Garlic, is also valued for its therapeutic value. Second, onions give a big bang for the buck. An average family spends around Rs 100 per month on the stuff. If price doubles, the burden is irksome but not a killer. Just economizing on pre-paid phone calls can make up the difference. But onion is the key savory for low income households.

It’s the politics stupid!

The fuss about onions is more about politics than economics. The political footprint of onions was established in the 1980 elections. Mrs. Indira Gandhi, on her comeback trail, after her post-emergency election debacle, shrewdly used the price rise in onions to drive home how uncaring of the ordinary person and how incompetent, the government of then Prime Minister Chaudhary Charan Singh had become. This clicked. The Congress won 67% of the Lok Sabha seats. In 1998, a sharp price rise in onions, dethroned the BJP government of Chief Minister, Madanlal Khurana in Delhi thereby establishing a new metric for good governance – the price of onions.

Delhi CM Kejriwal fingers the BJP for price rise

Delhi Chief Minister, Arvind Kejriwal has fingered the Union government for failing to control hoarding and speculation leading to the current price rise. Delhi government flooded Delhi markets in mid-August with onions at Rs 30 per kg. It plans to hold the price line just below Rs 40 per kg through public sector retail supply versus a market retail price of Rs 70 to 80 per kg.

Union government on the back foot

But the Union government claims this is too little and too late. More nimble footwork by the state government could have prevented the steep rise in onion prices in Delhi. The Union government had made available a Price Stabilization Fund of Rs 500 crore in April 2015 which state governments could use by contributing an equal amount to buy onions for retail supply at reasonable rates.

On July 2, when wholesale prices were still around Rs 20 per kg in Lasalgaon, Maharashtra-India’s largest onion mandi, the Union government brought onion under the Essential Commodities Act, thereby enabling stock limits to be enforced on wholesale agencies. It also enforced a Minimum Export Price of Rs 30 per kg to discourage exports.

In todays’ intensely adversarial, no-holds-barred competitive politics no government can ignore a public challenge. The traditionally business friendly BJP government, at the center, is particular sensitive when “hoarders” are fingered for the price rise. Maharashtra, Madhya Pradesh, Gujarat, Haryana, Andhra Pradesh and Punjab- all BJP/allies governed states – account for more than 60% of national onion production.

Grow more onions, reduce trade margins & transaction costs

Per a NCAER 2014 paper selected productivity enhancement can boost roduction. Three big onion producing states- Maharashtra, MP and AP- account for 50% of production but produce less than 17 kilo gram per Hectare against 27 and 21.5 kg/Ha in Gujarat and Punjab respectively. Again all three are ruled by BJP/NDP. Increasing productivity in just these three states can boost production by 20% ensuring sustained exports and no domestic shortages. Doing more on reducing the trade margin (better storage, faster transportation, lower market fees) can also leave more of the money with farmers whilst lowering domestic prices.

Clearly the government needs an effective and transparent mechanism, which provides the right price signals and rationalizes expectations for both farmers and consumers.

Killing export or killing farmers

Increasing the Minimum Export Price, as the government has done again this year, is the standard response. But such intervention in the market, even as it helps consumers by diverting supply to the domestic market, robs farmers of the gains from export. It also disrupts any attempt to develop export markets. Similarly, importing onions to keep consumer price low reduces the incentives for farmers to grow onions.

The fall back-leaky public distribution

But both these options are less intrusive than using the public procurement and subsidized retail supply template used for food grain. Such publicly managed mechanisms are invariably highly inefficient and ineffective with cascading losses in procurement, storage, transportation, distribution and retail sale. Sometimes inept government managed imports flood the market after the seasonal supply dip has passed and just as the new crop arrives- with disastrous impact on farmers’ incomes.

Can private distribution agencies do better?

Why not appoint a private trading agency for marginal but politically sensitive food crops, mandated to import, export or arrange for domestic distribution to balance market led demand and supply and keeping retail prices within a pre-defined retail trading band, which meets the twin needs of both farmers and consumers. This is what the RBI does for our currency to avoid excessive volatility.

Private trading agencies would charge a hefty commission for their services but it would be considerably less than the cost of direct administrative action to purchase, stock and supply onions along the Food Corporation of India model.

Onion diplomacy anyone?

Alternatively, use onions as a vehicle for building bridges with our neighbours – particularly Pakistan, which loves the stuff almost as much Punjabis. Why not negotiate a stand- by, bilateral onion supply agreement to meet onion deficits in either country on preferential terms? A similar arrangement is possible with our larger northern neighbor- China whose onion productivity exceeds ours’s. Onions can add a savory flavor to Track 1.5 – B2B- diplomacy.

Say no to expensive onions

Isn’t it high time the government bit the political bullet and said no to being bullied about the price of onions? They are not a necessity, which the sovereign is obliged to supply. The Jains don’t even touch the stuff.

To show that onions are dispensable, the entire cabinet should voluntarily say no to fresh onions during the lean period. PM Modi could launch a social media campaign to entreat well-off folks to substitute fresh onions with dried ones or switch to other seasonings, during the lean period. This can reduce demand and hence prices for those, to whom onions are the only savory they can afford other than salt and chilies.

The core of sustainable living is to adapt to what is seasonally available locally, rather than store, pack, can or transport food compulsively to cater to a menu plan made universally available but at a high cost to the environment.

Politics trumps economics hands down

But the catch is that Bihar is a big consumer of onions. People are unlikely to be amused if they can’t get their daily fix of onion, before they go to vote in November. This is one election the BJP needs to win. Visible, strong, centrally managed administrative action to lower retail prices is therefore likely to win over better options – after all the metric of good governance has to be met.

Adapted from the authors article in Asian Age August 31, 2015

BJP, take five!

BJP

(photo credit: archives.financialexpress.com)

Delhi Assembly election 2015 is beginning to resemble a Greek tragedy for the Bharatiya Janata Party. What a change from the national elections in May 2014 when the BJP shone in comparison to the inept Congress Party. The motley crew of small regional or local parties (like the Aam Aadmi Party) also could not measure up to the exhilaration created by Prime Minister Narendra Modi who seemed capable of moving the nation, if not the Earth itself, so long as he was given a long enough lever to do so. The people responded positively in ample measure.

But charismatic, centralised leadership, like Mr Modi’s today and Mrs Indira Gandhi’s earlier, whilst a huge advantage in national elections, cannot single handedly carry a local election. Delhi is likely to make this point to leaders yet again.

It is highly unlikely that the BJP will get a majority when the votes are counted on February 10, 2015.

Why did the BJP juggernaut fail in Delhi? Here are five reasons, which are also lessons for the future:

First, there is no substitute for an empowered, decentralised leadership in state-level elections. National parties are, by their very nature, highly centralised. This is why their only option is continuous micro-management by a central election committee. In the instant case of the BJP in Delhi, this was left till too late. The media blitz, the frenetic campaigning, the Cabinet ministers unleashed in end January to make up for inept local leadership, all reinforced the general impression of panic at the BJP high table and a crass attempt at wooing the voter purely for electoral gain.

Second, never underestimate your opponent. The BJP, which has a very thin leadership, got completely engrossed in its grand project of governing India and forgot that local votes have to won locally. The fact that the BJP won all the Lok Sabha seats in Delhi by hanging onto Mr Modi’s coat tails should not have induced the lethargy it did.

In comparison, Arvind Kejriwal never let his guard down. He also had the advantage that the AAP got purged of interlopers, self-servers and free-lunchers; all of whom left it when its prospects seemed dim, post May 2014 debacle in the Lok Sabha elections.

Lean and hungry, core AAP supporters kept up the leg work amongst the voters.  They refined their agenda to suit the Muslims, Christians and disenchanted Congress supporters and carried their message door to door. India loves a fakir (ascetic) and Muffler King Kejriwal resembles one, even from the tinted window of his new Toyota Innova.

Third, performance matters. The BJP’s biggest handicap in Delhi is the non-performance of the Union Territory’s three municipal corporations ruled by it. These entities are dens of corruption and completely erode the national image of the BJP as being relatively above corruption. Prime Minister Modi came to power on the performance plank. But the sordid reality in these three local bodies did not change, not even in the last nine months of direct management by the Union government, significantly diluting the BJP promise of good governance.

Fourth, stopping petty corruption yields high dividends. The instant “governance reform”, to the relief of Delhi’s “underbelly” (street hawkers, small shopkeepers, auto drivers, casual workers, petty contractors), during the 49 days of the AAP government meant the complete stoppage of harassment by the police and municipal corporations. Once Mr Kejriwal resigned and governance devolved upwards to the Union government, petty corruption returned in full force. This reinforces the impression that Mr Modi’s extraordinary executive capacity and expansive aspirations for India are not reflected in the rest of the leadership of the BJP.

In comparison, the AAP got “tempered” in defeat. They humbly accept that they erred in resigning. They appear more politically savvy. They kept up their strategy of ground-level contact and are hungry for power. The belief is strong that an AAP government will enforce “freedom from petty corruption”.

Fifth, Delhi is a city of “winners” and winners do not take kindly to subaltern rule. Delhi has the highest per capita income in the country. Its public services are both highly subsidised and of superior quality than elsewhere. It is not surprising, therefore, that it has been a “destination city” for the last two decades. Delhi comprises people who have self-selected themselves as “winners”: by entering government service through an exactingly competitive process; migrating from the surrounding areas with “fire in their belly” to earn a better life and small and medium scale business people in tourism, hospitality, IT and exports. These are highly entrepreneurial people and expect to see the same quality in their leader.

Mumbai is no different. Maharashtra’s chief minister Devendra Fadnavis is so conscious of his relative youth (he is 44) and inexperience that he takes every opportunity to dispel the notion that he is just a shoo-in of Prime Minister Modis. He needs to do that if he is to govern the proud Maharashtrians credibly.

In Kiran Bedi, the BJP had an independent, high profile, outspoken candidate for chief minister. But she was muzzled and has looked progressively more forlorn since her nomination on January 15. Gone is the assertive confidence. The Bedi baan (arrow) has been tamed into a submissive, humble “subaltern”, basking only in the reflected glory of the Prime Minister. Not quite what she has been thus far.

In the change from being a leader to becoming a dutiful subordinate, Ms Bedi lost her edge to inspire. She now closely resembles any of the many “subaltern” leaders of the Congress, none of whom are encouraged to have an identity larger than the party. She is likely to suffer the same fate. She will have to wait for the tide to raise the BJP boat again before she can have a go at political power, most likely at the national level.

Finally, is the BJP’s likely poor show in Delhi a harbinger of what will happen in Bihar? Nitesh Kumar’s Janata Dal (U) would do well to bear in mind the lessons from Delhi’s elections.

The BJP is today India’s only real national party. Fighting the “Gir Lion” needs more than development statistics and caste calculations. Time to put the JD(U) boots on the ground to5work.

Reposted from the Asian Age February 6, 2014 <http://www.asianage.com/columnists/bjp-take-five-497&gt;

Why the BJP will lose- Delhi State elections 2015

sadhu

(photo credit: freepik.com)

There are three reasons why the AAP shall succeed in holding off a BJP government in Delhi.

BICKERING IN THE DELHI BJP

First, the debilitated state of the Delhi BJP unit for which the malfunctioning mike at PM Modi’s election rally on January 10, 2014 was an apt metaphor. PM Modi or his alter ego Amit Shah have not had the mind space to redress what ails it: intra-fighting, lackluster leadership and just sheer inefficiency. These short-comings do not go unnoticed by the demanding and discerning BJP supporters in Delhi. They showed how lukewarm they were during PM Modi’s recent 10th January election rally in sharp contrast to the upbeat mood, way back in March 2014, when Modi first rode into Delhi as the BJPs PM candidate.

In contrast Kejriwal and his team are a chastened lot- apologetic about their earlier blunders; better honed for politics; eager to please and reach out to Delhi voters with a campaign strategy of individualized and personal interaction and long term relationship building which appeals instantly. With the Congress in retreat and tacitly backing AAP-their ideological ally- an AAP surge is certain.

SAFFRON SELF GOAL

Second, the aggressive Hindutva campaign and the indiscipline of the saffron clad BJP ranks, who frankly sound like they belong in the 18th century, with their calls for increasing the production of Hindu babies; a return to the “traditional” subservient role of women in Hindu families and the obsession with religion. India is a religious country and most Indians believe in God and practice a faith. But we do not want to impose our faith on others. Nor do we want others to impose theirs on us. Mutual respect with complete freedom of choice for believers is the Indian social mantra of long standing. All faiths proselytize. But it does not have to be done in a grandstanding and confrontationist manner designed to make headline news. True and efficient Missionaries do not try and get brownie points by advertising what they do.

Departing from the development script immediately risks losing the minority- read Muslim 12% and Christian 1%- vote entirely and alienating intellectuals, secularists and educated, aspirational women and a large segment of the upwardly mobile youth. This is the “self-goal” that the saffron clad leaders of the BJP have scored.

Some also read into this irrational indiscipline of the saffron clad crowd, the invisible hand of the wise men in Nagpur- the RSS.  PM Modi is very much his own man and not the typical RSS acolyte who will allow fuzzy theology to trump real achievements or threaten medium-term National objectives. His agenda is clearly development and this is what got him votes in the 2014 national agenda. He has gone from strength to strength and in the space of a mere one year, has become the sole voice of the BJP/RSS. Nagpur could not have liked that.

More importantly, those, over whose heads PM Modi elevated himself, have an axe to grind and an incentive to undermine him. Ensuring the BJP loses the Delhi poll aligns with this perverse objective.

MISALIGNED AGENDA

Third, the BJP has not reduced its image handicap of being perceived as the party of the rich. The erstwhile refuge of the poor-the Congress- has slipped into oblivion and that mantle has squarely been grabbed by Kejriwal. But it is not just a matter of perception.

The poor-the foot path vendor, small shop keepers, “auto” drivers, retired folk and Dalits (25% population) remember with nostalgia, the short reign of Kejriwal when he cracked down on the widespread petty corruption at the public interface level. In contrast the over 200 days of indirect governance by the BJP Union Government has seen an upsurge in petty corruption and disregard for the poor and the powerless in the Police, the Public Service Departments and the Municipal Corporation.

WHY SHOULD BJP CARE?

How big a blow will it be for the BJP to lose Delhi? Far from bemoaning this outcome the BJP should want to lose this election. There are three reasons for this contrarian view.

First, AAP is likely, at the very least, to be the main and significant opposition. The BJP will be hard put to keep up with the forensic oversight the AAP would unleash on the functioning of a BJP government in Delhi unless the Delhi unit is completely revamped. There is little chance of this happening since too much political capital needs to be invested for this with meagre political returns. This helplessness is best demonstrated by the inability of the BJP to reform the three Municipal Corporations it controls in Delhi. Hence the BJP has very little upside to lose in Delhi.

Second, an AAP government is likely to have the very same limitations it had when it last came to power; an uncooperative National Government controlling both the Police and Urban Development. Delhi is thirsting for more water but with a BJP government in Haryana (the source of additional supply) and a BJP National Government, an AAP government in Delhi will get no help in getting additional supplies. This indicates an AAP government is likely to underperform versus people’s expectations. So best to give them a long rope with which to hang themselves conclusively.

Third, PM Modi’s “A” team (Arun Jaitley-FM and Rajnath Singh-Home Minister) is getting awfully stretched. Big political battles are around the corner; Bihar end 2015 and UP a year later. There is also the job of getting on with routine governance; the nuts and bolts of managing the pipes that deliver public interest outcomes like investment; growth and jobs. Managing Delhi is a distraction the BJP could do without.

Of course the BJP does not have it in its DNA to take the low profile, strategic, sustainable path. Their forte is the “shock and awe” tactic. The focus is very much on glossy, big ticket items: grand new schemes and projects; a “strong Rupee; soaring stock markets; clever IT apps; outstanding oratory and a one-headline-a-day frenetic outreach schedule.

Time for the BJP to do a huddle and think its Delhi election strategy through. Having recently won the war (National Elections), losing a skirmish (Delhi) is ok if it results in winning the battle (Bihar & UP) to follow.

PM Modi “let it be”

mother mary

PM Modi should consider listening to the “words of wisdom” in the famous 1970 Beatles hit –“Let it be”.

Of course in this cruel results centric world of ours, only those who get going fast and hard survive. But there are virtues also to sometimes take a call and just let things be.

Take for instance the manner in which BJP is keeping up the electoral rhetoric. Amit Shah the BJP President is everywhere exhorting voters in Bengali and Tamil to vote BJP. The adoption of “shock and awe” tactics- the use of such overpowering force that it leaves the enemy convinced that defeat is certain and thereby demoralizes them- is useful especially since the BJP is adept at using technology and has “Sangh boots” on the ground to realize this tactic in real life. Such tactics may work, but not against an extremely well organized and determined enemy- like the Afghans or Kejriwal.

In fact Kejriwal would welcome the adoption of the tactic in Delhi to magnify his underdog status and “David versus Goliath” effect. Ironically, in Delhi the BJP is painting Kejriwal as the “shock and awe” man with an Rs 100 crore election budget. Be that as it may but Kejriwal’s electoral base amongst the poor and the Muslims seems intact and he will give the BJP a rum fight.

The real question, is should PM Modi bother about Kejriwal? Some fights are best lost. After all India would lose its democratic plurality if every Indian state government from Kashmir to Kanyakumari became saffron-the BJP colours.

A ceaseless election rhetoric also has the downside that it does not allow the adversarial environment to cool down for the business of governance to commence. This the BJP can ill afford since it has built its election agenda around performance and shall be judged accordingly.

If Parliament cannot function harmoniously; if state governments get deadlocked in confrontation with the center, the development agenda, the BJP so desperately needs to implement, will remain just good intentions and plans.

The dilemma confronting the PM is starkly outlined by the Mid Term Economic Analysis 2014-15, the first document authored by the new Economics team in the Ministry of Finance, headed by Arvind Subramanian.

The Analysis notes that all through the period 2007 to 2010 it is private investment which led growth. It acknowledges that private investment has dried up. Corporates are deep in debt- partly due to their own greed in lapping up cheap debt because all through this period, inflation rates exceeded interest rates making it a no brainer to access debt- but also because investments have not resulted in revenues and remain locked in incomplete projects bedeviled by land unavailability; fuel shortages; contractual disputes; scams; and hold up in environmental approvals.

Rapid institutional reform (the underpinnings of good governance) could attract private investment for growth but the Analysis is starkly honest and pessimistic about the possibility of institutional reforms in the near term.  Apparently the PPP model is “broken” and cannot be fixed in the near term. Ergo the only available, albeit second best option, is to pump up public investment to compensate and hope to kick start private investments.

The efficacy of a public finance led growth option is not the topic of this post. The dangers are well known. No amount of public finance can fix a “broken” system. The more we rely on public finance led investment; national champions and a necessarily interventionist government; the deeper we slide into the morass of mega scams; gold plated projects; monopolies; tariff walls to “nurture” the consequential white elephants built using public finance and a further erosion of state credibility. This is exactly what the opposition wants to happen, so PM Modi should beware.

Political nirvana lies in sticking to the path the PM propounded when the country voted for him.

First, work doggedly to reform institutions in the near term. The near term is not as near as the next budget in February 2015, it is till end 2015 by when election fever will grip Bihar and then Uttar Pradesh. This can be done by building a team of selected state governments, the higher judiciary, Parliament and the trade unions all working to a minimalist institutional reform plan, which stops at causing unbearable (and uncompensated) pain to any one actor. That is the essence of democracy.

Second, PM Modi should rise above the metric of stock market numbers. What matters to him is an improvement in the lives of the average voter.  These are not people who live or die by what is happening on Dalal Street. Stick to the “micro economic” problem of making their lives better and here we have a problem. The ongoing deflation (reduction) in rural wages, as the Analysis maps, is not a desirable outcome for the poor, especially in an environment in which government servants are 100% inflation indexed.

But above all the PM has a political choice to make. Is it better for the BJP to continue to hog headlines via an adversarial electoral agenda or reserve the “shock and awe” effect for later in 2015 when preparations for Bihar and then Uttar Pradesh elections kick-in?

He would be well advised, in these troubled times, to “listen to Mother Mary and let it be”.

(This blog is dedicated to my Grand Nephew Angad Ahluwalia, age 6, whose favourite song is “Let it Be” and whose current ambition is to be a Lead Guitarist in a band.)

Alternative governance systems

We subscribe to the myth of complete symmetry in governance systems across India. The British, Sardar Patel and todays “eliterati” believe this is a good thing leading to uniformity in development opportunities, thought and circumstance. The unpleasant fact is that this not a good model for a country the plurality and size of India. Unity yes but only through diversity. Till now the “diversity” permitted to us by the State has been of language, religion, culture and caste. Sardar Patel’s view of a “steel frame” and common governance systems, as a necessary skeleton for diversity is no longer critical. The Durga Shakti case is yet another illustration of the potential for conflict with overlapping functions between the center and the state. Delhi simply does too much and often it meddles in a biased manner…. turning a blind eye to the misdemenours of its own party at the state level. Delhi needs to give up power and responsibility to the state government, which must in turn devolve powers and finance to block and village panchayats. The central government must (a) devolve more finances to states for developing their own schemes and priorities (b) merge the IAS, IPS and Indian Forest Service, since they are no longer needed to “bind” the country together, with the parallel cadres in each state, We have other and better  “binders” in place. The glue for making India a “sticky” concept is the political parties; the private sector and empowered citizens. All these drivers of unity are already kicking in. Many may apprehend that the withdrawal of central remote management of the state government will mean more corruption and mismanagement in the states. This is a myth. Through all the 20 years of Lalau’s rule the “bureaucratic steel frame”  could do nothing to blunt his destructive disruption of institutions, the economy and the rule of law. The long periods of left rule in West Bengal and Kerala did not result in corruption or poor management. Better then to let the states manage their matters in their own way. Devolve all funds to them except the 40% needed for defense and diplomacy; federal security; fiscal management; financial sector regulation; network backbone development (grid connectivity; inter operability in telecom; rail track development and management; civil aviation facility regulation; interstate roads etc); space and atomic energy.  Currently the central government keeps 70% and devolves the rest to states. It is moot whether inequality across states would increase, beyond what it already is today (per capita income in Bihar is less than 25% of Maharashtra and Harayana), if this ratio is reversed.  Higher fiscal resources for state governments could lead to better cash flow for projects and higher growth and better social development, aligned to the needs of the states. More importantly, the discretion with Delhi to bend finance to politics will diminish and states will be responsible for what they decide. China devolves around 75% of its central revenue collection to states. Of course with the Party in control everywhere it does not need to play fiscal politics, in the manner that Delhi does, to remain relevant. Also China is not as plural as India. Admittedly these differences are real but more than six decades after independence the only sustainable way to hang together is to acknowledge diversity and cater to it, rather than continue with the tired template of  uniform governance systems for development.

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