governance, political economy, institutional development and economic regulation

Posts tagged ‘good governance’

Dirty money: Joining the dots

Which of us does not enjoy pulling down the high and mighty? And the thrill is even sharper if these are people who may have breached laws whilst rising to dizzy heights. And so it was with the recent Panama Papers leak which opens a window into the morbid financial gymnastics of the amoral, global elite. There are five hundred Indians also in the list. But no “A” team players have yet been disclosed. Of course there is considerable overlay between unaccounted money and simply “smart” money which is avoiding not evading tax- the former is illegal but the latter – well it is just good financial management. The Panama data leak does not sift out the latter.

The scale of dirty money

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photo credit: gizmodo.com

Global Financial Integrity (GFI) – a United States-based entity, which tracks and campaigns against black money – ranks India fourth out of 149 developing countries, after China, Russia and Mexico, on the basis of the volume of illicit outflows. But this metric is fuzzy. It relates outflows to the size of individual economies and consequently fails to reflect the severity of the problem in each country.

Conflating the GFI data on illicit flows with the World Bank data on GDP at current market prices results in a more useful metric. The average annual illicit outflows as a proportion of GDP for India, according to this metric, was 2.7 per cent over the period 2004 to 2013. Within the BRICS countries cluster, South Africa was at a whopping 23 per cent, followed by Russia at 5.6 per cent. Brazil was the lowest at 0.9 per cent, with China the second lowest at 1.8 per cent.

Out of the other large developing economies, illicit outflows out of Malaysia stood at a worrisome 14.1 per cent of GDP, Thailand at 5 per cent, Mexico at 4.5 per cent, Nigeria at 4.1 per cent and Indonesia at 2.1 per cent. In South Asia, Bangladesh is the leader with illicit outflows at 4.2 per cent of GDP, followed by Nepal at 3.1 per cent and Pakistan at a low 0.1 per cent.

Dirty money links

So, how do illicit outflows, tax evasion, corruption and crime link up? Simply put illicit flows legitimize the proceeds of any of these activities. In the hawala transfer route, an individual or entity, resident in India, desiring to transfer dirty money overseas, makes a payment in cash in India to a hawala agent whilst a designated counter-party overseas gets paid in foreign exchange.

The source of the cash in India could be from income on which tax has not been paid or the proceeds of crime, including corruption. The foreign exchange overseas could be similarly sourced from corruption, crime or from Indians remitting money home (remittance of invisibles, including by overseas Indians of their earnings, was around $223 billion in 2013). Remittances through hawala get a better exchange rate than those via bank transfers. Foreign exchange overseas could also be the proceeds from under-invoicing Indian exports with part payment being made by the foreign importer to an overseas account related to the exporter.

Such illegal caches of foreign exchange overseas can be legitimated by bringing them back to India by over-invoicing Indian exports. Such funds can also be masked as foreign portfolio investments from foreign jurisdictions where obscuring the ownership of funds is a fine art, as in Panama. GFI estimates that under and over invoicing of trade flows accounts for 83 per cent of global illicit outflows. Usually a combination of several illicit transfer mechanisms may be used to obscure and mask the direction and ownership of the net flows.

The drivers of dirty money

Crime, corruption and the ability to avoid tax are all the outcome of poor governance aided by low levels of financial intermediation and digitization in the economy. Identifying the real ownership of bank transactions using biometric tracers, reducing cash transactions, embedded red flags and alerts which identify and monitor irrational transactions and sniff out a mismatch between income and consumption or income and savings, are standard tools for clamping down on the extent of black money. But we have started down this path only very recently.

Till the 1990s, when India had a chronically precarious balance of payments, the loss of foreign exchange through illicit transfers was a major concern. Today with foreign reserves at around one year of imports this is less so. But the loss of potential tax revenue hits us hard. Assume the value of tax lost on illicit outflows of $83 billion at a conservative 30 per cent or $24 billion per year. This equals around one-fourth of the average fiscal deficit during the period 2010 to 2013.

Lost tax is just one of the problems associated with dirty money. Other downsides are less tangible. Strong political and business interests get entrenched which obstruct enhanced transparency, the reduction of discretionary administrative powers and systematically subvert the formal governance systems and the informal norms which bind society.

Where this happens over a period of time, societal norms shift towards a new normal which actively subverts the rule of law. Prolonged conflict creates a similar loss of cultural and social capital. Government loses credibility as the provider of security and the arbiter of equity and fairness. Citizens look to informal structures like caste, clan or even professional alliances for social support.

Triangulating the evidence

Can we substantiate this link between poor governance and enhanced illicit outflows? The World Bank’s Worldwide Governance Indicators (WGI) provide a ready index which maps six drivers of good governance across multiple data sources. For our purposes we look at two of these – Rule of Law and Control of Corruption. A close and negative correspondence between illicit outflows and the country WGI score can validate both the WGI and the GFI methodologies. High illicit outflows should correspond with a low WGI score.

The WGI ranks Brazil, Malaysia, South Africa and Thailand high on both upholding the rule of law and exercising control of corruption. India edges in only into the Rule of Law category in this ranking. But good performance in the WGI has not helped Malaysia, South Africa and Thailand curb illicit flows which are high, relative to GDP. In comparison, China and India with lower ratings in the WGI have far lower illicit outflows relative to GDP.

Similarly, Pakistan and Indonesia have minimal illicit outflows relative to GDP but score very low in the WGI index. The bottom line is that either the GFI assessments need to be improved or that good governance- at least as it is measured to day needs to be reviewed.

The trend going forward

GFI estimates that the aggregate outflow of illicit money for the set of 149 countries grew at 6.5 per cent per annum during the period 2004-2013 – more than double the rate of economic growth. This is worrisome because it illustrates a looser than desirable link between growth and tax revenues. If economic growth is leaky and does not boost tax revenues in developing countries, achieving social protection and human development targets can be severely compromised. Is India sliding down this slippery slope?

In India, illicit outflows more than doubled overnight from $29 billion in 2009 to $70 billion in 2010. During the period 2010 to 2013 – the latest year for which data is available – it averaged $83 billion per year or around 4 per cent of GDP. This period coincides with the second term of the United Progressive Alliance government, which was marked by serial scams in telecom and coal. But whilst it is tempting to deduce a causal relationship between the two, this is difficult to substantiate.

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Better tools can help

What we do know is that we need better tools to monitor, in real decision time, the origin, magnitude and direction of illicit outflows, which are a vital red flag for poor governance. Achieving this is closely linked to professionalizing the government and rapidly digitizing the economy and government processes. We are doing far more on the latter, than on the former. This could be a costly and careless error. Till advanced robotics and artificial intelligence kick in sometime around 2030, the effectiveness of government servants will continue to matter

Adapted from the authors article in Swarajyamag April 12, 2016  http://swarajyamag.com/economy/joining-the-dots-on-dirty-money-and-how-india-can-become-clean

India’s Urban Adolescence

jama masjid

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

First time visitors to India are usually taken aback by our degraded cities and the seeming public apathy to sewage and garbage competing for space with Bentleys and Porches-much like puberty when it is as important to hide the pimples as it is to dress smart.

Ed Glasser of Harvard University, speaking at the LSE-NIUA Urban Age Conference” in New Delhi today illustrates the dire situation by using the metric of vertical plus horizontal living space available per person.  India’s low rise cities squeeze people much closer together-often to suffocatingly high levels- as compared to high rise cities with a similar spatial (horizontal) density.

The perplexingly happy co-existence of some of the finest hotels and monuments in the World, with the largest slum populations has multiple explanations. Some trace institutionalized urban neglect to the Mahatma’s vision of a happy India as comprising only self-sufficient villages with cities as necessary evils.

Others point to the stratified, Hindu, caste system as the reason, why spotlessly clean households and well-scrubbed people have no qualms about chucking their filth into the streets. The central concept of “ritual pollution” is a purely personal one. Public filth is a public issue and it is enough to be personally clean.

Urban government “groupies” identify the extended atrophy of municipal government in independent India, as the key reason for listless municipal governance today.

Possibly there is a little bit of truth in all these explanations and some more. But none of them are helpful in solving the problem.

The Mahatma and his thoughts have long been relegated to the realm of our “glorious past” with little salience in a rapidly growing, open economy. Spinning one’s own yarn and milking one’s own goat, even if one is a rocket scientist, negates the central concept of “comparative advantage” on which international trade is based.

The caste system has not stopped us from sending a low-cost space mission to Mars; from becoming the Information Technology back office for the West; from producing more films in Bollywood than another country in the World and becoming the most successful, largest and most diversified democracy. Blaming urban decay on caste is just plain lazy thinking.

As outdated, are those who mourn the relatively light touch of municipal government in India and the over whelming influence of higher levels of government at the Provincial and National levels.

T.S. Panwar, Deputy Mayor of Shimla at the same conference illustrated the helplessness of municipal government by calling himself the “garbage man” since that is the only unique function his municipality could legitimately claim. Of course, one may well ask why small, municipal governments need autonomy beyond the functions best performed at the local levels, like garbage management, street lighting and the maintenance of demographic records.

In this vein Harvard University Professor, Neil Brenner posits that municipal autonomy, as an explanatory variable for citizen satisfaction, in an increasingly networked world is pretty meaningless. When even nations face the prospect of losing sovereignty in monetary policy; resource use and trade policy, it is too late to target greater devolution of powers to municipalities, as a driver of high urban growth.

India’s ambition for urban led growth has to be based on the consensual transfer of resources which fuel growth, from their existing owners, to cities. Far from devolving powers downwards this means looking upwards to supra-municipal jurisdictions where meaningful negotiations can be done between rural constituencies, like sugar cane and rice farmers, who use water wastefully today and cities who should be willing to pay for incremental water. Similarly cities need to negotiate with the owners of agricultural land to buy land for growth at market rates. Meanwhile, city dwellers have to boost city revenues by paying higher taxes and “user charges” for the privilege of staying in a high growth area where jobs are plentiful and the quality of life indicators higher.

Gerald Frug of Harvard University has a similar vision in which metropolitan conclaves, comprising representatives of all municipalities, decide how people should live in cities and are empowered by their collective size and reach to negotiate with National and Provincial governments. Richard Sennet of the LSE and NYU advises the just starting 100 Smart City program, to be careful to avoid creating “stranded assets” financed by public funds, as in China. The down side of fast, lumpy investments is that what once looked like a good idea very quickly gets sidelined by technological change; shifts in business cycles and evolving trade regimes.

How can India grow beyond its urban adolescence? Some lessons are relevant.

First, for all large projects ensure that public money only leverages private investment rather than being the sole source of funding. Public resource allocation methodologies are famously inefficient. The willingness of private entrepreneurs to risk their capital by co-funding public projects becomes a plausible proxy for sound investment decisions.

Second, whilst Public Private Partnerships are consequently the chosen instrumentality for lumpy investments, both the benefits and the risks must be equitably shared between the public and the entrepreneur. Arun Nanda of Mahindra Lifespace hits the nail on the head, by stipulating that successful Public Private Partnerships never forget to ensure quantum benefits for the Community they dispossess of resources.

Third, whilst it is true that there can be no governance without an effective government, it is unwise to equate decisive governments with good governance. Good governance implies embedded systems for “direct participation” by all stakeholders to hold government accountable.

Within the good governance eco-system, the role of political parties is the least discussed and is the most deficient. China’s rapid urban development is as much due to single party rule as it is to inner party discipline. Democratic plurality is meaningless without well administered political parties which reflect democratic ideals and public accountability in their internal processes.

The helplessness of even well-meaning politicians, lower down the food chain, in the face of low traction with party bosses to solve their local problems, often reflects the top-down, stratified architecture of political parties, where “lateral entry” at the top level is the norm and meritocratic selection from within party cadres an oddity. We need more efficient, vertically integrated and transparent party structures as part of good urban governance.

PM Modi fails first governance test

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Good intentions do not a good government make. As many as 8 out of 44 Modi ministers have serious criminal charges against them (Association for Democratic Reform report, May 27, 2014). The existing laws do not bar such citizens from either becoming MPs, or ministers thereafter. However, the test of a government committed to good governance is if they are bold enough to push the frontiers of public probity. This opportunity has been missed.

Admittedly, our judicial system does not help with its in-built opportunities for process delay. Our law holds that no one is guilty unless convicted. This is based on the principle of Natural Justice which allows an accused to plead her case before conviction. It is a much needed protection for innocent victims, wrongly accused; sloppily investigated against by the police; complicitly prosecuted by our civil prosecution architecture and usually, wilfully charged by the lower judiciary. Politicians too, can be victims of such a system especially when they are out of power, as BJP and supporters were for long.

However, there is a difference between legal eligibility to be an MP and the minimum requirements to be a minister. An MP becomes a minister only if the PM selects her. Modi, who enjoys a gargantuan majority in the Lok Sabha, was under no compulsion to elevate MPs, charged with serious criminal offences, to ministership.

Consider the degrees of political freedom available to him today. He has the fire power to keep Advani hanging. He has ignored the claims of Murli Manohar Joshi- a powerful BJP satrap. He only needs to pay lip service to the BJP party President, who may soon be his acolyte: Amit Shah. This illustrates his leverage with the party and the RSS.

It is unconscionable, in this context, for him to have made the eight MPs charged with serious crimes into ministers. Imagine the shock to his good governance image if any of these is convicted and then, by law, has to resign. Nothing illegal here. But good governance is mostly about the ability to claim the high moral ground, as Modi has done and then walk the talk. He has not done so.

Viewed in the larger context of distancing himself from Godhra and breaking fresh ground for rapprochement with the minorities, he has done himself a disservice by appointing as minister, an MP, who is associated with the sorry episode of the Muzzafarnagar hate crimes of 2014.  The MP does not have a serious criminal charge against him. But perception matters. The MP, who has little else to commend himself, seems to have been “rewarded” for being the BJP front man in Muzzafarnagar.

All the eight ministers have obviously been put in place with an eye on forthcoming state elections; Ram Vilas Paswan (the Dalit face of the NDA in Bihar); Upendra Kushwaha, a BJP ally from Bihar; Uma Bharti (the Hindutva face of the BJP in UP); Maneka Gandhi the Punjabi face of the BJP in UP Terai; Vijay Kumar Singh from Ghaziabad, UP; Nitin Gadkari and Gopinath Munde from Maharshtra and Dr. Harsh Vardhan in Delhi.

Pursuing good governance is like being on an escalator. There is no escape from constantly elevating yourself and pushing the envelope. Modi elected to ride the good governance escalator. Now, there is no escape from being judged on the elevated standards he has set from himself.

Admittedly, no previous government, in the recent past, has sacrificed the political returns from rewarding politically convenient appointments but remaining committed to creating a political environment for good governance. But then, we did not vote for Modi to get more of the same. We voted for Modi because we thought he was different.

Earlier, in 2004 we voted for Manmohan Singh because we thought he was different. We were wrong in his case.

But please Mr. PM, do not prove us and yourself, wrong. There is more riding on you and your government, than the blossoming of saffron pan-India. Your decade as PM can only be useful if you leave behind a political system which respects and uphold, by personal example, the Rule of Law and the principles of good governance.

Every ministerial appointment made on a purely political calculus sacrifices merit, fair play, efficiency, effectiveness and sustainability. These are preconditions for inclusive growth.

(Photo credit: dailymail.co.uk)

Modi governance milestone 1: No “tainted” MP to be a Minister

 

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The Modi led “near national” government has been voted in on the basis of its perceived capacity for good governance. Good governance is an amorphous concept. But one essential component is access to timely justice. Punishing people for the crimes they commit, at the earliest, through due process, becomes a key measure to make commitment to the Rule of Law credible.

India is a terrible laggard in this regard. Criminal cases drag on for years with the perpetrators, if they are rich, either out on bail or ensconced in jail with all comforts and privileges.

The Association of Democratic Reforms (ADR) has done stellar work in informing citizens about the criminality of Lok Sabha candidates, using the information submitted by the candidates themselves at the time of filing their nominations.  It is tragic that whilst the Election Commission does not highlight such information for the public, it is left to NGOs to cull and present it to citizens.

ADR has reported on 8163 out of the 8236 candidates who contested the 2014 elections. Of these 889 declared that they had serious criminal cases pending against them, including murder, attempt to murder, assault on women and hate crimes. Sadly the proportion of such candidates increased from 8% in 2009 to 11% in 2014.

21% of the candidates the Bharatiya Janta Party (BJP) put up, belong to this category. Nine parties fielded a lower proportion of “tainted” candidates: Amma’s AIDMK (8%), Didi’s Trinamool Congress (10%), Aam Admi Party (10%), Biju Janta Dal (10%), CPI (12%), Congress (13%), DMK (14%), Bhenji’s BSP (15%) and the CPI (M) (16%)

ADR has yet to report on how many “tainted” candidates have won from each party. But 21% of the 521 studied by ADR had serious criminal cases against them as compared to 15% in 2009. Unless candidates are convicted of serious criminal crimes, they remain eligible for becoming MPs. There is little Modi can do about that till the law is changed.

But there is one major way in which Modi can herald the era of good governance in India to which he and his party are committed. He can declare that no BJP MP shall be made a minister if there is a serious criminal case pending against her. The data is a bit fuzzy here. What is a criminal case? Is it the filing of a First Information Report; completion of investigation report by the police; presentation of charge sheet by the prosecution in court or the framing of charges by the court? But this is a technicality and can be used to massage the data.

Good governance is as much about changing the reality as it about shaping perception. Modi is the proclaimed master of perception and should rightly be concerned that his government starts off on the right foot.  

The World Justice Project which tracks the health of the Rule of Law worldwide, in its Index 2014, ranks the criminal justice system in India at 48 out of 99 countries; better than China (rank 51) or Malaysia (rank 53) but lower than Brazil (rank 37) or Sri Lanka (rank 38). More importantly on the factor of “timeliness and effectiveness” India does worse that all these countries, except Brazil.

Improving the criminal justice system, to developed country standards, is a time consuming effort involving change in practices; incentives for judges to conclude cases; better investigation practices and capacity and more motivated prosecution. These are deep procedural and bureaucratic reforms which should be started, but are unlikely to kick in with results by 2019.

In the meantime, the problem of sitting MPs with unresolved criminal cases needs to be deal with pronto if Modi’s promise of good governance is to be implemented. Modi and his team are not one to let the grass grow under their feet.  So here are three initiatives to deal with the problem:

  1. An all-party committee of the Lok Sabha should review the cases of all MPs with pending criminal cases to identify those with serious charges against them.
  2. Modi to request the new Chief Justice of India to constitute a fast track court specially mandated to decide all such cases by June 2015.  
  3. In the meantime, all MPs with serious criminal cases against them to be embargoed from getting Ministerial berths in his government.

The electorate dealt harshly, in 2014, with parties which claim to align with good governance norms but fail to take effective action, when mandated to rule. Across India, the electorate has rewarded parties with strong leaders and a record of effective governance (BJP, BJD, AIDMK, TMC) and punished those which are ideological without being pragmatic (AAP, CPM) or enabled but self-serving (Congress and Alkali Dal). This is not the moment to disappoint them with false integrity.

Making public commitments on the manner in which Ministers are going to be appointed is unprecedented. It takes away some discretion from the PM. But good governance is also about tying your hands publicly to do the right thing and burning your bridges, lest one is tempted to retreat into half-truths. Best to start now.    

 

The New Politicians

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The citizens of Delhi are a spoilt lot. They pay the least in taxes relative to income (the highest in India and three times the average national income) and get the maximum subsidies and facilities from the government. The expenditure for the current financial year 2013-14 is INR 24,000 per person, the bulk of which is grants received from the kind central government. It seems that even this is not enough to get re-elected. In this respect Delhi illustrates the demands that modern democracy imposes on politicians who are forced to desperately try riding the never ending escalator of expectations. Five lessons emerge.

First, there are limits to pork barrel politics, the staple of the “traditional” parties. This limit is quickly reached as population growth outstrips the increase in resources. Population grew at around 3.5% per annum since 1990 (with growth slowing in the decade since 2001), primarily through in-migration of the poor and marginalized from the hinterland. In comparison, the additional public resources required to raise the quality of life of the immigrants (infrastructure, basic services and jobs) are far more than the taxes in-migrants contribute. Under conditions of fiscal stress, the level of pork available stagnates or declines and people have to pay for improved public services.

Second, expectations always outstrip the reality unless people are made to recognize that there is a cost to better services. Someone has to pay for 24X7 good quality water and power supply, efficient public transport, roads and drains. In this context, the new electoral promises of sharply reducing the cost of power supply or a supply of free water, in limited volume, are highly misleading and irresponsible. A subsidy driven world is just not sustainable.

Third, whilst the leitmotif of the day is corruption-free politics, the real underlying sentiment is for better service delivery. International experience suggests that diluting corruption is a complex task which has much to do with social norms and capital. Better and transparent public management systems also help by reducing babu discretion and limiting the “corruption envelope”. But the world is littered with state-of-the-art public management systems (usually funded by obliging international donors) with no perceptible dent on corruption. It is only if a corrupt person becomes socially tainted that disincentives for corruption, kick in. Social sanctions for the corrupt are noticeably lacking in the National Capital Region, which has prospered, over the last two decades, on the back of cheap loan finance, speculation in real estate and massive public spending, all of which are riddled with corruption.

Delhi voted for the unknown Aam Admi Party (AAP) candidates, purely because they were not party to the small club of “regular” politicians who have bonded, across party lines, in the heady miasma of the power elite (politicians, bureaucrats, journalists, businessmen, publicists and sadhwis) over the last six decades.  

Fourth, Delhi rejected the role of political parties in democracy, by voting significantly for the unknown AAP candidates. This calls in question the relevance of this model of democracy, based on political parties, as an instrument of reform. Political parties serve the purpose of aggregating common interests and political power. The problem is that the process of aggregation itself breeds the rot of gradually losing touch with who is the boss. Anna was right in warning against the debilitating dangers of joining the political game.

Today, the AAP aims to play the role of a constructive opposition keeping the BJP on the straight and narrow path. This is a worthwhile, but narrow, parliamentary agenda but it fails to disrupt the political process, which created the “traditional” political party system, with all their ills.

A more fundamentally productive agenda would be to change the structure of politics in Delhi by pursuing the three principles of good governance: Transparency, Access to information and Participation. These principles need to be applied to (A) devolve powers to the level best suited to exercise them and to bring the decision making process closer to the people; (B) introduce third party monitoring of public expenditure and (C) implement a transparent compensation policy for Delhi State politicians and babus; provide a generous house rent allowance instead of government houses, which should be auctioned; provide a car and driver allowance instead of government cars; bind Ministers and Secretary level babus to publicly available annual and three year work agreements with specific targets.

AAP would waste this unique opportunity if it was to focus purely on a parliamentary agenda and abandon its tentative efforts at social transformation. Equity considerations indicate that per capita spending, across wards, should be mapped and disclosed. This is likely to reveal the massive skew in favour of the rich. Other developmental goals should be to (A) privatize water supply and sanitation with the intention of improving access and the quality of supply, including by levying user charges; (B) publish all public contracts; (C) rapidly expand public transport including by contracting-out road transport to private companies-the killer blue line services were a product of the structure of the contract rather than any lack of interest from the corporate private sector; (D) work with Haryana and UP to evolve a common, suitably heavy tax on the use of private vehicles, especially luxury cars.

Lastly, Delhi has voted unequivocally for more jobs. Whilst support from the AAP has come from a cross section of citizens, fed up with status quoist political parties, much of their appeal is to the poor and the unemployed. Poverty reduction is clearly less about providing subsidised food, fuel and water and more about providing productive jobs. In this the Delhi government is likely to be hamstrung by its fractured mandate but the first step must be to adopt a job creation strategy through a consultative process. 

Kejriwal and his colleagues have lived up to their promise to be “disruptive innovators” with the intention of shifting the existing political equilibrium to a higher level. They have done so by following the twin paths of Gandhi’s strategy of voluntarism led social mobilization and the change opportunities offered by parliamentary democracy. They must now work hard to avoid becoming “destructive” change agents.

Aside

Politics and theater

Parliament disgraced it self yet again. The statement of the PM on the economic situation was a welcome window into the minds of the policracy. Perhaps it is the Shatrughan or Babbar effect, but may of the honorable members believe that they magnify their own self image by copying a fiery, rightious Bachan, a braggart Sanjay Dutt or a stylishly, thughish Pran, If we wantd to see imitation actors we would watch movies instead. Pity none of them can dance though. It would have been good to see Manmohan deliver his economic sermon break dancing to a Hritesh number. The nearest any member comes to this is the redoubtable Rajiv Shukla who vitrually goes into an attarctive “wave” dance the minute the opposition shouts at the PM.

It was not clear what the government wanted to achieve yesterday. Statements made in the house are assurances of delivery (promises) which are monitored. No new promises were announced by the PM. He merely repeated what Chidambaram had already assured the house. Worse the manner in which he read the speech out had less credibility than the assured delivery style of the practised lawyer, Chidamram. The opposition oddly thought it necessary to shout down a “maun” PM. Possibly they have become so used to not hearing him at all, that that the merest squeak out of him is tantamount to an aggressive barrage.

Yes unbridled corruption is a mjor failing of the present government but that is the election plank of the Aam Admi party which is invisible in Parliament. Only those in power can be corrupt. The UPA is in. The BJP is out, so we can’t compare apples and oranges. Corrupt sons and sons in law are not a chink of the Congress alone.

I wish the opposition had cornered the PM on the three key constraints to unlocking growth and good governance. One is the recent sense of “entitlement” of the “policracy” to massive corruption. The potential and many would say the impunity, to be corrupt, erodes the possibility of shrinking Delhi in economic decision making and the transfer functions and finance to the States. On corruption it is only the record of the left parties which is relatively clean but unfortunately, unlike their brethern in China, they join the populist bandwagon here and shed crocodile tears for the poor, with little regard for the disastrous economic outcomes of populism. In fact the left is very much like our PM….honest but ineffective and the new India does not endorse that.

 Second, we need to correct  the extravagant spending on defence of around 20% of the budget. This is a major drag which comparative developing countries in East Asia (excluding China), Latin America and Africa do not face. Since the defence sector is notoriously non transparent, little is know of how much public finance leaks…..but the growing political clout of arms dealers makes it apparent that it is they, who are king makers and not the other way around.
 Third, the dynamic economic record of some state level leaders (Modi, Nitish, Patnaik etc) has a major medium term constraint. ALL of them follow the centralised Delhi model of not devolving functions and finance downwards,  to where the real action is, at the local level. That is the third quiet revolution still to happen in India but is completely ignored by all parties.
India does not lack economic or technical expertise in the public sector, skilled labour or private entrpreneurship. What we lack is a honest, formally endorsed leader at the national level. The best cooperatives, like Amul, grow because of honest, pragmatic and enigmatic leaders, like Kurien. If INFOSYS today needs to recall Murhty, to rescue it, shouldn’t India also reach back in time and get an oldie (albeit preferably, one without a child-in-waiting), who has the experience, the rectitude and the fire in the belly to lead? India is a young country but sometimes, it is only the exprienced who can deliver what the young want.

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