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Posts tagged ‘PM Modi. India’

NITI’s vision 2032 disappoints

NITI vision 2

NITI vision 2032 : foggy, disjointed & barely hanging together

Prime Minister Narendra Modi and the chief ministers of states spent most of Sunday deliberating over the plans and prospects for India in the next 15 years to 2031-32. The third governing council meeting of the Niti Aayog seems to have been an underwhelming affair, judging from the two presentations put up on its website. Why this listless thinking?

Great expectations

Three years ago, when the dowdy Planning Commission was transformed into a glitzy Niti Aayog, expectations were high that it would be the loci of innovation and cutting-edge analytics in public policy. The Planning Commission was merely an extended office of the Prime Minister. Chief ministers, whilst supposedly integral to the National Development Council (NDC), which the commission serviced, felt like interlopers rather than participating members. The flamboyant J. Jayalalithaa used the NDC forum like a television station — walking in to deliver her speech and then walking out. Others stoically suffered the process, making debating points, that no one heard.

New beginnings

Some of that has changed. Mr Modi has done away with the elevated podium of yesteryear for the PM and Union ministers. Now all are seated at the same level around a round table. Another first — the meeting was held at Rashtrapati Bhavan. Symbolic, as our head of state is not the PM, but the President, with whom the Union and state governments have an independent constitutional equation. In deference to the beacon ban, the long line of official cars streaming into the venue were minus their flashing red lights, thereby letting the tricolour atop Rashtrapati Bhavan take pride of place. On optics, the arrangements were perfect.

More optics than substance

The substance, however, seems not to have been as uplifting. Five examples will illustrate.

Lacks credibility

indian dream

A car for every household – is this the Indian dream?

First, a 15-year vision which is not nuanced enough to reconcile trade-offs lacks credibility. To aim to make India a prosperous economy by 2032 is a pie in the sky. India can, at best, and that too with enormous effort, go from being a lower middle-income country (per capita at current $1,600) to become a middle-income country (per capita current $4,800). A very long shot from being prosperous. The per capita income (at current US dollars) in Latin America and Caribbean today is $8,415, while in East Asia it’s at $9,512. There is no way we can catch up to even these levels by 2032. Consider also that the high growth rates required to make this jump could negatively impact equality. The international experience amply demonstrates that high levels of growth come with the risk of increasing inequality. There is not a whisper in the vision statement of how we propose to navigate the trade-off between growth and equality — the latter being part of the PM’s vision.

More of the same

brick stacks

Second, the Niti Aayog’s vision statement is backward looking. It ignores the dislocation caused by technological developments which technology leaders like the Chinese entrepreneur, Jack Ma have been warning against. NITI aims to make India a highly-educated country by 2032. Should we not be looking, instead, at becoming highly skilled? We are already battling progressive robotisation. By 2032, artificial intelligence would have squeezed jobs further in traditional sectors. New jobs, 10 million a year, which we require and still don’t have, are only likely in highly specialised areas — like space travel, frictionless transportation and psychological counselling — niches which are not easy to robotise, rather than general education which we value today. By 2032, just as plumbers, carpenters, masons and welders would be obsolete so would equity traders, bank clerks, low-level lawyers and IT workers. We will still need pure scientists, social scientists and engineers, but in limited numbers, We already produce 2 million of these every year. But very few are of cutting edge quality. Our challenge is to develop innovative minds with appropriate skills, not to educate 400 million of our under 18 years population to become “thinkers” – the bulk of the thinking will soon be done by machines. Humans will need the skills required to choose and make wise decisions, intermediate between humans machines and train other humans to work with machines. No sign of this transformation in the vision.

Not joined up – conflicting objectives

oil pollution

Third, the vision statement wishes India to become “energy abundant”. But being energy abundant is a retrograde desire tinged with the potential for waste. Energy abundance means energy prices tumbling, spurring even more per capita consumption of energy. Surely this is incompatible with the other objective of being “environmentally clean”? Are we really aiming to provide a car or a motorbike to each household, as the vision proclaims, or do we wish to make public transport the most convenient option? Should we not be allocating funds to become energy efficient rather than spending on acquiring or developing more energy resources? The hunger for energy abundance is a stale ambition.

Mushy & emotional, not pragmatic

Fourth, the Niti Aayog aims to make us a “globally influential nation”. How is one to go about this Dale Carnegie-type revamp? India has thumped the tables of the United Nations for over five decades. And yet, suddenly today, we are more influential globally than ever before because of our large, growing markets, relatively easy access for foreign capital and technology, facilitating internal institutional arrangements and stable polity. Influence is an outcome of domestic capacity, confidence and conviction. These 3C’s are the drivers we should be looking at. Best, like Arjun, to aim for the eye of the bird and not get distracted by the clouds floating around.

Process matters for cooperative federalism

Fifth, the Niti Aayog was constituted to showcase cooperative federalism and be the entry door for its implementation. But it remains poorly organised for living by this principle. Its staff should be deputed both by the Union government and directly by the state governments, much like multilateral entities operate. It must have a permanent secretary-level board to review and clear documents to be presented to the governing council, and provide a forum for discussion and implicit negotiations between officers from the Union and the states deputed to the Aayog. The governing council should structure meetings to provide for negotiations at the political level to evoke the spirit of cooperation and collaboration. Currently, the council functions more as a receptacle for the views of state governments and offers an opportunity for the Union government to tell states what it is doing, just like the Planning Commission used to do.

Put some flesh on the vision

famine

The vision unveiled, yesterday, is muddied by a vast array of disjointed initiatives, thereby reducing the clarity of purpose expected from such a document. Words matter and must be used selectively and deliberatively. Otherwise a vision is nothing but a laundry list of wishes. For years the World Bank “dreamt” about a world free of poverty. It now recognises that wishes need to disciplined to the takable actions to convert wishes to reality.

The public expects much, much more than old wine in new bottles from Mr Modi- especially over the next decade. He and the outstanding talent in the Aayog, must allocate time for thoughtful negotiations at multiple levels. There is no other way to make others — particularly the state governments — feel like valued members of the same Team India!

Adapted from the authors article in The Asian Age  April 25, 2017 http://www.asianage.com/opinion/oped/250417/niti-aayogs-vision-2032-disappoints.html

PM NITI 3 GC

 

Basic income transfer- Modi’s next big thing?

poor woman

Irrespective of its economic virtues, demonetisation — an aggressive, unprecedented initiative of Prime Minister Narendra Modi, brought rich dividends for the BJP in the Uttar Pradesh election. Above all, voters were impressed with his determination to punish those who have become fat on black money. That the move also “punished” those who had no black money — via extended inconvenience, loss of business or employment — was collateral damage.

An incredible 41 per cent of voters gave a thumping majority to the BJP, including possibly those who were collateral fodder or the target — proving, yet again, that in politics, good intentions trump technically appropriate action.

The next frontier

So what can the Prime Minister do next to shock and awe the Opposition and win minds and hearts across India? Elections loom in Karnataka in 2018, currently ruled by the Congress, and national general election is in 2019. The chosen programme must be elegant not clunky; effective not merely palliative; quickly deliverable and fiscally prudent.

The Union government currently uses clunky, partially- or fully-funded schemes, implemented by the state governments, to establish its human face. There were 1,500 such schemes, which the Modi government has pruned to around 657. Most are massively inefficient. Arvind Virmani, a former chief economic adviser, claims they follow the one-third rule. Only one-third for the targeted beneficiary, one-third for administrative expenditure and one-third for corruption.

Mind you, it is expensive to provide access to public services and goods even via a cash support mechanism. Prof. Abhijit Banerjee of MIT assesses the average administrative cost, across countries, of cash support programmes at 50 per cent of the amount delivered.

A universal, unconditional income transfer in cash to all citizens is the most efficient option. But it suffers from bad optics. The same amount of money is given to a beggar as to a real estate baron. But Sudipto Mundle of NIPFP argues that select exclusions are possible without massively retarding efficiency. The most obvious exclusion is anyone in urban areas. The average income in urban areas is consistently higher than in rural areas, where 80 per cent of the poor live.

Substitution or additional support

Others, like Jean Drèze, are sceptical about the cash transfers, specially for food support. We know food prices spike during drought. During such extreme events, the transferred income would be insufficient to buy the targeted amount of food. Those living at the edge cannot afford to be caught in such a situation.

Clearly, basic income transfer is not a substitute for all other existing social support mechanisms in education, health and social protection, but it can substitute those mechanisms which are the most wasteful and poorly targeted.

Reform wasteful, leaky de-merit schemes 

The Economic Survey 2017, lead-authored by Arvind Subramanian, chief economic adviser, does signal service by evidencing the problem of misallocation of fiscal resources in the existing schemes. The share of the districts, where 40 per cent of the nation’s poor live, in allocation for anti-poverty schemes, like the mid-day meal scheme is just 20 per cent and just 24 per cent in the Swachh Bharat Mission. Such misallocation is wasteful.

SEWA pilot shows the way in MP

SEWA

A pilot done by SEWA in four villages in Madhya Pradesh, over a period of two years, covering 6,000 people along the universal coverage principle, transferred Rs 3,600 per year to each adult, with lower amounts to children. The results are impressive. The most significant outcome is that even four years later, many of the initial achievements with respect to the enhanced decision-making role of women; sustainable income from assets — mainly livestock — and the continued productive use of income remained strongly in place. Similar pilots are being done in Africa. But the caveat is that pilots involve significant handholding and oversight without which, as in Ghana, sustainable income enhancement is negligible. This cautions that even with a universal basic income scheme the role of handholding will remain.

A first for India

India could become the first country in the world to use a “qualified-universal” basic income transfer to end poverty. The real problem is how to find the money. Arvind Panagariya, the Prime Minister’s key economic adviser and vice-chairperson of the Niti Aayog, however, highlights the fiscal requirement. At just Rs 10,000 per year per person the cost is equivalent to the government’s entire revenue of 10 per cent of GDP.

Use second best options – sequential implementation; finance the poverty gap

But there are viable second-best options. First, smaller amounts could be transferred. The poverty gap has been estimated at around Rs 3,500 per poor person per year as in the SEWA pilot. The Economic Survey records that an annual transfer of Rs 3,240 to every female would cost one per cent of GDP. The cost can be reduced further by a quasi-universal scheme focused on females only in rural areas, with girl children getting less and women getting more, as in the SEWA pilot.

Subsidy reform is overdue. The Prime Minister had also adopted the approach of “subsidy tyaag” the voluntary giving up of subsidy by those who were well-off. It is also possible to make it administratively more difficult to access demerit subsidies like on cooking gas; fertiliser and income-tax exemptions with the target of eliminating them altogether.

In the meantime, a “quasi-universal” basic income transfer scheme can be started by allocating just Rs 75,000 crores (just 0.3 per cent of anticipated GDP in 2017-18) to one-third of the poorest districts. The programme can be expanded to other districts by allocating just two-fifths of the incremental revenues, especially if growth trends upwards beyond eight per cent per year.

PM should grasp the moment

Prime Minister Modi is not one to be hesitant about funding innovative ideas in the public interest. The quasi-universal basic income scheme is one door that he should consider walking through, specially if he is confident that India shall grow at above eight per cent.

Adapted from the author’s article in the Asian Age, March 31, 2017  http://www.asianage.com/opinion/columnists/310317/basic-income-transfer-modis-next-big-thing.html

poor children

New social compact : wooing the underdogs

voting

Do Indian voters remain deeply aligned with caste, clan and community (read religious) interests, as reported in the ongoing state elections? Possibly, yes, they do. Continued allegiance to traditional identities makes sense, if new ones never had the chance to take root.

Industrial work was one such silo-buster, as is urbanisation. Both, have had a limited impact on India’s social profile. Large, organised industry employs barely 10 million people, or just two per cent of the workforce. The impact of urbanisation is still far too recent to induce a change in social behaviour. Migration by men, for work in the urban, informal sector, has done a lot to contribute to the urban sprawl. But it doesn’t let new urban identities take root, as families remain village bound.

Modi – disrupting the status quo

No surprise then, if the 657 political parties (many are moribund) that are registered with the Election Commission vie for existing group interests as vote banks. There are only two examples in the past three decades which go against this grain of vote bank politics. The BJP came to power at the national level in 2014 by disrupting traditional identity-based vote banks. In a powerful outreach to young, aspirational India, Prime Minister Narendra Modi provided the instant hope of jobs through a government which worked for them, not against them. This enlarged support beyond the BJP’s traditional vote banks — upper caste and bania groups.

tea-3

Modi exults in the hard work and determination that enabled him to overcome his humble origins  – chaiwala (tea server) – in status quoist India. Mayawati – BSP and Mamata Banerjee – Trinamool Congress are female avatars of Modi.

It helped that Narendra Modi is himself from a backward caste. His is a rags-to-riches story. More important, he flaunts his humble origins and makes a virtue of his struggle to make good. More conventionally, he publicly dons the mantle of the selfless “sevak”. Anybody in the audience could be him, if they only had the gumption to succeed.

AAP – the new “Left”  

aap-uk

The Aam Aadmi Party had similarly disrupted traditional identity politics in December 2014. It fashioned a winning alliance of the urban poor and neo-middle class against the corruption of elites in the Delhi state election. This anti-establishment, anti-corruption model is now facing a test, for its resilience and appeal, in the rural settings of Punjab and the BJP stronghold of Goa — both of which are “rich” states.

Its a tough world out these

wire

Like the Congress during the post-Independence period, Mr Modi’s BJP is shaping a new India. It is an India that recognises today’s harsh international realities. First, unlike the rosy expectations of the 1950s, foreign aid, as an instrument of change, is dead. Economies need to fund their own development, by borrowing from the market or collaborating with foreign investors. This requires governments to bend before those who have the surplus capital; ship up to strengthen their own economies or continue to lag. Second, the consensus of the 1980s, that markets could substitute for the State’s inefficiency, is less credible, particularly after 2008. Strong states seem inevitable, albeit exercising judicious restraint while regulating markets.

A Nobel for the Communist Party of China?

china-politburo

For lifting more people out of multi-dimensional poverty that ever before; for adapting ideology to market realities and for standing true to their national objectives, the Nobel goes to ……. 

China has been the most successful economy, post 1990. It deserves a Nobel Prize for overcoming massive poverty and low levels of human development to become the factory of the world. It accounted for 1.5 per cent of world GDP in 1990 — the same as India. Since then it has cornered more than a fifth of growth in world GDP. By 2015 it accounted for 15 per cent of world GDP and has liberated nearly 300 million people — almost as many as the population of the United States — from poverty.

The Chinese story is of a single-party-managed mega-nation. By mixing market principles of merit and competition with the political energy of a proactive state, it has fashioned a massive politico-industrial machine. China has little patience with the effete romance of liberal idealism. Theirs is the classic hunter’s approach to life — smart strategy matters more than social ideology for filling your belly and remaining stronger than your adversary. This approach resonates in a world where persistent vulnerability to poverty; falling real income and increasingly skewed income distribution clouds even the rich world.

Where is the leadership in India?

tamil-nadu

Reverence for the absent trumps concern for the living, for gathering votes, in mystical India

Mr Modi’s world is that of realpolitik. Performance and outcomes matter the most. In contrast, the other national parties seem dated. The Congress — once a people’s movement, albeit led by professionals — is dormant. The Left is trapped in ideological echo chambers, seemingly unaware that organised, permanent workers are a diminishing vote bank. That economic forces have moved value addition beyond the spatially focused, integrated work areas, of the industrial age. The Lohia movements of the late 1970s rallied the backward castes into regional parties. But these lack vision, credibility or sustainability, beyond their narrow vote banks. The dalits have been transactional in their support for parties, although Mayawati has tried to substitute the Congress with a rainbow-style coalition. Muslims remain boxed into a defensive stance, perpetually seeking the status quo rather than transformation.

Where then do we turn to for leadership in India? The BJP is a clear and credible option. The mantra is that the government must focus on economic inclusion and social inclusion will follow. To take a practical example — higher government revenues from a more efficient tax regime can enable transfer of universal basic income to the poor and marginalised. This neatly avoids the clunky and inefficient option of physically providing cheap goods and services to the poor and caste or community-based support for the marginalised. It may also reduce corruption significantly by around one per cent of GDP.

A new social compact – trade entitlements for opportunity

taxi

The existing social compact between citizens and the State should be reworked. Will citizens be ready to give up their entitlements and de facto freedoms, in return for the State providing more economic benefits — security, macroeconomic stability, jobs, infrastructure and access to healthcare? With money and smartphones in their pockets, people — including the poor — will be able to shape their own societies, without being clouded by the past seven centuries of civilisational shibboleths dumped on them. Can Mr Modi get past the elites who benefit directly from the status quo? 2019 will tell.

Adapted from the authors article in Asian Age March 2, 2017 http://www.asianage.com/opinion/columnists/020317/can-modi-revise-social-compact-2019-will-tell.html

 

Budget 2017 – say what you mean

professor

Some pictures may be worth a thousand words. But when the two are put together, as in a video, they evoke deep emotions and convey subliminal messages. Watch the master of the spoken word — Barack Obama, in his January 2016 address on the mundane subject of gun control in the United States and you will see what I mean. It is unfortunate, that despite the best talent in branding and outreach we fail to use words which convey our intent unambiguously.

Poor namkaran begets poor results

Consider the name of the government department, which is supposed to privatise the public sector. It was created in 1999 under the BJP-led NDA regime and helmed by finance minister Arun Jaitley. Even way back then, it was clear it would not take root. Mandated to raise capital through privatisation — it ended up being named, hypocritically, the department of disinvestment. “Divestment” would have been more proximate to the intent. But the fuzzy name, matched the lack of sustained resolve for a big-bang approach to privatising the public sector. It muddled along till, mysteriously, in April 2016, it was cumbersomely renamed as the department of investment and public asset management (DIPAM). It does nothing of the sort. Its core mandate remains to sell the industrial Central public sector. Public sector investment and asset management continue to be the mandate of every line ministry, for the state-owned enterprises (SOE) under them. No wonder then that the Central public sector not only lingers but grows.

In 2015, there were 235 operating SOEs. But an additional 63 were coming online. One-third of the operational SOE made a loss of Rs 27,000 crore in 2015. The data for 2016 is yet to be publicly shared. But there are unlikely to be surprises here. Named badly at birth, the department lingers on much like the loss-making SOEs.

Clever acronyms can mislead

bhim

Consider also the new government-sponsored payments app named Bharat Interface for Money (BHIM) created by the National Payments Corporation. The app was ostensibly named after Babasaheb Bhimrao Ambedkar — the learned dalit leader and constitutionalist. A payments app named after Babasaheb is quaint just as launching a human rights initiative in his name would resonate. The app is more likely to be associated with the brute power of the legendary Bhim from the Mahabharat conveying that the app is safe and impregnable. Yes, security is one important feature of an app. But it must also be nimble, adaptable, scalable, efficient and convenient to use. Bhim of the Mahabharat was none of these. Legend has it he was pretty resource-intensive — gobbling up nearly as much as all his four other siblings and was difficult to discipline, much like an invincible Robocop. “Killer app” is how kids term an outstanding app. But slang shouldn’t be taken literally to name government initiatives.

Words without momentum

modi-troubled

Prime Minister Narendra Modi, in his New Year’s Eve address to the nation, fell into the same rhetorical trap of belting out a preachy sermon but chose the wrong words. He stressed purity, pain and renunciation as key processes for exorcising evil — in this case black money and corruption-fed terrorism, Naxalism and Maoism.

Left unanswered was who should feel the pain more and make sacrifices — the honest many or the dishonest few? Also, conflating Maoism and Naxalism with terrorism, drugs and loss of human rights is okay if you are a right-wing, conservative American. But in India, these misguided socio-economic movements are the consequences of state failure in providing a basic level of welfare to the poorest of the poor. One cannot simultaneously romance the poor for their virtues — fortitude and honesty; finger the rich for their vices — dishonesty in evading tax, wallowing in luxury in big city bungalows — and yet denounce social movements which seek to give voice to the marginalised, however unpalatable their senseless violence may be.

BJP – get your mojo back

The BJP came to power in 2014 as the voice of reform and growth. It has traditionally been private sector-friendly. This resonated with an India fed up with populism and ersatz socialism, unemployment, poverty and a low quality of life. Touting the cause of the poor by pulling down the rich was never meant to be the BJP’s trademark. The Communist parties and the Congress fight from that shrinking corner of the electoral base. The poor versus rich genie will now be difficult to put back into the bottle. This will be particularly so if growth disappoints and economic stability suffers — both of which are near-term probabilities.

A strong government can trample over many citizens’ rights so long as it can stuff the mouth of citizens with money — as in China. But no money, no jobs and no rights are the fertile grounds on which violence, Naxalism and Maoism thrive.

Keep the narrative simple, not simplistic

Multiple objectives in public governance are a recipe for disaster. One hopes that in the waning days of this fiscal the government will shed some of the fluff it has accumulated. Focusing on infrastructure, macro-stability and private sector-led growth is the only option for creating sustainable jobs and reducing poverty. If an all-out fight against corruption is a must, because of electoral promises, let it begin where corruption breeds. This is in the public and not in the private sector.

A trishul for action

trishul

Three initiatives are overdue. First, make the funding of political parties open to public scrutiny. This is a far more important political reform than having simultaneous elections. Second, exorcise the public sector of corruption before terrorising the private sector. The bribe-giver is the victim of an unresponsive governance system. It is the bribe-taker who is delinquent. It is public sector banks, public service departments, the police and the lower judiciary which need to be “purified”, not the voting public. Third, restore the credibility of regulatory institutions by respecting Chinese walls purposefully built between them and the government. The Reserve Bank of India seems to be the latest victim of executive activism in the demonetisation snafu. Let’s ring the curtain down on disruptive, executive muscularity.

Adapted from the author’s article in Asian Age January 11, 2017 http://www.asianage.com/opinion/columnists/110117/to-create-new-india-3-initiatives-overdue.html

TRAI’s ersatz socialism kills innovation

TRAI

R.S. Sharma the new TRAI chairperson and  architect of “ersatz socialism” in the www. Photo credit: economic times.com

By ruling against Facebook’s Free Basics type of innovation, which offers, hitherto undreamed of, free but limited access to data services, Telecom Regulatory Authority of India (TRAI) has regressed to a version of “ersatz Nehruvian socialism”, which persist long after Panditji. It would have astounded him that his thoughts are still evoked to preserve the privileges of a thin crust of 250 million elite Indians whilst doing little for the 700 million poor Indians. Consumer benefit has been sacrificed yet again for ideology.

Nehruvian Socialism and Net Neutrality

Remember the car you used to drive in the 1970s? Most don’t, because it was an expensive, exclusive asset owned only by the rich. Even today Indian cars remain a rich person’s trophy because of the high cost of owning and using one relative to average income. Only 10 per cent of the 230 million Indian households own a car. Ironically, the TRAI order of February 8, 2016, is driven by a similar vision — preserving notional equity and freedom within a small bubble of 250 million well-off, “Internet connected” Indians owning smartphones.

poor buy

India’s poor- ersatz socialism permanently excluded them from the bubble of shiny cars. Net neutrality similarly excludes them from the virtual world. Photo credit: bbc.co.uk

Shunning innovation in the pricing of access to the Net under the garb of Net Neutrality has precisely this bubble effect. TRAI has decided to protect the existing ecosystem which privileges platform managers, content and app developers who today have unpaid access to 250 million netizens. But it ignores the need to grow this market to include 700 million Indians who are too poor to access data services other than phone calls and SMS.

TRAI’s vision of the www is like that of an owner of an expensive mall- keep the poor out.

The net is like a Mall except that you have to pay to get in and guards are actively instructed to keep shabbily dressed people out so that rich customers can float through an air-conditioned heaven- just like in Dubai. The good news is that in the real world business serves the needs of the poor through street markets because the municipality facilitates it. in a TRAI ruled internet the poor are to shunned, exactly as in expensive Malls and no street market is to be made available for the poor. The poor are to be kept invisible – as in China or Rwanda where the strong arm of the State keeps the poor severely controlled.

It is unsurprising that the Congress which has made ersatz socialism into a family business should support “Net Neutrality”. But that this should happen under a government led by Prime Minister Narendra Modi which has vowed to “free” India from the social and economic chains of the past, shows that this government needs to put on its “thinking” cap.

TRAI order equates porn with socially relevant content

TRAI’s decision is perverse and here’s why. It throws out the baby with the bath water. Whilst banning price “discrimination” for content, it also effectively disallows “positive discrimination” or “affirmative action” for access to socially responsible content. In essence it says a consumer must pay to access content whether it is porn or wikipedia.

Consider a large Indian company which may want to subsidise a telecom service provider (TSP) for providing free access to educational sites targeted at helping poor or dalit kids crack the JIIT exam. The TRAI order disallows this effort.

Similarly, it bars a poor, pregnant woman, say on the outskirts of Patna, from availing free access to check the cost of having her baby in a decent hospital in Mumbai, where her husband works. Sorry, says the TRAI order. You must pay the TSP to access the Net.

It is hypocritical to simultaneously support free content-unhindered by state control whilst arguing against “affirmative action” for providing free access to the poor to socially relevant content, developed just for them.

It is not just about Facebook

It’s not only about Free Basics. It is the principle of killing innovation that’s the real concern. The Trai order kills innovation in developing socially relevant content for the poor because there is no way now of getting the content to them.

Free Basics is driven by commerce. Free access has to be paid for by someone. Today it is Facebook subsidising access, tomorrow it could be a Tata CSR project. In Africa, Net subscriptions of the poor are subsidised by foreign donors.

Net neutrality is bad economics

More practically, there is money at the bottom of the income pyramid. Activists, platform managers, content and app developers are being short sighted in ignoring the role of “free access” in getting them there. They lack the business vision of Hindustan Lever which innovated shampoo sachets two decades ago to give every woman an affordable taste of luxury. Or do they fear that international players with deep pockets may get there first before they get their act together? Are they using the garb of “Net Neutrality” as a fig leaf for self-preservation? Do existing Indian players, TSPs want to keep Facebook out so they can do the same once they become big enough?

Predatory pricing based on enormous private equity funding is the essence of the IT start up.

All IT start-ups attract customers by subsidising prices. Take Uber, Flipkart or any other. The fear that they will start increasing prices once they get bigger is misplaced because unlike the bricks and mortar world entry barriers are low in the digital economy which ensures sufficient competition to keep each big player on their toes. Guarding against predatory pricing is a slippery slope for TRAI. It can result in taking the fizz out of e-commerce which is growing by out-pricing the corner mom and pop store and traditional taxis by relying on serial funding from investors, not profits to fund unheard of price discounts. In any case India has laws and the Competition Commission of India to regulate dominance and monopoly. TRAI is hardly equipped to rule on anti-trust issues.

Today’s startup is tomorrow’s business biggie

flipkart

The Bansals of Flipkart- value $ 15 billion and counting- give Amazon a run for its money. Photo credit: livemint.com

Ironically, whilst making it easy to do business for “start-ups,” we are killing commercial innovation by business biggies. Can an “innovation” friendly eco-system really be sliced and diced, such that it is a “free market” for start-ups but a stiflingly regulated environment once they become a business biggie, like Facebook? In the virtual economy startups grow on the strength of innovation not government protection. In any case, the record of ersatz socialism in growing small industry via protection is miserable. The Indian Telecom industry, the only success story of privatisation and reform, has grown from being yesterday’s “start-up” to today’s business biggie. Why discriminate against it because it has been successful?

The digital eco-system must be fair to all stakeholders, not just the software and content developers

There is a symbiotic relationship between TSPs, content providers and app developers. TSPs, represented by Cellular Operators Association of India (COAI), buy expensive spectrum from the government, install and maintain the telecom network to link-in netizens and ensure that the number of eyeballs grows. If the content available is attractive, netizens spend more time surfing, thereby boosting TSP revenues. They enrich app developers by buying an app off the Net.

To access content on Flipkart, Snapdeal, Amazon, Uber or Myntra there is no additional charge other than the Internet access cost. So are these companies just plain generous? No. Like Facebook or Google, they make their money by selling the data they gather from the netizens — demographics and preferences — to market analysts and sometimes to governments; they leverage their eyeball score to increase advertising revenue and get additional private or public equity funding. This is the money they burn to offer fantastic discounts and out-compete brick and mortar pop and mom stores.

So why does National Association of Software and Services Companies, an Indian IT lobbyist, support the Trai order? Because it is in the interest of the software developers and content providers they represent to try and hang-on to the freebie they have — the roving eyeballs of netizens for which they pay nothing.

Why do the parents of the www (US & the Brit Sir Tim Berner) support net neutrality?

Berner

Sir Tim Berner-Lee inventor of the www. Photo credit Wikipedia.com

Indian activists are fond of using the United States as an exemplar of non-discriminatory pricing access and the trenchant advocacy of Tim Berners-Lee – the inventor of the www-for net neutrality. This is their Brahmastra to clinch the argument for “Net Neutrality”.

This is unsurprising. For most netizens, the US is the mother lode of innovation, which it certainly has been. But cut-paste is bad tactics for good governance. The context in which things work is key. Activists and governments routinely overlook the difference in context in a slavish tendency to adopt best practice international templates.

Why the US is different

US poor

The poor people of the US: photo credit: rediff.com

In the US, the poverty level income is $2,000 per capita per month. Data access costs just 5 per cent of income or $100. In India, the poverty level income is $30 per capita per month. Data access costs $10 or one-third of a poor woman’s income. The cost of Internet access is not an economic barrier in the United States. The US is under no compulsion to abandon “Net Neutrality”, an ideology which sounds noble. For India, TTAI’s ideology of “Net Neutrality” means the economic exclusion of 700 million poor people.

TRAI’s technical incompetence drives the ban on differential pricing

The bottom line  is that despite its rhetoric on “net neutrality” TRAI is technically incapable to monitor data services to detect instances of blocking or preferential access for content favoured by TSPs. This why it has opted for the blunt instrument of a complete ban on commercial innovation in pricing and financing. This is the worst option driven by regulatory incompetence not by high minded adherence to principles. A sad comment on the state of regulation and of consumer protection in India.

Adapted from the authors article in Asian Age February 10, 2015 http://www.asianage.com/columnists/trai-s-socialism-kills-innovation-136

Startups: Keep the adrenalin flowing

Being workaholics and 24×7 people, Team Modi must be avid coffee drinkers, with a yen for espresso. For the uninitiated, espresso is the end product of forcing boiling water through ground coffee, thereby concentrating the caffeine content and enhancing the “kick”.

espresso

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

India’s “espresso” moment happened last Saturday in New Delhi with the grand inauguration of “Start Up Stand Up”, the new campaign with the unfortunate acronym SUSU. This new mission focuses government resources and effort around the creation of new entrepreneurs. Established businessmen were not welcome to join the party at Vigyan Bhawan. And some confusion prevailed whether startups in the old economy space were on the guest list, or it was restricted to the “new economy” subset of IT-enabled startups.

But the crowd of young “been there and wannabe” entrepreneurs were not quibbling about such nit-picky issues. They were there to bond, stamp their feet and whistle their approval at being noticed and included in the national mainstream.

The presence of the founders of Uber, WeWork and Softbank was icing on the cake, which undoubtedly was an extended opportunity for “selfies” with Prime Minister Modi.  Expectedly, older inhabitants of this charmed business space were not impressed by the ground swell of support from the young. They spent their time warning against the danger of expecting too much from this space, which is already clogged. Apparently of the 500 e-commerce startups launched in India, only 10 survive — a survival rate of 2 per cent. Internationally, the survival rate for startups is better at 40 per cent.

But India’s burgeoning, literate, young “wannabe” entrepreneurs would have no truck with such pessimism. They pushed and shoved and cheered their way into the frisson of excitement which Team Modi had carefully generated for the event. Hope sprung eternal in every ones’ heart as Prime Minister Modi stoked the embers of youth entrepreneurship. So how long will the “espresso moment” last?

Adrenalin has a self-regulating mechanism for ramping down. The Prime Minister’s gesture is a welcome beginning to look beyond the “big men in suits” for business solutions. Mr Modi is right when he looks to the young and the intrepid to take risks, follow their dreams and escape the golden handcuffs of contracted servitude. If we want to scale up jobs and disperse commercial opportunities across the country,facilitating small startups is likely to give the biggest bang for the public buck.

Indian corporates- too many tiny ones

India is not short of business enterprises. We have 1.4 million registered companies though 30 per cent are closed, being liquidated or not functional. In comparison, our workforce is around 700 million. Just one working company per 700 workers is way too low. Even worse,75 per cent of the operational companies have an authorised capital of less than Rs 25 lakh ($38,000) and one-third have less than Rs 1 lakh ($1,500). This illustrates their limited potential for adding to gross employment. It also explains why only 1.5 per cent of the workforce is in formal, private employment, with the government providing jobs for another 2 per cent. Incentivising new entrepreneurs makes sense.

The Prime Minister announced a package of goodies to induce those present to just go and do it — tax breaks; venture capital; easier entry and exit processes and innovation hubs. These are the basics for any industry to grow. But startups need more. By definition, a successful startup is small but poised for explosive growth company. This is what attracts investors to accept the higher risk in anticipation of the huge rewards from added volumes and scale.

Government best placed to scale up social sector startups

The government is best placed to help in adding scale. However, care must be taken that government finance does not dilute the financial discipline which private finance imposes. One option is for the finance minister to encourage ministries to spend a small proportion of their purchase budgets for this purpose. The Union government has a residual budget of around of Rs 7 lakh crore ($100 billion), after accounting for salaries and pensions, overheads, interest payments and transfers to state governments. Even a 1 per cent allocation for buy-back arrangements with startups translates into performance-dependent support of Rs 7,000 crore ($1 billion) annually. This amount could usefully provide a revenue cushion to around 500 startups.

The Prime Minister proposed to provide Rs 2,000 crore ($300 million) annually as a public grant for institutional finance and a guarantee of around Rs 400 crore ($60 million) to de-risk venture capital.  Letting actual user departments contract directly with startups using their individual budgets is preferable.

Four next steps to embed the startup culture in government

First, encouraging government departments to work with startups has the hope that some of the private sector mojo will rub-off on them. Indeed, government officials who participated in the inaugural function seemed a far cry from the stodgy, grumps that “babus” are presumed to be.

Second, organically linking actual government users with startup founders bridges the chasm between small business and government. Startups are nimble problem solvers and disrupters. They can be used beneficially to enhance the effectiveness of public spending. But babus have a deep aversion to be fingered by audit. Only an explicit budgetary direction to engage tangibly with startups can nudge departmental secretaries to risk public money.

Third, it makes sense to de-concentrate the mandate for growing startups across the entire government architecture. Embedding this objective into central schemes further extends this mission to the state governments which manage these schemes.

Lastly, government should focus on encouraging startups in enhancing the rule of law, social protection, human development and agriculture. Commerce and industry are already well serviced by established mentors and private venture capital funds.

Last Saturday’s fever in Vigyan Bhawan was just the froth at the top of a cup of espresso. Keeping the adrenalin going will take far more grounded effort to keep those who stood up from sitting down again.

Adapted from the authors article in Asian Age January 20, 2016 http://www.asianage.com/columnists/how-keep-start-ups-standing-009

PM to babus: Learn to work with “plentiful resources” for social and human development

DC

(photo credit; namakkal.tn.nic.in)

Prime Minister Modi, addressing the civil service officers, last week, made three telling points. First, he asked the bureaucracy to shrug off the inhibitions of the past and think big and assured that resource constraint would not limit them.

Second, he exhorted the bureaucracy to change citizens’ perception of babudom by personal example.

Third, he advised that social and human development were core sovereign areas that babus should focus on.

Taking the second first, he was bang on. Babus have taken a severe beating over the last three decades, with even the government giving this institution short shrift. Cleary, this PM is different. This warmed babu hearts, as it was meant to and possibly sparked off in a few, the determination to be different. But unless some core steps are taken to create the enabling environment for babus to earn respect, the warmth will dissipate quickly.

There are three key issues which bedevil the bureaucracy and unless these are dealt with widespread change is a dream.

Management by Janampatri

First, the bureaucracy remains mired in colonial, vertical hierarchies, with each having its own jagir of positions that only they can occupy from induction to the day they retire. Aspirants work hard to join the various silo like career lines, not because they have a talent or even liking for the type of work they do, but based purely on differential career prospect, which bear no relationship to the value addition. This is clearly out of sync with the horizontal institutional structures which are the new work place.

Of course change has to be gradual to be fair to those, who for no fault of theirs have become what the system made of them. Starting with the top is always the best way to signal change. Recruit all senior positions in the Government of India on contract for fixed terms through open selection, based on core competencies. This is what will incentivize junior babus to be performance oriented; acquire relevant skills and to specialize.

The electron is mightier than the pen

Second, government has to go 100% digital to manage the ensuing burden of monitoring, managing and rewarding performance. Digitisation also establishes audit trails, which cannot burn down, as files do. It is also crucial for fixing accountability. Lastly, digitisation promotes transparency and access to information. India lost an opportunity when it did not become part of the steering group for the Open Data initiative of President Obama in 2013. But this is where we should be heading.

Pay for value addition not status

Third a common problem, across bureaucracies, is that that the most unskilled get paid the highest relative, to the market comparators and the most skilled are severely underpaid. The logic behind this “madness” was socialism which expected you to “give” to the nation per your capability but to expect only what you needed. Since there is not much variance in human need- roti, kapda, makaan- pay scales across the vertical levels of babus were compressed unreasonable in a show of faux equity. Even today the highest gets paid only 10 times the lowest. This needs to change. In the private sector, where pay is related to value addition, this ratio is meaningless. The start should be made by making all senior positions-Joint Secretary and above- contractual, filled by open selection through UPSC and paid on market rates.

Just making these three changes can inject skills into the bureaucracy; make them more responsive to public needs and generate the right incentives for those in line for senior positions.

Are we heading for a fiscal surplus?

What about the other significant point of the PM-thinking big and learning to work with “plenty” instead of coping with resource scarcity.

The source of the PM’s confidence that a fiscal bounty is around the corner is unclear but the point is relevant in the context of his objective “minimum government, maximum governance”.  If the physical size of the government is reduced to only the skills required for core sovereign functions, the ensuing surplus public funds can be deployed.

Focus the bureaucracy on core sovereign functions

His remark gains heft when linked to his third point that he did not visualize a big role for the bureaucracy in areas which were earlier considered “prime “ positions- industrial development, commerce and infrastructure, since these were not core sovereign responsibilities. Developed economies function very well, through professional bodies and the private sector in these areas, using light touch regulation.

Instead he exhorted the bureaucracy to align their skill set with what people expected of them- enforcement of the rule of law; social protection and human development. Working with and for the disadvantaged, is a core sovereign function. This must have come as a shock to many babus, aspiring for career in the glamorous world of industry, infrastructure and commerce.  But, if and when translated into reality, a focus on using the bureaucracy primarily to fulfill social objectives is very welcome.

Management of “plenty”

Are there special skills required to work with plenty? A fiscal bounty or “plenty” has obvious advantages in improving funding even for functional areas like personnel management, accounting, auditing and technical consultancy which are fundamental to public efficiency; in improving the timely availability of budgeted amounts or in making government more receptive to innovation requiring some additional up-front cost. But perversely, plenty also breeds its own “spoilers”.

Keeping the “Locusts” at bay?

First, “plenty” attracts locusts in droves each trying desperately to get at a slice of the action. If the institutional arrangements are poor, or the government weak kneed, “locusts” will gnaw away till they bring down the very tree they feed on. The UPA 2G and coal allocation scams were exactly these.

So PM Modi is correct that the bureaucracy will need to change their skill set if they are to manage “plenty” as efficiently as they have been managing scarcity all along.

The might of public finance breeds civil service arrogance

Second, the most pernicious outcome of public plenty is the perception, within government, that it can go it alone without the collaboration of other stakeholders- civil society organisations; NGOs and the private sector. The collateral damage is of “know all” babus and surrounding supplicants, who would prefer to allow government to make costly mistakes rather than risk point out an error for fear of being labeled as a “problem creator”.

The systematic subservience, during the colonial period, of local public management systems to centralized, top-down arrangements like the District Collector or the Police Superintendent, have left an enduring miasma of suspicion, envy and mistrust, which still colours the relationship between the people and the State, seven decades into our independence.

Resource scarcity has the advantage that it humbles the State and its representatives and forces them to take help from the local community thereby creating horizontal working relationships between the State and Non State Actors. Loosening of the fiscal strings can retard this healthy socio-political institutional development.

The State has to progressively step up partnerships with CSOs and NGOs, not only when it is driven to do so by budget constraints but because of the social and economic benefits accruing from letting people manage their own affairs.  Decentralisation and direct democracy has multiplier effects, beyond just the fiscal mirage of making personnel liabilities off-budget for government.

The begging bowl is easier than community effort

Third, one of the biggest problems in lavishly funded, extended United Nations relief and rehabilitation missions is how to wean the beneficiaries away from the psyche of dependence on an beneficent external actor, be it the UN or the government.

A government of plenty begets the same dilemma. In the face of the might of public finance, the internal juices of communities, to fund and manage their own needs, dry up. Instead it is so much more convenient to stand in line with a begging bowl every time the PM comes calling and to lobby for public funds in the capital.

Gold plated stranded assets

Fourth, at the best of times due diligence, design, planning and execution of public projects is made impossibly inefficient by process norms and the political economy constraints of spending public money per the “value for money” principle. When money is scarce, decisions get pared down to the essentials. Conversely well-funded public entities make bad investments merely because they can afford to do so.

Public decisions-be they big or small, are so difficult to get made that the tendency is to lump what should be a series of separate decisions into a single omnibus project which becomes so big and involves so many stakeholders that it “just cannot fail” and has to be approved. But this also generates surplus capacity.

This tactic is unsuited to an era of rapid technological change. Excessive future commitments can become stranded assets-technology which is no longer efficient. Building 100 GW of solar capacity in the next five years has precisely this risk.

There are four key ingredients for making good decisions in a time of plenty going by the acronym- COLON.

First- Collaboration with all stakeholders is key to inclusion. Embed it in government process. Second-Outcomes like reduced electricity outages, should be monitored rather than inputs like project spend or intermediate outcomes like project completion. Third-LOcal decision making is key for ensuring buy in. Leave room for it even if it means slower implementation. FourthNo is what a Finance Minister should say to politically motivated, low social return investments. Currently we have only the fourth ingredient.

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