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Book review: Tharoor, An era of darkness

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Shashi Tharoor’s latest book originated in a debate at Oxford on whether Britain should pay reparations to its erstwhile colonies. The YouTube clip of Tharoor systematically demolishing the opposition, his brilliance evident in the thrust and parry of debate, has been watched by more than three million viewers. But the author says he felt a “moral urgency” in informing the “layman and students” in India and in Britain, about the “horrors” of colonialism and hence this book.

The book is conveniently divided into eight chapters. Unusually, each is virtually self contained though each focuses on specific topics, as for example, the extent of the loot; dividing, rather than unifying India; subverting Indian diversity in ersatz modern British institutions; the policy of divide and rule; the absence of enlightened despotism et al. Whilst this stratagem of comprehensive rendition adds to the length, it facilitates selective, speed reading. There are also 295 helpful references to other works—both Indian and foreign, a veritable treasure trove.

The Raj – long on loot short on local benefits?

The author deploys the familiar nationalist tactic of talking up the wealth and virtues of pre-British India, while playing down the inadequacies of much of post-independence India, to book-end the “horrors” of the Raj. The benefits from the Raj are dismissed as few and that too, unintended, barring the development of a pan-India modern press and media; development of canal irrigation; scattered electrification of towns; and of course -the railways. Oddly, the planning and building of regulated, urban settlements for the British, expanded versions of which, subsequently, also became the refuge of India’s political, business and professional elite and in less oppulent versions for India’s middle class, goes unacknowledged.

The “loot” neither began nor ended with the Raj 

The litany of colonial woes is expectedly long. Nothing attracts instant attention more than stories of loot and rape inserted early on in a book. The British drained 8 per cent of India’s GDP as per Paul Baran’s 1957 estimate. Annual outflows are separately estimated by William Digby at 4.2 billion British pounds during the 19th century. Extrapolating this trend onto the first half of the 20th century, the additional outflow was 2 billion British pounds. Huge as this cumulative sum seems, consider that Indians themselves are estimated to have amassed $500 billion of illegal wealth abroad in less than seven decades of India’s independence as per the CBI in 2012. Consider also, that against the less than 10,000 British subjects employed in India, the Report of the Indian States Committee of 1929 lists a total of 562 princely states, each with a retinue of vast numbers of relatives of the ruling family living off the state treasury. There is no corresponding account of how much these effete rulers and their families cost the ordinary Indian.

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Indian Maharajas delighted in maintaining humongous households and extravagant habits – and why not, since the aam admi paid for it all.

Yes, the British used India as a source of capital and raw material for their industries, which stilted Indian industrial development. Yes, they helmed organised commerce in India via the Managing Agencies. But just as surely, Jamshedji Tata’s dream of establishing a modern steel mill saw fruition because British India guaranteed the off-take of steel and built the railway to link the steel mill with raw materials and markets, thereby making it India’s first Public Private Partnership.

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Jamshedpur, 1912: The first steel ingot is rolled 

The author cites the regulations forcing Indian mills to produce only British Specification Steel as a low stratagem to make them uncompetitive. But it could also be viewed as the first step towards internationalising standards in Indian industry. Not producing to international standards was our failing till we liberalised industry and opened our markets to competition in 1991.

The Raj was neither elightened nor did it serve a moral purpose

Of course, the British, as a colonial community, were rapacious, openly racist and self-serving. But the evidence is thin that they were any worse than the long line of Indian rulers that preceded them. Admittedly, it mattered where you lived. The princely states of south and west India were generally better managed and more progressive than those in north and eastern India.

Colonial consequences: The death of institutionalised privilege & rise of the new middle class

Tharoor’s view that neither the political unity of India nor the adoption of democratic norms was a direct outcome of the pan-India political architecture of the Raj is inadequately backed up with evidence. The mere fact that Arabs refer to all Indians as “Hindi” is hardly evidence that pre-British India was already integrated. By this logic, all those living south of the Vindhyas are “Madrasis” because that is what ignorant North Indians called them and all of Arabia is one because we refer to people from there as “Arabs”.

The author ignores the greatest accomplishments of the Raj—the decimation of the old order of inherited privileges and rights; kindling of the spirit of democracy and incubation of the great Indian middle class via government jobs in the railways, the army and in civil governance.

Prime Minister Indira Gandhi, by abolishing privy purses in 1971, ended what the British began—the consigning of India’s numerous Maharajas to the dustbin of history. By institutionalising the common law and opening up vacancies—admittedly too few—at the very top, the Raj inspired millions of young, ordinary Indians to aspire to be literate and professionally qualified. That three generations of Indians had to serve as clerks to British superiors, not necessarily more accomplished than themselves, is a regrettable but possibly an inevitable consequence of gradual transition.

The Indian Constitution – equity, liberty and inclusion

The Indian Constitution is a direct outcome of the groundwork done over the previous four decades, since the Minto-Morley Reforms of 1909, to implement consultative democracy by including the professional middle class in the process. Ask any Dalit, backward caste, tribe or other minority and they will ascribe their liberation from traditional shackles to the modernist, reformist social and economic thinking which emerged, possibly as a nationalist response, to British rule.

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Babasaheb Ambedkar: Iconic messiah of dalit inclusion

It is not for nothing that Babasaheb Ambedkar wore a suit and a tie rather than a dhoti. For him the suit was a symbol of liberation from the oppressive rule of India’s traditional, upper caste elite and the Constitution was his guide to a more equitable future. Mayawati, Manmohan Singh and Prime Minister Modi are the organic outcomes of the much-needed, albeit self-serving, prising open, by the British, of India’s dormant, traditional cleavages—a black box of competing religions, castes and regions. Consolidation of these traditional identities at the national level via democratic institutions is what has changed the social landscape of India.

Sans the Raj – either a balkanised Hindustan or Red India

Tharoor speculates that if only the East India Company had not been as successful as it was, India would have found its own way to modernity. But what if we had remained hopelessly Balkanised instead? Why would we have not succumbed instead to the romance of Communism and gone the Chinese way? Would bloody revolution, social upheaval, the end of private enterprise, de-legalisation of religion and cultural diversity, unrelieved even by the constitutional promise of human rights and freedoms, have been better?

Contempt for the “box wallah” and the bania -Colonial hangover or the convenience of ersatz socialism? 

Tharoor speciously links our inward looking, anti-business attitude in the first four decades of independence till 1991, to our bad experience with the East India Company. This looks awfully like a red herring. It would be more instructive instead to examine the role played by our ineffective brand of ersatz intrusive socialism, used by the elite as a cloak, to retain domestic privilege. The ordinary Indian has looked westward for higher education and advancement, primarily because the professional choices at home have been too narrow and the glass ceilings too low.

Even the author accepts that the British Raj was more efficient than the domestic institutions it replaced. He is right that the rapacity of the Raj was exaggerated, precisely because its extractive capacity was greater than the loosely regulated Princely States. Consider the establishment of land records and the uniform and regular assessment and collection of revenue.

High taxes, yes but also efficient systems and records

Tharoor bemoans the high rates of taxes and the resultant penury for landowners since the burden of taxation fell on land and not trade. Yes, indeed. But that very system also bequeathed an embedded practice of recording individual property rights and updating transactions thereof, which is fundamental for development of private enterprise and for access to bank finance. The British left us with a treasure chest of land tenure, revenue and demographic data and an entire community of rule-bound “babus”. Better this than the institutional anarchy many other developing countries faced, post-independence.

Tharoor packs in masses of information and opinions around the British Empire in India. But it is all done in a grand, Quixotic style of tilting at windmills. The book is a hard-hitting, one-sided debate and caution is advised in succumbing to its mesmerising message, that the Gora (white man) is to blame.

Adapted from the authors book riview in Swarajyamas December 2016 http://swarajyamag.com/magazine/tilting-at-windmills

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Well run, PM Modi

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

PM Modi’s second governance test

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Success attracts its own supporters. Narendra bhai epitomizes the success of merit and dedication. It is not surprising therefore, that supporters, including erstwhile critics, both national and international, are thronging his doorstep for a darshan.

There are visible signs that the public adulation has not gone to his head. He has shot down an attempt to curry favor with him by BJP governments, by revising the textbooks with a chapter devoted to him as a role model. This is very welcome and good news.

But a big governance test will confront him over the next two months.

Can he support the Finance Minister deliver a “realistic” budget which does not fudge either revenue receipt or expenditure- two favourite tricks of budget managers to fool the public, adopted by the UPA2 in its last budget? Second, can he reduce the fiscal deficit below the level of 4.9% in 2012-13; the last “normal year” data available. The Fiscal Responsibility and Budget Management Act 2003 targeted a maximum Fiscal Deficit level of 2% by 2006. We never achieved that level. The best was 2.7% in 2007.  A plan to reach close to this over the next 3 years, by reducing it by 0.5% point every year is sorely needed.

Growth fundamentalists will shout that this is retrogressive. His advisors eager to “kick start” the economy and show dramatic results will advise him to throw fiscal caution to the winds and spend his way out of the economic downturn. But none of the growth fundamentalists can guarantee that “kick starting” growth by public spending actually adds jobs for the poor. Indeed the evidence is adding up to quite the reverse conclusion. Public spending windfalls (as in the Common Wealth Games), line the pockets of the top 1% of Indians, whose business margins soar and of shareholders, whose equity capital appreciates (on which there is no tax at all!). But the impact on jobs is likely to be lagged or minimal.

Narendra bhai’s best bet is to listen to his RBI Governor who is the protector of the poor and the salaried middle class, against the ravages of inflation. The PM should let the RBI Governor set inflation management targets and measures, without restraint. This approach is not sexy, stodgy and reminiscent of IMF style fiscal fundamentalism.

But the short term strategy of boosting the stock market and growth numbers through massive public spending, would be dangerously negligent for an economy, like India, where over 60% of the people are poor, unskilled and live mostly in rural areas and are unable to access jobs in the market economy. For 40% of the people living in urban areas, who are poor, inflation is a bigger calamity, because wages are stickier than prices.

Unearthing black money is being considered as a revenue earning measure, which could painlessly increase the spending power of the government. It also sounds like a “win-win” solution since it responds to the high moral objectives of good governance.

But Narendra bhai, must consider that, Black Money is the lubricant, which keeps the economy ticking today. There are more than 300,000 new, unsold flats clogging the inventory of builders and investors because growth prospects are uncertain. Much of the real estate boom was driven by Black Money fueled speculation, betting on high growth to keep the Ponzi scheme going. But the boom in construction activities did create jobs. A war on black money will directly impact any revival of the listless real-estate market, the economy and jobs. Timing is everything in successful governance reforms. Black money has many negative consequences. But the time to become like Denmark is in a boom, not during a bust.

There are no short cuts to fiscal stability. Cutting back on the governments wasteful recurrent expenditure (which comprises 80% of total expenditure); enlarging the tax base and better tax collection are key priorities.

In this context, good governance, would dictate that tough, unpopular decisions need to feed into the 2014-15 budget:

(1)    Target a real reduction in revenue (current) expenditure of 10% over the previous year. Over 50% of the current expenditure comprises interest payments and subsidies. Salaries account for only 8%. As a result, the wage bill is rarely targeted. But just by restructuring Railways into a corporation and the Postal Service into a bank and a corporation, nearly 50% of the wage bill can be taken off the public payroll. Other benefits from corporatization would also accrue.  

(2)    A majority of central government officials, including in the ministries of coal, power, steel, mines, oil and gas, chemical, fertilizers, civil aviation and telecom spend their time, second guessing, remotely managing or monitoring Public Sector Enterprises. This is a wholly unnecessary job. Transfer the lot of them to the concerned PSE. This will automatically reduce the size of most ministries. Appoint professionals to the Boards of these PSEs, instead of the “shoo-ins” we have today. PSEs are not the “jagirs” of the concerned administrative ministry. “Shoo-ins” are popular today, as Directors of PSEs, because the concerned Minister and the PSE management are comfortable with them. But they do nothing for improving the efficiency of the PSEs.

(3)    A second, large chunk of central government employees spend their time administering development schemes implemented by the state governments, but funded either wholly or partly. by the center (central sector schemes). These are wasteful tasks. Hand the task of monitoring such schemes over to NGOs. Send the concerned ministry officials to these NGOs on deputation and get them off the government’s payroll.

(4)    Cut back the long chain of command in Ministries. Today a file passes through at least five levels of scrutiny (i) Section Officer(ii)Under Secretary(iii) Deputy Secretary-Director(iv) Additional Secy.-Special Secy.(v) Secretary. This is way too long. The Secretary should be at most the third level dealing with a file and not the fifth.

(5)    Filter all incomplete and new projects for their private employment and poverty reduction potential. Fund only the ones with the best “social and economic returns” and review what to do with the “politically sensitive” but wasteful, other projects. Bridges to nowhere and empty but beautifully carpeted roads, are “pork”, not development.

(6)    Finally, target fitting the “core” ministries (External Affairs, Defence, Home, Finance, Power, Coal, Mines, Transport, Agriculture, Industrial and Urban Development, Social welfare and Women and Child development), into the space available in the glorious North and South Blocks, which was meant for them. Make space for them, by shifting the PMO into the Rashtrapati Bhawan complex, which is conspicuously vacant. Lease the vacated Bhawans, along Rajpath, to the private sector to earn additional revenue. This will also spare us the drab view of Soviet era, building blocks.

This is the nit-picky governance agenda which the UPA never attempted. A bloated central government, with lots of fingers pointing at each other, is not compatible with Narendra bhai’s ambition and our expectation of effective governance.

Achieving the Fiscal Deficit target for 2014-15 of 0.5% point below the 4.9% actual deficit in 2013-14 by reducing the current expenditure of the central government, is the PMs second test in governance.  

Modi.gov

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The Modi government is being formed on the back of a mandate for honest and effective governance. Fortunately, it inherits a raft of incomplete social and economic equity initiatives from the UPA II. These need to be continued, deepened and tweaked to deliver more bang for the buck.

But every government craves the opportunity to distinguish itself from their predecessors. The Vajpayee government is remembered for the inter-city state highways it built, state enterprise privatization, albeit stymied half way through and the blot of Godhra.

Clearly, everyone wants a full stop to future Godhras. But the mere absence of organized violence is rarely memorable even though it is immensely difficult to achieve in a tinderbox political environment. What then are the “headline” opportunities that Modi.gov could grab?

Infrastructure, coal and defence present themselves instantly. The former two, to build an enabling India. The last, to deter the many “spoilers” of an Indian development story.

Within infrastructure, the real opportunity is in the railways. China now exports railway projects and technology and we are, reportedly, keen to learn from them. But the truth is that we have not served our cause well over the last two decades. The last memorable Railway Minister was Madhavrao Sindhia; not just for his dashing, good looks but for ushering in the era of “fast Shatabdi trains” in 1988.

What has held railways back since then is the “fiefdom” the Ministry became for coalition partners interested only in distributing goodies. Should not the railways them be privatized to nip its politicisation in the bud? Certainly not. Out of all the infrastructure sectors, railway privatization is the trickiest. Secondly, as we have learnt from the power sector, it makes little sense to privatize a sector, in which tariff setting is highly politicized, before it is stabilised.

The Rakesh Mohan committee on railways (2001) laid down a blue print for the sustained financial viability of a railway system performing on par with international standards of efficiency. More than a decade since, the situation has only degraded further: antiquated track and rolling stock; poor customer orientation; declining service and safety standards; distorted tariffs which are either not remunerative or are not competitive with air and road options.  

The target should be to restore, the low proportion of freight and passenger traffic presently carried by railways, to more economically and environmentally efficient levels with a push towards rapid electrification of rail tracks.

Convert the Railway Ministry into a set of publicly owned companies with core expertise in production of rolling stock; freight or passenger traffic with self-owned rolling stock and track and facility maintenance. These companies should be Board managed and have only an arms-length relationship with their administrative Ministry, which should be the Ministry of Transport. Corporatisation will distance railways from being the “freebie-bag” it has become. This has happened, in the case of National Thermal Power Corporation and POWERGRID, both power sector publicly owned companies, where sound technical and financial decisions are taken by professionals.

Coal, whilst actually being one step ahead of railways, since Coal India is already corporatized, seems even more degraded. The next step should be to privatize it and closely review the vast unused or sparsely developed mining areas which have been allotted to these companies. This could be the Maggie Thatcher moment for Modi.

Abolish the largely discredited Ministry of Coal, as an independent entity; merge it along with oil and gas into a Ministry of Extractive Energy Sources. Appoint a savvy, industry friendly, politician; a Sharad Pawar clone, to restore positive energy into the fractured government-energy industry relationship and watch this sector take off.

Defence is the third big area, which India has pussy footed around for too long. Revamping the structure of our defence forces to be lean and mean with less tail and more teeth; modernization of weaponry, aircraft and warships; minimum levels of usable ammunition stocks and efficient procurement processes; integration of operations across the three services and para-military units; compensating defence personnel handsomely, for putting their life on the line, and re-integrating then productively in civilian life, post retirement, should be near term goals. Opening up defence production to the private sector, including foreign investors can kick start a dormant, defence industry led, domestic supply chain, mini, revolution.

The ideal Minister to manage this mini revolution would be the personable and upright, economist, writer and investigative journalist; Arun Shourie, who displayed nerves of steel as Minister Disinvestment in the NDA and navigated both, the political perils of rapid economic decision making and the roving eye of the CAG, with equal dexterity and success.

The Modi.gov reform and restore agenda is likely to be fairly full. The challenge is to isolate the few lead stories which could be the bell weather for its commitment and credibility to work in national interest; its ability to kick start the economy and generate productive jobs for the educated unemployed.  

Railways, defence and coal are not low hanging fruit. All three have deeply embedded elite interests; the risk of failure is high and the likely adverse fall-out significant. Reforming them is not for the faint hearted. But that is precisely why they are good choices to announce ones arrival. The one that succeeds at reforming the three would have bent and strung Shiva’s bow.   

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