governance, political economy, institutional development and economic regulation

Posts tagged ‘Tata sons’

Grow up well India

statistic_id254469_median-age-of-the-population-in-india-2015

So, what are we trying to say when we repeatedly stress that 65 per cent of our population is below 35 years of age? It is not as if we are growing any younger. In fact we are ageing. And that is a good thing because it is an outcome of development. India became younger between 1951 and 1970 when the median age (the point at which one half of the population fall below and above) decreased from 21.3 to 19.4 years due to improved healthcare and rising incomes.

Demographic googlies

Since 1970, the median age has increased steadily as people live longer, fewer babies die and fewer babies are born. By 2040, the proportion of the population below 34.5 years will fall to 50 per cent from 65 per cent today. Will that be terrible? Consider that by 2040 we will be in the same demographic boat that Singapore is in today. Age merely indicates we can become like Singapore in two decades if we do the right things.

The point here is that the advantages of a youthful population are exaggerated. There are 84 countries with a more youthful population than us today. None of them is competitive with India. The virtues of youth are likely to fade over time. Advances in artificial intelligence and healthcare will reduce the demand for manual work — which is best done by the young — whilst also prolonging productive life. This means that the definition of the workforce will change to include older folk — possibly up to 75 years — who will continue to earn, pay tax and pay-in rather than draw out from health insurance. Tata Sons and the BJP have already used the magic number of 75 years as a marker for obsolescence.

We are working towards an ageless society. The Pradhan Mantri Jan Arogya Abhiyan being launched on September 25 will provide in-hospital medical insurance to 107 million families (45 per cent of the total number of families) at the bottom of the income and caste pyramid. Public health centres in 150,000 locations are to be upgraded to provide pre-hospitalisation diagnostics and preventive care. State governments have also taken the lead in launching similar schemes for health security. Robotisation is widespread already in our automobile sector. Machines will progressively replace workers in construction, agriculture and sanitation.

Wear those wrinkles with pride – they signal the long road we have travelled

wrinkles

The bottomline is that we should not emulate the paranoia of filmstars about ageing. Our collective shelf life is far longer than the first flush of youth or middle age. We should also not be nudged into having more babies to keep the median age low. China, with a median age of 37.4 years, is reversing its family size restrictions and doing just that. But their demographic transition, like their economic transformation, has been jagged and artificially staged via the heavy hand of State control. Ours has been a natural demographic transition driven by personal choice, higher incomes and better old age and health insurance.

Hone kids to be productive future citizens

What we do need to fear is that we may continue our business-as-usual approach which prioritises near term results over sustainable growth. If India is to grow up with dignity we need to transform our educational system to produce multilingual, multi-skilled and multicultural professionals, as capable of cooking up a meal, singing a song or cleaning their toilets as of designing a complex space mission.

Hai! the plunging Rupee

There is another number which is being bandied about with alarm — the exchange rate of the Indian rupee versus the American dollar breached the 70-rupee mark last week. Our currency has been overvalued since 2013 because of a complex belief in a “strong” currency being a proxy for a “strong” nation.

False pride

strength

This belief is wrong on two counts. First, if our exports are not competitive because our currency is overvalued, relative to our peer exporters, then a strong rupee is merely false pride, not strength. Second, if strength is gauged from the ability of domestic producers to beat back the competition from imports and retain domestic market share, then a strong rupee works at cross purposes to this objective. It subsidises imports at the expense of domestic production. It taxes our exports and benefits our competitors like China.

The only thing a strong (overvalued) rupee achieves is to artificially reduce the landed cost of imported coal, petroleum products and military hardware. It also signals to foreign investors that exchange rate depreciation risks are minimal, thereby reducing the risk premiums they add to the hurdle rate of expected return from their investments. To this extent it reduces the stress on our fiscal position, improves the external balance and also impedes inflation.

However, these advantages of a strong rupee must be evaluated against the numerous downsides. Reduced employment and the loss of revenue from GST for those state governments, where producers have shut shop because of cheap imports. Consider also that a strong rupee actually encourages Indians to go on holidays and shop abroad rather than at home. This impacts retail trade directly. It simultaneously makes India an expensive tourism destination, versus options in East Asia.

Look to the RBI to set a predictable “real” exchange rate for the Rupee

A belief in a “strong” INR is as shallow as male machismo. Neither is a “weak” Rupee the answer. Setting the right “real” level for the rupee (accounting for domestic inflation), to optimise the complex trade-off, is best left to the Reserve Bank of India, which has the expertise and the information to strike this delicate balance. The rest of us must desist from creating false shibboleths of national strength. Our strength is best demonstrated by balancing our trade account without imposing prohibitive import or export tariffs; making our budget revenue surplus so that borrowings only finance investments and by following a need-based strategy for allocating resources for human capital development and social protection. None of these three milestones have been achieved yet.

collaboration

Grow up well India, collaboration is better than conflict; maximalist negotiating positions are self-limiting and the high from winning has diminishing utility unless the agenda ahead is compellingly uplifting.

Adapted from the authors opinion piece in The Asian Age, August 19, 2018 http://www.asianage.com/opinion/columnists/210818/grow-up-india-time-to-set-an-uplifting-agenda.html

An “Ambassador” amongst “box wallahs”

Rasgotra

Maharajakrishna Rasgotra, India’s foreign secretary from 1982 to 1985, records that in 1948, contrary to the popular perception, the wealthy “Doon School wallahs” preferred to join the domestic services, where they could keep an eye on their assets, and that the IFS boys were at a premium only amongst the urbanised, “sophisticated girls of marriageable age and their even more pretentious socialite mothers”! Things have changed considerably since then. Ambitious Indian girls and boys now routinely choose to work and live abroad, on their own steam, rather than as “diplomatic baggage”.

But true to nature’s rule, when one door shuts, another inevitably opens. Losing out in the marriage market place has been compensated now for the IFS by  major Indian corporates wooing them post-retirement. Just-retired foreign secretary S. Jaishankar has been picked up by the Tatas to head the group’s  overseas operations, reporting to Mr N. Chandrasekharan, the executive chair of the board of Tata Sons, the holding company of all Tata enterprises. The board already has two retired civil servants — Ronen Sen, a ex-IFS officer and former ambassador to Washington, and Vijay Singh, an ex-IAS officer who served as defence secretary. But unlike these board level directors, Mr S. Jaishankar will be more substantively involved, with a hands-on role, as the President of a business vertical. “Descent from heaven” is how Japanese business describes the practice of absorbing retiring senior bureaucrats, who have held key positions, to cushion them from a hard landing in the real world.

Jaishanker Modi

Mr S. Jaishankar is reported to have said he was happy to join “the Tata Group… India’s most respected brand globally”. Just this simple endorsement of the Tata business leadership, from a recently retired foreign secretary, who was selected personally (unusually) by Prime Minister Narendra Modi in 2015, to replace a serving foreign secretary, Sujata Singh, is sufficient to justify the Rs 6 crores that he is speculated to be paid per year. As far as value for money in advertising goes, it can’t get any better for the Tatas.

Despite the 1991 liberalization, Indian business remains constrained by red tape at home. Overseas, it is an orphan, with little formal support from its home government. Blame our perverted colonial legacy for this. The British came to India to trade, profit, export and rule. They used every trick in their mercantilist book of “free trade”, including the selective use of state power and the law, to benefit British companies. But, in a classically hypocritical stance — which incidentally appealed greatly to the convoluted sensibilities of upper-caste Indians, the average British officer feigned a horror of being in bed with business interests. The “boxwallah” was an inferior being as compared to his Army or civil service brethren, who were on a morally superior mission of civilizing India.

Colonial hypocrisy persists – “it is not the business of government to help business”

This “red line” between government and business, which Free India inherited, though always surreptitiously porous, has long since dissolved for India’s domestic service cadres — except for odd cases of the most particular officers. The foreign service, however, has taken to these new commercial roles, over the past decade, as the overseas business interests of private Indian corporates have expanded. This is a welcome outcome of liberalization.

Talk of being a market-led economy is hollow, unless the government works actively to grow the Indian private sector at home and abroad. At the most minimal level, this involves opening doors abroad for our businessmen. This is what retired IAS or revenue service officers having been doing for business interests, at home. But opening doors is low-level stuff, albeit with high personal returns. More potentially transformative, is the opportunity to develop an institutionalized public-private partnership, around the human resources required, by “India Unlimited” to become an A-level international player.

Big is not beautiful

With 162 missions overseas, the Indian Foreign Service looks extremely stretched, with just 600-plus serving elite officers. Expanding the service — using the existing generalist skills-based platform on which it is recruited and trained — would be a costly mistake. It would be far better to add the human resources, specifically needed in the ministry and in the missions overseas, through multiple entry options – lateral contracting, deputation from other services based on relevant skills and selective promotion from within.

Create a new position-based Apex Public Service Ecosystem

The origin of an exclusive service for external affairs, as opposed to a combined one for political and external matters lies, in the Government of India Act 1935. The idea at that time was racist. A separate “political” wing to deal with Asiatic powers — namely the Indian princes (there was already a separate home department for police and security matters) and a “foreign” wing to deal with the European powers.

Is it time now to end this farcical divide. “India unlimited” should have a seamless, internationally competitive and standards compliant architecture. inside, out. An integrated, elite Apex Public Service ecosystem for the Government of India, consisting of no more than 3,000 officers, could be a targeted support mechanism. Selected by the UPSC on merit, at mid-career, with a minimum experience of 10 years, it would provide the specific position-based skills and expertise, required for formulating policy and representing India at technical negotiating fora in trade and intellectual property; fiscal management, including tax; economic development and technology; social protection; human development and human rights.

ambassador

A foreign secretary has boldly and transparently opted to step directly into an executive role in an Indian corporate entity. Over the last decade retired IFS officers have taken to self-acquiring a life long title, copying the US practice, of “Ambassador” – a reminder perhaps of their once hallowed status as a flag officer oversees. Now, many more may cross the divide between them and the “boxwallahs”. But till it becomes common to see retired IFS folk jostling amongst the corporate crowd, it will be odd to see an “Ambassador” parked at Bombay House, the Mumbai headquarters of the global Tata empire, rather than at Birla Building in Kolkata, which is the original owner of the brand.

Adapted from the authors opinion piece in The Asian Age, April 28, 2018 http://www.asianage.com/opinion/columnists/280418/govt-india-inc-time-to-diffuse-the-red-lines.html

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