governance, political economy, institutional development and economic regulation

Posts tagged ‘technology’

Data protection – new challenges but lame solutions

LOCK

Safeguarding your privacy from government and the use of your data by companies without asking you or paying you explicitly, are current concerns, even in under developed India, where more than one half of the population remains effectively unhooked to the internet because of patchy service in low population density areas.

The proposed solutions are pretty humdrum. A committee constituted by government under B.N. Srikrishna ( a retired judge of the Supreme Court) has adopted a please-all stance. A new legislation with new government agencies and draconian provisions for imposing penalties, modeled along the European approach seems to be the best that we can come up with.

An institutional approach to data protection

A new Data Protection Authority (DPA) is to be created as an “independent regulator” for monitoring, enforcement, standard setting, adjudication and grievance handling. Will this regulator work when so many others have failed to deliver? Only time will tell. But it cannot worsen the present levels of data protection. It may cost a bit more. But it will also create additional “good” jobs. So, on the whole, we should probably go for it.

A regulatory pancake is undesirable

The committee also recommends, somewhat surprisingly, that the Unique Identification Authority of India (UIDAI), which has the mandate to issue Aadhaar and manage its database, should also be given regulatory functions, its autonomy enhanced with enforcement powers over those entities which, in turn, are authorised to access the Aadhaar information. In addition, UIDAI will also become a data fiduciary regulated by the proposed DPA, like any other data fiduciary – all this via amendments in the Aadhaar Act.

This is convoluted, but it preserves the existing Aadhaar Act while also bringing the UIDAI under the mandate of the DPA. Clearly, this device diffuses potential resistance. However, wouldn’t it be sufficient for the UIDAI to be regulated by the DPA? The issue of data privacy in Aadhaar using fiduciaries could be directly regulated by the DPA. Data privacy leaks happen not within the UIDAI database, but in agencies like banks or food distribution centres which are required by the law or by executive order to access the Aadhaar base.

No reciprocity between citizen and State rights

In the context of private data protection versus the State, the committee’s recommendations are fairly status quoist. The committee has ceded regulatory ground, near completely, by exempting all authorities controlled by the government, as defined in Article 12 of the Constitution, from the need to obtain the consent of individuals (termed data principals by the committee). The only restraint is the triple test laid down by the Supreme Court (Puttaswamy case 2017) — State rights limited to those permitted by law; the principles of “necessary” and “proportionate” restraint on privacy and finally restrain only to promote a legitimate interest, such as the “security of the state”.

Trawling Big Data for security of the State

Civil society is almost certain to be unhappy that better and more explicit safeguards haven’t been suggested over public agencies to curb the practise of gathering “intelligence” or exercising “surveillance” in the manner of a “fishing expedition” — casting the net wide to gather all possible information.

The safeguard today is that approvals for interception, under the Telegraph Act 1885, are given by a three-person committee of top bureaucrats. The number of requests — around 8,000 per month — are huge. The secretary-level committee can only hope that their junior staff has sifted the requests carefully. A similar architecture exists in state governments. Under the Information Technology Act 2000, private information stored in computers can be similarly accessed for reasons of state, including crime prevention and detection.

The committee suggests that a new law is needed to exercise better oversight over intelligence-gathering, including wider parliamentary and judicial participation. That will take time. An earlier bill to regulate the functioning of the intelligence agencies had lapsed in 2011.

Cynicism on intra-State mechanisms to check abuse of data privacy are misplaced

Surely, even within the existing laws, there is much scope for improvement. Enhancing the capacity and willingness of government agencies to adopt a minimalist approach to data use is one such. Why not use artificial intelligence to handle the huge workload of identifying unreasonable requests or those drafted without proper application of mind? Why not empower the committee of top government officials to discipline line agencies submitting unreasonable requests? Further, can these high officials themselves not be disciplined if they fail in exercising due care? Why not have a group of ministers exercise regular and specific oversight over them? It is the minister, after all, who is answerable in Parliament.

Consider that the most egregious cases of privacy intrusion relate to the use of state power. A new law to improve state functioning is a narrow and time-intensive approach to the problem. It ignores the fact that “gold standard” laws in a poor, developing country, with massive functional illiteracy, does not really work.

Data is valuable “property”. Harness it to pay “data principals” for its use

The recommendations with respect to safeguarding privacy versus business interests are broadly aligned with the “gold standard” of the European Union General Data Protection Regulations of May 2018. We have a fatal instinct for legislating for gold, but settling finally for results equivalent to baser metals.

The committee has sought inspiration from the Directive Principles of the Constitution. Article 39(b) and (c) enjoin the State to work towards redistribution of the material resources of the community for the common good and to avoid the concentration of wealth and means of production. These are non-justiciable segments of the Constitution meant to guide lawmakers. It is worrying when the judiciary starts second-guessing the lawmakers.

Consider that applying these principles bluntly could mean, at an extreme , that data aggregation should be reserved for the public sector to avoid the concentration of wealth which private data aggregators like Amazon have achieved. This could kill the goose which lays the golden eggs. Reducing inequality is a legitimate concern. But the worst way of going about it is to socialise either the means of production or value creation. More significantly, these ideological considerations are misplaced whilst  thinking through what should be done to protect data without killing the value proposition embedded in its use.

Proposed restraints on business include stiff fines and draconian penal provisions 

JAIL

Businesses and bureaucrats will also view with considerable apprehension the recommendation that severe criminal liability should extend to incidents of “intentional or reckless” harm caused to data principals. That such offences should be “cognisable” — arrest by the police without a warrant and “non-bailable”. Experience shows in the case of criminal penalties, unlike in negotiations, the heavier the stick wielded, the lighter becomes its actual use. The low efficiency of our judicial system also needs to be considered. Such draconian provisions only serve to dissuade honest, lawful businesses, but do little to discipline criminal intent.

The direction for change recommended by the committee is positive, the narrative outstanding and the information collated impressive. An incremental, contextual approach and a near-term vision, would have helped earlier actualisation of its admirable intent.

Adapted from the author’s opinion piece in The Asian Age, August 3, 2018 http://www.asianage.com/opinion/columnists/040818/to-ensure-data-safety-a-better-vision-needed.html

Secrecy, privacy and property rights

access denied

Rahul Gandhi alleged, during last week’s doomed-from the-start no-confidence motion in Parliament, that corruption in the 2016 agreement signed by the Narendra Modi government to purchase 36 Rafale fighter jets from France had forced defence minister Nirmala Sitharaman to backtrack from her assurance to disclose details of the price of purchase.

Parliamentary subterfuge – unnecessary, if there is nothing to hide

The matter could have been ended by Ms Sitharaman admitting that being new, she had overlooked the confidentiality clause – a plausible explanation since military purchases are a tough, black box to unravel. Instead, the government chose to hit back by pinning the blame on a 2008 bilateral security agreement signed by the then UPA government with France. This needed both parties to protect classified information which could compromise the security and operational capability of the defence equipment of either.

It is quite a stretch to argue that keeping the price paid a secret meets the test of “necessity” or “proportionality” which guide how much a citizen’s right to know can be restricted. The Chinese or the Pakistanis couldn’t care less what the Indian taxpayer shelled out for the fighter jets.

They likely already know the specifications of our purchases. But at the same time corruption cannot be lightly presumed to be the reason why Ms Sithraman backtracked. Expect this unresolved debate to hang like an ominous cloud as the counter to the BJP’s allegations of corruption during the previous UPA government.

The underside of unrestrained privacy

Privacy is to individuals what secrecy is to the State.  The debate on privacy got muddied by the recent arraignment of WhatsApp for being the conduit of fake news, which incited vigilante violence and hate crimes.

WhatsApp encrypts content in its pipes end-to-end like no one else. Complete secrecy attracts 1.5 billion active monthly users and 60 million messages per day. Its end-to-end encryption cannot even be decrypted by its own administrators. This rabid commitment to secure the privacy of its users doesn’t align with the extant law and is as over-the-top as is our government’s thirst for secrecy. The fundamental right to privacy is restricted by other fundamental rights, including public order, security and those embedded in Article 21 of the Constitution of India, to which privacy was also mapped by the Supreme Court in 2017.

A fundamentalist view on the right to privacy has spawned “dark”, impenetrable means of communication, like WhatsApp. This is a precursor of what could happen if the “dark web” becomes the norm. Similarly, if crypto currencies are allowed to subvert a sovereign’s power to issue currency and bury crime-related financial transactions underground, catastrophe beckons.

WhatsApp managers initially expressed technological helplessness to regulate the unsavoury use of its technology. They are now making conciliatory noises with an eye to their bottomline. Non-compliance could jeopardise their application for adding-on a payments app in India.

Psst! I have a secret

Secrets

Why has WhatsApp been allowed to linger on and not simply told to shut shop, as is China. The bottom-up view is that encrypted communication has wide appeal across political parties and individuals. We all have secrets.

WhatsApp democratises the power to have secrets, unlike the Official Secrets Act 1923, which locates this power only within the State. WhatsApp allows everyone to have secrets. This suits freewheeling democratic India.The last word on the privacy of digital data will be from the Justice B.N. Srikrishna Committee on data protection. This committee, appointed in August 2017, has worked in unprecedented grand isolation. Presumably, things have been decided behind closed doors and the collective wisdom will be revealed in due course.

TRAI recommendations on data privacy and security mundane, at best 

But in chaotic India, surprises are routine. Days before the report was to be submitted, the Telecom Regulatory Authority of India (Trai) published, on July 16, 2018, its recommendations on privacy, security and ownership of data. The TRAI recommendations are unlikely to make the committee pause and think again. It is already broadly agreed that the individual’s ownership of data is paramount. But both the fundamental right to privacy and the right to property over data are restricted. If the necessary safeguards exist to mask sensitive and personal information, the plea of privacy loses force for denying access to data, at least to the State.

Artificial intelligence requires masses of data to train machines to think and behave better than humans. Anonymised data aggregated across a large number of individuals is more valuable than oil, in order to understand and predict contextual human behaviour.

Who is “Free riding” on data?

The debate on free riding on data has focused on how aggregators free ride on individuals data. However, if an aggregator “pays” explicitly for using individual data, ownership over data should stand transferred to the aggregator. Consider that in touristy locations across the world, locals demand a fee to be photographed. Such contracts, for non-anonymised data, with adequate safeguards, should be encouraged not pushed underground.

With respect to strictly anonymised data the right to deny or withdraw access to, despite adequate masking safeguards, can be viewed as anti-development and also at a stretch anti-national. At the very least, denying or withdrawing access to anonymised data should attract a cost to be paid, since it amounts to “free riding” on the technological benefits gained by others providing their anonymised data.

TRAI has passed up an opportunity to assert that the ownership of anonymised aggregate data should vest with the entity doing the aggregation if a specific contract exists with the data generator (app user). This needs to be clarified to retain the value proposition in data aggregation.

A market for anonymised data

Conversely, TRAI has ignored the need for a market to price data. A market exists even today. But it is an informal and non-transparent market which hurts the commercial interests of the individual data owner and puts the controller or processor of data in the driver’s seat. This information asymmetry can be removed through innovative institutional development to ensure that individuals are not shortchanged and have to sell their data cheap – much like innocent tribals selling their land for peanuts. If data is the new oil, it must priced accordingly.

Restore property as a fundamental right 

demolition

We have grossly neglected property rights in general and specifically in the context of  data management. Civil society mostly focuses on safeguarding the privacy aspect of data management. There is a reason for this. Unlike privacy, the right to property stopped being a fundamental right in India in 1978. This makes it difficult to challenge laws infringing on property rights.

Conversely, the higher judiciary has been indulgent in admitting public interest litigation  (writs) challenging laws threatening fundamental rights generally, so privacy gets privileged legally over property. Privacy rights also align with the need to decriminalise gay sex. It is an emotive issue. In comparison, a right to property seems almost crass, where 60 per cent of people own no land or electric consumer durables; 40 per cent of households live in just one room and can fit their possessions into a gunny sack.

But make no mistake. Socialism erred in hiving-off the right to property from human rights. Property is intrinsic to the right to privacy and liberty. But we will have to keep arguing till we fix this error, eventually.

Adapted from the author’s opinion piece in The Asian Age, July 24, 2017 http://www.asianage.com/opinion/oped/230718/whatsapp-row-on-secrecy-privacy-property.html

A “green” Diwali sans firecrackers

SupremeCourtPhotos(47)

Managing winter smog in the National Capital Region (NCR) has occupied the Supreme Court since 2015. Three interim orders — in November 2016, September 2017 and October 2017— each of which changes the status quo, imposing commercial costs, illustrate the limitations of the judicial approach while balancing commercial interests with public health concerns.

Joined at the hip

joined at the hip

Delhi and Sivakasi, 2,650 km away in Tamil Nadu, are symbiotically joined. Sivakasi produces three-fourths of India’s firecrackers. Delhi and its surrounding areas are the prime consumers. Consider that 40 per cent of 610 permanent licensees for selling firecrackers are located here. Delhi also licences 968 temporary fireworks retailers. The NCR’s stock of fireworks is estimated at 6,000 metric tons — enough to fill 600 trucks.

CPCB plays truant

The reason why a substantive decision on the sale of firecrackers remains elusive is that the Central Pollution Control Board (CPCB) has failed to define the permissible ingredients for firecrackers and their volumes thereof. Without a standard regulating manufacture, the task of optimising across public health concerns; preserving employment and nurturing business potential becomes, at best, an approximation with avoidable costs. Only blunt options like banning the sale of firecrackers present themselves. The actual public health benefit of such measures is uncertain. But irreparable harm to businesses and distress to workers is certain.

At the very beginning…

Back in November 2016, during the Diwali season, Delhi was enveloped in smog. CPCB air quality reports indicated that in 2015 and 2016, the level of pollution had spiked during and after Diwali. Pitampura, a densely populated area in Delhi, suffered an increase of pollution by four times in 2015 and more than 10 times in 2016. Dealing with an emergency, the Supreme Court suspended all licences for the sale of firecrackers in the NCR on November 11, 2016. It also directed the CPCB to submit, within three months, a comprehensive report on the air pollution impacts of bursting firecrackers. The implied strategy was clear. Take stern action in keeping with the magnitude of the crisis and incentivise manufacturers and sellers of fireworks to negotiate with the government for setting standards. Since Diwali was already over, the commercial dislocation caused by the order was minimal.

The CPCB has yet to submit the report due on January 11, 2017, on the air pollution impact. Meanwhile, prohibitions on using antimony, lithium, mercury, arsenic and lead compounds were imposed piecemeal by the Supreme Court on July 31, 2017 and on strontium chromate on September 13, 2017. The court is clearly working hard despite executive intransigence.

And more recently…

Gearing up for the festival season in 2017, the Sivakasi manufacturers and suppliers requested the Supreme Court on July 5, 2017 for a modification of the suspension of permanent licenses.

The Supreme Court recognised the harm being caused to 300,000 livelihoods, despite the absence of any proven link between the bursting of firecrackers and hazardous air pollution.

The National Green Tribunal has listed seven sources of air pollution in NCR. Firecrackers are not one of them. A January 2016 IIT Kanpur report had also not listed firecrackers as among the major sources of air pollution in Delhi.

On September 13, 2017, the Supreme Court allowed a partial lifting of the suspended licences, to enable the accumulated stock of fireworks to be sold in NCR or to be transferred out. To avoid any reoccurrence of a fait accompli, it directed no more fireworks should be transported into the NCR. More significantly, it directed that the number of temporary licences in NCR be halved in 2017, and both permanent and temporary licences further halved in 2018. Taking a cue from the 1999 experience in defining noise pollution standards for firecrackers, it constituted a multi-stakeholder, technical committee chaired by the CPCB to report on the impact of bursting firecrackers on air quality. By all accounts this was a fair and forward-looking order mitigating the commercial harm caused by regulatory uncertainty while seeking to reduce the public health impact.

The puzzling about turn

Inexplicably, on October 9, a three-judge Supreme Court bench put the September 2017 order in abeyance till November 1. The intention was clearly to postpone the restitution of sale till after Diwali, thereby nullifying the positive commercial benefits. The court invoked the “precautionary principle” in the public interest. This principle advocates abundant caution if the potential for irreparable harm exists. Thereby, the significant, negative commercial impact of the order simply became inevitable collateral damage.

Regulating better is possible

Could the regulatory process have been managed better? First, it goes without saying, that this is yet another instance of the government purposefully abdicating politically sensitive, inconvenient regulatory ground. Commercial uncertainty and public health costs are bound to escalate when this happens.

Strong action effective only if sustained

CJI Thakur2

Second, could the Supreme Court have been more consistent? Yes, it could have limited its initial intervention in 2016 to simply nudge the executive to introduce safe manufacturing standards, including by using back channels for the purpose. Possibly, its strained relationship with the government during this period, over the judicial appointments issues, may have constrained it from using this practical tactic to resolve the problem.

Optionally, the court could have issued a nuanced order, suspending temporary licenses in NCR to restrict retail sale; allowing permanent licenses to continue, but at a progressively decreasing scale and directing the executive to limit the bursting of firecrackers to collective displays at pre-designated sites. This would have reduced the quantum of firecrackers burst; minimised the commercial harm and preserved the incentive for firecracker manufacturers to actively pursue formulation of safe manufacturing standards. Despite the storm in the social media decrying the  encroachment of Hindu religious rights by limiting firecrackers, the public is in favour of clean air and a cleaner India.

Green “bangers” anyone? 

bamboo

Finally, the court could have explored the manufacture of “green” firecrackers. Before gunpowder was invented in the 10th century, the Chinese made them by heating bamboo. Northeast India is resplendent with bamboo, just waiting to be used. China might also be happy to modernise this sustainable technology and commercialise it under the Make in India initiative. Green “bangers” can preserve the thrill of Diwali, only minus the smog.

Adapted from the authors article in The Asian Age October 12, 2017 http://www.asianage.com/opinion/columnists/121017/costly-flip-flops-over-ban-on-firecrackers.html

Keeping our children safe

Kid security

Violent crimes against children are grabbing headlines. The latest is the sexual assault and murder of a student in a private school’s toilet in Haryana’s Bhondsi, near Gurgaon. However, Haryana is not the most dangerous state for kids. That dubious distinction belongs to Delhi, with a crime rate (crimes against children per 100,000 population) of 169. Chandigarh follows at 68. The safest states for kids, per the National Crime Records Bureau data, are Jharkhand, with a child crime rate of just three, followed by Bihar, at four.

Long term negative impacts of child abuse

The World Health Organisation estimates that in developed countries, six per cent of adult depression, alcohol and drug abuse; eight per cent of suicide attempts; 10 per cent of panic disorders and 27 per cent of post-traumatic stress disorders are due to abuse during the first decade of the victim’s life.

But there is scanty scientific evidence, in developing countries, of the drivers — the sources and location — of child abuse. David Finkelhor, a sociologist, tellingly comments that “there is more experimental science in the toilet paper we use every day, than in what we have to offer abused children or families at risk of abuse”.

Crime data

In India, where the general standards of personal security and protection of human rights are low and public resources are stretched, child abuse can easily become just another statistic. Crimes against children increased from 14,975 in 2005 to 94,172 in 2015. Over the same period, violent crimes increased at the rate of 5.5 per cent per year — much faster than the growth of the population. Sadly, the proportion of crimes against children to total violent crimes, increased from seven per cent in 2005 to 28 per cent in 2015. Our children are increasingly more unsafe.

With whom does the buck stop?

Preventing such crimes is a shared responsibility. Initiatives include regular oversight and counselling of risky families by specialised agencies; early identification of high-risk adolescents to aid them through high school; imparting life skills training to make children streetsmart and reducing access to alcohol, drugs and weapons.

Inevitably, poorer kids are more at risk than rich kids. The same applies to other population segments at risk — senior citizens and women. The well-off can cocoon themselves from a prevailing ecosystem of insecurity. But for other vulnerable groups, it is the State which must step in to offer protection.

First, increasing the effectiveness of policing aimed specifically at controlling crime on the street and in public spaces is the key. Predators seek out low-security havens — parks, lonely lanes and unoccupied spaces to strike. India is historically under-policed. The UN standard is 222 police personnel for every 100,000 population. India has never crossed 140. Singapore — that haven of orderliness, which all Indians marvel at — has 1,074; disciplined Japan has 207; the European Union has around 347 policemen per 100,000 population.

Even this aggregate data exaggerates the level of police available for citizen centric, local policing — beat patrols, traffic management, crime prevention, detection and investigation. In India 60 per cent of the police are occupied guarding government buildings and assets (such as CISF & RPF); patrolling the borders (BSF, ITBP, SSB); quelling riots, fighting insurgency or doing VIP bandobast (CRPF and state armed police). Local policing must be strengthened much, much more.

The police is too busy with other stuff

police action

Comprehensive police reform has never been tackled seriously despite a series of commissions — starting with the National Commission on Police Reform, 1978, and ending with the Second Administrative Reforms Commission, 2007, all of which recommend broadly similar measures. The police mandate is fractured between states and the Centre, leading to silo functioning. The Central police forces are significantly better resourced than the state police forces, though the latter are directly concerned with controlling crime. The buck often stops with the police. But they are poorly led. Senior police officers skip from helming one complex area to another, where they may have no prior experience and no long-term allegiance to the specialised force they command. Even junior officers and constables are neither specifically recruited nor are they permanently slotted in specialised areas, like crime detection and investigation; communications; community policing; traffic management; cyber security or intelligence and riot control.

The “danda” is still the primary instrument of policing

Second, the use of technology to identify high-risk locations and victim behaviour and profile potential predators is constrained by the low educational qualifications of the personnel. 86 per cent of the force consists of constables who have merely passed their Class 10 or at best Class 12 exams. The officer cadre is thin and inadequately skilled. Service conditions are terrible. Police personnel regularly do 10-hour to 14-hour long shifts, with no weekly time off. Police housing, of indifferent quality, is available only for just one-third of the personnel. Worse, the police force is highly politicised and tends to rely on fear and the use of brute force, rather than by earning the respect of citizens — a colonial hangover. These conditions are not conducive to attract committed, qualified recruits.

Too few first responders to save lives and manage trauma

PS tent

Third, improving the first responder reaction, can save lives and minimise damage by getting victims to healthcare facilities. But there are just 15,500 police stations across more than 650,000 villages and road links may not be the best. Of these nearly 10 per cent lack even a wireless link. There are only 164,000 vehicles with the state police forces. Their spread across locations is likely to be highly uneven and concentrated in the major cities.

Better oversight by government of security arrangements in schools

Other than improving policing, viable short-term options include better oversight by the government education departments over school administrations. Value-add community participation, like authorising Parent Teacher Associations to certify the school’s adherence to minimum safety and security standards, can help.

Decentralise security to groups of parents & kids

cop teaches

Get kids and parent groups to collectively enhance their own security. Readers may remember the captivating proactivity of kids in outwitting, admittedly bumbling, adult, minor criminals from the 1950s era, in Enid Blyton’s Secret Seven and Famous Five series. Fiction can become a reality — once the imagination and interest of the kids is ignited. Herein lies the fastest and most effective route to making our kids safe.

Adapted from the authors article in The Asian Age, September 15, 2017 http://www.asianage.com/opinion/columnists/150917/to-keep-our-kids-safe-all-have-a-role-to-play.html

 

Needed paychecks not pink slips

Jobs 2

Photo credit: Zee news

Ask any of the 68 government departments in New Delhi, what they are doing about private sector jobs, and each will point at the other for an answer. The truth is that governments have not been held accountable for job creation since the 1980s, when neo-liberalism took root. No one advocates going down the horribly inefficient public sector job creation route again. So, it is up to the private sector and self-employment to absorb our surging army of millennials — almost 10 million strong annually — which is equal to the entire Australian workforce.

bot

Humans versus machines- who’s winning?

But does the private sector have incentives to produce jobs? Looking purely at the bottom line, machines are superior to humans. They also come with financial incentives for capital investment — cheap bank finance and accelerated depreciation for tax purposes — which boost the bottom line. Technology is fast eroding the capacity gap between the unique attributes of human labour and machines. Siri (Apple), Cortana (Microsoft), Google Now and the mellifluously named Maluuba are all cheaper than hiring a real-life assistant and are on call 24×7. Bots will progressively replace humans, more so in logically-executed routine jobs. Not only are human services more expensive, but they come with enormous social and economic costs for housing, transport, education, health and security.

Can government help preserve human employment?

highway

So, how can the government help create new jobs and preserve existing ones? Kickstarting infrastructure projects; promoting “Make in India” and resolving the bad loans burden of banks — are all great government initiatives for new employment. But their impact is medium term. In the near-term, the government needs to preserve existing jobs. Here are four options.

Market Indian skills in 34 “Aged”, rich, countries 

indian farmers

First, extend the H1-B strategy, used to great advantage in the US, for temporarily exporting Indian workers overseas. Rich countries, with ageing populations who need the workers, but fear the cultural dilution associated with permanent immigration would be the targets. Assign targets to our ambassadors posted in these locations to negotiate with their host countries to allow temporary immigration, lightly monitored by the government and directly supported, under the Skills India initiative, to acquire local language and cultural skills. The associated fiscal costs are outweighed by the social and economic benefits from repatriated earnings alone. A stretch target could be to export a million workers over the next three years.

Discourage the “paper chase” by avoiding “gold plated” human resources.

microsoft-employee

Second, build respect for skilled work by venerating those who have these skills. Our caste and hierarchy-ridden Brahmanical social norms devalue skills and overvalue “intellect” — both in the public and private sectors.  This unfortunate social milieu engenders “qualification creep”. Both Indian companies and the government routinely advertise for engineers even when an experienced mechanic is needed. Consider the irrational gap between the wage for a nurse versus a doctor. Good nursing vastly reduces the workload for doctors — specially in the emergency room for the care of trauma patients. But this noble, highly skilled profession is not a first choice today. Instead, there is a stigma attached to it, as being fit only for those who cannot afford the high cost and long incubation period for becoming a doctor. Why is a Bachelor of Arts degree needed to become a bank clerk — a high responsibility but a routine, people skills-oriented job? Only a select few, intending to teach at the college level or do research, should need a master’s degree. Tests and interviews for jobs should focus on personality and psychological attributes, rather than educational qualifications, which are rarely aligned with job skills anyway. Only when we consciously make the paper chase redundant will we value real-life skills accretion, where the maximum potential for human jobs exists.

Reward socially responsible business leadership which looks beyond the “bottom line”

murthy gates

Third, introduce disincentives for layoffs. Yes, flexibility in workforce management is a must for employers. But companies can be incentivised to be socially responsible employers. Those who go beyond watching their “bottom line” to retaining and growing their employees should be rewarded through tax breaks, access to cheaper finance and publicly recognised as nation builders. Why not devise an index to assess social leadership qualities of company honchos before they get awards and honours, get invited to Rashtrapati Bhavan; preferential access to our ambassadors overseas or get nominated on to government committees? We need to publicly distinguish between narrow-minded private employers who only watch bottom lines, and truly transformative business leaders, if the private sector is to lead in job creation.

Give incentives for digital/banked wage payments by individual employers

Around 300 million workers are employed in the agrarian and household sector as daily wagers or long-term help by individuals — farmers, rich and middle class urban households. Legislating minimum wages and benefits for this segment is lazy policymaking and can end up having a regressive impact due to weak oversight capacity. The Niti Aayog has taken the lead to plug the data gap on informal employment where most of the incremental jobs will be created. The government can step in with near-time transactional measures for light-handed regulation of such employment. As an initial step, the government should promote the payment of wages into bank accounts to generate big data on such employment. An incentive of Rs 5 credited back to the employer’s account for every Rs 1,000 paid into an employee account could help. If costs are shared between the bank and the government, a budget outlay of Rs 5,000 crores can pay for this incentive and bank annual wage payments of an estimated Rs 18 trillion, much of which is in cash today. Individual employers, with a track record of employing more than five workers and banking wages of more than Rs 10 lakhs per year, should be publicly recognised as “social growth enablers”.

Collaborative governance is key

bicycle with flag

Last, the optics must be right. The government needs to step away from the colonial pedestal of being the “mai baap” (supreme preserver). The “lal battis” (red beacons) have gone. It is time now to puncture some sarkari egos further and spread the accolades for social and economic achievements.

Adapted from the author’s article in The Asian Age July 16, 2017 http://www.asianage.com/opinion/columnists/160517/a-to-do-list-for-govt-to-create-more-jobs.html

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

 

Change UP to change India

victory 2

When it comes to winning elections, the sophistication and efficiency of the BJP political machinery is unmatched. Of course, Prime Minister Narendra Modi’s charisma provides the base, which the party leverages, to ensure that their individual candidates win. So what does this historic win — pulling in an unprecedented 77 per cent of the seats up for grabs in the UP Legislative Assembly — mean for the nation. And specifically, is UP the tail which can wag the dog? PM Modi knows it can. This is why he has set five years from now 2022 as the milestone for changing India – not 2019 when the next general election is due.

UP the sleeping giant

The taj

UP has a rich past and a glorious future. It is the present which needs some looking after.

Uttar Pradesh accounts for around 12 per cent of India’s GDP but has 17 per cent of its population. If you sometimes wonder why India doesn’t grow more than it does or why the existing growth is not well-distributed, look no further. UP is to blame for both negative outcomes. It pulls down national metrics on per capita income and growth. It also makes us look bad on social inclusion. Nearly a quarter of all Muslims and the poor (based on the government’s poverty headcount metric) live in UP. The state’s poverty level, at just under 30 per cent, is the second highest in the country, after Assam.

UP – the key to ending poverty

child poor

If the BJP can halve poverty in Uttar Pradesh, bringing it down from 30 to 15 per cent (same as the existing levels of poverty in Rajasthan, Gujarat and Maharashtra), the national poverty ratio will fall by a massive 10 percentage points, from 22 per cent to 12 per cent. Reducing the levels of poverty in UP also has high positive externalities — particularly political. There are sizable communities of migrant workers from UP in Kolkata, Mumbai and Delhi, through whom the message of “achche din” can travel to these metros, generating a “feel good” tsunami.  Consider that if the BJP can make Uttar Pradesh grow at the average rate of national GDP, it would increase the rate of growth of the national GDP by 0.5 percentage points. This additional income, even if it is proportionately distributed across the population of the poor, would reduce poverty to single digits in UP.

Why the BJP is uniquely place to take up the challenge

BJP leaders

Cynics could ask how can we be sure that the BJP will extract the potential? Others think the BJP will face headwinds while picking a chief minister, thereby risk displeasing sections of the winning rainbow coalition. The squabbling in New Delhi in 2014 is evidence that even the BJP is not immune to internal sabotage by disgruntled cadres. The BJP works best when it functions in a vertically-integrated manner — much like the Communist Party of China. Significant decisions are all made at the very top. Targets are determined for lower level formations at the state and municipal levels. These are then vigorously followed up and performance measured against targets. Now that UP is directly controlled by the BJP, the Narendra Modi performance juggernaut can be rolled out uniformly across the state.

So here are three focused ways in which the BJP can be different.

Give UP back to real-time management by it’s bureaucracy

UP officers

UP has many Durga Shakti Nagpals – officers who seek to serve. The present Cabinet Secretary, the Chief Election Commissioner and the PMs Principal Secretary are all UP cadre officers. But two decades of “populist” rule post “mandal” in the 1990s have diminished the excellence, which was the hall mark of UP administration.

First, today UP is a state which is resource poor and deficient in entrepreneurship. Out of the 100 top companies listed by market capitalisation on the Bombay Stock Exchange, only one company — Dabur India — is headquartered in UP. The Annual Survey of Industries 2014-15 lists only six per cent of the total number of factories and industrial workers, and just five per cent of industrial capital in UP. This illustrates that government efforts remain crucial, unlike in more developed states, where private sector initiatives can substitute for government efforts. The Modi magic, of revitalising the bureaucracy through direct interaction and consultation, as is now being practised at the Centre, must be institutionalised. This “direct contact” pattern of administration at the Centre has significantly reduced the earlier proliferation of corruption and silo-based operations. Mr Modi must return Uttar Pradesh to the real-time management of its bureaucracy, who have been sidelined and broken in spirit for too long.
The State in UP has become moribund. It must be reinvented, and used as an instrument for social change.

Make UP the international “laboratory” for agri growth

farmer

Second, agriculture is the heartbeat of Uttar Pradesh. Poor rural infrastructure and lawlessness have constrained additional investment in agriculture. Eighty per cent of the poor also live in rural areas. Agriculture based on “per drop more crop”; large scale diversification to non-cereal crops and commercialisation of agriculture outside the subsidy regime format of minimum support prices; cheap fertiliser and energy can pay rich dividends. The new land leasing arrangements should be led by UP, just as Rajasthan has taken the lead in amending outdated labour laws. More urgently, crop yield is not uniform across the four sub-regions. Average agricultural productivity can be increased by 10 per cent by simply pushing up productivity in the lagging central and eastern sub-regions (which account for around one-half of total foodgrain production in UP) to the levels prevailing in the state’s western region, adjoining Delhi and Haryana.

Invest in UP’s infrastructure

gadkari 2

Finally, UP has the worst road infrastructure in North India. Power cuts are rampant, even in Noida, which is a satellite township that adjoins Delhi. A proposal to build a regional air hub to service Agra has been gathering dust because the political alignment between the Union government in New Delhi and the state government in Lucknow was not favourable since 2002. If Delhi plans to link Myanmar and Southeast Asia by road with Afghanistan and beyond, over 700 km of this highway must pass through UP. Some of transport minister Nitin Gadkari’s expertise in getting infrastructure going could be usefully applied to UP.

2017 election results are a gift – use it well

The BJP is known for its executive and managerial abilities; its disciplined cadre; its capacity to ramp up domestic and foreign investment and to link investment to results. Uttar Pradesh is likely to give it the biggest bang for every buck it spends, simply as the desire to do better in UP is matched only by the utter frustration of its citizens over their stagnating future prospects. If UP booms, India will follow. This is one chance that we simply must not lose.

bangles

Bangles in Firozabad, brassware in Moradabad, rich textiles in Varanasi, the juciest mangos from orchards across the state, Nimish – the flavoured forth from early morning milking of cows, Mughal delicacies from Lucknow and Rampur, ancient monuments at every turn and a culture bred by centuries of civilised life – UP has it all, except transformational leadership- will Modi be the one? 2022 will tell.

Adapted from the authors article in Asian Age  March 13, 2017 http://www.asianage.com/opinion/columnists/130317/if-bjp-can-uplift-up-all-of-india-will-gain.html

 

Is a machine kicking u out?

 

only-humans

Davenport and Kirby’s book “Only Humans Need Apply” Harper.2016 comes with a whiff of optimism and plenty of specific practical advice- based on real life cases- for professionals – scientists, radiologists, teachers, actuaries, financial analysts, lawyers and all “knowledge workers” who fear loss of jobs. This is where it is different from the previous, scarily sensational non-fiction on machines versus humans. The title is an inversion of Jerry Kaplan’s memorable “Humans Need Not Apply”.

Yes, computers are after your job.

loss-job

Yes, computers could be coming after your job. And yes, machines are very smart and becoming smarter. So ignoring them or trying to compete against them is a zero-sum game- the machine will win and you will lose. John Henry, a West Virginia driller learnt that in 1870. He competed against a steam powered drill. He won- only to die from over exertion soon after.

Dirty, dangerous, physically demanding and highly structured jobs like on an industrial production line have been doomed since the 1990s. The US lost more jobs to automation at home, than to outsourcing to India. This trend will worsen. Even “knowledge workers”, highly educated professionals – 25 to 50 percent of the workforce in advanced economies- will get flooded out via automation by 2040. McKinsey estimates automated systems will replace the equivalent of between 110 to 140 million human jobs, by as early as 2025.

Five ways to win the battle

comp battle.jpg

The way out is “augmentation”- keeping humans at the center whilst farming out work machines can do better, as opposed to “autonomy”- progressively substituting humans with machines. Steve Jobs illustrates – a human, “augmented” with a bicycle, becomes far more energy efficient that even a condor, the most energy efficient of all species. Augmentation is more than mere “complementarity” or co-existence with machines. It means actively collaborating with automation and artificial intelligence to sharpen our skills in areas where humans are most competitive.

Take apart your job into two components – structured tasks which can be codified and tasks which cannot – or at least not just yet. Focus on honing the latter. The former will be automated. You have five options to adapt to the future.

Step in: You can’t beat them so collaborate

step-in

You can “step in” by learning how machines can offload your “dodo”, routinized tasks, thereby freeing up space for your core “human” skills. This presents the largest opportunities to partner machines, oversee them, point out errors they have made or help in improving them.

Step forward: Join the race to make computers better

computer-engineer

You could also “step forward” by acquiring the highly specialized quant skills, engineering knowledge and coding expertise needed to create newer and better machines. But the skill requirements would be of a very high level with the need for continuous upgrades.

Step up: Use computers to widen or deepen decision making skils

step-up

“Step up” options involve honing the expertise to take unstructured decisions by integrating information from multiple sources. Warren Buffet defines one such which defies codification – what should a car driver do if the choice is either to mow down a child, who has strayed onto the road, or to plough into a car with four adult passengers? Complex, corporate “trade-offs” in business strategy are no different.

Step aside: Develope skills in managing human behaviour 

ben-bernanke

Others may prefer to “step aside” or take up jobs machines cannot do, like explaining in plain language, to an irate Ben Bernanke, the erstwhile Chairman of the US Federal Reserve, why a computer assessed him as too risky for a mortgage refinance or building relationships in business.

Stepping narrow: Specialise in what computers can’t do.

falconer

“Stepping narrow” is the fifth option. These are jobs so specialized and so restricted- like dealing with special kids or translating lost languages -that they lack the scale required to make automation efficient. In 1997 film maker Errol Morris featured four such narrow specialisations – a topiary gardener, a lion tamer, an authority on the colony behavior of naked mole rats and ironically Rodney Brooks – inventor of autonomous robots.

Computers are  like a horse or a car: They get you where u want to go

Is automation, Keynes’ leisure filled utopia, or a jobless dystopia, scarred by rising inequality and violence? Elon Musk thinks artificial intelligence is “our biggest existential threat”. Stephen Hawking warns that it “could spell the end of the human race”. Bill Gates wonders why “some people are not concerned”.  The authors are clearly not concerned. Nor are 52 percent of nearly two thousand experts polled by PEW. But the near term problem of managing the transition, particularly in poor countries like India, remains a public concern. The authors rightly debunk the option of universal income transfers, as short term palliatives –like NREGA in India – with potentially negative fiscal and work-ethic related unintended consequences.

Governments need to teach us differently for us to adapt

Governments need to reorient education. The focus on science, technology and quant skills is good for those who step in, up or forward. But one half of workers will be stepping aside or narrowly. Education policy does little to encourage these skills. Corporates should get incentives for generating “humans-only” work as Innovation for Jobs (i4j) is doing. International regulation of autonomous machines and artificial intelligence is critical, but absent. We need to collectively “trade off” the benefits from automation against the social cost of increasing joblessness and inequality. Such complex decisions should be a humans-only skill. Unfortunately, we have rarely made wise public choices. This skill needs to be augmented. A first step could be all those concerned reading this book.

Adapted from the authors book review in Business Standard weekend October 22, 2016 http://www.business-standard.com/article/specials/human-factors-in-the-automation-debate-116102101369_1.html

i4j

Small guys always win

Star Wars episode VII tells it like it is, in reel life. The small guys — with fire in the belly and a higher moral purpose as their force — always win in the end.

smallguys

In this universe, big is evil. Thomas Picketty, the celebrated French economist, agrees. The bigger you get the further behind you leave most people. Just a handful hoarding wealth can’t be good and it isn’t.

Government of the underdogs but not for the underdogs

India has a long tradition of the government trying to protect small guys against the big guys. Our post-colonial mindset and our laws pretend to penalise the rich and big business. In actual fact, they work against the middle class and the poor. To make things worse, government has been pretty poor at doing the things rich people and big business could do, like investing in infrastructure and creating jobs.

The government in China manages to do this. But the government there has some advantages: The tight social compact between it and citizens and its credibility based on sustained growth, increasing incomes and improving lifestyles. Higher levels of homogeneity help.

In real life, of course, being big is often an advantage. Teenagers will agree instantly. Older folk may not be so sure. A great body with bulging muscles looks awesome at 19. But as the 40s kick in, things begin to sag and get lumped around as useless weight. Nations are no different. India is a big, old nation with a governance history and systems developed over the last 500 years. It is unsurprising that it is flabby today.

Our options

We can go two ways. Either we can reenergise the existing, highly-centralised system of governance or invent a new, highly-decentralised system celebrating the small guy.

Technology enables efficient centraisation

Technology enables and often induces a higher degree of centralisation today than ever before. In earlier times the bigger an empire became, the more loosely were the far reaches managed. It took the British force, marching up from Calcutta, three months to relieve the siege of the Lucknow Residency in 1857.

Residency

Today a trained and equipped special force can reach a trouble spot anywhere in India within a day. Things can be monitored in real time, across enormous distances, providing early signals of “hot spots” or flashpoints for potential trouble. Social media has created a new, real time, citizen-centric information ecosystem. For every two Indians there is one mobile connection. Of these 20 per cent are smart phones. Within five years there will be as many mobile connections as Indians and 60 per cent of these will be smart phones.

Standardisation is another advantage of centralisation. Education, health, products and services all reflect the “Big Mac” effect — places change but the service remains the same. This is very attractive if you are a fan of robotic life. It also reduces the cost of doing things.

But centralized templates sap innovation

But there are problems which come with big, centralised empi-res. One problem is how to manage the concentration of power at the top. Humans have coped with inequity for generations. But “glass ceilings” sap potential and deaden the desire to innovate and take risks.

Choice is at the heart of efficiency. Old, immigrant nations like the United States retain their mojo because people choose to become citizens; virtually no one is born to a job and everyone has a voice. China is also a meritocracy, though choice is limited there.

But humans are neither robots nor pets. We are honed to express our individuality, search for better alternatives, a better way of doing things.

Inefficient, small, good guys versus efficient, big, bad guys

In Star Wars terms, India is the good guy and China the bad guy. We are the small good guy. We cannot destabilise the world economy. China can. We do not have a history of flexing our muscles. China does. We don’t deliberately infringe human rights. China puts national interest above human rights. But we the inefficient small guy, unlike Singapore, Mauritius or Malaysia, whilst China is the efficient, big guy.

starwars

Competition and choice make decentralized systems efficient

Large, efficient democracies are not born overnight. They are nurtured over six to eight generations. Ours is just three generations old. Our Constitution recognises that one size does not fit all. That is why it establishes state and local governments. Most state governments haven’t empowered local governments, partly because even their own empowerment is very recent. Smaller state governments work better than bigger ones. The shining stars are the five southern states, Punjab and Haryana. Gujarat and Maharashtra are the outlier, efficient, big states. The bigger northern and eastern states illustrate that size is a handicap especially if coupled with antagonistic social diversity.

Choice is embedded in our Constitution. But powerless local governments make choice a redundant option. Our nascent democracy makes us obsessive about potential threats to the unity of India. Destabilising threats from our immediate neighborhood heighten this paranoia.

Consciously dumbing down the Center to the bare essentials of sovereignty is the only way of making the big guy efficient. Empower state governments by transferring human development and social protection functions with the required financial resources. Make the transfers conditional to states empowering their local governments in turn. A cascading stream of resources empowering the smaller guys is the mantra for equity with efficiency. It is only then that India will become an efficient good guy, even as we grow bigger and bigger.

boy

Adapted from the authors article in Asian Age December 26, 2015 http://www.asianage.com/columnists/small-guys-always-win-373

Retired Generals win OROP: will the tail of pensions now wag the dog?

It is just as well that Finance Minister Jaitley was away in Turkey rapping with the G20 about “India’s strong fiscal fundamentals”, even as a small part of that fiscal stability was compromised, with nothing much gained, except possibly 20 million votes that the armed forces represent.

Faujis (armed forces) deserve better but not this way

victory

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

The approval of One Rank One Pension is a bad decision. This is not to say that Faujis don’t deserve a better deal. They do – particulars the officers. But succumbing to the OROP demand meant compromising on a sound principle. “Rank”- a level of command responsibility entrusted to a soldier, should only have historical and ceremonial value post-retirement. Associating pay, or even worse pension, with rank is indefensible.

OROP creates perverse incentives

Consider the perverse incentives rank based pay generates. First is the “toe in” incentive to just cross the rank hurdle and be equated thereafter for life. Not very inspiring. Second, rank as a basis for pay, is a huge disincentive for specialists – high quality surgeons, robotics engineers, pilots, staff on nuclear subs, missile technologists, communication specialists. These “geeks” may not have, nor may they want, the “command profile” that comes with a high rank. Civilians call such profiles “desk warriors”- being good at babugiri or administering power.

Two options exist-though both are bad ones- for getting around this conundrum. One-proliferate “Ranks”, as is done in civil service, to create a top heavy architecture but accommodate time scale promotions. Second-compensate specialists by adding on allowances. But this still does not protect their pensions. Therein lies the potential for a second bad decision.

India’s Chief Missile “Geek” and most loved, people’s President of India- late A. P.J Abdul Kalam – a role model for technologists in India’s defence forces. 

Kalam

Army versus  para military forces- chalk and cheese

The third bad decision would be to extend the OROP principle to the Para Military Forces (PMF). Unlike the Armed Forces, senior PMF officers do not suffer the disabilities of their men, who live in much worse conditions than do the jawans of the army. The “in and out” rotation of officers from the Indian Police services and the lack of regimental tradition binding officers to their men are other differences. Most tellingly the “khaki” these forces wear, is stained by the disrepute that the civilian police has brought to that glorious colour.

Happily, the term of the 7th Pay Commission has also been extended up to December 2015 because it has much to mull over in the context of OROP. Here are five suggestions.

Who should pay for OROP?

First, OROP will cost between Rs 10,000 to 20,000 crores annually. This is not a killer. The money can be found over time. Fast forwarding disinvestment, including in the defence departmental undertakings, is an option. But it is a bad principle to sell the “crown jewels” just to service pensions.

The best option is to implement the “there is no free lunch” principle. The Pay Commission should find the money by cutting back on the pay increase it might otherwise have given to faujis. The OROP demand was for inter-generational equity- between those recently retired and the more aged veterans. It is only fair that what fauji pensioners gain should be paid for by faujis in harness today, by foregoing any anticipated increase in pay.

serving fauji

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

On a life cycle basis faujis should have an edge

Second, assess the extent to which OROP corrects the post 1973 skew against the armed forces. Compare the pay and pension earned over an average life cycle of a fauji and a civilian, taking into account the shorter tenures and the fewer promotion opportunities of the former. If the skew persists, rather than an “edge” the armed forces should enjoy, this is the time to correct it.

Pensions and fiscal stability

Third, move explicitly towards fiscal sustainability. Since 2004, the government’s liability on pension stand capped at its “defined contribution” per new civilian employees. But the liability remains open-ended with respect to the armed forces who enjoy an assured level of pension. Is this the “edge” they should continue to enjoy? Fiscal prudence dictates that a “defined contribution” pension, as for civilians, should be the way to go even in the armed forces.

Find the fat in the army

Fourth, previous Pay Commissions, have refrained from suggesting rationalization of personnel- officer to jawan ratios; substitution of mobile strike capacity for “stand and hold” physical presence and clearer separation between the tasks performed by the army and the para military forces. This is where the fat lies to finance OROP. The army, which constitutes more than 80% of the pay and allowances and 90% of the pensions paid in the armed forces, should specifically be in the cross hair.

bungle

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

China has just signaled its transition to a modern superpower by cutting 300,000 redundant, possibly “tail” related jobs, in the People’s Liberation Army, whilst simultaneously sharpening its teeth. India needs to do the same.

Government servants must not feed off the bottom half of India

Lastly, there is little justification for an overall increase in government pay in general. It has been 100% indexed to inflation since 1996. In nominal terms, the per capita net national income increased by 124% over 2006-2015 but the distribution of growth is skewed in favour of the top 50% which includes government servants. The salary including DA, of government servants increased by 113%.

Government servants likely increased their share of the national income, versus the bottom half of India, who do not enjoy automatic inflation hedging. But there has been no appreciable change in the quality of services provided by government to citizens over the last decade. Private employment has been hit by the global economic slowdown, jobs are scarce and inflation a continuing risk.

The bottom line is that the proportion of national income pie available for government salaries must remain capped. The combined share of the public sector (including parastatals) in national employment is barely 5%. Public sector pay must reflect performance and the market test.

Mind the gap please

The demand for government jobs is skewed-very high for unskilled, semiskilled work. But at the other end the Governor of the Reserve Bank bemoans that cutting edge economists are not available for public service. The armed forces face a shortage of officers against sanctioned posts. Doctors, nurses, good teachers, professors, scientists and engineers are similarly scarce. Children of government servants vote with their feet by preferring private sector jobs.

Public sector pay policy must first address demand supply gaps, before fiddling with the pay for positions and cadres where there is excess supply. These latter are usually those, where job entitlements are significant but accountability limited. The tail must not wag the dog.

Adapted from the authors article in Asian Age September 8, 2015: http://archivev.asianage.com/columnists/orop-rough-cut-379

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