governance, political economy, institutional development and economic regulation

Posts tagged ‘United States’

India’s “green” moves

solar-shade

Solar powered sun and rain shades in India!

India formally ratified the Paris climate agreement on Sunday, notwithstanding that Donald Trump trashed global warming, last week, as a hoax and efforts to control it as expensive and ineffective.

The United States contributes around 16 per cent of world carbon emissions. Truculence in its approach to manage global warming can scuttle the efforts of the rest of the world. Mr Trump’s cavalier approach to climate change can only be explained by his belief that a slowing US economy should not be the one which pays to set the world’s climate right.This abdication of international leadership appears to resonate with his not inconsiderable supporters.

Clearly, the expectation is that China, which contributes 28 per cent of global emissions, needs to step up to the plate of international burden-sharing. China is now the world’s second largest economy. Despite the slowdown it is growing at three times the rate of the American economy. That is reason enough for higher expectations from it to play the role of a global leader.

china-smog

Photo credit: huffingtonpost.com

India is also a fast-growing economy. In the long term we may be where China is today. But not for a while yet. We are just one-fifth of the Chinese economy. Our emissions are just six per cent of world emissions. Our global ambitions should be commensurate with our constraints. This is why, unlike China, we have not committed to cap our emissions at a predetermined level.

Paris – the agree to disagree concord

Under the Paris climate agreement countries have agreed to disagree. It is now left to individual nations to exercise “strategic direction” in developing their future energy profile and “tactical restraint” in energy consumption.The decentralised responsibility is welcome but worrisome on two counts. First, countries which are too small to make a difference but which will face the wrath of global warming like island countries now have to depend not on covenant but on the generosity of others to survive. Second poor, technologically deficient countries will now pay more to mitigate global warming since there are no pressing compulsions for the rich to change consumption patterns or develop carbon benign technology for domestic use.

India’s challenge is to remain green

green-house

Laurie Baker’s characteristic green building in Kerala

Altogether 37 per cent of India’s energy consumption is non-fossil fuel based. This is fairly similar to the world non-fossil fuel energy consumption of 33 per cent. But the big difference is that bio energy accounts for only two per cent of the world’s green energy consumption, unlike in India, where biomass accounts for 92 per cent of the renewable energy used.Hydro power and new renewables — solar and wind- account for just six per cent and nuclear for two per cent of our green energy profile.

india-cooking-2

The challenge for India is to ensure that as incomes grow, poor consumers – who use non commercial biomass sources today like dung, firewood and agricultural residue for heating and cooking – should graduate to new renewables like solar and wind, rather than go down the fossil fuel route, as the OECD countries have done. This challenge is principally for the government, not consumers. Consumers typically want energy services — cooling, heating, cooking and transport. They don’t really care about the fuel that provides these services. It is for the government to put in place the incentives which drive energy suppliers to provide renewable energy services.Energy users are underserved in India particularly in dispersed habitations. This presents the opportunity to use renewables to bridge the gap in innovative ways.

To be sure, domestic compulsions like smog do compel us to clean our energy profile. India already has economic incentives in place for this. High energy prices induce energy efficiency in industry. High taxes on petrol and diesel are expected to result in frugal consumption for personal transport. Scarce public funds are allocated to subsidise renewable electricity. Investment in public transport is being stepped up to substitute high energy-intensity personal vehicles. Rail freight has been reduced to stem the shift to the more energy-intensive road transport. Bulk public purchase and supply of low-energy intensive LED bulbs help manage domestic electricity peak load. The path to carbon sustainability is fortunately closely aligned to the the path to make our economy competitive by squeezing out the fat along he supply chain. But gains in the efficiency with which energy services are delivered  can only mitigate, at best, around 20 percent of our additional energy needs.

The compulsions to consume more energy services are stark.India’s per capita energy consumption is just 0.6 tons of oil equivalent (toe) versus global per capita consumption of 1.9 toe. India will likely consume four times the energy it does today to provide welfare enhancing energy services to its citizens. Similar compulsions face most developing countries in South Asia and Africa.Only a technological revolution in clean energy and in energy storage systems can delink the growth led increase in energy consumption from unsustainable levels of carbon emissions.

Target renewable energy services

Setting up clunky publicly owned entities to research and transfer renewable technology to industry is not the way to go. Backing selected private firms willing to invest in renewables in anticipation of an assured domestic market is also tough. We don’t have the democratic space in India, unlike South Korea, to back industrial winners.Transparent subsidies on the “viability gap funding” template will suit the private sector best to innovate, implement and increase the consumption of renewable energy. Shifting the subsidy from energy generation to the provision of energy services can enlarge the pool of potential investors whilst retaining the objectives of efficiency and effectiveness in subsidy provision.

solar-bus

Prime Minister Modi flags off a solar bus service for MPs

Link green subsidies explicitly to revenue – social cost based levies on fossil fuel and a green cess

India’s clean energy strategy is built around the principle of minimising environmental damage whilst maximising economic growth. But the implementation of good principles also needs accurate and timely monitoring mechanisms to ensure that progress is along the desired trajectories. One such mechanism is to monitor the social cost of our fossil energy consumption and to use the data for fiscal allocations. The Arvind Subramanian report on pulses has suggested the inclusion of social cost, with respect to water intensity, while determining the maximum support price of agricultural food products, to ensure that subsidies do not deplete our water reserves. This is a good way of allocating public resources.

Social cost filter for resource allocation

If a social cost filter is adopted for allocating finances, public investment in the railways and in coastal shipping would surely trump investment on road transport. This is also a good mechanism for making users pay differentially for the energy they use. Charging more from those who use electricity at peak time is justifiable beyond the additional financial cost it imposes, to being an affirmation of commitment to going green. Habitats, offices and homes all impose social costs and must be taxed in proportion to the extent of their footprint. This “green tax” should be used to directly subsidise green energy and energy conservation.

A green balance sheet – green tax revenue and expenditure 

The government should consider including a green fiscal resources allocation and tax collection balance sheet along with the annual financial budget. This would provide, at a glance, the revenues collected by taxing fossil fuel and the capital allocated for green energy initiatives. Similar green fiscal resource balance sheets at the state and municipality level could feed into a green national fiscal framework.

India has traditionally punched above its weight in international affairs. Preserving the global commons is a lofty goal; an opportunity to upstage the international economic Goliaths and to improve well-being at home.

laurie-baker

Laurence Wilfred “Laurie” Baker 1917-2007 – architect & practioner of the science of living comfortably with nature. Seen here with his wife Elizabeth, in their home in Thiruvananthapuram, Kerala.

Adapted from the authors article in Asian Age October 4, 2016  http://www.asianage.com/columnists/green-taxes-cleaner-india-600

Why Raghuram Rajan is not Indian

Yes, it’s true. Raghuram Rajan is very Un-Indian on multiple counts.

RR early

Photocredit: live.av.info  Raghuram Rajan a youthful financial messiah amidst grey heads

Early start

First, like Dr. Manmohan Singh before him and unlike every other Governor of the Reserve Bank, Rajan became governor at the “tender”, almost youthful age -by Indian metrics- of just fifty years. This is a tribute to his compelling competitiveness for the position. But more importantly, this means he is likely to have a long professional after-life, once he stops being Governor, just like Dr. Singh.

Not wedded to holding everlasting public office

But unlike Dr. Singh, Rajan is keeping his professional options open in case his term is not extended in September 2016. Of course, Rajan is not the first RBI Governor to contemplate an after- life out of public office. I. G. Patel, who also became the fourteenth Governor of the RBI at a relatively young age, went on to head the IIM Ahmedabad and then the London School of Economics. He is also reputed to have declined the offer to become Finance Minister in 1991.  But such instances of daring to dream beyond everlasting public office are rare.

The outsider

RRajan outsider

photocredit: mumbaimirror.com

Second, Rajan, unlike all his predecessors, did not come to the Governor’s office via the serpentine pathways of the extended public sector. Instead, like millions of upwardly mobile, middle class Indians of his generation, he earned his spurs in the US, in academia and then in the International Monetary Fund – where merit means having the capacity to challenge the established status quo with evidenced, sensible and better policy options.

Mission: To perturb, not preserve, the status quo for equitable growth

Perturbing the status quo is not a quality held in high regard in the backward looking Delhi Durbar. Here, precedent and incremental change- often mistakenly equated with policy predictability – command a premium. Rajan stands out for his impatience with an India, known perpetually for its potential but with an unendingly, shoddy present. Worse, he speaks out against a financial system, which has traditionally encouraged crony capitalism; been cavalier with the rights of the poor and constrained, rather than freed, India’s abundant animal spirits.

Tactics: Unafraid to work only for public interest

Third, Rajan’s single minded pursuit of macro-economic stability – read low inflation- in an increasingly uncertain world, marks him out as an outlier. The dominant, albeit convenient, consensus in India, is that we can simply spend our way out of an economic downturn, without feeling the pain of the structural reforms, which underpin sustainable and equitable growth. This is understandable, because inflation doesn’t really bother Imperial Delhi, Mercantile Mumbai or Harit Hapur- the triumvirate which moves India.

After all, babu pay and pension is 100% indexed to inflation, so why worry? Inflation doesn’t bother corporate India either. It pushes real interest rates into negative territory; reduces the cost of servicing debt and makes fresh borrowing cheap. Nor does inflation bother big farmers. The cereals or sugarcane they produce are sold on a cost plus price fixed by government. Never mind, that inflation is a silent killer – of daily wagers in the unorganised rural and urban sector, who have to eat one roti less, to make do and the lower middle class and the aged, who see their savings go up in smoke.

Metrics: Cut red tape and discretion in bank licensing

Fourth, by making available private bank licenses on-tap for eligible entities, Rajan displays completely Un-Indian haste in throwing away executive discretion in favour of transparency. By disciplining banks and forcing them to clean up their balance sheets, Rajan is exceedingly Un-Indian. He hits at the roots of the cozy relationship between politics and corporate money, which dates back to the Freedom Movement.

Market value: Options on both sides of the Indo-American universe

Lastly, Rajan’s ultimate betrayal of Bharatiyata is that he holds a Green Card, which entitles him to permanent residence in the US. Even worse, he wants to hang onto that privilege, if he gets a second term as Governor, post September 2016. Should he not have reciprocated his everlasting gratitude to the nation, on being appointed Governor, by tearing up his Green Card? Certainly, it would have been a grand gesture of his long term commitment to India, had he done so. But in a democracy, contractual obligations are determined by the law, not sentiment.

Attitude: Professional not a supplicant

But most galling is that by hanging onto his Green Card, Rajan displays a very Un-Indian desire to seek a second term, not as an abject supplicant but as a professional, on terms, which are mutually acceptable between him and his employer – the Government of India. Of course this is never-before-seen arrogance, by the standards of the public sector, where applicants must wait cap in hand, for the chance to serve.

Role model: For Indian bureaucrats

The upside, in this otherwise grim tale, is that Rajan’s approach is the only way we will ever have a professional, merit based bureaucracy, working in public, rather than narrow political interest. The internationally recognized system of contractual, senior public service appointments, has never found salience in India because politicians fear losing control over a pliant bureaucracy. Contractually appointed professionals, like Rajan, can say no, because they have market based options, outside the public sector.

Every Indian expatriate values competition and choice

But, consider also, that the hordes of expatriate Indians who throng Prime Minister Modi’s meetings overseas, are similarly Un-Indian, like Rajan, because they value competition and choice above embedded entitlements.

Not too different from any other worker in the Indian private sector

Guess what, 97% of the workforce in the Indian private sector are also Un-Indian, like Rajan, because they have no secure, life-time tenures. They face the test of competitiveness, on a daily basis.

arun jaitley London

Photo credit: Business standard.com:  Finance Minister, Arun Jaitley very much in tune with the future.

In fact, even Finance Minister Arun Jaitley might also be Un-Indian, under his very Indian clothes. After all, he does seem to be quite comfortable with Rajan and birds of a feather flock together. But, then again, perhaps not. After all, Jaitley’s Hindi is impeccable, whilst no one has ever heard Rajan speak in Hindi. Field Marshall K. M. Cariappa, India’s first commander-in- chief of the army, couldn’t speak in Hindi either. When berated by the entho nationalists of his time, he riposted, that he made up for not knowing Hindi by having a dil (heart) which was “ek dum Hindustani”. Surely, so is Rajan’s and that should be good enough.

cariappa

Field Marshall K.M. Cariappa- speaking from the heart 

Adapted  from the authors article in Newsiaundry  May 23, 2016    http://www.newslaundry.com/2016/05/23/why-raghuram-rajan-is-not-indian/

Paris Takeaway: One Culture Is Not a Quick Fix

Indian bus

(Photo Credit: www,m,inmagine.com)

For the French, “culture” is everything. It encompasses the language one speaks –French of course-; the food one eats-mildewed “blue” cheese; the wines one imbibes and the best of fashion. One Just has to compare the tres chic Christine Lagard-Managing Director of the International Monetary Fund with the practical, stodgy Mrs. Angela Merkel, Chancellor of Germany, to  visualize why France was so very different from the rest of Europe.

The idea of “one culture, one people” was peddled by France across its colonies, particularly in West and North Africa to create vast populations who, “in their heads”, were French, not African or Arab. Macaulay’s Minute (1835) did the same in India, except that British “Shepherd’s Pie and warm Beer doesn’t have quite the appeal as French cuisine.  No surprise then that in a cruel twist of fate Asian “curry” is the favorite British dish today. This would not have been possible in France.

French culture is emotively attractive. English has to be bit into-like a tough roast- to speak it but one has to swim languorously into French to speak it well. Listen to the French song “je t’aime”; a duet written by Serge Gainsbourg and immortalized by the Goddess of sensuousness- Brigitte Bardot in 1967. Compare this with the somber notes of Don McLean’s “And I love you so” and you will feel the difference between the cold Anglo Saxons and the emotive French.

The French, including the French co-optees- are a warm and loving people with their heads full of wooly, socialist ideals of Liberty, Equality and Fraternity. Of course all these ideals are bounded by a narrow regard for “French culture”. Take the case of dress codes. Muslims, who increasingly regard the “hijab” as an Islamic symbol, were not permitted to wear one in public. It is just as difficult to break through the French tradition of a large and inefficient public sector and taciturn trade unions- though we in India could give them a run for their money in this aspect.

Many nations, including the US and India, borrowed the ideals of the French Revolution 1789 but all applied them in a practical manner. Slogans like “we are all one World” sound great in a hippy hangout but are impossible to implement. End goals like Equality are just that. They define a glorious possibility but can never reflect the cruel, everyday reality of power hungry elites, patrimony and dissimilar endowments, as it exists everywhere in world.

The killings in Paris are being explained away as caused by religious, ethnic or economic cleavages. All of the above or any one of these could have been the immediate reason for the killings. But what they have laid bare is that the basic underlying assumption in France that one culture can laminate over all other cleavages is a lie.

A common culture is not enough of a glue to paper over the growing gaps between immigrants and insiders; white and the others; the Muslims (10% of the population) and the majority Christian faith; the educated and aspirational and the hopelessly poor and forgotten. Even Communist China has spectacularly failed in elevating the God of Communist Nationalism as a substitute for religion or ethnicity. This is despite the assistance of State machinery which is at its best in very heavy handed policing.  But a Common Culture is surely anathema alongside a belief in Liberty, Equality and Fraternity.

Our deepest sympathies are of course with the French for what has come to pass to their beautiful country. But no Indian can resist the deep sense of relief that despite our poverty; our widespread illiteracy; our linguistic, ethnic, cultural and religious heterogeneity we as Indians have hung together fairly well in relative terms.

This is not to say that minority rights are well protected in India. Nor do we hold that India has done well by its marginalized populations. But for a relatively new State and a less developed economy with deep rooted traditional cleavages, it is a remarkable achievement that we are bound ever tighter by our non-traditional beliefs in democracy; equity in access to public opportunities and freedom of choice in all aspects of life.

India has weathered violence more extreme, that seen in France recently, despite it being directly as viciously and specifically at a particular sect; religion or ethnicity. The reasons why we have managed to do so are ironical.

First, a weak State can be an asset. Unlike France we were never able to become a “Nanny State”. Every Indian knows that if she or her extended family does not look after themselves no one else will step in-least of all the State. This lack of an efficient, impersonalized, State provided social protection is cruel for the poor. But the consequential, pervasive, economic pressure of constantly working to make two ends meet keeps us on our toes. The desperation to keep working reduces the availability of idle human fodder to perpetrate the kind of terror in Paris.  The downside is the magnified roles local elites play in shaping opinion due to their economic and political clout.

Second, Indians happily accept that all 1240 million of us we are NOT one big happy family with a common culture. No Indian wants a common, Pan-Indian culture. Indians are used to living and working in an aggressively antagonistic, “non-localized environment”. The French in contrast are more molly coddled and less “internationalized” than us. 25% of Indians do not live in the place they were born and large scale migration is a fact. 2% of Indians live in foreign countries. We have assimilated and adapted to invaders, foreign conquerors and traders over the last 1000 years.

So let’s take heed of what has happened in France and the failure of the “one culture” project of the French. The world is too open; too complex and too integrated today for seeking “autarkic” options.

Culling our traditions to get options for the future is sensible but must have the caution that our greatest tradition has been of keeping our windows open, not tightly shut and making space for anyone wanting to clamber onto the “bus”, which is India.

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