Gurcharan Das: January 2004

CAPITALISM AND OUR SCHOOLS DEC 28, 2003

The government presented the free and compulsory education for children bill in the winter session, and we are celebrating as though we had beaten Australia in cricket. We should hail it as a great blow against the curse and shame of child labour. But we are not, and for good reason — we have lost faith in the state’s ability to run schools.

We accepted capitalism and the liberal reforms in 1991 because we thought that as the state withdrew from running businesses, it would pay attention to education. Having abandoned the socialist ideal of the equality of result, we now hoped for greater equality of opportunity, as so many capitalist societies in the West and the Far East have achieved. But this did not happen. Government schools remain unreformed, the gap persists, and a sense of betrayal mocks us.

In desperation, many Indians have begun to look for radical, heterodox solutions and one of the best on offer is by Sanjay Kumar, B J Koppar, and S Balasubramanium in the Economic and Political Weekly (23/8). It proposes that government should not run primary schools but lease them to teacher-entrepreneurs (with minimum HSC qualification) who would manage them up to class 4 according to a standard curriculum of ankh and akshar. The state would give parents vouchers worth Rs 100 per child per month to pay for school fees, which the schools would be able to cash against confirmed attendance. Like railway bookings, vouchers would be tracked on the Internet to minimise corruption. Eventually, competition between schools for the vouchers would force the schools to improve.

The authors have suggested an innovative design for primary schools, consisting of two airy classrooms on each side of a common playing field. Each set of two classrooms would be leased to a teacher-entrepreneur and her assistant, who would compete for the children’s vouchers. If a teacher persistently beats a child, then the parent would move her to another school on other side of the playing field. A bad teacher would lose income and respect every time a child moved.

A greedy teacher who tried to pack in too many students into a class would be punished in the same way. Schools would become responsive to parents needs — allow flexible hours, for example, for older girls, who have to look after younger siblings and which today forces them to drop out. Schools would compete to ensure clean toilets, nutritious mid-day meals to win their customers vouchers. Thus, schools would become accountable to parents and children would be freed from the evil of absentee, or bored or bullying teachers.

School vouchers were first mooted in Prime Minister Vajpayee’s Economic Advisory Council in 2000. They have been tried in many countries with varying degrees of success, as a World Bank report brings out. In India, primary schools are in such distress that we owe it to ourselves to test this idea in at least one district, perhaps in Rajasthan, which is home to the best innovations in education. Through the test we will gain conviction before expanding vouchers nationwide.

We should also be prepared for opposition from vested interests — teachers, bureaucrats, and politicians don’t want to become accountable. But if the test succeeds, it might revolutionise primary education just as the STD booth revolutionised telecommunication. Mind you, the STD meter also started out as a test in one district.

FIRST, DO NO HARM DEC 14, 2003

A few months ago a well-meaning minister asked me if I had any ideas about how the government might help business. In an unguarded moment, he admitted that he had once been a socialist, but had now converted and wished to help the private sector.

I gently suggested that he first take the Hippocratic oath, which doctors used to take in the old days. The oath says, "First, do no harm," and reminds them that a visit to the hospital might make the patient worse off rather than better.

So, the best way to help the private sector is oddly enough not to help it. If he was serious, I added, the best thing he could do is to review all the controls that had piled up in his ministry over the forty years of 'licence raj' and eliminate most of them. I would then cheer his bonfire of the vanities.

Our politicians and officials would do well to read Robert Anderson's forthcoming book, Just Get Out of the Way. An advisor to many governments, including Russia , New Zealand , and the US , he offers examples to illustrate his title.

One of them is of Bangladesh 's Board of Investment. Meant to encourage foreign investment and help investors find their way through the thicket of government licenses and regulations, it turned out to be a disaster.

Manned by civil servants who had spent their entire careers regulating the private sector, they didn't know where to begin. So, they decided their job was to approve the qualifications of foreign investors and review the quality of their business plans before they would be allowed to invest.

Thus, they thought, they would keep out dishonest and incompetent investors. As a result, of course, the Board drove away the few genuine investors who were truly interested in Bangladesh . It's chairman was so impressed by his performance that he proposed that his Board should now encourage domestic investment in the same way.

Anderson shows repeatedly how government policies to help the private sector often do harm. The reasons are usually the same: 1) civil servants don't understand business; 2) corruption is pervasive; and 3) interest groups tend to hijack sensible policies.

In India , for example, our well-intentioned policy to help small businesses got translated into reservations for the small scale sector. This prevented larger, more capable companies from entering 800 industries and building an export base, in the same way as the East Asian countries.

This single policy probably did more to kill our industrial revolution as anything else. The government, however, instead of promoting competition, often does the opposite: it creates public sector monopolies; keeps tariffs too high, and this discourages competition from abroad.

Of course, Anderson is naive to think that governments can just get out of the way. We need institutions and the government helps create institutions that allow markets to flourish. For example, banks in India can now take over the property of those who default on loans.

This reform has done more to strengthen property rights, improve enforcement of contracts, and deter crooks. Unfortunately, crooks still get away, for example, by simply bouncing a cheque!

So, the best way governments can help is to create transparent institutions, which is what our economic reforms are all about, and it's shocking that so many sensible people keep opposing them.

IN PRAISE OF GREAT TEACHERS NOV 30, 2003

When I was thirteen I was lucky to have a history teacher who inspired me, made me learn to think for myself, and gave depth to my private life.

Many of us, I think, have had the same experience there was one good teacher at some point in our lives who changed us, and this made all the difference. Vimala Ramchandran’s recent research with poor children in U.P., Andhra, and Karnataka also confirms that the biggest motivator in getting children to complete primary school is a welcoming, and affectionate teacher.

Hence, it seems obvious that education reform must begin with creating conditions in our schools for inspiring teachers to enter and to flourish. But in endless meetings convened by state governments I hear only endless talk about the need for more resources, instilling values, universal literacy, but no one proposes the need for recruiting and retaining outstanding teachers. The reformers are so obsessed with literacy targets that everyone has forgotten quality. At the end of these frustrating meetings I wail in desperation, ‘‘Don’t worry if the roof is leaking or if there is no blackboard, let’s discuss how can we get our brightest youngsters to become teachers and motivate our existing army of time-serving teachers! But no one listens.

I realise money is an issue in attracting the best, but in recent years teachers salaries have risen after the Pay Commissions award. Moreover, there are always idealistic youngsters who would rather teach than go into law, medicine or business. What deters them is the coarse mediocrity of the teaching environment. My friends idealistic daughter decided to make teaching a career, but she quit after a year. She found that the average teacher was bored and did not want to teach. Her timeserving colleagues could not tolerate her sense of commitment and literally drove her away. Of course, there are many fine teachers who strive day in and day out despite terrible handicaps. The question is can we retrain the vast majority who do infinite harm to the minds of our children everyday?

In India , the middle class sends its children to private schools and the poor send theirs to government schools. But now even the poor are enrolling them in low-cost private schools, which charge between Rs 60-100 a month. Even though private school teachers earn less and are less qualified, children and parents report in surveys that they prefer the private school because the teacher at least shows up and teaches something. In government schools, teachers get away without teaching because they know that no one is looking.

I have spent sleepless nights over our failure to bring accountability to government schools, and have concluded that only way to raise their standards is do away with this dualism between private and government schools. For grades 1-5, I would give vouchers to parents and allow the schools compete for these vouchers. Because of competition, schools will have to hire better teachers, who will have to teach. The leftists and old educationists are horrified at this, but don’t we owe it to ourselves to at least test this idea when all else has failed over the last 50 years? Plato wrote more than 2000 years ago that the reform of our schools is everyone’s work—the work of every man, woman and child. Because of our guru-shishya tradition, we Indians revere teachers; so, we must not give up on high standards. But meanwhile, on this Sunday, let us praise great teachers!

CAPITALIST GREED OCT 5, 2003

Dick Grasso is one of the most competent leaders that the famous New York Stock Exchange (NYSE) has had in decades, but he resigned on September 17 because they discovered that he had been paid a shockingly-high salary.

When I read about his $140 million salary and benefits, I thought it must be a misprint, but the obscene figure turned out to be true, and even I, a votary of free markets, winced.

The head of California Teachers Retirement System (Calpers) told us that it would take an average American 5,200 years, working 40 hours a week, to make the same money. The Wall Street Journal reported that even his 2002 base salary (without benefits) of $12 million was greater than the combined pay of the heads of nine top stock exchanges around the world.

What does one make of all this, and who, in fact, is guilty? Dick Grasso for receiving a high salary or the board for giving it to him? And what lessons does this hold for us in India?

Grasso's defenders argue that his pay came from the pockets of the seat holders who own the stock exchange; since NYSE is a private company in competition with Nasdaq and foreign stock exchanges, his job was to build his exchange's brand equity, which he did brilliantly.

So, his salary is no one's business except the board. Grasso's critics point out that NYSE captured dominant market share because of historic luck and regulatory advantage.

They argue that the future of trading is electronic and NYSE has been unwilling to move in that direction because the present system favours insiders at the expense of the public.

The 211-year-old auction system ensures that every trade passes through a live trader's hands on the NYSE floor; they would like the NYSE to become a transparent publicly-listed company, and more accountable.

When my leftist friends in India heard about the Grasso affair, they gleefully said, 'We told you so - Capitalism is only about greed'. And they called for a return to the good old days of the licence raj.

If this scandal had happened in India, there would have been cries in Parliament for the government to control executive salaries.

But in a mature capitalist economy like America, the Grasso affair is leading to solid reforms in the system, bringing more transparency through all-electronic trading and stripping NYSE of its regulatory role.

Every once in a while a scandal engulfs American capitalism; then repairs take place as men of character take charge; and the system lunges forward once again.

The furore over Grasso's pay occurred because markets were recovering from an unprecedented period of corporate scandal, including shockingly-high compensation for CEOs.

These scandals have reminded people that the bottom 20 per cent of American workers have not seen their incomes grow for decades.

Clearly, the soft underbelly of capitalism is its tendency to inequality, but the public accepts it as the price for efficiency and for the enormous risk that entrepreneurs take in the marketplace where four out of five ventures fail.

Out of this 'creative destruction' comes economic growth and technological innovation, making everyone better off.

To take an example closer home, the lowest worker at Hindustan Lever does not grudge Banga for earning in crores because he believes the latter's competence will bring higher returns for Lever and a higher increment for himself. Were Banga not to perform, well, he could be fired. This is the unwritten compact of capitalism.

WE COULD DO WITH MORE OF SAYING LESS OCT 2, 2003

The following appears in honour of brevity, the defining characteristic of leaders. And of The Times of India Speednews, a new edition of The Times of India that packs in more news, in a concise form. For astute, time-pressed readers who demand a quick uptake.

Soon after he became prime minister, Winston Churchill wrote to the First Lord of the Admiralty to ask, ‘‘Pray Sir, tell me on one side of one sheet of paper, how the Royal Navy is preparing for the war.’’

Churchill knew that if he did not qualify his request, he would have received an unreadable 400-page report. Brevity is a great virtue, and nowhere more needed than in India. Our judges write judgments that are too long; our lawyers ramble on; our executives try to impress with lengthy memos; our politicians, well, try to get in a word.

That less can be more is especially true in good writing. I discovered this at Procter and Gamble, a company as famous for its legendary one-page memo as for its products. Its wondrous one-page memo was created out of the same confidence in reason and technology that built America, and is as elegant as Paninis grammar or Euclids geometry. Based on the reasonable assumption that all managers suffer from an overload of paperwork and files, it is simple, factual, and logical. The reader can scan it in minutes and grasp its contents.

It has just enough data that a manager needs to make decision and no more. It is clear, precise, eschews hyperbole, and it actually improves the speed and quality of decisions, and hence it can be a source of competitive advantage.

We Indians are verbose, and need to be reminded that humans were born with two ears and two eyes, but with only one tongue, so that we should see and hear twice as much as we say. Shakespeare too, I think, must have had us Indians in mind, when he wrote in Richard III: ‘‘Talkers are no good doers.’’ Hence, he offers us this advice in Henry V: ‘‘Men of a few words are the best of men.’’

GREAT EXPECTATIONS SEPT 21, 2003

The best teachers and CEOs will tell you that performance is a function of expectations, and those with higher expectations get more out of their students and employees. So it is with nations.

When national leaders create high expectations and follow them up with good policies and rules, citizens and businesses respond and nations prosper. This is in part the secret of China's success, and today it no longer thinks of itself as a Third World nation but as an emerging Asian tiger and a global power capable of challenging America.

China's attitude at the World Trade Organisation (WTO) is quite simply, how do I take advantage of it.

Although we were in the same camp at Cancun, China was quietly angling to make the best deal for itself, while India was grandstanding as leader of the Third World, harping on special treatment for poor countries. While our basic position was correct - rich nations must cut farm subsidies and open their markets - our mindset at the negotiations was wrong.

Unlike Africa, we are no longer a poor, victimised country, but a rising economic power getting ready to conquer world markets. Sure, we have poor people but we are also one of the fastest growing economies in the world, with growing exports, record reserves, and clear competitive advantages.

I did not envy our articulate commerce minister at Cancun. Arun Jaitley wanted the rich countries to open their agricultural markets presumably because we might then sell them our commodities.

But the truth is that our rice (barring basmati) is of lower quality and of higher price than Thai or Vietnamese rice. The price of Indian wheat is also too high. So if the rich were to accept Jaitley's advice, others would benefit not India.

The lesson from Cancun is that we must first put our own house in order. Implement agricultural reforms, and this can be done as Amrinder Singh has shown. Today, our politicians, not the market, decide wheat and rice prices (via MSP) and they raise them annually to win elections.

Since growing these crops is riskless, our farmers have become slaves to rice and wheat when they should be growing higher value crops. Second, we must lower tariffs, not because of WTO but because lower tariffs will make us more competitive, drive down our costs and raise our exports. Third, we must reform our customs procedures for both importers and exporters — for, saving one day's transit time is equal to a one per cent tariff cut.

Like China we should use the WTO to do domestic reform.

The prime minister believes he sets high expectations. After all, doesn't he keep talking about an 8 per cent economic growth rate? The problem is that he does not follow through with actions.

His government announced the reform of labour laws, eliminating small-scale reservations, an end to Inspector Raj, as well as significant agricultural reforms, which if implemented would set us on a solid path to becoming an agricultural power. But nothing happened, and our export potential remains unrealised.

Part of setting expectations entails carrying the people with you. Hence, the PM must educate our people that trade is a positive sum game in which everyone can win; that their suspicion about the WTO is misplaced.

In fact, it is our biggest hope because we aren't part of any trading block and depend on multilateral trade. I sometimes wonder if our PM could bring the same passion to making his people prosperous as he does to Pakistan we would be a more successful nation.

CYBER COOLIES OR CYBER SAHIBS? SEPT 7, 2003

‘The World as India’ is the title of a lecture that Susan Sontag gave in London last year, which was published in the Times Literary Supplement this June 13.

In it the distinguished writer celebrates the success of Indians in harvesting their legendary English-speaking skills in the global economy through call centres and other services. But Harish Trivedi, the no-less distinguished critic at Delhi University, promptly wrote an angry rejoinder in which he characterised call centres as ‘‘brutally exploitative’’ and its employees as ‘‘cyber coolies of our global age, working not on sugar plantations but on flickering screens, and lashed into submission through vigilant and punitive monitoring, each slip in accent or lapse in pretence meaning a cut in wages.’’

I have been associated with three call centres and I find Trivedi’s depiction truly bizarre. What he sees as exploitation by multinationals, the young boys and girls see as an exciting chance to work with the world’s top brands and acquire new skills to make a career in the global economy. It is true that many work the night shift but so do 21.2 per cent of all American workers. Yes, it isn’t much fun to persuade someone in Detroit to pay his credit card bill, but it does build valuable negotiating skills. Many call centre employees answer telephones but some also do highly skilled back office jobs on-line — for example, medical students prepare medical dictionaries, architecture students make detailed drawings for American architecture firms, accountants prepare payrolls. And if these are coolie jobs, why are labour unions in America and England so upset about job losses to India? Finally, Trivedi might ask, is it better to have an idle son at home or a productive one at work, earning Rs 10,000 a month (and if he is diligent, Rs 20,000 after three years)?

At the root of the dispute is ownership of the English language. Today’s confident young Indians view English as a functional skill, not unlike Windows or learning to write an invoice. When they speak English they feel they own it — ‘‘its another Indian language’’ — whereas Harish Trivedi’s neo-colonial English flies the Anglo-American flag. The minds of these ‘‘cyber coolies’’ seem to be decolonised whereas Trivedi’s is stuck in a post-colonial past.

We have always thought of English as the power language of India. Raghuvir Sahay, in a two sentence Hindi poem, caught it brilliantly: ‘‘The English taught us English to turn us into subjects/ Now we teach ourselves English to turn into masters’’ (which Trivedi quotes in a wonderful new book edited by Sheldon Pollock, Literary Cultures in History). But Star TV has now proven that when it comes to making money Hindi may in fact be the power language. When the old Star News in English changed to Hindi its audience share jumped from 2 per cent to 30 per cent, along with its share of advertising revenues.

Yet English remains the passport for every youngster who dreams of becoming ‘‘master of the universe’’. Sontag is on the right track. Business process outsourcing will create enormous number of jobs in India, and the first company to employ technology to teach quality English via language labs in franchised outlets across the bazaars of India will get rich. So, who is the coolie? Not the confident young person at the call centre with her liberated attitude to English, but Harish Trivedi, whose mind remains colonised in the old linguistic categories of post-colonial, pre-reform India.

CAPITALISM, INDIAN STYLE Aug 24, 2003

My niece, Priya, was in town recently. She has been teaching English as a second language in cosmopolitan Vancouver, where every summer Chinese youth flock to learn English. Many are children of the newly rich who have prospered in post-reform China, but it is extraordinary how difficult they find learning English. Of the dozens of nationalities she has taught only the Japanese find it more difficult. The reason is that the languages of East Asia are tonal. The same word in Mandarin can have many meanings depending on the tone; hence, the Chinese have difficulty coping with English grammar and pronunciation, and Japanese children, I am told, have been trying to learn English from kindergarten since 1870, and they still cannot speak it.

'Schadenfreude' is not a nice German word — it means to take pleasure in the misery of others — and like envy, it is a base human emotion. But I must confess it is exactly what I felt as I listened to Priya. Linguistic experts confirm that Indians find it easier to learn English than the Chinese because our languages are part of the Indo-European family and share the same grammar. Since our success in the global capitalist economy lies in part in our ease with English I felt reassured that our competitive advantage would not easily disappear.

The Chinese government understands better than ours that the potential demand from global outsourcing of business processes through call centres is so large that it could literally wipe out the old disease of ''educated unemployment'' in the Third World. Hence, it has adopted a national policy to make every student literate in English by 2008. Other nations have also figured this out and teaching English as a second language is a huge industry across the globe. But in India our education policy towards English remains paralysed.

Fortunately, every Indian mother seems to understand what our politicians and intellectuals don't. She knows that the way to lift her family from poverty into the middle class is to teach her child English. Even in the poorest home, she will save from her meagre family budget to pay for English lessons or remove her child from a government school and put her in a cheap private school where they teach some sort of English.

If our success in the global economy depends on our natural and historical advantage with English, and if our ability to conquer educated unemployment also depends on it, shouldn't we aggressively push teaching English as a second language right from class I? You would have thought in a democracy that an enterprising politician would have discovered votes in such a promise. When I put this to the education minister in one of our states, he asked, where will the teachers come from? I repeated what Priya had told me — to know English is to be able to master 400 words. Thanks to interactive English teaching either on the Internet or through CD Roms, you can learn to speak them in three months.When you make a mistake, your world-class teacher corrects you. Good call centres are employing these very tools.

So, here is our chance not only to win the global capitalist game Indian style, but also to bring more equality of opportunity. A child in a Gorakhpur slum with Internet access can now learn from the best English teachers in the world, and suddenly the field begins to look more level between her and a child in Mumbai's elite Cathedral School. All we need is someone in some education ministry in some state to wake up.

TURN OF THE WHEEL July 13, 2003

I have an old friend in Mumbai and every once in a while, he will pause, sit back, and ask, how are we doing? How are we changing? A small but visible change, I told him last week, is the rich aroma of coffee in our bazaars. Thanks mainly to Barista, but also to Cafe Coffee Day, Quickies and others, the well-heeled young of a tea-drinking nation have found a fashionable place to hang out, and its women a safe public place to be sociable.

Since we are not a culture of public squares like the Mediterranean cities, we depend on the bazaar to "eat the air" in the evenings and to be seen and to see others. But Barista’s success also defies conventional business wisdom: to be able to open a new coffee shop every fifth day in a country of such rigid land laws is worth something.

I find that new professions have begun to come up, as every Indian wants to become a designer. We have had software and fashion designers for some time, but significant talent is also rising in chip design. The biggest surprise is the new talent emerging in automobile and components design. No one could have imagined, in fact, how quickly India would become a hub for global automobile sourcing. Most car companies are now exporting and this is another testimonial to reforms.

Our vocabulary is also changing. No one talks about shortages, hoarding, smuggling, black-marketing, or even rising prices when for decades that’s all we spoke about. Nor do industrialists complain about interest rates and high cost of capital. We are more resilient to monsoons and oil shocks now. Despite a bad monsoon last year, most states did not panic; instead they executed water-harvesting programmes that will bring long-term returns.

Similarly, when oil prices shot up last year, we managed because of record currency reserves.

What this means, of course, is that our economy has changed from one of scarcity to plenty, but since we are a nation of complainers, we now moan about excess food stocks and excess foreign reserves. Worse, the mindset of our geriatric rulers remains mired in dearth and hence we haven’t come to terms with our disgraceful food mountain, which could have brought relief to the three per cent of India that still goes hungry — that may look small but it is 30 million people! An abundance mentality should long ago have replaced our "begging bowl" agricultural policies with vibrant new ones that will create a confident, food-exporting nation.

What has not changed is the disconnect between our politics and economics. Instead of working single-mindedly to make every Indian literate, the education ministry has enacted a rule whereby donations to Indian colleges must be routed through Bharat Shiksha Kosh (so that a babu decides what donations are worthy). This will surely kill the wonderful movement started by alumni in recent years to give funds to their colleges, and this is why a wealthy Indian in America, Gururaj Deshpande, recently decided to endow MIT with $20 million rather give it to his own IIT Madras.

Second, just when Indians were beginning to feel proud of world-class Jet Airways, envious bureaucrats tried to destroy it with the hare-brained idea of replacing airport handling staff of private airlines by the staff of Air India and Indian Airlines in the interests of security.

So the wheel turns, but what never changes is the enormous capacity of our rulers to do mischief

THE SORCER'S ENCHANTMENT June 29, 2003

When our tax refunds arrived in May, within six months of filing our return, we thought we were dreaming. Since it normally took years, something must be afoot we thought, and decided to pay North Block a visit. There we were astonished to learn that computers had already completed 95 per cent of this year’s returns.

Our meeting began with a common lament — why do so few Indians pay income tax? We soon realised, however, that this might be the wrong question. In March 1992, the year the reforms began, there were 78 lakh assessees; this rose to 1.4 crores by 1998 and climbed to 3.4 crores by March 2003. In a nation of 100 crores, this may seem small, but if you subtract 65 per cent of the population that is rural and exempt from tax, it leaves 35 crore urban people; divide this by 5.2 persons per home, and you get 6.8 crore urban homes. Assume one taxpayer per family, and divide 6.8 by 3.4, you realise that this is every second urban family. Even after subtracting corporate and multiple taxpayers per family, it still means more than two out of five families are on the tax rolls — and this the best testimonial to our economic reforms!

Despite these gains, the average Indian holds his tax officer in contempt; he thinks him rapacious and corrupt, and he’s probably right. My corner bania wants to pay his taxes but he refuses to be victimised. My accountant has been issued two PAN numbers by mistake and the ITO has the gall to ask for Rs 500 to fix his own mistake. The bribe for an individual assessment is Rs 10,000, for a company Rs 25,000, and for avoiding ‘‘scrutiny’’, it is Rs 20,000 to 50,000. No wonder the tax department is known as the ugliest face of the Indian bureaucracy.

On this scene walks in the sorcerer, Vijay Kelkar, clutching Chapter 3 of his report, innocently titled ‘‘Reform of Tax Administration’’, and with Jaswant Singh’s support, he begins to cast a spell. At the heart of the sorcerer’s enchantment is to break the link between the officer and the taxpayer, and remove the official’s discretion, and create transparency through technology. Although only two per cent of the returns are scrutinised today, officials arbitrarily decide which ones, and this brings corruption. Soon, thanks to new software, even the commissioner will lose this power. Each morning the computer will decide which cases to scrutinise.

The computer’s decision will be based on a mismatch between a person’s consumption and income. Hence, the biggest task engaging the department is to collect and monitor consumption data — who is spending how much on cars, cell phones, credit cards, hotels, airline tickets, and even jewellery. Since 95 per cent of the gold is now purchased through banks (and not smuggled), jewellery purchases can be monitored. The permanent account number (PAN) is crucial to all this, and the Board realises the mess they have made of it. Hence, they have outsourced this activity, and from July, a PAN card will be couriered within 10 days on demand. Banks will provide refunds, there will be no challans, and no one need visit the taxman.

Towards the end we were still sceptical, and we asked, won’t corrupt officials be able to get around this? Bhagwat Swarup, who is implementing many of these reforms, gently answered, ‘‘Just as computerisation in the railways took away the clerks discretion to give a ticket, so will ours.’’ If it does, generations of grateful citizens will remember Jaswant Singh’s innings at the North Block.

WHY INDIA MATTERS June 15, 2003

On a recent lecture tour of America I found that Indians are regarded with new seriousness. Whether in a Bay Area restaurant or a Wall Street office or a Chicago hospital we are now perceived differently. Indian professionals abroad have succeeded in making India relevant: something our leadership of the non-aligned movement could never achieve.

Washington pays us attention not because of our bomb but because American politicians look to 200,000 Indian millionaires in America for funding their elections. Yes, 2 lakhs! These Merrill Lynch figures also explain why 120 Senators and Congressmen are members of the India Caucus on Capital Hill and why Indians are on the donor list of major American charities. The old begging bowl is giving way to the picture of a confident young Indian emerging from his Park Avenue apartment in an Armani suit.

That India has been one of the fastest growing economies in the world for 25 years is also beginning to be known. Investors have noticed that the rupee has strengthened as our foreign reserves have crossed $79 billion. A strong currency isn't good for exports, but investors like a strong stable currency, and this may signal higher foreign investment inflows in the near term. Europe is suffering from sclerosis, Japan has been stuck for a decade with deflation, the US is in recession, Latin America has its own problems, and SARS has clouded China's near term future. So, in comparison India has begun to look attractive to investors.

A less welcome sign of India's new relevance is America's concern that India will steal its white-collar jobs. China has already robbed it of blue-collar jobs; now India is set to become America's back office, as US companies try to cut costs in this recession. Every day some newspaper reports that a new company plans to outsource some office process to India.

This may be good news for educated Indians -- accountants, architects, scientists, doctors, graphic designers, phone operators -- but it has got US employees genuinely worried. They are anxious because they know that economics usually prevails over protectionist sentiment. But, as Congressman Jay Inslee recently advised, Nasscom should mobilise Indians in America as well as the Indian Caucus to fight this rising protectionism.

Investors now complain less about our infrastructure. They are aware of our telecom revolution though news about the world's largest highway project has not reached them. But they do criticise our corruption and red tape. "One foot on the accelerator and 100 on the brake" is how one American described our bureaucracy. A potential investor in our power sector said he fled from India when he realised that he would have to get 97 permissions, which raised the spectre of 97 bribes. If only Prime Minister Vajpayee showed the same determination in implementing economic and administrative reforms as he does in Indo-Pak diplomacy, this black mark too would fade.

Clearly, nothing has changed India's image more than the success of Indians abroad. It is reinforced by the grim prospect of middle class office workers in India taking away their "knowledge jobs". On the flight back I was next to a young Indian returning from Antwerp's diamond area. He told me that Hoveniersstraat, a Jewish street once celebrated for famous kosher restaurants, now offers the best dal roti in Europe. And why not: 80 per cent of the world's polished diamonds now pass through Indian rather than Jewish hands.

A SENSE OF POSSIBILITIES June 1, 2003

I made a new friend last week. Shashi Kumar is twenty-nine and comes from a tiny village in Bihar, where his grandfather used to be a low caste sharecropper in good times and a day labourer in hard ones. They were so poor that on some nights he didn't get to eat. But his father somehow escaped this bondage and got a job in a transport company in Darbhanga.

Since they couldn't quite manage on his father's salary, his mother began to teach for Rs 400 a month in a private school in their neighbourhood, where Shashi was educated free under her watchful eye. Determined that her son should escape the indignities of Bihar, she tutored him at night, got him into college, and when he finished, gave him a railway ticket for Delhi.

Today, Shashi is a middle manager in a business process outsourcing (BPO) call centre in Gurgaon with customers in America and he exudes the confidence of a young man with promise. He earns Rs 25,000 a month, lives in a nice flat, which he bought last year with a mortgage from HDFC, drives an Indica and sends his daughter to a good school. Soon they will be leaving for Boston where his company has transferred him for a year's training at their customer's office.

Shashi is an average, affable young Indian, but what makes him different is that he has a sense of life's possibilities and lives and works in an environment that encourages this attitude. His grandfather would have been beaten had he dared to think of such things, and it is partly our 1991 reforms that have given Shashi a chance. Prior to 1991 jobs with dignity and possibilities existed largely in the government, and if you got an education and didn't get into the government you faced a hopeless future. The middle class remembers well the nightmare "educated unemployment."

But all this is changing: services have exploded since our economy opened up, and with telecom reforms a new Fortune 500 company is relocating its back office to India every day. In three years, people employed in BPO alone have grown tenfold to 200,000, and at this rate they will be two million by 2008 and educated unemployment will be gone forever. Shashi is a testimony to globalisation.

Shashi is also a Yadav and belongs to the same caste as Bihar's chief minister, and I wonder what Laloo Prasad would make of him. Shashi escaped but the ones left behind either don't have a school to go to or go to schools where teachers don't show up. They get sick too often because the water is unclean and there is no doctor.

Does Laloo think of these things? Does he ask how Shashi earned his possibilities? The simple answer is that anyone with education, computer skills, and some English can make it today in India, and it doesn't have to be an IIT, for much of one's potential can be realised by learning at the workplace, as Shashi did at his first job in a BPO company earning Rs 3000 a month. Now, here is a challenge for our education policy!

For Shashi, it is a good time to be alive in these days of ferment. His proud mother confesses that she did not understand much of what was happening to them even when it was happening. She simply did what she had to. On the way home from Gurgaon I think of life's possibilities and of Rainer Maria Rilke's lines:

A billion stars go spinning/ through the night, /blazing high above your head. But in you is the presence that/ will be, when the stars are dead. gurcharan.das@indiatimes.com; post box 3046, New Delhi110003

SECULARISM GONE AWRY May 18, 2003

Two weeks ago I met an old friend after a longish gap and he asked me what I had been up to. I admitted somewhat reluctantly that I had been wrestling with our ancient Sanskrit texts, but mostly in translation.

On prodding, I confessed sheepishly that I had been dipping into the Arthashastra, Manusmriti, Kathopanishad, Bhagavad Gita, and Kathasaritsagara. "Good God, man!" he exclaimed, "You haven’t turned Hindutva, have you?" I think his remark was made in jest, but it upset me. I asked myself, what sort of secularism have we created that has appropriated my claim to my intellectual heritage?

I was born a Hindu, had a normal Hindu upbringing, and like many in the middle class I went to an English medium school that gave me a "modern education". Both my grandfathers belonged to the Arya Samaj, but my father was drawn to the syncretic sant tradition of bhakti, and he joined the Radhasoami sect in Beas. When I was growing up, I vividly remember my mother telling us stories from the Mahabharata in the evenings while my father meditated in the next room. Despite this, I grew up like many Indians with a liberal attitude that is a mixture of scepticism but sympathy towards my tradition.

Our most cherished ends in life are not political. Religion is one of these and it gets demeaned when it enters public life. Hence, religion and politics must be kept separate, and to believe this is to be secular. I agree with BL Mungekar that "India will die if secularism were to die" and if we abandon secularism we will become like tragic Pakistan. But why has such a sensible idea failed? Our secularism has failed to stem the tide of intolerance because most secularists do not value the religious life. In well-meaning efforts to limit religion to the private life they behave as though all religious people are superstitious and stupid. This naturally doesn’t go well with the majority of Indians who are deeply religious and suspicious of godless, westernised, brown sahibs telling them what to do.

Secularists are also statist and think that the state can reform society and religion, which is again arrogant and foolish for genuine reform must emerge from within society. Moreover, secularists forget that the truly religious people are usually deeply secular. Thus, what has failed is not the noble philosophy of secularism but its practice. And in the meantime, intolerant fundamentalists have filled the vacuum.

So, how do we begin to privatise religion? The answer, I expect, lies with the moderate voices in each religion’s mainstream. Moderates must come forward and teach us that true religion has nothing to do with hating others. It worked when Gandhi or Maulana Azad preached secularism for they were believers themselves and the masses identified with them.

Secularism was successful in Europe in the 18th century because people were disgusted with the corruption of institutionalised religion. In India too, moderate religious leaders must demonstrate that the agendas of Ayodhya, conversions, and banning cow slaughter are perverse. They must show up the extremists for what they truly seek, which is a grab for power. The answers will not come from the Congress or the BJP. Nor can we wait for another Gandhi to emerge. The answer lies with the many reasonable voices of good sense within the Hindu and Muslim communities. Surely, there must be a few courageous individuals among them who will speak up before their faith is totally hijacked by the terrorists.

MAKE MONEY FROM TRASH May 3, 2003

Kevin lives in America but he is no different from most Indian nine-year-olds who do their arithmetic homework before dinner. One evening in February he worked diligently on the ratio of birds to worms and gave it the next day to his teacher, who was pleased that he had begun to grasp fractions. That evening Kevin showed his homework to his parents, who taped it on the fridge. On Saturday Kevin's mother casually threw the homework into the paper section of the family garbage, from where it was picked up and taken to Clifton, New Jersey's recycling centre.

The following day a truck belonging to Zozzaro Brothers Inc took it to its plant, where it was made into a 700-kilo rectangular jumble by a paper baler, bound by steel wire, and loaded into a container. A week later they sold Kevin's homework to Yao Yang Enterprises in California, who in turn sold it to Hangzhou Jinjiang Paper Co in Linan, a Chinese town about 100 miles northwest of Ningbo.

Linan is small by Chinese standards. The paper mill is located in the town's centre and its prosperity is based on getting cheap waste paper from America. There Kevin's homework was cut into fine pieces by a machine, its ink removed, added to a slurry that broke its original fibres, dried and made into newsprint and sold to a Chinese newspaper.

This quintessential story of globalisation was recounted recently by Jon Hilsenrath of the Wall Street Journal, and it ought to inspire India's entrepreneurs and policymakers. Last year China sold goods worth $125 billion worth to America, but it bought only $22 billion, and given this imbalance, American policymakers are delighted that waste has become

America's third largest export item to China, after airplanes and semi-conductors. ‘‘We are the Saudi Arabia of scrap,'' says the research director of America's Scrap Recycling industries.

Some of America's waste is recycled and stays on in China, but most of it makes a round trip - it is reconverted into toys, stationary, electronics - that are sold in American stores.

This story shows how the global economy is creating masses of jobs in both China and America. More Americans are now collecting waste paper than in paper manufacturing or in newspaper publishing. By law Americans are required to recycle certain varieties of paper and it now recovers 50 per cent of its waste, thanks to the environmental movement.

Fortunately Indians abhor waste, but this story should teach us the value of separating paper from other trash at home. There is also a huge entrepreneurial opportunity in organised paper collection in India. We do have our kabariwalla, but there are so many layers in the trade channel that a paper mill ends up paying Rs 7 versus the Rs 4 per kilo that I earn from my kabariwalla. Hence, Ballarpur, Rama Newsprint and our other paper mills prefer to import waste paper from America. But unlike the Chinese, our mills are stuck with old technology and convert waste paper inefficiently. If our entrepreneurs with the latest technology could convert 10 per cent of America's waste (China does 23 per cent), it would fuel a small revolution. The government can help them with a more rational duty structure.

Today, our newspapers import fresh newsprint at 5 per cent duty, but paper mills have to pay 9.2 per cent for importing waste paper. Both ought to pay the same, 5 per cent.

When Jon Hilsenrath told Kevin about his homework's complicated journey, the nine year old replied, ‘‘That's pretty cool,'' and he showed the reporter his favourite toy, a Nintendo Gameboy, which was made in China.

LIMITS OF NATIONALISM April 20, 2003

I wrote in my last column about how arbitrary and tenuous are our borders and how we should treat them with a bit of healthy contempt. The right attitude is to think of 'South Asia without Borders', which is the title of a seminar at Harvard, and which is consistent with the cosmopolitan Indian way of the first millennium AD, when Sanskrit was the subcontinent's common language of culture before the vernaculars rose.

Amartya Sen wisely suggests that all of us have multiple identities and we ought to resist privileging our national identity. For example, I am an Indian male, but I am also a Punjabi, a father of two, a writer, a vegetarian, an enthusiast of Kishori Amonkar's music, a cheerleader of our liberal reforms, a fan of the Indian cricket team, and so on. I have different identities, and which one I choose at a particular moment is often a practical decision. When I am amongst Punjabis, I relish abusing in Punjabi; among music lovers I talk about Kishori's latest concert; with my children I try to behave like a responsible father (usually without success); and in the recent cricket World Cup I cried myself hoarse before the TV.

While I am proud of my Indian identity, I don't feel that I have let the side down if I enjoy Thai green curry or Italian pasta, Bach's German baroque or Kurusawa's Japanese films. Our identities also change with time; some people even change their religion; others migrate and change their nationality. And it is certainly human to stop and occasionally ask like Socrates, "Who am I?" When I go to sleep, I prefer my male identity for I can dream of Krishna kanhaiya surrounded by a hundred gopis, but when I die I'd like to be remembered as a human being, not delimited by nationality, caste or religion (a lesson that Tagore teaches in Gora).

The point is that identity is a matter of reasoned choice. Unfortunately, both Hindu nationalists and American chauvinists (who ventured blithely into Iraq) want to force fit me into an overarching, rigid nationalistic identity that takes away this choice and impoverishes my plural human spirit. They would return me into the cesspool of pre-modernity where my religious identity is the only one that counts.

I had not realised the damage that 9/11 has done to the free American spirit until last month when I was refused entry into an office building in New York because I had forgotten my "picture id". I went back to the hotel for my passport but I was stopped again, this time because I did not have the phone number of the person I was to meet. Sure, I felt humiliated and even angry, but then I thought, I am only a visitor here, whereas all Americans are now subjected daily to this identity paranoia.

It is our unreasoned acceptance of a single identity that is responsible for the atrocities of our times. I was only four years old when Partition took place, but even as a child in Lahore I could tell that our newly devised Hindu identity had redefined our Muslim friends as enemies in 1947. The Pianist, the much-honoured recent film by Polanski, makes your stomach turn as you watch German nationalists express their nationalistic identity by killing half a million Polish Jews.

We should think of human beings as diamonds with many faces. Hate begins when we categorise people, choosing one face and ignoring the others. When we reduce people to one dimension we encourage a fragmented view of humanity, whereas we should celebrate our plural identities. The tragedy of war, including this one in Iraq, is that we privilege one face, usually our national identity.

IMPERIAL FAULT LINES April 05, 2003

Whether it is the continuing ugly massacres in Kashmir or this dreadful war in Iraq, the truth is that far too many of the trouble spots in the world are the consequence of the frontiers created ad hoc by Britain's wicked old imperialism and the legacy of its divide and quit policy.

Christopher Hitchens, the author of Why Orwell Matters, points this out in an elegant essay in the Atlantic Monthly. In 1916, it was one Sir Mark Sykes who divided the Middle East into Lebanon, Syria, Palestine and Jordan. Six years later, Sir Percy Cox carved Kuwait out of Iraq. The year before the Irish were told they could either have an independent or a united state but not both. And as we know, it was Sir Cyril Radcliffe's pen that carved a Pakistani state in 1947 out of what had formerly been India. More recently, Lords Carrington and Owen of the British Foreign Office advanced the ethnic division of Bosnia-Herzegovina, and before Nelson Mandela came out of jail, the same Carrington wanted to split South Africa three-ways into a white Afrikaner area, a Zulu reservation, and a free for all among the others.

Marya Mannes captured this historic legacy with wonderful irony in a poem that no one reads any more. She wrote: "Borders are scratched across the hearts of men/By strangers with a calm judicial pen,/And when the borders bleed we watch with dread/The lines of ink across the map turn red." Ruefully, one remembers that most of those lines would not have been there had the map not been coloured red in the first place. The year after she wrote this, the British government informed the people of Cyprus in 1960 that they must either accept a sullen independence or face an outright division of their island between Greece and Turkey.

But for us in India it was Audens poem, ‘Partition', that truly brought out our sweet sourness over Mountbatten's disengaging mission: "Unbiased at least he was when/ he arrived on his mission,/ Having never set eyes on this/ land he was called to partition/ Between two peoples fanatically at odds,/ With their different diets and/ incompatible gods./ Time, they had briefed him in/ London, is short. It's too late/ For mutual reconciliation or/ rational debate:/The only solution now lies in separation."

Hitchens questions the popular view that Islam was a big loser from colonialism. In India, he says, "the British were openly partial to the Muslims, and helped to midwife the modern state consecrated to Islam. In Cyprus they favoured the Turks. In the Middle East Muslim Hashemite and Saudi dynasties benefited as much as anyone from the imperial carve-up. Had there been a British partition of Eritrea after 1945, the Muslims would have been the beneficiaries." No, the Muslims were not losers but they do have reasons to feel resentful over the loss of the Islamic empire, which is a different grievance.

There certainly were Muslim losers in Palestine and elsewhere, but the big losers were the many people of the other creeds and those who believed in modernity and transcended tribalism. It is the same in today's India where amidst the fanaticism of the Hindu nationalists and the Muslim terrorists, the losers are the ordinary people who want to get on with their lives. This unhappy British colonial legacy not only holds lessons for imperial America in Iraq — when its time comes to quit it ought not to botch things — but it is a reminder to all of us on the sub-continent that our borders emerged from scornful bureaucratic pens, and deserve to be treated with similar contempt.

NASTY CAPITALIST MYTHS March 23, 03

For more than a decade now we in India have been moving in the direction of some form of capitalism. It is a much misunderstood and much reviled system, which seems to put everyone on the defensive, and one of our defence mechanisms is to use euphemisms like "the market" to describe it. The governance scandals involving Enron, WorldCom, Arthur Anderson and others have confirmed to its detractors its evil nature. Although I am an apologist of this system, I too have been deeply concerned about some nasty myths that have taken hold inside the corporation in the past 15 years, which Henry Mintzberg and others have recently written about, and which might explain its recent failings.

The first myth is that since we are all self-interested human beings, intent on maximizing personal gain, our only duty is to the bottom line, implying that everything goes and everyone has a price as long one stays within the narrow limits of the law. This myth ignores that a company exists in a social space and that man is a social animal, as Aristotle reminded us more than two thousand years ago, and integrity, self-respect and cooperation have always been equally important values to the system’s success. Leaders of the enduring companies have always known this and tempered dogmatic individualism with social engagement as a form of enlightened self-interest.

I have found that the lives of most entrepreneurs and senior managers is characterised by an ethic of ceaseless work combined with a ceaseless renunciation of the fruits of their toil. They work so hard that they have no time to enjoy their money. Aditya Birla, JRD and Rattan Tata, Azim Premji, Narayana Murthythe more successful they became, the more they tended to live frugally. Max Weber had called this "secular asceticism", and had used it to characterise Protestant entrepreneurs, but it can easily define most outstanding businesspersons (and outstanding lawyers, doctors, artists, scientists.) Hence, the spirit that took hold in the nineties on Wall Street and in the dotcom world was pathological, and for the critics to characterise the system as synonymous with greed and selfishness is wrong.

Another myth is the notion that the corporation exists only to maximize shareholder value and the claims of other stakeholders in societycustomers, employees, suppliers, and the community at largeare subordinate. Again, enduring companies have always believed that shareholders must receive a good return, but they are able to balance shareholder’s expectations with those of other constituencies. Successful companies know that they exist because of their customers; they don’t serve customers by serving themselves, but serve themselves by serving their customers, and the more selflessly they do it the more successful the enterprise becomes.

Another fabrication is that the chief executive is the enterprise and he must be rewarded disproportionately. This explains why CEO pay in the U.S. rose 570% in the decade of 1990s, while profits rose 114% and average worker salary went up 37%. Leadership is obviously important, but enduring companies understand that good leaders are often more quiet than heroic; they foster teamwork, and work towards smooth succession and getting the best out of all employees. As Bertolt Brecht aptly put it, "Unhappy is the land that needs heroes."

These myths are seductive partly because they contain a kernel of truth; but they are in the end half-truths. The governance failures of the past two years have highlighted the excesses that resulted from glorifying self-interest in the decade of the nineties, and that is why only 34% percent of employees worldwide feel a sense of loyalty to their employers according to a recent study, and only 47% view the leaders of their companies in the United States as persons of high integrity. As a result of the present churning I expect the balance in the system will right itself over time, as it usually does, and the old truth will re-emergethat capitalism, like democracy, is by no means perfect, but it is better than any of the alternatives.

COSMOPOLITAN & VERNACULAR 9 March 2003

I sometimes wonder what language we Indians will be speaking fifty years from now. One possibility is that the status quo will continuea small elite will be comfortable in English while the masses converse in the vernaculars. A second prospect is that almost half the population might speak English to varying degrees of comfort. A third option is that there will be a linguistic renaissance of the vernaculars and we might have a bilingual middle class. A fourth possibility is the sangh parivar’s dream of a Hindi rashtra.

If I were a gambler I would bet on the second scenario. For every Indian mother knows that English is the passport to her child’s futureto a job, to entry into the middle classand this is why English schools are mushrooming in city slums and villages across the country, and English has quietly become an Indian language fifty years after the British left our shores. David Dalby, who measures these things in Linguasphere, predicts that by 2010 India will have the largest number of English speakers in the world.

This may well be what will happen, but is this what we would want to happen? If there were a poll, I suspect most of us would vote for option three for none of us relishes the idea of forgetting our vernacular literary cultures and traditions. I have recently read a wonderful essay, ‘Cosmopolitan and Vernacular in History’ by Sheldon Pollock, a professor of Sanskrit at the University of Chicago, and he sheds new light on the debate. He writes that the vernacularisation of the Sanskrit world began in the 9th century as Kannada and Telugu became the languages of literary and political expression in the courts of the Rashtrakutas and Chalukyas. About the same time or soon after, Sinhala (9th c.), Javanese (10th), Marathi (13th), Thai (14th), Oriya (15th) began to produce literatures. Tamil, our oldest literary vernacular, also began to express courtly ideas under the imperial Cholas in the 11th c., and Hindi was similarly fashioned by Sufi poets in principalities like Orcha and Gwalior (15th c).

Pollock teaches us that our vernaculars were ‘created’ and are not primordial, as many vernacular nationalists would like to think. Also, the bearers of these languages were the elite and not the people, as Gramschi and Bakhtin had made us believe. Neither is the spread of our vernaculars related to the popularity of bhakti as many historians have told us; finally, we were always relaxed about our languages and the consciousness of a ‘mother tongue’ did not even appear until the Europeans arrived. Interestingly, in Europe, vernacularization of Latin happened at the same time, but there it led to the nation-state.

Prior to our vernacular millennium, for a thousand years or more our literary world was cosmopolitan as Sanskrit held sway over South Asia, and as Latin did in Europe. Pollock says, ‘there was nothing unusual about finding a Chinese traveller studying Sanskrit grammar in Sumatra in the 7th century, an intellectual from Sri Lanka writing Sanskrit literary theory in the northern Deccan in the tenth, or Khymer princes composing Sanskrit poetry for the magnificent pillars of Mebon and Pre Rup in Ankor in the twelfth.’ Again, unlike Europe where Latin was the language of power and the Roman state, the Sanskrit cosmopolis was dharmic and voluntaristic--the Shakas and Kushanas, for example, as they migrated into India adopted Sanskrit and its culture.

This brief history lesson makes one realise that the sangh parivar’s project of linking power with language is so un-Indian. Language for us has always been a vehicle of aesthetic distinction and not of power. While I regret the loss of tradition, I also think that languages and cultures are evolving things and we ought not to do too much social engineering. Hence, vernacular nationalism is also unhealthy. Let’s think of the global ascent of English as another cosmopolitan phase in our history, and perhaps not worry too much about the language we will speak fifty years hence.

SAVING CAPITALISM February 23, 2003

The Sunday before last I wrote about my failings as a board member and I concluded that an independent director had an impossible job. It is not easy to penetrate a company, and one way to do it is to become an insider, as I did when I became a consultant, but that, of course,means that one ceases to be ‘independent’. Hence, I ended on a pessimistic note about the prospects for corporate governance within the present structure of capitalism.

This Sunday I shall take a stab at a few solutions, some of which are being avidly debated around the world. Clearly, it is not feasible, nor desirable to make directors into consultantsmine was a very personal solution to keep own my juices flowing while I contributed to the companies’ marketing side, but it had the unexpected side effect of letting me penetrate into their darkest corners.

The answer to governance, I think, must begin by making the boss accountable and separating the roles of chief executive and chairman of the board. I don’t have Indian data but in America, three out of four companies (in the S&P 500) combine the two jobs; in Britain they usually do not. This separation will allow someone other than the CEO to set the board’s agenda and steer the flow of information. Until separation is achieved, I would designate a lead director to represent the outside directors, someone who can influence the agenda and takeover in a crisis. Board members are like fireman; they are not needed everyday, but they are crucial when there is trouble.

I have noticed that companies with a majority of independent directors are more likely to have dissent and open discussion in a board meeting. But the most powerful signal of board independence, I think, is for non-executive directors to hold regular meetings without the CEO and company management present. In this meeting directors ought to discuss if the board receives enough information and if the CEO answers their questions transparently. This idea is being actively discussed in the U.S and it has many CEOs worried.

Successful boards, I find, appraise their own performance formally and dispassionately, as well as the CEO’s performance. They take the time and trouble to meet and discuss not only how the CEO is doing but how the board is faring in its governance function. Like any organisation, boards need knowledge, power, motivation and time. The last two are the least appreciated, because board members are busy, and board governance like any job needs commitment and time. Hence, I suggest limiting an individual to five directorships, but simultaneously raise the director’s remuneration.

It always helps to have a large investor on the board, someone who gets hurt personally when the company does something stupid. Warren Buffet is such a legendary director. Kay Graham, the owner of the Washington Post, tells us in her charming autobiography that Buffet owned 20 percent of the newspaper, and he was committed to see it succeed; he invariably did his homework, was on the phone to the company between meetings, and often saved the management from making stupid decisions like getting into the cable business.

Enough has been written and said about the role of auditors and the enhanced power of the audit committee and I agree with it. What is less well known is the link between good governance and high performance. The Economist reports that Paul Gompers and two others at Harvard Business School examined 1500 companies, and found that those most responsive to shareholders gave 8.5 percent higher annual returns in the 1990s versus management dictatorships.

At the end of the day, however, corporate governance is not something that can be just legislated and I worry that we all look to SEBI to come out with yet another law. I fret because too many rules might discourage risk-taking and innovation. Remember, an independent attitude is something we learn from our mothers when we are young and no amount of legislation will necessarily bring it about.

LOSING OUR BEST January 26, 03

Our government’s recent decision on dual nationality did not assuage my feelings of unease, and I continue to agonize over the loss of our best and brightest to the West. I ask myself, does it matter if highly skilled Indians leave? Certainly, I celebrate the success of the Hyderabadi software engineer who makes good in Silicon Valley--she has enhanced the respect for Indians everywhere, and there is no loss in that. But my experience in running a business is that skilled talent is the scarcest commodity in the world and everyone is in a hunt for it. Ask any CEO of a reasonable sized company and he will tell you about the long evenings he has spent trying to persuade a good candidate to join his company. The same goes for nationsAmerica’s success is measured not only by its economic or military might but because it is able to attract the best talent from the world.

My dilemma over losing our best is compounded by my passionate belief in free trade and investment, which I am convinced, will eventually bring enormous prosperity to all Indians. Why should I demur when it comes to globalisation of labour? My reason tells me that I should support it but my heart doesn’t agree. One side of me thinks of my passport in a deeply emotional way--as a commitment to an identity; but another side says that passports are merely a convenience. A friend of mine has three passportsAmerican, French, and Italianand he doesn’t spend much worrying about his nationality. And 93 countries agree with him as they recognise dual citizenship.

Living in the world of passports and visas we tend to forget that these barriers are a recent phenomena. There were no such fences a hundred years ago during the first age of globalisation, which in many ways was a far more liberal than today, especially after 9/11. It was also an age that produced two of our best non-resident IndiansMahatma Gandhi and Jawaharlal Nehru.

We blame NRIs for not being as patriotic as their Chinese counterparts and not investing enough in India. It’s a false comparison, I think, because we fail to recognise that it was only in the 1990s that our NRIs became broadly wealthy and capable of making entrepreneurial investments. The Chinese diaspora of Hong Kong and Taiwan, who are the main investors in China, have had a 15-year head start. Hence, the timing of the government’s decision on dual nationality is excellent because this is the moment in history that we need globally successful Indians to link our enterprises with global markets.

Unfortunately, our dual nationality policy is flawed, and is going to result in too many Indians giving up their Indian citizenship, and adopting a foreign one. Our babus should learn from the best practices among the 93 dual nationality countriesand give, for example, full citizenship rights to NRIs and virtually the same passport as residents. Few NRIs may, in fact, change their behaviour as a result of dual nationality, but most will get a sense of being valued and of belonging, and that is worth a great deal.

I am not in favour of taxing expatriates, as Jagdish Bhagwati and Mihir Desai have suggested. The only solution to bringing our brightest back is to make India a nice place to work. This will only happen if we accelerate the pace of reform. Just as we have reformed telecom--where rates are dropping by the day and queues for phones have virtually disappearedso must we reform power and other infrastructure. Taiwan, South Korea, and China have begun to see a reverse flow in talent. Ireland has become a country of immigrants after centuries of being a land of emigrants. Once we reach Taiwan’s level of infrastructure, we too will experience what it did recently. Of the 312 companies in Hsinchu industrial park near Taipei, Silicon Valley returnees have started 113, and 71 of these continue to recruit talent from there.
GOD IS IN THE DETAILS January 6, 1998

If there is a widespread consensus on economic reforms, as everyone says, why are there such frustrating delays in implementing them? If we are agreed on what is to be done, why don't we just do it? One reason is that we haven't had a true reformer at the top, such as a Deng or a Thatcher. The agenda of our political class is also at odds with what the world believes is necessary for the prosperity and well being of our citizens. Moreover, we haven't had reformers heading our ministries dealing with infrastructure. The most important reason, however, is that our discourse is disfunctional. We continue to waste our energies in debating "the what" when we ought to focus on "the how". How to reform is a more difficult challenge and it is not for lazy minds. It needs the full application of the mind; it needs problem solving ability; and it needs mental toughness. Most of all, it requires acute attention to detail. It is not for drawing room amateurs. We Indians are good when it comes to defining the broad picture. But we fall apart when it comes to detailed planning and tactics which lead to successful implementation. This is a flaw which attaches both to our public and private sectors. Hence our products and governance are both shoddy. Most of our politicians and businessmen suffer from this disability. Our political parties are mentally lazy. The leftists want more money for the poor. No one grudges them the money if it actually reaches its beneficiaries. But people resent that most of the poverty funds are lost in corruption and administrative expenses. Why don't the leftist parties apply their minds to showing how subsidies can be cut and redesign poverty programs so that the poor actually receive the benefits? The voters will respect them and might even vote for them. The BJP wants Indian companies to became strong and competitive. This is a laudable objective and few will contest it. The BJP wants to achieve this objective by eliminating foreign competition in consumer products. But it doesn't offer a criteria to decide what is a consumer product. The BJP merely says that it wants high tech and not consumer products. However, even the simplest consumer product today contains high technology. Potato chips are easy. But isn't a car or scooter, a personal computer, a telephone a consumer product? Will the BJP yuppies give up their Marutis and go back to driving bullock carts? For even the Ambassador was based on foreign technology. Because the BJP has not mentally applied itself to these issues, it will turn over the task to bureaucrats. And what will happen? Since there is no objective way to make the distinction, between a consumer and non-consumer product we will return to the bad old days of the licence-permit raj. These are the consequences of mental laziness. Every Indian wants electricity. However, putting up a power plant costs money. Everyone knows that our government doesn't have money. But the global private sector does. Thus, the only alternative to living in darkness is to have private power. Why, then, have we lost six years in endless debate over each private power project? The problem with private power is that our state electricity boards are bankrupt, and no sensible supplier will sell electricity to a bankrupt customer. This is a genuine problem of "the how" and this is what we should be debating. It is no good moaning about bad MNCs. Fortunately, this U.F government had made some real breakthroughs in solving these difficult problems. If the U.F wants to go down in glory, it should now complete this job over the next few months and leave us with some showcase power plants which have achieved financial closure and are ready to start construction. The citizen will be forever grateful and might even vote for them. Instead of berating multinationals, let us learn from them. One of the first lessons that a young MNC manager learns is that "God is in the details." It is not enough to have a broad strategy; success depends on penetrating the details of an issue. One has to be mentally tough in choosing between unpalatable alternatives. It is this attention to detail which allows MNCs to deliver awesome performance--e.g. reducing costs by 30 per cent across the globe within 9 months by involving 100,000 people, as Nissan did in 1989.

Gurcharan Das

Monday, January 26, 2004

MORALITY AND THE MARKET

Monday, January 12, 2004

STOP BULLYING CHILDREN

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