Sunday, November 30, 2008

Changing rules of dharma

Speaking of the global financial crisis, Sonia Gandhi recently applauded Indira Gandhi’s bank nationalization of 1969, saying that it had given India ‘stability and resilience’. Like the Bourbons of France our political class neither learns nor forgets anything. I don’t think Sonia Gandhi realizes quite what she was saying. India’s bank nationalization delivered neither growth nor equity. Any public sector bank manager will tell you how loans were diverted to friends of politicians rather than to commercially deserving farmers. Bad debts of banks rose alarmingly in the 1980s and moral hazards persist.

Indira Gandhi drew us further away from world trade, raised tariffs and taxes, and made us one of the world’s worst performing economies from 1966 to 1989. Industrial growth plunged to 4% a year vs. 7.7 % in 1951-1965. Manufacturing productivity declined half a per cent a year. Rakesh Mohan estimates that her mistakes cost the nation 1.3 per cent lower GDP per capita per year—meaning that our income would have been more than double today. I don’t blame Nehru for adopting the wrong economic model as socialism was the wisdom of his age; I blame Indira for not reversing course as sensible countries in East and Southeast Asia did. Even China changed in 1978, but we had to wait till 1991. She multiplied by zero and put us back by a generation.

But let’s not dwell on the past. India is in the midst of a dire crisis and we don’t seem to realize how much we are hurting. Panic has choked credit worldwide. Our economy is slowing pitifully. Exports are collapsing. Banks have stopped lending. Construction has come to a halt. Fear has taken over, and people are not buying (except mobile phones). As demand shrinks, so do revenues and profits of companies. Investment has stopped and lakhs in textiles and construction are out of work.

The Mahabharata points out that rules of dharma change in times of crisis when one is forced to observe apad-dharma. Paradoxically, defending capitalism requires state intervention. History teaches that decisive government action can stem the pain. If Lehman had been bailed out the world might not have gone over the cliff. But once normal times return governments must sell off the banks that they had bailed out and not leave them as cash cows for politicians, like our public sector banks.

The quickest way to restore confidence is to further cut interest rates, CRR and SLR, and recapitalize banks. Today’s rates are still too high. Since oil and commodity prices have plunged, the risk of inflation has receded. As property prices decline, and as old mortgage terms become available, people will begin to buy the homes they postponed when interest rates rose. When people buy houses, they give jobs to millions. The same goes for other sectors. Consumer spending will raise demand, restore production, and lead to investment. There is a currency risk in this strategy, of course, but the risk of deflation is greater.

Of course, we should spend massively in infrastructure, but the trouble is that even the current programs are not moving. World Bank has threatened to withdraw funding from highway projects. 234 out of 515 Central projects are delayed. Hence, public spending wont work when speed is of the essence. The saving grace is that we have been accidentally ‘pump priming’ via the rural employment guarantee scheme and loan waivers. What we must not do is to close borders no matter how much local industry clamours for protection. In the 1930s every country tried to protect its own industry. World trade declined 60% between 1929 and 1932 and this caused a worldwide depression. We must do everything to protect the fruits of globalization which has lifted millions out of absolute poverty over the past 20 years. No one can predict when the present crisis will be over. Things could get much worse, meanwhile, but capitalism will eventually correct itself.

Sunday, November 16, 2008

What are you reading these days?

One of my earliest memories is of a visit to a lending library. We lived in Shimla and I had discovered a circulating library near our home. Since my mother would not let me borrow a comic, I picked up my first copy of Enid Blyton. When we got home, my overbearing uncle thundered: “How can you let the boy read this trash!” Blyton may not be Shakespeare but with her I began my love affair with reading. When my kids were of that age they too found a lending library at Kemps Corner in Mumbai. When our family meets nowadays, we don’t ask, ‘how are you feeling?’ We ask, ‘and what are you reading these days?’

Just as a great city must have a big public park along with lots of small neighbourhood parks, so it must have one big public library and many neighbourhood libraries. Ideally, public libraries should be free, paid by taxes, and managed by the municipality. But this is a distant dream in India where the state has failed to deliver even more basic services like schools and hospitals. So, what do Indians do? Well, we don’t sit around. We start lending libraries in the bazaar, which are a metaphor of India’s middle class as it pulls itself up by its bootstraps. When government schools fail we start private schools in the slums; when public health centres fail, we open cheap health clinics.

Generally lending libraries charge ten percent of the book’s price. Since a new paperback costs Rs 200, one can borrow it for Rs 20, which is cheaper than an ice-cream. Chennai boasts the most lending libraries—129—but Eloor, they say, is the best with 80,000 volumes in a digital catalogue. Now thriving in Bangalore, Kolkata, and Delhi, it started in Kerala, the legendary home of the Reading Room movement. Hundred years ago villagers could not afford a newspaper and so they shared it or read it aloud to others. Thus, reading rooms were born. They made people politically aware, and EMS describes how they helped abolish the princely states of Travancore, Cochin and Malabar and united Kerala. By 1947 every village in Kerala had its reading room from which the communists recruited their cadres.

When I was thirteen, I visited America, where I discovered the neighbourhood public library from where I could borrow books for free. I walked in one day, filled out a form, and I was a member. The library had got started through a philanthropic donation of Andrew Carnegie, the ‘robber baron’ who built America’s steel industry. Between 1900 and 1917, Carnegie founded 3000 neighbourhood public libraries, insisting that the local municipality had to guarantee tax support for running and maintaining them.

In India, we do have some grand public libraries—the National Library in Kolkata, the Royal Asiatic in Bombay, and the splendid Connemara in Chennai. But these are more for scholars. Our most inspired library effort in recent years has been Delnet. The brain child of Dr HK Kaul, Delnet has electronically linked 1350 public libraries in India and a member can access 75 lakh books via an inter-library loan within 2-3 days.

But a neighbourhood library has a social purpose as well. Like a tea or a paan shop it brings people together. Delhi Public Library has a few branches but it insists on your identity verified by an MP/MLA/Gazetted Officer before you can borrow a book. My library in America only wanted an envelope bearing my family’s home address—such as a phone bill—as proof. I was treated as a citizen, not as a subject. Despite television and on-line reading, people will continue to read books for pleasure. Perhaps, one day we too will spawn our Carnegie. Or, as we turn into a middle class nation, we will demand publicly funded libraries. Meanwhile, at least, we have our lending library in the bazaar.

Monday, November 10, 2008

Finally, a lifeline for India’s poor November 2, 2008

Nothing causes as much anxiety in a family as when someone falls sick. 65% of India’s poor get into debt and 1% fall below the poverty line each year because of illness, according to NSSO 2004. The answer, of course, is health insurance, but only 6% of India’s workers have it. Free public hospitals are not an option as two out of five doctors are absent, and there is a 50% chance of receiving the wrong treatment, according Jishnu Das and Jeffrey Hammer’s study. This tragic state of affairs is, however, set to change dramatically with Rashtriya Swasthya Bima Yojana (RSBY), a visionary national health insurance scheme, which provides Rs 30,000 ‘in patient’ health benefits at a premium of Rs 600, which the government pays if you are poor.

A brain child of an IAS officer, Anil Swarup, this scheme will succeed when others have failed because of choice, competition and a magical ‘smart card’. A patient can choose from almost 1000 private or government hospitals. States can choose from 18 public or private insurance companies. Insurers have the incentive to recruit the poor as they earn premiums by doing so. Hospitals will not turn away the poor because they don’t want to lose the Rs 30,000 in potential revenue. The poor have a choice to exit a bad hospital, something that only the rich can do today. Competition between hospitals will improve the quality of health care and new hospitals will come up because there is now money in catering to the poor.

The insured carry a smart card with a photo, fingerprints of the family, and an official’s ‘key’ who is accountable. It makes transactions cashless and paperless for the 725 pre-agreed medical procedures. This card contains Rs 30,000 and it tracks expenses day to day in the hospital and the money is deducted automatically after each procedure. No need for pre-approval or reimbursement. Since the poor are migratory birds, the smart card empowers a Bihari to use a hospital in Gujarat. Smart cards are designed to prevent fraud because of 11 unique types of embedded software.

So far 500,000 cards have been issued in six months covering 2.5 million people. Most states have agreed to the scheme because the centre foots 75% of the premia. Haryana and Gujarat are the most enthusiastic. Uttarakhand and Orissa are dragging their feet. Kerala is offering it to everyone as long as the non-poor pay their own premia; thus, it has become a universal product of the insurance company. Only Madhya Pradesh and the North East states, to their disgrace, have not joined. If all goes according to plan 30 crore people or one third of India will be covered in five years at an annual cost of Rs 4500 crores--a tiny sum compared to the money wasted in dozens of other schemes. Previous state health insurance schemes failed because they insisted that people use public hospitals and public insurers—with predictable results. This one will succeed because insurance companies, hospitals, and patients all have ‘skin in the game’.

Smart cards can dramatically cut corruption in all our social programs. India spends 14% of GDP in subsidies for the poor, which is more than enough to wipe out poverty. But poverty persists because subsidies leak out through corruption. Smart cards can also carry data on payments for rations (PDS) or earnings from employment schemes (NREGS) and it can expose corruption very quickly. Despite the Left’s strident rhetoric, middle class Indians do not resent income transfers to the poor as long as the benefits reach the poor. Our problems in India are of the ‘how’ not of the ‘what’. The smart card addresses the ‘how’, and we know its powerful because corrupt officials and politicians are trying hard to kill it. For the nation, it is the best Diwali present amidst all the gloom in the marketplace.

A passion for death or life? October 19, 2008

The persistent attacks of terror on Indian cities by Islamist fundamentalists and on Christians in Orissa by Hindu fundamentalists have spread fear, re-opened old wounds, and polarized us. India’s economic rise is threatened as much by religious fanatics as by the global financial meltdown. This raises an insistent question: Will our 21st century be the story of an India turning middle class or will it get derailed by religious wars?

I have always believed that India would relentlessly march towards a modern, capitalist and democratic future; and terrorist attacks are a noisy, tragic, but ultimately futile sideshow. Islamism and Hindu extremism are a barely disguised form of tyranny, which will eventually lose their appeal. Even fundamentalists will get absorbed in finding good jobs, decent homes, and good schools for their kids. Since the attractions of peace are greater than of war, commerce will replace conquest as the route to achievement. History is on my side. In the past two centuries, the combination of democracy and market capitalism has triumphed over feudalism, monarchy, theocracy, fascism and communism. Europe, the home of religious wars, is now tolerant, and irreligious. There are today 120 genuine democracies versus only 10 a hundred years ago.

Since 9/11, Americans have also been debating the future of capitalist democracy. Many believe that Islam is incompatible with modern democratic values. Samuel Huntington in his book, The Clash of Civilizations, argues that future conflicts will not be between nation states but religious civilisations, and he predicts that Islamism will form an alliance with China to bring down the West. Francis Fukuyama rebuts this in The End of History. After communism’s fall, he predicts most countries will become capitalist democracies and the world will be at peace. But people, he feels, need more than shopping malls to satisfy their thymos--the human need for spirited achievement, which religion and wars fulfilled in the past. This explains the amazing religious revival in America, which Philip Jenkins has documented in The Next Christendom: The Rise of Global Christianity. He describes a new, vigorous, missionary Christianity that is increasingly assertive. The question is whether aggressive conversions by this new Christianity is producing the current backlash from Hindu extremists, who are behaving no better than Islamist terrorists.

For all its seductiveness, I never did buy the ‘clash of civilizations’ theory. Radical Islam or jihadism is political rather than religious. Sayyid Qutb and Osama bin Laden employ dangerous ideas of violence that are not Islamic but resemble anarchist ideologies of Europe. They resonate with Arab and European Muslims because of their deeper alienation with the West. In India, we have reacted to terrorism more maturely than the U.S. Indians are more relaxed than paranoid Americans, and this must dishearten terrorists. Our security agencies have not shown the same competence, however. Our government has also failed to assert the primacy of the citizen over the group, and stop pandering to religious and caste identities. Religion is a double edged sword----while it gives meaning to our confused, uncertain private lives, it also creates an exclusive identity, and this asserts itself publicly before long. In a competitive democracy secular politics does not spring automatically. It took centuries in the West to persuade politicians to eradicate religion from political rhetoric. The Islamic world is still struggling with this problem.

It may seem odd to say this at a moment that capitalism has been humbled, but I still believe that secular, democratic, capitalist India will prevail in the end. Just as we have rejected socialism and central planning as the path to prosperity, so will our plural, secular democracy ultimately defeat political Islam and political Hinduism.

Tuesday, October 14, 2008

When everyone lost, October 5, 2008

When you teach people for two generations not to respect the property of others you are bound to have a tragedy. Singur is 50 km northwest of Kolkata where Ratan Tata made the surprising decision to set up a factory for the world’s cheapest car, the Nano. Bengal’s image may have improved but it still has a poor work culture. But its chief minister Buddhadeb Bhattacharjee is a charming man. He sees himself as the Deng of India, and he persuaded Tatas with an attractive plot of 1000 acres.
Although the state offered farmers a higher than the market price, some refused to sell their land. When they protested, the ruling CPM party let the police loose and acquired their land forcibly. Mamata Banerjee, an opposition leader, sensing an opportunity for votes, arrived on the scene and insisted on the return of 300 acres. By now the factory was almost ready; Tatas claimed they needed the land to house component suppliers to keep costs down. Mamata’s agitation soon went out of control. Tatas fearing for their staff’s safety, decided on Friday to leave Singur.
Here is a tragedy in which everyone lost! CPM’s culture of violence has been exposed. Buddhadeb’s hopes for an industrial renaissance of Bengal are dashed. Tatas and their vendors face massive relocation costs which have jeopardised Nano’s magical price. Mamata will now only be remembered for destroying Bengal’s future. For the people of Singur the dream of a better life is over. And India’s image is unhappily tarnished.
So, who does one blame? Clearly, the state violated the farmers’ right to property when it forcibly acquired their land. We used to think that property rights concerned only the rich—especially when the targets were zamindars and big business, whose banks and insurance companies were nationalized without due compensation in the 1950s and 1960s. The judiciary, however, kept warning successive governments that the right to property was fundamental. But our socialists were impatient, and on one sad day in 1978, the Janata government removed ‘property’ from the list of fundamental rights in our Constitution. Today, thanks to Mamata, we have realized that the even a poor farmer has a right to his land.
Just as I have a right to my life, I also have the right to the shirt on my back or my home, so that I may live in peace. I can only give up this right when I voluntarily sell my property. If someone forcibly takes it away, the state has a duty to get it back. In societies where property rights are secure and legally enforced, citizens feel safe. They have the incentive to buy, sell, engage in business, and everyone's life improves. There are times, however, when the state has to acquire private land forcibly for a public purpose such as a road. But acquiring property from farmers for the sake of industry does not qualify as ‘public purpose’. To our democracy’s credit, our government has now realised its mistake. A new land acquisition bill is up for Parliament’s approval in the next session. In the future, industry will have to negotiate with farmers, and only if there is a deadlock and only if 70% of the farmers have agreed to sell, will the state step in.
The lesson from this Bengali tragedy is give the poor a clean title to their property—their huts and plots--so that they may take a loan against it. Also, put land records on the Internet so that corrupt revenue officials will not exploit the poor. Karnataka has done it—it has computerized 2 crore land records of 67 lakh farmers. This is one way out of poverty. The Bengalis are our Irish, who as Yeats said, have an abiding sense of tragedy. Their tragic sense lies in striving to be rational but recognising life’s underlying irrationality. One cannot avoid tragedy, but strengthening institutions like property rights can help to minimize it.

Monday, September 01, 2008

Kashmiri choice, August 24, 2008

A Kashmiri Muslim student came to see me last week and it was not long before our conversation turned to the current azadi wave in the valley. He did not think that an independent Kashmir was viable, and its only choice was either to be with India or with Pakistan. After a pause he asked guilelessly, why was India a democracy and Pakistan an autocracy? This set me thinking. I told him that Pakistan was more the norm--third world countries do not generally become stable democracies. India is an exception.

India’s democracy and Pakistan’s autocracy have deep roots in history. India’s nationalist movement was older and more widespread. Millions of ordinary Indians were drawn in by Mahatma Gandhi. Muslim nationalism emerged later and did not become a mass movement--Jinnah was more comfortable in the drawing room rather than the ‘dusty road’. While Indians prepared for democracy over three generations, Pakistanis-to-be got the itch only a couple of years before independence. After Independence, Pakistan’s politicians performed abysmally. The Muslim League Party disintegrated; there were nine governments in ten years; and the army under Ayub Khan seized power in 1958.

Jinnah’s great error as to impose Urdu as the national language when only 8% of Pakistanis spoke Urdu and 55% spoke Bengali. Thus, he sowed the seeds of Bangladesh. Sri Lanka made the same tragic mistake. India did not succumb to this anti-democratic temptation by imposing Hindi. This is how India gave space for sub-identities to flourish, allowed the rise of peoples’ leaders from linguistic states, and deepened democracy.

Although his slogan in the 1945-46 elections in undivided India was ‘Islam is in danger’, Jinnah wanted to build a modern nation. Even though General Zia ul Haq reinforced theological priority, I do not believe Islam prevents Pakistan from being democratic. The rise of Islamism does tear the ordinary Pakistani’s loyalty between the brotherhood and the state, but the Maulvi is not Pakistan’s natural leader as in Iran. The chief obstacle to democracy is the army. Hence, I am relieved that Musharraf is gone. It does create a vacuum that might be filled by extremists, but longer term the best thing for India is to have a democratic Pakistan.

For a brief moment in the mid-1970s the two nations seemed to converge. Zulfiqar Ali Bhutto began to steer Pakistan towards genuine democracy while Indira Gandhi took India on the path of dictatorship. The paths diverged after 1977 as Mrs Gandhi called an election, and Bhutto was executed by Zia in 1979. India returned to the path of democracy, whose binding glue is the liberal notion that all Indians are equal citizens before the law, owing loyalty to the Constitution. This is a British legacy. Before that we were a collection of communities and kingdoms. Although we still feel loyal to our caste or community, we are different from tragic Pakistanis whose land has been hijacked by the military. Once there is military rule you get a state within a state. You are powerless to stop your secret service from creating monsters like the Taliban, and before you know it your country has become the world’s top university for terrorists.

I then turned to my young Kashmiri friend. He wished more Kashmiris could come and see India’s vibrant democracy, its confident economy, and the rise of the low born. ‘There is a simple choice before all Kashmiris,’ he said: ‘If you want to be a citizen of a modern democracy with unparalleled opportunities, you will choose self-assured India. If you believe that Islam is in danger and you want the army’s protection, you will choose tragic Pakistan’.

In praise of grand gestures, August 10, 2008

On a soggy monsoon afternoon last week I found myself in the company of not just one but two finance ministers, P.Chidambaram and Jaswant Singh, at the launch of a book by the admirable Swaminathan Aiyar. An unfailing rule for spreading happiness in the political class is to flatter—there is no limit to how much one can boost the human ego. I chose, however, a less comfortable course and quizzed the worthy politicians about the painfully slow pace of reforms. When both BJP and Congress agree on the major reforms, why can’t we insulate them from the football of competitive politics?

With the Left finally off its back, the Congress’ dream team wants to redeem some honour after four years of non-performance. Chidambaram picked up the ball and recalled how it had taken over five years to pass the insurance bill when it should have taken five months. When it was finally done, the NDA capped the foreign equity at 26% even though it had earlier killed the same bill because it was opposed to 20%. Jaswant Singh, normally quite charming, seemed bewildered and defensive. Perhaps, it was Sushma Swaraj’s outrageous statement that had put him out of sorts. When she declared that the BJP would not help pass the pending reforms, she was actually saying that she did not care about the lives of ordinary Indians.

The Congress, of course, is no better when it is in the opposition. Both parties should memorize Arun Shourie’s precept—the Opposition should never oppose anything it would itself do in office. Later over tea, the irrepressible Mani Shankar Aiyar, with classic Doon School bluster, reproached me for harbouring undemocratic temptations. If he had listened, I would have told him that many democratic countries pursue bipartisan policies when national interest is at stake. In the UK, the Northern Ireland issue was always above politics and prime ministers always kept Opposition leaders informed. The unwieldy US Congress has an unwritten rule, ‘politics stops at the shore’. Thus, bipartisanship rapidly delivered the Marshall Plan to reconstruct Europe after the World War II; Homeland Security after the 9/11 attack; and the sub-prime mortgage bailout this year.

The Nuclear Deal was one such moment in India’s history. It was less about energy and more about national security. Both the BJP and the Congress agreed on its essentials. Yet it became hostage to tragic politics. Bipartisan institutions could have spared us the cash-for-votes scandal and saved the political class’ image. Democracy does not have to mean permanent conflict. The Opposition does not have to only oppose. Mamata Banerjee is a failure because voters think that she only knows how to oppose. Ultimately, cooperation reflects character.

The Prime Minister showed statesman this week in reaching out to the Opposition on the Amarnath issue. Emboldened by this, he should now prime-move a bipartisan summit with key Opposition leaders, seeking agreement on an economic reforms slate over 200 days. The BJP knows at heart that pensions, insurance, banking are as much about national interest as preventing terrorism. The secret is to take the competitive sting out of the process. With this agreement in hand, Manmohan Singh should repeat what he did in July 1991. He should institutionalize an implementation mechanism inside the PMO for monitoring weekly progress. I am thinking of the famous Thursday Meetings of the economic secretaries, which were coordinated by AN Varma, Narasimha Rao’s principal secretary—it was the crucial instrument for implementing reforms at an unprecedented pace in 1991. This is the way to answer our mini-9/11 terrorists. India’s destiny will not be stopped by anyone.

Monday, July 28, 2008

Go beyond Left and Right, July 27, 2008

On July 22, the Congress led UPA won a vote of confidence in Parliament over the nuclear deal. Despite the murky moments I truly enjoyed the debate. I got a sense of how our MPs think, feel and view the world. There were great moments in the speeches of Lalu Prasad, Rahul Gandhi, Omar Abdullah and others. Suddenly, it was all eclipsed by the stomach turning sight of bundles of currency flying about.

The debate showed how much our political landscape has changed after 1991. Both the right and the left are exhausted. The left, which earlier stood for idealism and change, has lost all common sense. It defends the status quo in voices from Jurrasic Park, forgetting that it too is a victim of vested interests. The right, which in India means the Hindu nationalistic right, finds less and less takers for its Hindutva ideology. The Congress is in deep trouble, unable to shed its traditional attachment to statism. It fails to grasp that the Indian mind is now unbound, and the young want to take charge of their lives.

Ideology is also exhausted in the rest of the world, where left and right matters less and less. In the West the left tries to conserve the welfare state. The liberal, economic right wants to dismantle it. Beyond that, the distinctions are blurred. The right has accepted transfers to the poor but it wants them to be efficient. The left no longer wants government to run businesses. Few oppose the market--the debate is on how to regulate it wisely.

If people don’t care about ideology, how will politicians win elections? Human beings want the same things everywhere--a safe, place to live; good schools and hospitals; clean air and water; be able to ply one’s trade without having to bribe; a judge to resolve disputes speedily. The amazing thing is that our politicians will do everything but deliver these. When we throw them out after five years, they blame ‘anti-incumbency’. Some of us have heard of an obscure railway official named Erapalli Sreedharan, who is quietly building a world class Metro for Delhi. If he were candidate for the Prime Minister, we would vote for him. His ability to execute projects has nothing to do with capitalism, socialism or Hindutva. The Chinese politburo has this advantage over our cabinet—its leaders have Sreedharan’s abilities.

Indians have been raised on a steady diet of Mahabharata, and so we are pragmatic. The Yudhishthira, who made the reluctant decision to go to war, was following a practical, achievable dharma. He was aware that while ahimsa, non-violence, is the ideal way to act, violence is sometimes inevitable. In politics, protecting the state’s interest is the path to justice rather than seeking human perfection. When ideology becomes the driving force of politics, room for compromise disappears. The Congress Party has just learned this lesson in the most painful way from its Marxist allies. As a general rule, the ethic of perfection appeals more to those who are far removed from public office.

The history of the twentieth century is littered with the graves of ideologies, all of which had some great and benign aim. This was the faith of Lenin, of Mao, even of Hitler, and who knows, maybe even Pol Pot. In India, we escaped these tragedies, but our modest experiments with Fabian socialism led to statism, and we are still trying to shake off that yoke. Our politicians should learn from history—shed ideology, acquire implementation skills, and focus on the real needs of people. This is the way to beat ‘anti-incumbency’ and win the next election.

One cheer for Mayawati, July 13, 2008

On July one, 86 lakh children in class one and two began to learn English in government schools of Uttar Pradesh. It fulfilled a long standing demand of parents who believe that they have lost two generations to Hindi chauvinists. They know that a child who learns English by age 10 has a natural advantage for the rest of its life. Shortage of English speakers is one reason why software companies, call centres, export oriented industry has been slow in coming to UP and the caricature of the ‘bhaiya’ persists.

Mayawati’s decision on English was hailed by Dalits, and for good reason. A study in Mumbai shows that among Dalit women, those who learn English rise economically and socially by marrying outside their caste. 31% of Dalit women who knew English had inter-caste marriages compared to 9% who did not know English. This makes sense. Knowing English gives a Dalit woman a chance to work in call centres and other modern jobs where there are fewer caste barriers. Is Mayawati finally realizing that there may be more votes in meeting people’s real needs than in erecting statues to Ambedkar? She has also ordered toilets for girls in 90,000 primary schools.

It must have taken some courage to challenge the teachers’ union and the Hindi establishment. So, why do I offer only a single cheer to Mayawati? I would give her three cheers had she attacked the basic disease of teacher absenteeism. The famous Kremer-Murlidharan report shows that one in four teachers is not present in school, and one in four present is not teaching. As a result, 53.1 % of UP’s children in Class 5 cannot read a Class 2 text, according to ASER surveys. 67.2 % of children in urban UP and 29.1 % in rural UP are now in private schools.

What is the answer? Quite simply, the government should fund students and not schools. When a child reaches age 5, the government should give parents a voucher (like a scholarship), which can only be exchanged for education at a school of the parent’s choice. Since all parents want a good school for their kids, vouchers will create competition among schools. As vouchers will be the only source of a school’s income, and as teachers will be paid salaries only from vouchers, teachers will show up and even teach with inspiration. Teachers will have an incentive to perform. Good teachers will be able to earn more thanks to higher voucher income earned by their school. Teacher morale will thus rise. They will be accountable to parents rather than remote officials in the state capital.

Competition for vouchers will improve both government and private schools. Bad schools will close down, good ones will flourish. The poorest parents will be able to send their child to a quality school. The ability to exit their children from a bad school is hugely empowering—it is like having “voice” in a democracy. The rich have it because of their money power. Vouchers will give them purchasing power and “voice”. A poor child will get the same opportunity as a rich one to rise in the world, and we will progress to our dream of equality of opportunity.

Mayawati used to be a teacher. So, she will appreciate this public-private partnership. Teachers unions will oppose her, of course. She will be scared of losing lakhs of teachers’ votes, but she must remember that she will gain crores of votes of grateful parents. I’m convinced that more and more sensible policies will come from Dalit/OBC leaders who have fewer vested interests to protect (like teachers’ unions).

Monday, June 30, 2008

A winning merger June 29, 2008

For some years now I have been on the board of Ranbaxy and have watched with admiration as the company transformed itself into India’s first real multinational. I have seen it inspire a dozen other companies and helped create a world class generic drugs industry that is feared by the Western giants for aggressively challenging their patents and admired for lowering the cost of medicines around the world. How then was I to respond to the announcement by Ranbaxy’s CEO, Malvinder Singh that he wanted to sell his family’s stake for Rs 10,000 crores to a Japanese company, Daiichi Sankyo? The family was equally shocked. A CEO’s ability to keep months of negotiations secret in a country afflicted by verbal diarrhoea speaks to the company’s character.

My initial reaction was one of dismay—how could one of India’s finest companies become a mere Japanese subsidiary? A company that had acquired 14 companies in 30 months was now itself about to be acquired. Slowly I realised, however, this momentous deal would make the merged company much stronger and create greater value to the Indian nation.

In a world where the large, drug-discovery companies are struggling with expiring patents; where rising health care costs have pushed countries to favour quality, affordable generic drugs; where intense competition between generic drug makers has dramatically lowered profit margins; the logical solution is for the discovery and generic companies to merge. This is why the drug discoverer, Daiichi Sankyo, has valued the generics Ranbaxy at $8.5 billion when its stock market value was only $5 billion and is paying 35 times its future earnings. However, it will only be able unlock Ranbaxy’s value if it does not gobble it up like most mergers, but leaves it alone, as Roche, the Swiss company, did with Genentech.

But how could selling an Indian company create wealth for India? Companies create wealth for nations when they create jobs, give returns to shareholders, and pay taxes to governments. If Ranbaxy had not been sold, it would have continued to generate steady returns. By joining hands with a larger, innovative Japanese concern, it will produce more and better products, be able to better fight patents, and provide Japanese skills in process, quality and teamwork to its employees. Daiichi Ranbaxy will potentially create more jobs, more returns to both shareholders, and more taxes to both governments. And when the family invests its Rs 10,000 crores in its other businesses-- Fortis hospitals, Religare finance --it will create more ‘Ranbaxys’ and more wealth for India.

Compare Malvinder Singh’s decision to sell at the right time to the sentimental, insecure reaction of Escorts and DCM families in the 1980s. When Swaraj Paul bid for these companies, our pre-reform government stopped him. Most companies of the two groups went downhill after that as the next generation was neither hungry nor capable. The families lost and so too did the nation. In Ranbaxy’s case, the family put the business interest before their own. Thus, Daiichi wants Malvinder Singh to stay on as CEO.

The Ranbaxy affair shows how the Indian public has also matured. Ten years ago our political class would have shed tears, waved the flag and stopped this deal. The 2008 Pew Survey of 24,000 people across 24 major nations concludes that Indians are now amongst the most confident people. Nine in ten Indians favour foreign trade and six in ten welcome foreigners buying up Indian companies. We have behaved far better than the French when Laxmi Mittal bought Arcelor. Now let’s apply this lesson and sell off our obsolete, bleeding public sector navratnas as well.

Monday, June 16, 2008

Deceits of our political class June 15, 2008

Another election has come and gone. As the dust settles in Karnataka, Election Watch, a civil society watchdog, has reported that 40 out of the 224 winning MLAs have a criminal record. Of those who contested three were brothers--all of them criminals. To make sure one succeeded the brothers obtained tickets from different parties. The bet paid off--one was elected.

We have known about criminals in our politics for some time now. It is easy to get depressed when law breakers become law makers. Yet there are reasons to feel hopeful. Karnataka has elected 20% fewer criminals. Jaffer Sharief, the former union minister, was unable to give a Congress ticket to the notorious Samiullah because of local outcry. Criminal MLAs have declined in Gujarat, Delhi, MP, and Rajasthan. Even in corrupt UP, criminal MLAs came down in 2007 from 206 to 160. There are no criminals in the Bihar cabinet. Both the BJP and the Congress have begun to scrutinise candidates more diligently.

The nation has to thank a group of professors at the Indian Institutes of Management for this. Disgusted with our politics, they formed the Association of Democratic Reforms, which filed a Public Interest Litigation in the Delhi High Court in December 1999 demanding the Election Commission provide voters with the criminal background of candidates. They won the case. The government appealed, however. The IIM professors again won in the Supreme Court in May 2002. At this point, twenty one political parties rose up against the Supreme Court’s decision. The government hastily brought in an ordinance, which the Supreme Court also declared illegal.

As a result election candidates are now required to file an affidavit giving details of convictions or pending criminal cases. This is a big step forward. 1200 NGOs have joined together to form Election Watch to publicise criminality of candidates. A Bill on Electoral Expenses in 2003 has tried to control political expenditure, and the Central Information Commission’s ruling last month that income-tax returns of the political parties must be provided under the Right to Information Act will boost financial accountability.

Politicians argue that all this will lead to frivolous and false frame-ups by crooked rivals. It will. Note, however, that candidates are expected to disclose only cases that have been admitted for trial with charges framed. Analysis of Rajasthan Assembly elections in December 2003 showed that half the alleged criminals were, in fact, criminals who were in the midst of trial proceedings on very serious charges. The other claim of politicians that offences are mostly political in nature--related to bunds, dharnas and rallies--is also not borne out by data. It also begs the question, why should politicians flout prohibitory norms in the first place? It is true, this will not stop false cases but in the end transparency is a greater good. The real worry is that most crimes of politicians are never even booked--this is the real deceit of the political class.

You would think that political parties would not want to be tainted by criminals. So, why give them tickets? It must be because they are “winnable” with their money and muscle power. For the whole political class to unite, however, to prevent disclosure and transparency is an amazing act of deceit. One day, perhaps, the cost of harbouring criminals will become intolerable as civil society pressure grows. Meanwhile, let us celebrate the fact that a few determined individuals could take on the entire political class with the aid, no doubt, of the two institutions that we admire--our higher judiciary and our Election Commission. It restores our faith in democracy.

Wednesday, June 04, 2008

Go on, save the deal June 1, 2008

Lal Krishan Advani is a lucky man. Fortune has given him the chance of a lifetime. He can save the historic Indo-US nuclear accord and grow in stature from a politician to a statesman. Less than four weeks remain, after which the treaty will die. The Left has no room for manoeuvre, but the BJP does. If Advani seizes the day and persuades his BJP colleagues, he will go into history as the “white knight” that saved India’s energy and security future. He would also take a giant step to fill the large shoes of his predecessor, and become more worthy in the eyes of NDA’s coalition partners.

A hundred years from now history books will recount that when oil was ruling at $135 a barrel, India’s leaders were complacent. They argued that since 65% of India’s power needs are met by coal and only 3% by nuclear energy, why does India need a nuclear treaty? Oil did run out in the 21st century, but the nuclear deal rescued India. Initially, it freed the country from 35 years of nuclear apartheid, allowing it to import uranium, which helped to lift the performance of its 17 reactors from 50% to 95%. After the treaty, India’s energy needs were increasingly powered by nuclear energy while other countries scrambled for the last few barrels of oil.

History will describe how China rose in the second quarter of 21st century to dominate the world. Some Asian nations became its satellites, including its closest ally, Pakistan, to which it supplied vast quantities of arms. India was able to hold its own thanks to the treaty, which paved the way for closer ties with the Western democracies. The West stood by India during its times of trouble and eventually India went on to balance power in Asia and the world.

History will narrate that the nuclear treaty never compromised India’s right to Pokharan III. China and France did nuclear tests in 2020, which ended the CTBT regime. India was by then the world’s third largest economy, and it followed up with its own test. The Democrats in America, instead of throwing the CTBT at India, were relieved to see India balance Chinese power in Asia.

History will report that during the 2009 election campaign Advani confidently took credit for having saved India’s future from a traitorous Left and an indifferent Congress. During his campaign, Advani claimed that in saving the accord he had merely completed a process that Vajpayee had begun with Pokharan II; Jaswant Singh had followed up in his dialogues with Strobe Talbott and Brajesh Mishra with Condoleeza Rice. Manmohan Singh had crowned this effort, he said, showing great wisdom in signing the accord with Bush. He claimed that BJP’s pressure forced crucial changes in the final treaty in India’s favour. Advani told voters that when the UPA let its own Prime Minister down, BJP had to rescue the nation’s honour and energy future.

This history will also have a coda. When he was trying to persuade his BJP colleagues in June 2008, Advani quoted from Arrian’s account of Alexander the Great. As the Greeks were crossing the Jhelum in narrow boats on a stormy, monsoon night in 326 BC, just before their famous battle with Raja Puru, Alexander told his generals, “Don’t be afraid my friends, your grandchildren will sing your praises and remember your glory.” Hearing this, the BJP leadership broke into applause. They had finally found a statesman to lead them to victory at the next elections. Rescuing the nuclear treaty became the turning point in the career of Lal Krishna Advani.

Friday, May 30, 2008

A Right to Walk May 18, 2008

When the Bus Rapid Transport (BRT) fiasco was being discussed in a high-level meeting in Delhi, a dazzling thought came into the head of a senior official. ‘Why don’t we just get rid of the footpath!’ he exclaimed triumphantly. Someone gently pointed out to the worthy administrator that his wife also happened to walk on the same street daily and what would she say about eliminating the footpath?

What Americans call a sidewalk, and the British a pavement, we call a footpath. In romantic minds it conjures images of tree lined boulevards and sidewalk cafes in gay Paris. But in a typical Indian town let the mind focus on the image of children walking home from school on a busy road without a footpath. A lorry comes hurtling at them at 70 km per hour, and suddenly those children could be yours. In a nation where people mostly walk, it is frightening that footpaths are non-existent or disappearing. We build roads for cars—pedestrians are nuisance. Where footpaths do exist in a few cities, they have either been encroached upon or filled with garbage or taken over by hawkers, litterers and urinaters. Walking to the bazaar is not for the faint hearted.

Kanthi Kannan, a lady in Hyderabad, has started “The Right to Walk” movement to address this problem. She filed a Public Interest Litigation in 2005 praying for the Andhra High Court to save footpaths in her neighbourhood. She bombarded municipal officials with Right to Information emails, asking why the width of the footpath leading from Mehdipatnam to Sarojini Devi Eye Hospital had been reduced and a structure resembling a Dargah built upon it. By March 2008, her efforts had met with some success. Footpaths were restored, parking forbidden on them, but the structure remained untouched. She discovered that no one is responsible for footpaths. The municipality thinks it is a problem of the Roads and Buildings Department, which denies it and says its job is only to build roads.

Mumbai used to be wonderfully endowed with broad sidewalks. I worked there in the 1980s when the municipality approached my company, asking us to build a narrow garden along the long stretch from Mahalaxmi Station to King George’s hospital. They wanted us to illegally encroach upon the footpath in order to prevent squatters from taking it over. Such was the political power of the squatters! We did build a lovely, longish garden along E Moses Rd but l felt guilty about cutting into the walking surface. I consoled myself that at least the pedestrians were now walking along flowers, grass and trees.

Prosperity is beginning to spread in India but happiness is not. This is because our government repeatedly fails to provide simple public goods which citizens in other nations take for granted. Footpaths are one of them. It may seem churlish to worry about footpaths when there are more pressing problems of hunger, illiteracy and water. Remember, however, India’s future rests in its cities. By 2020, half of India will be urban, middle class, and crowded. What will be the point of becoming prosperous if it isn’t safe to walk?

Kanthi Kannan’s noble example shows that instead of sitting around and complaining, citizens can make a difference. The starting point is to extend your circle of concern beyond your front door (as Yudhishthira did in the Mahabharata when he insisted on taking a stray dog into heaven). You will discover that municipalities do respond to citizen pressure if citizens are united and relentless. Demand footpaths but don’t be surprised if they demolish your proud garden if it encroaches on the pavement.

Why India is not a threat May 04, 2008

On a recent lecture tour of the Far East I was repeatedly asked a fascinating question: Why does the rise of India not threaten the world in the same way as China does? We in India don’t realize the depth of fear that China inspires in the East.
My first reaction was that India is a democracy and democracies are supposed to be more peaceful. I was quickly reminded that democracies have been known to invade places like Iraq.

True, but democracies tend to have more voices and more checks and balances. India’s democracy, in particular, is a coalition of twenty parties. It cannot govern itself--how could it possibly threaten anyone? India’s inability to take advantage of an historic opportunity to climb to world power status through the Indo-US nuclear deal shows this. My audiences found it inexplicable that Indians could quibble over a treaty that is so obviously in India’s self-interest. Someone wondered if we had a self-destructive streak. The consensus was that had China been a multi-party democracy, and had it been presented with the same opportunity, it would grabbed and run with it. .

Asian security analysts, I was surprised to note, had deep respect for India’s military capabilities. They seemed to know all about our navy’s aircraft-carrier force, our air force’s latest Sukhois and MiGs, and our army’s professionalism (although they felt that we had been badly let down by DRDO). They believed that India’s military did not threaten Asia because of the turmoil in our neighbourhood. Terrorist threats from Pakistan, an unending civil war in Sri Lanka, Maoists in Nepal and Bangladesh’s chronic instability—these were huge distractions which prevented India from thinking strategically about its role in the world.

East Asians who had visited India felt that we still needed to get our act together. Although India’s economy was growing brilliantly and Indian companies had become world beaters, they found our physical and social infrastructure “depressing”. What is the point of having a world class airport in Bangalore if it is isn’t well connected to the city? What is the point of having a million government primary schools if half the students can’t read a single sentence? One speaker asked why Indians are still wedded to democracy when it has failed to deliver the most basic public services.

Nevertheless, I came away with a feeling that East Asians are cheering us and believe that history’s momentum is on our side. They have their own reasons, of course—they fear China and desperately want a countervailing power. They don’t trust Japan—the wounds of the Second World War have not yet healed. They wish that the Indian state would show more determination, however, and shed its old self-perception of a victimized Third World nation. Some expressed the hope that India’s rise would improve Asia’s image as a whole. India’s mind was closer to the West. Indians spoke good English and were more open. The West distrusted Han China profoundly because it was closed, and the Tibetan protests had not helped.

Buddhists in the audience seemed to cheer India’s rise because the post-9/11 world needed our traditions of tolerance and non-violence. I was surprised to see how many remembered Mahatma Gandhi and Tagore. They even wanted me to feel embarrassed about our nuclear weapons. On my way home, I asked myself that if it is true that the Indian state is genuinely less aggressive, then that is in fact the right answer to the original question about why India’s rise does not threaten the world. I, for one, do not want an intimidating India which seeks military greatness. .


War of the creamy layers, April 20, 2008

One of our great triumphs as a nation is that we widely condemn social discrimination. This was demonstrated again on April 11 when the Supreme Court allowed a 27 per cent quota for Other Backward Castes (OBCs) in higher education. I am against all quotas but I support vigorous affirmative action. Our leaders in the future will be next generation OBCs, and if they are not better educated, governance will not improve. Why then do I feel a deep pain in my gut over the court judgement? This case, alas, was not about social justice; nor about legitimate OBC aspirations. It is was about a war between two “creamy layers”--middle class factions of the backwards and forwards-- in which the nation may have lost. I fear this “landmark” judgment will do irreparable damage to our few good institutions.

The ordinary family in the village merely wants a good school to lift its children out of poverty. IITs are as alien to it as the Queen of England. The hidden purpose of the OBC quota was to push the wards of OBC netas, babus and elite into our top institutions via an unfair handicap. But the strategy backfired because the Court has excluded the “creamy layer”. Since the aspirations of OBC voters and politicians are different, the quota controversy was unreal. It was not about compensating for disadvantage. As Mayawati has discovered there are poor Brahmins and rich OBCs.

The India of our dreams is one where everyone will belong to the middle class. High economic growth, of the sort we have today, can deliver this dream. But individuals of talent will play a disproportionate role. Since talent is such a scarce resource, successful nations nurture it through elite institutions like the IITs. They don’t place a person with 20th rank in the IIT-JEE exam in the same classroom as one with 20,000th rank. At the same time they meet the demands of the others through an adequate supply of reasonably good institutions. This is how they achieve excellence and equity.

The clamour for quotas in higher education arises from scarcity. We have very few good colleges because education, unlike industry, has not been liberalized. It is firmly under the control of netas and babus, whose energy is spent in doling out favours. Because the government refuses to give autonomy to universities, less than 50 out of 300 can produce an employable graduate. If they had the freedom to set their own fees, curriculum, salaries, and standards, many of our colleges would take a leap upwards.

By contrast Indian industry is more autonomous. In competing for customers it has been expanding supply at breakneck speed. In March, India achieved a miraculous 300 million mobile phone customers in a country of 200 million households. Before liberalization, we had five million phones in 1990. No one talks about quotas for telephones any more because the market has raised both supply and quality. The same thing could happen to education. Prosperity doesn’t trickle down; it goes down like a flood.

The political class is dead set against liberalizing education because scarcity would disappear. So would the need for quotas and so would vote banks. The roots of individual failure are laid in school. World Bank data shows that Arjun Singh presides over one of the worst primary school systems in the world, worse than many African countries. His job was to reform it. Instead he let loose a caste war. But voters are no fools and they can see through his game. If he thinks the Congress Party win will votes from his game, he is mistaken.

Monday, April 07, 2008

Power of subtitles April 6, 2008

Girirajsingh Natubha studied up to Class 2 in Jamnagar. All his life he struggled to read simple words. A few years ago, however, he found to his surprise that he had begun to read. It happened quite amazingly after he began watching Chitrageet, a Gujarati television program of film songs, which had sub-titles at the bottom of the screen. Since he knew many of the songs, he could anticipate the next word. When it appeared he would read it unconsciously and sing along, Karaoke style. Soon he found he was able to recognise words in the bazaar and before long he was reading headlines in the newspaper.

A brainchild of Dr Brij Kothari, a social entrepreneur and an IIM professor at Ahmedabad, ‘Same Language Sub-titling’ is a simple but powerful idea which is proven to improve literacy among adults and children. When lyrics are sub-titled on film songs, and words appear in sync with the actor’s voice, the viewer makes a sub-conscious link of the spoken to the written word. Literacy, thus, takes a sudden leap for early and struggling readers. Based on his powerful academic findings, Kothari decided to become a social entrepreneur and help raise India’s literacy. Between 1997 and 2002, he made countless attempts to persuade Doordarshan to allow him subtitle film songs on TV. Each time he was thrown out of their offices. In 1999, a new director at the Ahmedabad Kendra agreed to experiment with subtitles on four episodes of the Gujarati program, Chitrageet. It created such a sensation that they had to continue it for a year.

The breakthrough, however, came in 2002 when a new Director General of Doordarshan, Dr. S.Y. Quraishi, overrode the objections of his entire risk-averse staff and allowed Kothari to subtitle their hugely popular national program Chitrahaar. It happened soon after he won the $250,000 global innovation prize from the World Bank, which he used to pay for the cost of sub-titling. For the past five years, every Sunday morning, 15 crore persons have watched Chitrahaar and Rangoli with subtitles. A Nielsen-ORG study, conducted in 2002 and 2007 to assess the impact of sub-titling, showed that only 25% schoolchildren could read a simple paragraph in Hindi after five years of schooling. However, this jumped to 56% if they were also exposed to subtitling for 30 minutes a week on Rangoli. Equally dramatic results were found among adults.

Despite this success, however, a Damocles’ sword hangs over Kothari’s head. Unless Prasar Bharati takes a policy decision, subtitling will depend on the whims of each CEO, although the last two have been supportive. Moreover, the Department of School Education and Literacy ought to fund subtitling rather than Kothari having to go with a begging bowl each year to raise funds. It costs a pittance (one paise per person per week) compared to the rewards of giving lifelong reading practice to 15 crore early-literate personse every week. Since subtitling also raises the ratings of the program by 10-15%, I’m surprised private channels have not jumped into this game, including children’s cartoon channels.

You’d think that the best way to bring about change in a democracy is through politics. But when our political class is callous, unreliable and venal, you have to depend on individuals. India has always had our spiritual entrepreneurs, the most famous being the Buddha. In recent years we have seen the flowering of business entrepreneurs, making India one of the world’s most dynamic economies. Now we have also begun to produce social entrepreneurs like Brij Kothari who are making a difference. Hence, India is rising not because of its political leaders but despite them.

Thackeray scores a self-goal March 23, 2008

The damage is done. Hit by an exodus of North Indian labour in the past two months following Raj Thackery’s Marathi rage, industrialists in Pune, Nashik, and Thane have slowed their expansion plans in Maharashtra and are looking towards other states. They fear a return of the old nightmare when Datta Samant’s labour militancy combined with Bal Thackeray’s xenophobia drove white collar jobs from Mumbai to Bangalore and blue collar jobs to Gujarat.

In a free market, investment flows to the most attractive destination. What makes a destination attractive is, in part, the availability of industrious workers. Immigrants everywhere tend to be hungrier and harder working than locals. Economists like Harvard’s Richard Freeman, have shown that societies that encourage immigration outperform those that do not. This is why experts predict that America will remain competitive in the 21st century, while Europe and Japan will decline. As a land of immigrants, America is more capable of accepting immigrants, unlike Europe and Japan which have historically failed to absorb outsiders. Under pressure of ageing populations and shrinking workforces, Europe and Japan will thus lose out to China and India. .

The Indian Railways sells 6. 4 billion tickets annually. Assuming a third are commuters, this means roughly four journeys per person per year in a nation of 1.1 billion people. We are a nation on the move, especially the poor in search of jobs and a better life. Our cities are becoming more cosmopolitan and an Indian identity is being forged, which will increasingly trump regional identities. This imposes real costs on Raj Thackeray’s bigotry.

Maharashtrian workers do have a legitimate problem, however. How do they respond to the challenge of more nimble and productive immigrants? The answer is to make Maharashtra even more attractive for investment. Raj Thackeray should push for better infrastructure, better colleges, and better vocational schools. This will make Maharashtrians more skilled and more competitive. Eventually, many will move up into the middle class and leave the menial jobs to migrants.

There is a more troubling question, however. What makes ordinary, decent Maharashtrian boys turn into a violent and cruel mob? It is the same question that Germans have asked for 75 years—“how did we become evil Nazis in the 1930s?” David Livingstone Smith tries to answer this in his book, The Most Dangerous Animal. He argues that all human beings are disposed to evil—it only needs a trigger like Hitler or Thackeray. The men of the German Reserve Police Battalion 101, who shot 38,000 Jewish unarmed civilians one afternoon, were “middle-aged family men without military training or ideology”. The same could be said of all mass killings. The murderer could be you or me. Scientists explain our violent tendencies through our genes. Like all social animals, from ants to chimpanzees, we are highly xenophobic. The more closely knit we are, the more aggressive we are to outsiders. Our Constitution makers realized the dangers of giving power to the human animal—hence they set up a system checks and balances.

Raj Thackeray is not the only one to score a self goal. Malaysia’s “bumiputra” movement continues to drive investment from Malaysia to other South East Asian countries. Germany failed to attract Indian software engineers a few years ago, despite an attractive ‘green card’ scheme, because its people are inhospitable to immigrants. In a competitive world, it takes maturity and luck to realize that immigrants make a society successful.

Monday, March 10, 2008

This Waiver is immoral, 9th March, 2008

Nagoba Khamnakar feels like a fool. Like many farmers in his village of Mahakurla in Chandrapur, Maharashtra, he borrowed money from his bank last year. He repaid it diligently, in installments and on time. Many of his neighbours, however, did not. When the Finance Minister announced last week in his Budget an amnesty against repayment of small farm loans, he said sadly, ‘What is the use of being honest?’

Canceling debts of small farmers worth a massive Rs. 60,000 crores, equal to 3% of all loans in the entire banking system, was a staggering, seductive but a hugely destructive act. When Devi Lall, announced a similar loan waiver worth Rs 9,000 crores in 1990, he killed most cooperative and rural banks. Farmers stopped repaying loans, banks stopped lending to them and it took ten years for the nation to recover from that mistake. When we hurl abuse at Devi Lall, we always add, ‘What did you expect from an illiterate peasant!’ But what do we say to a government headed by eminent economists and reformers?

One’s heart goes out to those in distress in the rural areas. There is great suffering, indeed, in our villages. But there are other, better ways to relieve it without turning the nation dishonest. For example, a sustainable crop insurance program or a restructuring the loans would have done much more good. There will be distress again; farmers will borrow again; and get into trouble again. A crop insurance scheme will then come to their aid, unlike this one-time political bribe. Sharad Pawar, the Agriculture Minister, admitted as much when he confessed the day after the Budget--‘I cannot say if [suicides] will stop after this loan waiver’.

Human society is based on trust. When the ordinary person takes a loan, he feels duty bound to repay it. He will even sell his family’s jewellery to fulfill his promise. This is because we learned as children from our mothers to keep promises. Tulsidas’ ideal, ‘praan jaye par vachan na jaye’ was held up to us as a moral ideal. We admire Karna in the Mahabharata for not switching sides because he had given his word to Duryodhana. This loan waiver wounds that moral universe. It tells the farmer not to bother to repay his next loan, because, who knows, another party will be in power and it too will cancel his debts. What message does this send to the honest village woman who struggles every week to repay her micro-loan? It is like excusing the crooked businessman who bounces his cheque. Or bailing out victims of sub-prime loans in America who are clamoring for a similar act of false compassion.

The irony is that the UPA government might actually lose more votes than it gains from this loan waiver. According to NSSO figures, almost 60% of farm loans are from money lenders. They will not benefit. R Radhakrishna Committee says that farmers from the suicide prone areas of Vidharbha and Chatisgarh will benefit less than the richer farmers in the irrigated areas who grow sugar cane and grapes. Since those who will not benefit (or benefit less) are greater than those who will, resentment will build, and the UPA might end up in losing more than it gains. Sharad Pawar has understood this. Hence, he told the farmers of India last week, ‘Don’t pay a single paise to money lenders.’ No one likes the village sahukar, but to break a promise to someone you don’t like is just as wrong as to someone you do.

Imagine the staggering paradox--to turn a nation dishonest in order to win an election, and then go on and lose it! This is one irony that the UPA government might prefer to forget.

Leaping into a bilingual world, 24 February 2008

My friend, the linguist, Peggy Mohan, likens the evolution of the English language in India to the mobile phone. Just as our masses are leapfrogging to cell phones without going through a landline stage, she thinks that English might evolve in the same way from elite to a mass, second language of the fast growing Indian middle class. If functioning with pre-literate dialects is not to have a phone; and learning a standard regional language, say shudh Hindi, is to acquire a landline; then aspirant wannabe’s Indians might actually leapfrog from their pre-literate mother tongues to literacy in functional English.

This English is a skill above all, linked to getting a job, and associated not with the culture of Shakespeare but with the popular culture of Hinglish--Bollywood, FM radio, SMS, and advertising. Of course, mixing English words with our mother tongue has been going on for generations. Earlier it was basically the aspirational idiom of the lower classes. Now it is also the fashionable idiom in upper class drawing rooms in south Delhi and south Mumbai. This English is shared and democratic.

India’s poor send their children at great sacrifice to private, English-medium schools of varying degrees of quality. These children face incomprehension initially but eventually most of them manage to take a leap into a new world. This happens because a child is naturally bilingual. Our education mandarins dismiss these schools and think the parents stupid. The same mandarins thrust shudh Hindi down their throats for fifty years but all they achieved was an unemployable person. Now, at least, these children can get a job—so, who is the one who is stupid?

This should be a wake-up call for our education establishment. Unless we drastically reform how we teach regional languages, they might suffer the landline’s fate. According to Alok Rai, author of Hindi Nationalism, shudh Hindi was never a peoples’ language. It arose from a power struggle in the mid-19th century between Brahmins and Kayasthas, each of whom had their own schools and scripts--Devanagari and Kaithi By the time Brahmins won in the 20th century, English had become the language of the elite. At Independence, the Hindiwallahs tried to impose their Sankritized Hindi on the nation but they failed. Had they promoted Bollywood’s Hindustani, they might have succeeded. Yet they didn’t learn. So, the Hindi we are taught is artificial and soulless--like the landline, it doesn’t connect with the masses.

Instead of fighting Hinglish, our educationists must teach Standard English and regional languages in a lively and relevant way to naturally bilingual children. Studies show that if a child learns both languages by the age ten, she is advantaged for life. The problem is the dearth of English teachers. We at SKS Microfinance plan to overcome this with interactive English teaching on the computer, using a program like Pygmalion, which Karnataka is using in select government schools. It trains teachers to become facilitators. The child talks to the computer, who corrects her each time she makes a mistake. We aim to make 600,000 children bilingual in 600 primary schools, charging Rs 250-350 per month fees, for which SKS will provide loans to its 17 lakh customer base. Our schools will be run by professional edupreneurs like Educomp or Career Launcher and employ the new $100 computer. Tell me now, isn’t this how our government should be thinking? The Chinese government is.

Stephen Jay Gould, the biologist, argues that human evolution is not smooth and continuous but a series of jump steps, with long periods of stasis punctuated by quick flurries of adaptation. This explains perhaps the dearth of missing links in the fossil record. Languages evolve similarly. It took English only a hundred years to produce Shakespeare. Hinglish might do the same in the 21st century.

End this Killer Raj, February 10, 2008

For the first time an Indian institution of higher education has been ranked among the top twenty in the world. The Indian School of Business (ISB) was ranked 20th in a list of the top100 business schools by the prestigious Financial Times two weeks ago. A Chinese business school was No 11; four European schools came in the top 10, and the rest were from the United States.

But wait a minute. Isn’t the ISB illegal? ISB officials explain that they don’t want accreditation from India Council of Technical Education (AICTE) because then “they will decide our courses, our student intake, and even the size of our buildings”. I spoke to a top AICTE official, who scornfully dismissed the Indian School of Business--“its fees are too high and it doesn’t even have a permanent faculty”. I gently suggested that its faculty is world-class if not permanent. And why worry about fees when every student has a loan. They must be doing something right if students command a mean salary of Rs 16 lakhs a year at graduation.

ISB is India’s only school in the top-100 list. There might have been more but for AICTE. One of these is Mumbai’s premier SP Jain Institute, run by a no-nonsense Harvard graduate. It doesn’t bribe; nor does it succumb to politicians for admissions. Hence, it is punished. It applied to admit 120 students in 1992, but got approval for 45. In 2001, it applied for 180 but didn’t get approval for six years. In 2004, AICTE rejected its unique dual degree program with a reputed foreign university, whereby the latter would have flown its faculty to India. Its innovative program for family-run businesses was also rejected. Last year, it seriously contemplated closing down. Instead it has started campuses in Dubai and Singapore--far beyond AICTE’s reach.
What do you do when the keepers of the law become its oppressors? AICTE was set up to encourage higher education but it achieved the opposite. Honest officials have tried cleaning it up periodically, but they have always been removed by politicians, who happen to own many of our worst private institutions. The answer, of course, is to give autonomy to all education institutions. Regulators should only ensure that they provide mandatory disclosure on the Internet about their courses, faculty, fees, and facilities (with severe punishment for false claims). Professional rating services should evaluate colleges with the same credibility as CRISIL rates industrial companies. Competition will take care of the rest. Students will be able to make informed choices. Good institutions will thrive and poor ones will close.
In the India of my dreams the government will stop running universities and colleges. All institutions will be autonomous. The government will plough all the money saved into scholarships. The Government’s role will be limited to governance-- ensuring corruption free ratings and corruption-free exams (with the credibility of IIT-JEE) at various stages in a student’s career. The tombstone of the UGC/AICTE Raj will thus read: “For fifty years we promoted rote learning, incompetent faculty, and mediocrity. We punished original thinking and failed to create an employable graduate. We pushed students into a parallel universe of coaching classes, which ironically took their obligation to students far more seriously. We deserved to die.”

Building India is about building institutions. This Sunday let’s celebrate the emergence of a world class institution in India. The altruistic founders of ISB had a vision. They funded it privately and nurtured it in its early years. They persisted in difficult times, especially when they were under attack from AICTE. Now, his is how to build fine institutions.

Saturday, February 02, 2008

Let’s stop living a lie 27 January, 2008

“Until India is able to view itself and its history dispassionately, reject the twin failures of socialism and non-alignment, modernize its Muslim citizens and bring their aspirations in line with those of the Hindu majority, it will likely remain an underachiever” concludes Sadanand Dhume in the latest issue of the influential American journal, Commentary. I found this irritating, especially now that we are doing so well economically. As I thought some more, however, I had to agree with this unhappy verdict. We all need to acknowledge our past failures publicly. Only then will we stop repeating mistakes or reforming by stealth. Only then will we mature as a nation.

As for rejecting socialism, the opportunity arrived on 8 January when the Supreme Court issued a notice to the government to respond to a petition which questions the propriety of employing “socialist” in the preamble of our Constitution. The court also asked the Election Commission why every political party must swear to “socialism” before it can be registered. Appearing for the petitioners, Fali Nariman asked the court to do away with the compulsory socialist vow. “It is hypocritical to say that you believe in it when you don’t,” he said. “One can always have a political party that has capitalism as its intent, and why not?”

The bench, headed by Chief Justice K.G. Balakrishnan, raised an interesting question. “Why do you define socialism in the narrower sense as the communists do?” it asked. “Why don’t you go by the broader definition… which mandates the state to ensure social welfare measures for all the citizens… as a facet of democracy?” Nariman did not reply. The answer to that question, of course, is that we must use words in a clear manner. Ever since Marx “socialism” has had a very precise meaning--the “public ownership of the means of production”. Most Indians do not subscribe to this ideology any longer.

BR Ambedkar explained in 1948 why we must not use “socialist” in our Constitution: “[How] society should be organized in its social and economic side are matters which must be decided by the people themselves according to time and circumstances. It cannot be laid down in the Constitution itself, because that is destroying democracy altogether… It is perfectly possible… for thinking people to devise some other form...which might be better than the socialist organization.” The Constituent Assembly agreed with Dr Ambedkar and we decided to call ourselves a “sovereign, democratic republic”. But Indira Gandhi amended the Constitution during the Emergency and inserted “socialist” in the preamble. Later the People’s Representation Act was amended and now every political party has to pledge allegiance to socialism to gain recognition.

Well meaning Jawaharlal Nehru set out to create socialism, but we got statism instead. The state assaulted our right to property, whose victims, it turns out, were not the rich but poor farmers from whom the state acquired land forcibly (as Nandigram taught us). Socialist control on industry brought License Raj, which bred black money and damaged our moral character, making us one of the most corrupt societies in the world. Socialist labour rules shattered accountability among state employees. Hence, above-average people in government produce below-average results. And so, even the pretence to offer decent public services has gone. The saddest truth is that our socialist state did not work on behalf of the people but on behalf of itself.

The Supreme Court has now given us chance to look at ourselves in the mirror and reject the mistakes of our past. Until we do that we will keep living a lie and perform below our potential.

Terror in the neighbourhood 13 January, 2008

When a celebrity dies one has to put up with a certain amount of media hype, but after Benazir Bhutto’s death what struck me most was the singular lack of remorse in Pakistan There was plenty of grief, even some regret, but no remorse. Remorse is different from regret. When a child is accidentally hit by a car, an onlooker may feel regret, but the driver feels remorse even though it was not his fault. The regretful person says ‘too bad, it happened’; a remorseful person is scarred, sometimes for life. Nehru expressed remorse when Gandhi died. Yudhishthira’s remorse helped reconcile Hastinapur’s torn society although he wasn’t responsible for the war in the Mahabharata. General Musharraf, I think, lost a fine opportunity to achieve reconciliation in Pakistan.

As Indians, our main interest in Benazir’s death relates to terrorism. There is a respectable view that if Benazir had lived and ushered in democratic rule, terrorist attacks on us would have declined. The premise is that democracies are better at fighting terrorists than dictators because terrorists have to contend with public pressure which is absent in dictatorships. I am not convinced. True, a democracy like the United States has successfully prevented a terrorist attack since 9/11. This is the result of a strong will and very effective execution. However, India, also a democracy, has failed. We have had 20 external terrorist attacks in the past three years, the latest on New Year’s Day at Rampur when 7 CRPF men died. And we have failed to curb domestic Naxalite terrorism.

India is, unfortunately, a ‘soft state’ where the government’s writ is weak and its implementation ability weaker still. BJP blames the Congress Party for appeasing Muslims, which it believes, is responsible for UPA’s poor record on terrorism. The BJP’s own record, however, was not much better when LK Advani was Home Minister. As in most things, politics is not the issue. Our problems stem from a lack of accountability in delivering public services. The answer is administrative reform. We need to unify security agencies; provide security of tenure to agents; empower them; invest in technology; train them to respect human rights; promote the best. This will raise their morale and our ability to fight terrorism.

In India we have a historical tradition ambivalent to violence. It goes back to Ashoka Maurya in the 3rd century BC. A Gandhian friend of mine suggested recently that Manmohan Singh might be in Ashoka’s mould. I reminded him, however, that Emperor Ashoka in his 12th Rock Edict warned the forest tribes against terrorist acts and to be wary of his ‘power even in his remorse’. Thus, even a state based on the ideology of ahimsa could be effective against terrorism. George Orwell may not agree. In his famous essay, ‘Reflections on Gandhi’, Orwell wrote that ‘it is difficult to see how Gandhi’s methods could be applied in a country where opponents of the regime disappear in the middle of the night and are never heard from again’. That is to say, Gandhi’s methods might have worked against the British, but they would not against Hitler; nor against terrorists.

It’s is our bad luck to find ourselves next door to what the Economist calls the ‘most dangerous place on the earth’. As we cope with this thought, remember our ability to survive and flourish depends less on ideology and more on institutions. Although terrorists may be ideologues, countering them requires a very professional law and order machine. Our own machine is crying for reform. I don’t think Benazir would have made much difference. We have to solve our own problems.

Forgive and move on, Dec 30, 2007

A few weeks before Narendra Modi’s re-election, JS Bandukwalla asked Muslims in Gujarat to forgive the 2002 killings. He said, “Forgiveness will release Muslims from the trauma of the past. It may also touch the conscience of Hindus, since the crimes were committed by a few fanatics in the name of Ram. Most important, it may give Gujarat a chance to close the tragic chapter of 2002 and move on.” Is Professor Bandukwalla’s magnanimous gesture a viable alternative to retributive justice? My first reaction is “No, the guilty must be punished”. But something inside me says that forgiveness might actually work better than revenge. Punishment is, after all, revenge sanctioned by the state.

In her book Forgiveness and Revenge, Trudy Govier argues that revenge damages the human core when one exploits others’ suffering to satisfy oneself. It is also obsessive and escalating. Forgiveness, on the other hand, establishes a new relationship with a wrongdoer. After the war in the Mahabharata, Yudhisthira forgives Dhritarashtra instead of punishing him. With that he releases Hastinapur from the burden of resentment, bringing closure to the old enmities. Emperor Ashoka walked the same path. Gandhi found forgiveness empowering since it made one see the wrongdoer in a new light.

Revenge is a sort of wild justice that runs in the human heart. If a good person suffers, then the bad one must suffer even more—this idea is embedded in one’s psyche. Consciously one denies it, proclaiming, “I'm not that sort of person”. Yet unconsciously one applauds when a villain gets his due. Literature is full of examples--Achilles’ rage in the Iliad, Ashwatthama’s reprisal in the Mahabharata, Chillingworth’s cold, calculated vengeance in Hawthorne’s, The Scarlet Letter. In the movies people are always trying to get even—see Kill Bill. Retribution also drives politics--Dalits in India and Blacks in America want to right the catastrophic wrongs of untouchability and slavery. Revenge fulfills a legitimate human need, bringing a “profound moral equilibrium when people pay for the harm they have done,” says Susan Jacoby in Wild Justice.

Human beings have long wrestled with the right relationship between crime and punishment. When we lived in tribes, collective vendetta was the only justice. But as we moved into civil society, crimes became an offense against society which only the state was allowed to punish. In the 19th century, Utilitarians campaigned to rehabilitate criminals. But in the past fifty years public opinion has turned in favour of retribution because rehabilitation programs failed in prisons. The U.S. Supreme Court also brought back the death penalty in 1976. Today’s debate in America is more modest--about ensuring that judicial sentences are fair and proportional to the crime.

Although forgiveness is of limited value in individual criminal justice, it sometimes works in the case of collective events like riots, wars, and historic wrongs. Hence, it is worth giving Professor Bandukwalla’s idea a try. Those who believe in legal accountability will disagree, arguing that healing and communal trust will only be restored in Gujarat once the guilty are punished and victims’ right to reparations have been fulfilled. But I think that just as Nelson Mandela’s South Africa was healed through reconciliation, so might Muslims wounds in Gujarat and even Sikh wounds from Delhi’s 1984 riots. With one caveat, I think--an apology from the other side must accompany forgiveness. Having just been re-elected, it would be fitting for Modi to apologise to Gujarat’s Muslims in return for forgiveness. After that he should focus on rehabilitating victims and bring a tragic chapter to a close. Now, here’s a hopeful thought for the New Year.