Thursday, August 10, 2017

Why governments shouldn't mess with private school fees


Imagine you are a young, idealistic person and you start a private school. You hire inspired teachers like yourself. The school does well and gets a nice reputation. Then a new law, the Right to Education Act (RTE) comes in 2010. It mandates parity with teacher salaries in government schools. You are forced to triple your teachers' salaries to Rs 25,000 per month. Even Doon School has to raise its salaries. The law also insists that 25% of your students must come from poor families. Although the government is expected to cover fees of the poor, it pays only a partial amount or none at all. Fees of the 75% students rise steeply to cover the costs of both factors. Soon, teacher salaries rise again to Rs 35,000 as mandated by the pay commission. Again, you have to raise fees.

Parents are angry now with constantly rising fees and 'fee control' becomes a political issue. The government steps in with a new law to control student fees. Gujarat, for example, caps the fee at Rs 1,250 per month for primary and Rs 2,300 for high schools. Tamil Nadu, Rajasthan, Punjab also have fee caps and Uttar Pradesh and Delhi are considering one. Your school's survival is threatened because fees will not cover your costs. You have three choices. You can either bribe the school inspector, who is happy to show you how to fudge your accounts; or you can severely cut back on the quality of your school programmes; or you close down. Ironically, you had supported the RTE law, which raised teacher salaries and gave the poor a chance for a good education. Since you are an honest person and won't compromise on quality, you are forced to close down your school.

Parents are devastated. The widespread clamour for fee control results in the closure of good schools. As a parent, your choice now is to send your child to a government school or an inferior private school. Most parents won't opt for a government school — although it offers free tuition, textbooks, uniforms, school bags, meals — because teachers are frequently absent or are not teaching. This is why even children of the poor have been abandoning government schools. Between 2011-15, enrolment in government schools fell by 1.1 crore and rose in private schools by 1.6 crore, as per government's DISE (District Information System for Education) data.

Capping fees is a form of price control, which used to be a ubiquitous feature of our socialist days under Nehru and Indira Gandhi. It only created huge shortages and a black economy. The Soviet Union also collapsed partly because of price controls. But we have come a long way since then. Hence, it is curious that this damaging idea has become a political issue. Only 18% of private schools charge fees higher than Rs 1,000 per month and 3.6% charge more than Rs 2,500 a month. So, where are the votes? Narendra Modi knows this and has privately expressed his reservations against fee caps. He realises that there is vigorous competition between private schools, especially in cities, and this has kept private schools fees low — the national median fee today is only Rs 417 per month. You don't need fee control because competition keeps the prices low. Moreover, state governments spend two to three times per child in state schools than the fee cap.

What then is the answer? It lies in the Self-Financed Independent Schools Act 2017 of Andhra Pradesh, which encourages private schools to open, gives them freedom of admission and fees, and removes corruption from board affiliation. To the Andhra model, we should add a requirement for extensive disclosure on each school's website — giving all fees, staff qualifications, details of infrastructure, strengths and weaknesses — everything that a parent wants to know before selecting a school. With competition, fee control becomes unnecessary.

Private schools have played a vital role in keeping India afloat in the past seventy years. Their alumni have filled the top ranks of professions, civil services and business. Their leadership has made India a world class software power. The government should focus on improving government schools rather than messing with the fees of private schools. As citizens, we should drop this sinister demand for fee control. Instead, let us sing along with Nat King Cole, who expresses nicely our attitude to private schools: 'Sometimes I love you, sometimes I hate you. But when I hate you, it's because I love you.'

Friday, July 14, 2017

Indians grapple with a Dickensian dilemma of growth and secularism

Some of us remember from our schooldays the opening lines of Charles Dickens’ A Tale of Two Cities: “It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness…it was the spring of hope, it was the winter of despair.” This is not only the most famous beginning of an English novel but it also captures the contradictions in our present-day life in India. Let me illustrate with two recent events.
We celebrated ‘the best of times’ at midnight on Friday, June 30, when what seemed like a distant dream became a reality as the goods and services tax (GST) replaced 17 state and central taxes to make India one common market. It was a visionary constitutional moment as our states voluntarily gave up some sovereignty in taxation for the common good.
Ironically, when the English are fighting for symbols of sovereignty, Indians chose a mature path of ‘pooled sovereignty’ based on a sobering recognition that freedom to act independently in our interconnected world is an illusion. The GST is not perfect but it is good enough to get started.
A week earlier, it was our ‘worst of times’ as we mourned helplessly the killing of 15-year-old Junaid Khan. He came to Delhi to stitch a new suit but never got to wear it. On the way home, he was attacked by a mob that accused him of being a beef-eater. “He was a child… How could they hate us so much to have killed him so brutally?” asked his father. Junaid’s slaying is the latest in a string of anti-Muslim attacks by anonymous, bloodthirsty mobs, who form randomly in different parts of the country and are thus harder to prevent.
How does the mind come to grips with these two conflicting events? Charles Dickens wrestled with a similar dilemma posed by the French Revolution, which offered a ‘spring of hope’ by ending an oppressive old regime but also brought in its wake death and destruction in a ‘winter of despair’.
In India today, we are struggling with a moral dilemma between development and secularism. But why must we choose — why can’t we have both secularism and growth? Unfortunately, the Congress party will give us secularism but not growth and Modi’s BJP will give us growth but not secularism.
Congress has historically promised both but only delivered secularism because of its flawed economic model. As a result of the cumulative impact of the reforms post 1991, it did preside over high growth between 2003 and 2011. But then it promptly made a false trade-off between growth and equity and predictably GDP growth plunged after 2011, destroying millions of jobs.
As a result, Indian voters booted it out in 2014, and brought in Modi, who promised a more credible path to growth via job creation. Many in the middle-of-the-road who voted for the BJP were aware of the stain of Gujarat 2002 but felt theirs was a calculated risk.
Since then, economic recovery has been slow, the promised jobs have not yet come, and we face the risk of sacrificing another generation. The sporadic attacks on minorities, meanwhile, have wounded our civilisation’s foundational value of ahimsa.
It seems odd to morally equate the ideals of secularism and development. Writer Ajaz Ashraf says it is a ‘leap of moral imagination to establish equivalence between the Gujarat riots and the imperative of creating new jobs’. Ethical theories measure morality based either on ends or means. Utilitarians and political leaders, who seek ‘the greatest good of the greatest number’, judge an act based on consequences or ends.
Thus, Vidura, the royal counsellor in the Mahabharata, tells the king that he should sacrifice a person for the sake of a village and the village for the sake of a nation. The opposite theory is based on duties and judges morality on the actor’s motives. Since killing undermines the duty of ahimsa, duty-based ethics would choose secularism over development while utilitarians would do the opposite.
Ethical dilemmas are not easy to resolve. Platitudes are cheap — ‘means matter more than ends’; ‘one life is worth more than lifting millions out of poverty’. When there is a conflict between duties, utilitarian ethics is more useful. If a party emerged one day which would deliver growth and secularism then our moral dilemma would disappear. In the meantime, each of us must make an informed but unhappy choice.

Wednesday, June 14, 2017

Was voting for the BJP a risk worth taking? Three years on, jury’s out


Three years ago, I took a risk and voted for BJP for the first time. And today I ask myself, was it a risk worth taking? At the time, I had been worried that India had a narrow window of opportunity called the ‘demographic dividend’. If we elected the right candidate, prosperity would enter crores of lives, and in course of time India might become a middle-class country. Our opportunity came from being uniquely young; if those in the productive age got jobs, there would be gains in prosperity far outweighing the burden of supporting the old and the very young. This window would close in a dozen or so years as India would also begin to age. As I evaluated the candidates, I concluded that Narendra Modi offered the best chance of harvesting the demographic dividend.

I was aware of the risks — Modi was polarising, sectarian and authoritarian. But I felt the risk in not voting for him was greater. If India failed to create enough jobs, we would sacrifice another generation. I also felt India’s democratic institutions were strong enough to prevent a dictatorial or a fascist state. I did not absolve Modi of the communal stain of 2002 but I argued that job creation was as great a moral imperative as secularism.

Three years later, I feel Modi has delivered only partially. I am disappointed on the jobs front although the economy has been managed pretty well: inflation is down to a record low of 3%; fiscal deficit has come down; growth is at 7%, and were it not for demonetisation it would have been closer to 8%; India has become surplus in electricity and is the largest recipient of FDI in the world. The GST, despite its flaws, is a game-changer; the bankruptcy code, easing of FDI limits, auctioning natural resources, self-attestation of documents — all these will make a huge difference.

Why has Modi failed on the jobs front? No one has focused single-mindedly on the problem in the first place. Three years have been lost in solving the crisis of bank indebtedness that underlies the retreat of private investment and lack of jobs. There is an excessive reliance on the bureaucracy — most IAS officers don’t have a clue how a private economy creates jobs or how to align private incentives with public good. Housing is the largest creator of jobs in India; yet no one spoke up when the GST Council thoughtlessly put cement in the 28% GST tax bracket. Niti Aayog’s Three-Year Action Agenda reminds us that India’s problem is not unemployment but underemployment — we need high-productivity jobs. This will happen only if we produce for the world. Make in India should be ‘Make for the world’. It is appalling that the discredited pre-1991 idea of ‘import substitution’ has been revived. Those who are pessimistic about exports are wrong. ‘India has a huge export opportunity in a global market of $17 trillion with India’s share a measly 1.7%,’ says the economist Arvind Panagriya.

How about the risk side of the balance sheet? So far, no communal incident has gone out of control but there is a lot of troubling noise. Not a week goes by without a sectarian event, which must be a huge distraction to a government committed to vikas. While the new animal cruelty rules do not ban cow slaughter they will affect the livelihoods of millions of farmers and small traders through red tape, harassment, and corruption. They will put at risk India’s huge exports in leather goods and meat, and a potential loss in lakhs of jobs. Modi has the ability to go down in history as a great leader. But it will only happen if he controls extremists in his party, and acts quickly and decisively at the first smell of a communal incident. The idea is gaining ground that Hindutva means cow vigilantism or valuing cows more than human beings. This goes against the Hindutva ideology and is very damaging to Modi’s reputation.

So, was it a risk worth taking — to vote for the BJP? Despite poor job creation and a polarised atmosphere, there have been significant achievements in the past three years. I am willing to wait another two years with a hope that Modi’s purposiveness and determination will help overcome the deficits so far. The TINA factor — ‘there is no alternative’ — is there, of course, but I’d prefer it not to be the reason for my choice in 2019.

Wednesday, May 10, 2017

Triple talaq must go, but for real change India needs to become truly modern

Triple talaq is in the news again, and mostly for the wrong reasons. It represents a Muslim husband’s right in Islamic law to dissolve a marriage simply by announcing it to his wife; today, he even does it via an SMS over the cellphone.

Despite Narendra Modi’s avowals to the contrary last week, the Bharatiya Janata Party’s zeal to abolish this controversial practice has more to do with its commitment to a uniform civil code and a Hindu Rashtra rather than compassion for a Muslim woman. The record of the Congress in this regard is no better. A Constitution bench of the Supreme Court will soon begin hearing a host of petitions challenging its constitutional validity and it’s difficult to predict the outcome. The solution, however, lies neither in a social boycott proposed by the Muslim Personal Law Board, nor a mere change in the law. The real answer is a radical transformation of the mindset. 

To this end, it is important to understand how women have changed in history, from being mostly objects of male pleasure to free and equal human beings. It’s a useful lesson for not only Muslims but also Hindus, whose personal law may be more liberal, but its practice leaves much to be desired. While men and women are biologically unequal, society has historically institutionalised this into an inequality of power. Anthropological evidence suggests that prehistoric hunter-gatherer societies were more egalitarian; patriarchy or male dominance developed only after the invention of agriculture. Aristotle thought men were naturally superior and women’s role was only to reproduce and serve men in the household. 

The early Christian Church formalised this inequality. Manu did the same in India. He believed women were morally weak and hence, dharma texts fashioned a social code of streedharma that conditioned women to accept a subordinate place in the patriarchal Brahminical society. Feminists argue that the stories of Sita, Savitri and others were created so that the woman would ‘voluntarily’ aspire to a subordinate role. Oddly enough, it was the discovery of romantic love in the 12th century which brought a degree of freedom and equality to women, breaking entrenched social barriers. Romantic love is personal, subjective, and idealises the beloved as a superior being; thus, it turns a woman into a subject rather than an object. It is a mistake to think that romantic love originated in the West. It seems to have blossomed in three different parts of the world around the same time, expressed in three extraordinary literary works. In Europe, it culminated in Bedier’s Tristan and Isolde; in Islamic Persia, it flowered in the romance of Nizami’s Laila and Majnun. 

In India, it found expression in the divine love of Radha and Krishna in Jayadeva’s Gitagovinda. Prior to romantic love, there existed mostly erotic love, where a woman was an object, not the subject of love. Unlike India and Persia, the romantic movement evolved in the West, culminating in 18th century Enlightenment. One of its inspirations was the philosopher Immanuel Kant’s moral law — treat a human being not as a means but as an end — and this gave dignity to women. Modern marriage was born at the same time, based on love, replacing the old economic arrangement to raise a family. Women also challenged male domination by fighting for the right to vote in the 19th century and the Women’s Movement in the 20th century has gone on to effect profound changes in Western society, especially in marriage, including the “no fault” divorce, the right of women to abortion and property, as well as more equitable wages in the workplace.

All these ideas and practices have now spread around the world as a part of global modernity. Even though India retains its attachment to ‘arranged marriage’, it has gradually adopted features of the modern ‘love marriage’. Under the influence of Bollywood, urban middle class men are becoming less dominant and women less submissive. This trend will continue but we must avoid the breakdown of marriage and family of the West. Yes, the outrageous ‘triple talaq’ must go, but we must go beyond it. The minds and hearts of all Indians have to change in order to give dignity, equality, and self-respect to women. Changing the law is only the beginning, as Mahatma Gandhi used to say. Indians need to internalise the ideals of modernity, not as Western imitations, but in the way Gandhi thought of liberty and equality as emanating from sadharana dharma.

Thursday, April 06, 2017

Why Trump’s pro-war aide quotes the Gita


Most Indians are unaware that Steve Bannon, President Donald Trump’s chief strategist and member of his national security council, is not only the most powerful person in the White House today but he is also a great admirer of the Bhagavad Gita. Bannon is militarily inclined and believes in waging a holy war against Islam “to establish dharma in the world”. His long-time collaborator Julia Jones says, “He used to talk a lot about dharma — he felt very strongly about dharma… one of the strongest principles throughout the Gita.”


Like Krishna in the Gita, Bannon believes that the world is in moral crisis. The West is declining politically and economically from a lack of mooring in traditional Judeo-Christian values. “We’re at the very beginning stages of a very brutal and bloody conflict… (and we) need to fight for our beliefs against this new barbarity that’s starting, that will completely eradicate everything that we’ve been bequeathed over the last 2,000-2,500 years,’’ he told an audience at the Vatican in 2014. In his apocalyptic view, the world is a cosmic battlefield in a clash of civilisations. He is reportedly behind the United States’ recent attempt to bar nationals of Muslim countries from entering America — a first step, in his mind, towards an eventual victory against Islam.
Deeply religious Hindus will be outraged at the idea that one of their holiest texts is being misused for militaristic purposes. The intriguing question, however, is how can the moral idea of ‘dharma’ attract both the militarist, Steve Bannon, and the pacifist, Mahatma Gandhi? One answer to this question is that the Gita has something for both. To the warrior, it proclaims, do your dharmic duty and fight a just war. To the philosopher and the devotee, it offers the paths of wisdom and love (via jnana and bhakti yoga). A second answer is that the great texts lend themselves to multiple interpretations. To Gandhi, the war of the Mahabharata was an allegorical, ongoing battle between dharma and adharma inside every human being. The very first word of the Gita, ‘dharmakshetre’, signals that this is no ordinary battlefield; it is also a field of righteousness.
A third possible answer lies in the opposing positions of Arjuna and Krishna. When Arjuna refuses to fight, he is giving the following message to all rulers: before declaring war, consider its moral consequences — is it worth dying for? Normally, our rulers only consider political and economic consequences. There would be far fewer wars if rulers thought that they, in fact, might be killed. A fourth answer lies in two different meanings of dharma in the Gita. Gandhi was attracted to sadharana dharma, which consists of the inner virtues of the conscience — ahimsa, ‘not hurting another’ or satya, ‘telling the truth’. Bannon is attracted to sva-dharma or social duty, which translates to: “I am a Kshatriya and my duty is to wage a just war.” Thus, the Gita can be read both as a pro-war text and an anti-war text.
Finally, the difference between Gandhi’s and Bannon’s positions comes down to the problem of means versus ends. Krishna believes that the end of preserving the world justifies fighting a just war. In hesitating to fight, Arjuna obviously feels that there are limits to making war even if the end is worth pursuing. One can empathise with both — human beings are susceptible to both types of moral intuition. Many Indian nationalists — Tilak, Hedgewar, Lajpat Rai, and even Aurobindo — would have been on Bannon’s side when it came to fighting for India’s freedom. But of course, Mahatma Gandhi prevailed.
Indians should worry that Bannon might unleash a disastrous war in the Middle East. “Steve is a strong militarist, he’s in love with war — it’s almost poetry to him,” says Jones. Bannon is not unintelligent — he was considered among the three most intelligent by his classmates at Harvard Business School — and this makes him more dangerous. It is worrisome that an American president, who has enormous war-making powers, has Bannon as his closest adviser. Before undertaking a war, Bannon would do well to go back to dharma and the Gita and re-examine the rich ambiguity of both. He might well come up with a different answer, perhaps inspired by Arjuna’s refusal to fight in the Gita or by Gandhi’s ethic of non-violence.

Wednesday, March 01, 2017

Why classic liberals don’t win elections, and populists do


We are in the midst of another election season in India, and each time a poll rolls around, I get depressed at the thought that we are about to elect criminals, corrupt populists, and members of political dynasties rather than upright, independent, reform-minded liberals.
On this occasion, l’affaire Sasikala and Donald Trump’s shocking win in America also weigh on the mind. As a solution, I have earlier advocated setting up a classical liberal political party in India. A young, aspiring India in the 21st century deserves a secular party that trusts markets rather than officials for economic outcomes and focuses on the reform of governance institutions. It may not win votes quickly but it would bring governance reform to centrestage and gradually prove to voters that open markets and rule-based government are the only sensible way to lift living standards and achieve shared prosperity.
Based on this reasoning, Sanjeev Sabhlok formed Swarna Bharat, a genuine liberal political party in 2013. But it has not gained widespread support. I feel guilty that I have not done enough for it; nor have my liberal friends joined it. As I think about our failure, I have come to a startling conclusion. I have realized that a party based on classical liberal principles has almost no chance of winning at the polls  unless it ties itself to an ‘identity’ party.

Dancing heads: Both Thatcher and Reagan were free market proponents

A populist candidate who promises subsidised electricity and food will always defeat a liberal who advocates private initiative and competition. It is hard to sell the free market at the polls because the ‘invisible hand’ of the market is not visible to the voter whereas the state’s visible hand is only too visible. A ‘left liberal’, however, is likely to be more successful as he advocates an extensive welfare state via state intervention.
For this reason, classical liberals everywhere have chosen to join parties with cultural or social identities. In America, they went on to become ‘liberal Republicans’ or ‘conservative Democrats’. In both cases, they helped to change the economic agenda of their parties.
But as a price, they had to put up with the ‘anti-abortion’ Christian agenda and the gun lobby of the Republicans and the rigid, inept unions of the Democratic Party. In the UK, Margaret Thatcher tolerated Tory’s social ideals of ‘traditional Englishness’ as a price for converting her party (and the nation) in favour of the market.
Similarly, Tony Blair taught the Labour Party to trust market outcomes rather than state intervention. Adenauer and Erhard, both classical liberals in Germany, tolerated the Protestantism of the Christian Democrats while creating the great post-war economic miracle. In a recent volume of essays, Liberalism in India, Jaithirth Rao has argued that even the most successful liberal party in history, the Whigs, who were a force in British politics for over two centuries, had a ‘Low Church’ identity in contrast to ‘High Church’ Tories.
In India too, many liberals support Modi’s vikas agenda but do not subscribe to BJP’s cultural baggage of Hindutva. Modi’s miraculous success at the polls in 2014 was the result of a liberal appeal of ‘maximum governance, minimum government’ to the aspiring young. As a result, he created space in the BJP for market liberals, and the BJP has matured into a full-fledged right-of-centre party with a clear division between an ‘economic’ and a ‘cultural’ right. Modi, however, is not a classical liberal like Thatcher, with ideological commitment to economic and institutional reforms. He is closer to an East Asian ‘moderniser’ and he reforms on a pragmatic basis. It is still early to say if Modi will deliver, but if he wants to retain his liberal supporters, he will have to keep the cultural wing of his party under tight control. As it is, the latter is unhappy with him for not pursuing Hindutva vigorously.
I feel sad that a liberal party does not have a future in India or elsewhere. Liberalism has driven political action in the world in the past three centuries. “It has won much of the political argument in the 20th century,” says Barun Mitra of the Liberty Institute. It won India’s fight for freedom from colonial rule; it was responsible for the collapse of communism; and it drove India’s economic reforms. But liberals did not take credit for these reforms and hence we continue to reform by stealth. Liberals are no saints but it is a shame that emotional appeals to race, religion and caste identities still matter more to voters than rational arguments for prosperity and governance.

Sunday, January 29, 2017

The Budget will tell if aspirational Modi is now a populist Modi

The question on our minds is: has the Prime Minister changed? Is Narendra Modi turning populist? We shall have the answer on Wednesday when the finance minister presents the Budget. The nation elected Mr Modi on an aspirational platform of creating jobs, containing inflation, and stopping corruption. Indeed, in the first half of his term, he has pursued responsible policies to meet these goals. As a result, the economy has turned around; inflation has been licked; fiscal indicators are healthy. The big weakness is the lack of jobs, an objective that has suffered a setback in the past three months by a badly executed demonetisation. Modi has recognised this, and is this why his rhetoric has changed?

Instead of the aspirational talk of opportunities and jobs — of startups, ease of doing business, make in India — we have begun to hear the tired, pro-poor rhetoric of the Congress party. Nowhere was this more obvious than on New Year's Eve when Modi peppered his defensive speech with populist giveaways to farmers, pregnant women, senior citizens, etc. Gone was the refreshing talk of personal responsibility that we heard during his election campaign: 'India doesn't owe you cheap diesel, free electricity and loan waivers; the only thing it owes you is good governance; after that, it's up to you to work hard, pull yourself up, pay your taxes, and make India a great nation.'

So, what should we expect from this coming Budget? Let us hope the government will stay the course with the sound strategies pursued so far. Let's not take high growth for granted. Every rupee given away in populist doles is a rupee not available for job creation. Remember, recent state elections have also been won through purposive, long-term development, not giveaways. The window of opportunity for a grand demographic dividend is limited to the next decade, and it would be tragic to lose it to populism.

Job growth has been weak because the economy has been firing on a single cylinder: consumption. The other cylinders — private investment and exports — have failed. It is easy to get discouraged when jobs are disappearing around the world through technological change. The best course is to stay focused on bettering infrastructure, logistics, ease of doing business, implementing sectoral plans — such as the fine package for the labour-intensive textile industry — and resolving NPAs (non-performing assets) of public sector banks. The long-term solution is to bite the bullet and privatise these banks; eliminate the power of politicians to tamper with state electricity boards, and reform labour laws. So, no new schemes, please! Tell people that achhe din will take time; if you are honest, they will believe you.

Since non-farm jobs will take time, keep improving the productivity of farm jobs by allowing traders and farmers to buy and sell freely via e-NAMs (National Agriculture Market), thus ending the APMC (Agricultural Produce Marketing Committee) raj. Have a predictable export-import regime for farm products rather than the present switch-on, switch-off policy. Get over the unscientific bias against genetically modified crops, which is holding back productivity. On taxes, keep lowering corporate tax rate by 1% a year as committed (while eliminating exemptions) until we get to the effective rate of competitors. Move indirect tax rates closer to where they will be in the Goods and Services Tax. On personal income, stretch out the slabs rather than raising the limit for tax-free income to protect the tax base. Only implement the universal basic income scheme when all subsidies have been scrapped and supporting infrastructure is in place.

Whatever the cost-benefit of demonetisation, the Budget must snatch its long-term gains of a wider tax base, higher savings rate, and more resources for investment. Technology has offered a chance to bring banking to the masses. If we seize the opportunity, the aam aadmi can leapfrog over the bank branch into a digital banking future, just as he hopped over the landline with the cellphone. The Budget can fuel this revolution and keep alive the moral crusade against black money.

It was a fresh voice that reminded us in early 2014 that the state did not owe us anything except good governance, and it won Modi the election. People want opportunities and jobs, not loan waivers and sops. In fact, Arun Jaitley would do well on Wednesday to quantify the jobs that each lakh of rupees in the Budget will bring. It would be a pity to lose the Narendra Modi who wanted to make vikas a 'jan andolan', a mass movement.

Sunday, January 01, 2017

As stagnant West gets meaner, rising India spells hope but there’s a big if

2016 was a dreadful year and it is a relief that it's over. The values I cherish most took a profound battering. As a classic liberal, I want equal rights for all; I reject racial and caste discrimination; I revere religious freedom; I seek a free economy based on competition; and I uphold dissent. These beliefs have been undermined by Donald Trump's election in America, Britain's exit from Europe, and rising racism, intolerance and nationalism in the world, including in India where Narendra Modi has made his first big mistake with ill-considered notebandi. The fault partly lies with privileged liberals who have ignored growing discontent in their backyard.

A quarter century ago, at the fall of communism, the political scientist, Francis Fukuyama proclaimed the triumph of liberal democracy based on free markets. He called it the 'end of history' and predicted that the liberal order would spread globally as it best served the human desire for peace, liberty and prosperity. But the willingness to risk one's life for abstract goals and daring acts of imagination and idealism would be replaced by the satisfaction of ever more sophisticated consumer needs. Hence, he warned that the 'end of history' might become a boring place.

Today, it appears that Fukuyama was wrong. Liberal democracy and globalisation are under attack. China's 'Marxist capitalism' has delivered enormous wealth without freedom. The Middle East has seen the rise of violent Islamic fundamentalism instead of democracy. The 2008 global downturn has challenged the deregulation of banking and finance. Thomas Piketty, the French economist, has persuaded us that free markets have enlarged the gap between rich and poor. And white working class men in the West have let out a wail against outsiders because their political system has ignored them and religion's loss has left them with monotony without meaning.

Yet the post-war globalised liberal order has been one of the best periods in world history. It has been relatively peaceful. It has seen the spread of prosperity and decline in poverty, especially after the rise of China and India. The number of democracies have risen from 35 in 1974 to 120 in 2013. But there have also been job losses in the West due to technological change and the failure to compete with Chinese, Indian, and Third World workers, amidst economic growth that has mainly favoured the top one percent.

Despite electoral setbacks in 2016, the present world order is not in danger of dying. Yes, it will undergo change but Fukuyama's basic thesis remains sound. For one thing, there is no competitor. Radicals in the Middle East may dream of restoring an Islamist caliphate but the average Muslim does not want it. Neither is the rest of the world attracted to a 'China model' that mixes dictatorship, market economy and technocratic competence.

The model might, in fact, collapse in China as growth slows and people clamour for freedom. Ironically, many Indians admire China because it has delivered what the aam aadmi wants from the government: personal security, growing prosperity, and functioning public services. Although India's democracy is impressive, it has not delivered good governance.

In these dark times, India's prospects look bright. Unlike economic stagnation in the West, India has a rapidly growing economy with an upwardly mobile middle class, which is traditionally a bulwark of democracy. Stagnation has made the West meaner, less generous, and suspicious of people who look different. India's historical strength is its diversity. With over 50 tribal groups and 3,000 sub-castes, we are used to 'people who look different'. This is why the majoritarian project of the RSS is doomed to failure, although we must be wary of the intolerance of saffron groups in the short term. India's soft underbelly is governance. A confident new middle class, which pays taxes and feels entitled to hold public officials accountable, may well provide a cure in the long run.

Although a badly executed demonetisation has been a profound economic setback, it has not turned political sentiment against Modi. Ours is an age of rising expectations in India unlike the mood of diminished expectations in the West. India's ascent after 1991 has been based on the classical liberal values of democracy and free markets with multiplying connections to the global economy, Thus, India offers the best endorsement of Fukuyama's thesis. If only Modi could control cultural intolerance, India could become an inspiration to the world, helping restore faith in a liberal future. But it is a big 'if'.