Times of India 2001 Columns

MIRACLE IN PATAN 14/01/2001

I was in Kathmandu recently, where I had gone for my nephew's wedding. It turned out to be a warm family affair with plenty of good food and good feeling. This was before the Hritik Roshan episode, and there was lots of sunshine, attractive women, and beautiful clothes. But what took my breath away was the Patan Museum, which is arguably the best museum on the subcontinent with plenty of lessons for us in India. The museum displays the traditional sacred art of Nepal in a wonderful setting. Its home is an 18th century royal palace of Kathmandu's Malla kings, restored lovingly by Gótz Hagmúller and others, with funding from Austrian and Nepali sources. Its gilded door, guarded by two ferocious bronze lions, faces one of the beautiful squares in the world. Inside is an exciting collection of 200 sculptures and objects that transport one into the rich living traditions of Hinduism and Buddhism. This in itself is not exceptional. Many Indian museums are housed in grand buildings and contain equally rare treasures. What is exceptional is the world class presentation, the quality of the display, accompanied by educative commentary, impeccable maintenance and expert management. There is no dust, filth or anything shoddy, which alas, are the defining qualities of our museums. Museums in India are usually run by bored bureaucrats, who don't even have the authority to replace a light bulb. The treasures are poorly displayed, poorly guarded and poorly maintained. They depend on annual government grants, which are eaten up in staff salaries. The end result is that our museums appeal neither to local people nor to foreign visitors. They don't achieve their educational aim or their tourist potential. The creators of the Patan Museum were aware of these pitfalls, and their biggest victory was to convince the government to let it be a semi-autonomous body, with an ability to raise revenues, employ its own staff (not bureaucrats), and manage its pricing policy and budget. Its entrance fees are Rs. 10 for Nepalis, Rs. 30 for SAARC tourists and Rs. 120 for foreigners. It supplements the fees through revenues from an outstanding Museum Café in the landscape palace gardens, which is run by professionals and a gift shop that sells lovely posters, art books, and post cards. The end result is a self-sustaining, world-class museum that attracts 40,000 annual visitors or 5 per cent of all tourist arrivals in Nepal. It has been acclaimed around the world and its growing popularity guarantees it a sustainable, self-reliant future. A decaying old building has won a new lease of life as a cultural preserve that will be Nepal's pride for generations. Now, here is an idea for India's many languishing museums. Some will ask, how can we allow our national treasures to be managed by non-government institutions? Others will protest why do we need foreigners to restore our palaces and design our museums? The simple answer is that museums need people with special skills, a unique knowledge base, and a passion for art history and aesthetics. Museums are public spaces, but they don't have to be run by governments. The best museums in the world, especially in America, are managed as autonomous citizens' trusts. Expertise has no colour, and the issue is not swadeshi versus videshi. The challenge is to get passionate experts to run our institutions rather than bored bureaucrats. To be afraid of foreigners is the sign of an inferiority complex, and Tagore reminds us that "Whatever we understand and enjoy in human products instantly becomes ours, wherever they might have their origin." So, are there high-minded Indians who care enough about their heritage to come together, raise funds in India and abroad in order to upgrade our museums and be willing to convince our government that our museums should become semi-autonomous, self-sustaining institutions? To be sure the cultural bureaucracy will resist, but the truth is that our government doesn't have money. It might welcome a Patan type initiative, which will make our museums self-reliant. Once that happens we can dream of a Gótz Hagmúller to create magic one day in the Chola bronze gallery in Chennai. In these troubled times between Nepal and India, this will be our best compliment to our neighbour. While on the subject I, for one, do not think that Ayodhya needs a new building. But if there is "national sentiment" in its favour, as Mr. Vajpayee believes, I hope it will be a world-class monument to India's multi-faith diversity. I would invite one of the world's top architects--a Frank Gehry, Richard Meir, I.M. Pei, or Charles Correa--to design it. That will do more for Ayodhya's pride and tourism. Recall, Nehru had the courage to invite Corbusier to design Chandigarh. Now, here is another idea, Mr. Vajpaye.

DON'T ROB PRASHANT'S FUTURE 28/01/2001

For the past twenty five years we have owned a small coconut farm in a village in Maharashtra. If this does not make me a full blooded Maratha, it does make me at least an honorary Maharashtrian in my neighbours' eyes. Bhiku, our gardner,looks after our wadi, and we have seen his children grow up nicely over the years. I have always taken a special interest in his eldest boy, and when the Enron power plant came up I confidently predicted thatPrashant would have a shining future. The main obstacle to our village's prosperity is perennial shortage of power, which inhibits commercial activity. Although Enron has made Maharashtra surplus, our village still does not get power on Fridays and brown-outs define our other days. Across the harbour is Mumbai where people get plenty of power, and entrepreneurs set up industries, call centres and software companies and create thousands of jobs every day. Who is robbing Prashant's future, especially when our state now has abundant electricity? Most people blame Enron, and they expend enormous amount of negative energy in blaming the foreign devil for selling expensive power. The truth is that Enron's power is not more expensive than similar new plants. Enron's power appears expensive because Maharashtra's electricity board (MSEB) buys only half the power that Enron can produce and this makes Enron inefficient. If Enron could run its plant full blast, then the cost of its power would be Rs. 4.02 per unit. Even a new thermal plant like NTPC's Kayankulam plant produces power at Rs. 4.50 per unit. Enron's notorious Rs. 7.80 tariff was a fluke for the month of July when MSEB bought only 30 per cent of Enron's power. The rise in oil prices and the rupee's depreciation have not helped, but the main problem is MSEB's inability to buy enough power from Enron. If you buy a monthly train pass for Rs. 100 and use it only once then your journey costs you Rs. 100. But if you use it 100 times then each journey costs Re 1. If you create a fixed asset you should use it as much as possible. Maharashtra's electricity board behaves in this irrational way because it is bankrupt. It doesn't have money to buy Enron's power because it sells power below its cost. If a mango seller buys mangoes for one rupee and sells them for 50 paise, she too becomes bankrupt. MSEB has 13 million customers and of these 11.8 million get power below cost. 9 out of 10 Maharashtrians pay 42 paise per unit and 1 out of 10 pays Rs. 5.40. In addition, many of its customers steal power. Hence MSEB loses Rs. 5 crore per day. Mumbai, however, has plenty of power because MSEB does not distribute it. Professional private companies like BSES do, and they ensure that their bills are collected and they don't let anyone steal their power. Hence, Transmission and Distribution losses are only 9 per cent in Mumbai while they are 31 per cent in Maharashtra. The truth is that if some people have to pay 13 times more than others then no amount of policing by MSEB will help. The answer, of course, is to charge customers what it costs to produce electricity. This is easier said because no politician has the courage to raise tariffs to farmers and risk losing his assembly seat at the next election. MSEB must also learn from Mumbai and privatise power distribution. The crux of the problem facing Enron and every other independent power producer in India is that they have the freedom to generate power but they do not have the freedom to sell it. In a power starved country we should encourage Enron and all our power plants to produce as much power as possible (which will lower production costs). Put this power on the national grid, and open the trading of power to private entrepreneurs. Private companies will bid for power from generators and sell it directly to consumers. Those who want high quality power, without interruption will be willing to pay more. So will customers who live in power scarce areas. Consumers will be able to choose between different suppliers and from a menu of prices. During peak hours rates will rise, but eventually when supply exceeds demand prices will decline, as they did when cement was liberalised. So Prashant, don't blame Enron for spoiling your future. Blame Maharashtra's ugly politicians and the incompetent MSEB. In the next election vote for the candidate who promises to make everyone pay the real cost of power, privatise distribution, and sack MSEB linesmen who steal power. Remember, only insecure people blame foreigners for their own troubles.

SEEDS OF GODLIKE POWER 11/02/2001

Inspired by one of Emerson's essays, Mathew Arnold, the English poet, wrote in the 19th century about the "seeds of godlike power". He was referring to a human being's great potential for progress, but his happy phrase fits the new miracle seeds that will help India create a "second green revolution". The seeds are a product of biotechnology. They are resistant to pests, and the farmer doesn't need to spray his crop with pesticide. Farmers love them because they don't have to spend on costly pesticides and they raise yields and income by 30 to 50 per cent. Consumers like them because the food is less toxic and more nutritious. Many seeds are also nutritionally enhanced. For example, you won't feel guilty eating the new potatoes because you will get protein in addition to starch in your diet. No wonder, the seeds cover 44.2 million hectares in 13 countries on six continents. Eight of these countries are industrialised and five are developing. In the past five years, genetically improved crops have grown 25 fold in acreage--a dramatic rate of adoption for any new technology. Tragically, India's farmers have not been allowed to experience this miracle. China, our rival, has beaten us in this race as well. The new cottonseed, called Bt cotton, is especially popular because it is resistant to the dreaded bollworm, which attacks 70 per cent of India's cotton crop and destroys 35 to 50 per cent of it every year. Hence, 36 per cent of the US and 10 per cent of Chinese cotton crop is planted with Bt cotton. If our Andhra farmers had used it, their crop would have survived and we might have prevented suicides. Bt cotton is not available to Indian farmers because our regulators have not approved it despite 6 years of successful trials by Maharashtra Hybrid Seed Corporation (Mayco), the seed company. Similarly, Proagro's mustard seeds have been tested to death for 7 years and they have not been yet been approved. Chinese bureaucrats, in contrast, take a more practical approach. They saw that Bt cotton was being extensively used in America and a dozen countries, and it had cleared the rigorous requirements of the US FDA. So, they decided not to re-invent the wheel, but to merely check Bt cotton's bio-safety in their soil and climates. Hence, 18 months after trials, Chinese farmers had begun to enjoy its fruits while Indian farmers were committing suicides. Our two largest cotton growing competitors, the US and China have, thus, taken a lead over us. When global agricultural markets open up--and the day is not far--our rivals will be better positioned because their costs will be lower and their yields higher. As with any breakthrough, genetically improved seeds have plenty of critics, especially in Europe, including Prince Charles. They are creating a scare in people's mind without a shred of scientific evidence. Since most seeds are the discoveries of international companies, there is also the usual anti-MNC prejudice. European NGO's have funded Indian NGOs in order to stop transgenic seeds here and they are spreading plenty of disinformation. They have even taken the Indian government to court for approving the Bt cotton trials. Meanwhile, Professor Nanjundaswamy instigated 3000 farmers in Karnataka on January 3, 2001 and they approoted Mayco's trials in 2 locations. According to scientists, the European stand is emotional and based on unknown future risks and not on data. But these vocal critics have slowed our bureaucrats and made them timid. Fortunately, our bio-safety regulations are in place and our trials are well advanced. If they are not stopped either by obstructive bureaucrats, or eco-terrorists or the courts, the Indian farmer will be able to plant the miracle cotton in the next season, mustard in 2002, potato, tomato, cauliflower and brinjal in 2003. Transgenic wheat is ahead of rice but the farmer won't see it before 2005. Remember, India has only 2 per cent of the world's arable land, 1 per cent of the world's rainfall but 16 per cent of world's people. Indian farm yields are only half or one-third of our competitors. The hybrids of the first green revolution have stopped giving productivity gains. Remember, also, that our first green revolution in the sixties was not an accident. Bold individuals created it--they flew in the new dwarf wheat from Mexico and distributed it to Punjab's farmers. Had they waited for endless trials, our first green revolution would not have happened. In comparison, our second green revolution so far is a sordid tale of apathetic, timid bureaucrats, misguided NGOs and eco-terrorists who are robbing our farmers' future.

A HERO FOR OUR TIME 25/02/2001

Every nation must have its heroes. Having lost its stars of the Independence age, Indians have been desperately seeking new ones who can inspire them in these dispirited post-reform, post-Mandal, post-modern times. Narasimha Rao, like Deng could have been one such hero. Deng has become a hero to contemporary China and has supplanted Mao in Chinese hearts. Although Rao created an economic revolution between 1991-93, he was not a visionary; he was only a reluctant reformer. Now mired in corruption cases, he is no longer respected. V.P. Singh could have been a hero. He released a social revolution as he attempted to raise the backward castes in our society. But most Indians saw through his electoral ambitions. In the end, he divided society and seriously compromised standards. If he had genuinely cared for the backwards he would have delivered them education and health, and that would have truly lifted them over the long term. Manmohan Singh and P. Chidambaram are hero candidates. Indeed, with a solid record of achievement in reform, they are already heroes to the young. But politics has not been kind to them and they have been languishing in recent years. We are shy of politicians today and look to individuals with narrower but concrete achievements--to V. Kurien, for example, for making India the largest milk producer; to Sam Pitroda for inventing the STD call centre in the bazaar; to C. Subramaniam for our green revolution. Who ought to qualify to be our hero in the post-reform age? Many would agree that it is individuals who succeeded by helping themselves, who made a difference to society through their own efforts rather than the patronage of others, especially the government. Leftist intellectuals call this ethic "selfishness" and "greed", but it is rags-to-riches stories like Narayana Murthy's that resonate with our times. Recently I was reading Ashish Nandy's fascinating, An Ambiguous Journey to the City, where he discusses Karna, and it struck me that the mythic hero of the Mahabharata, might qualify as a hero. Of uncertain birth, insecure and defiant, Karna represents the predicament of a self-made person in an insensitive society that is not quite ready for individualism and competitiveness. His fight against the Pandavas is an attempt to break out of his lowly status as a charioteer's son and affirm the values of personal achievement and competitive individualism. If we cannot find a hero in the flesh we might as well import one from mythology. Karna, as every school child knows, was born of the princess Kunti, who had a boon that allowed her to have a child by any god that she wished. Whilst still young and unmarried she invoked through her prayers, the sun god. As a result, she conceived and gave birth to Karna. Fearing a scandal, she stealthily placed the child in an ornate casket and left it to float on the Ashva river, where a humble charioteer, Adhiratha and his wife Radha found him, and bought him up to be their son. Meanwhile, Kunti married the sickly Pandu, the prince of Hastinapur, who was cursed to die if sexually aroused. So Kunti exercised her boon and had children by the gods. These were the famous Pandavas who went on to fight the Kauravas in what became the Mahabharata. Meanwhile, Karna grew into a brave and gifted warrior, but he was subjected from birth to jibes about his humble birth and his princely ambitions. When young he challenged his half brothers to competition. They refused--competing with princes was a princely privilege. Karna was again humiliated when princess Draupadi refused to marry a charioteer's son even though he had won the right to do so in fair competition. Embittered, Karna turned to the Kauravas for friendship. This worried Krishna, who revealed to Karna the secret of his birth on the eve of the great battle and pleaded with him to join the Pandavas. He offered him, in return, the prize of Hastinapur's kingdom and Draupadi's hand in marriage. Kunti and Surya, his natural parents, begged him as well, but Karna was loyal to his word, and refused to betray the Kauravas, who had elevated him to a kshatriya and a prince. In the end, like a good hero, Karna knew when to die, and he went down unvanquished, killed through Krishna's trickery. Although he walks out of the pages of the Mahabharata, this Karna seeks power and legitimacy for a new ethic and a new mindset. He defies his low caste; he celebrates achievement in a competitive society; he stands for individualism and a "can do" attitude. He seeks legitimacy for the rustic and lowborn in a secular city. He could well be a hero for our times.

Hail, a new dawn! 11/03/2001

Praise has been showered on Yashwant Sinha's Budget, and deservedly so. There is much to laud and everyone has his favourite measure, but I am happiest that agriculture has finally entered the reform agenda. I am pleased because we have a comparative advantage in agriculture--something we do not enjoy in industry. By investing in agricultural reform we will get a "bigger bang for our buck" as the Americans say. The timing is good because we sit comfortably on a grain mountain, forty million tonnes high. Both domestic and international prices are down. So, no one seriously worries about food security. Agricultural reform is a big agenda and there is no point talking of globalisation or WTO when the Indian market is not free. Our farmers are victims of archaic laws that prohibit them from selling their produce freely within the country, traders face limits on how much they can buy and stock, mills face levy burdens on rice and sugar, prices are distorted by politicians. All this is incompatible with a modern, successful economy, but the biggest change we need is in our mindset. We still labour under a scarcity mentality. All our policies are aimed at achieving self-sufficiency when we achieved it 20 years ago! Year after year we produce wheat and rice surplus that piles up into a mountain for the enjoyment of rats. How can a nation be so stupid? Instead of a defensive mentality we need an offensive, exporting, "can do" attitude, which regards the WTO as an ally, not an enemy. No country became a successful agricultural power through peasant farming--this is the second mindset change. Farming is not a "noble profession"; it is agri-business. Ask any peasant--his son doesn't want to be a peasant. We must treat farmers as businesspeople. Our green revolution succeeded because we treated Punjab's farmers as capitalists. Our farms need a huge infusion of capital and technology in order to raise yields and compete globally. Peasants cannot make this investment. Neither can the government for is it bankrupt. Hence, we must free peasants to lease their lands to agri-business professionals with capital and technology. Thus, we will stage the second green revolution and become an exporter in a world economy. All our agricultural institutions are stagnant or defunct and incapable of reform--extension services, co-operatives, FCI and dozens of others. Five ministries interfere in our farmers' lives--Agriculture, Fertilisers, Water, Food, and Consumer Affairs--and there is no co-ordination, professionalism, or result orientation. It takes 6 months to import a commodity, and by then we don't need it, and 5 months to export it when prices have plunged. Hence, we need to trust the individual and the market and not the government--this is the third change. Mr. Sinha has struck a big blow for agriculture reform, not through budgetary measures, but by challenging these old mindsets. He has promised to free inter-state trading--this means he will amend the archaic Essential Commodities Act. He will lift storage and stocking curbs, which hurt farmers and diminish their incentive to produce. A 24 per cent expansion in rural credit (to Rs. 64,000 crores) is significant, especially for creating rural godowns and cold storages to boost the farmer's holding power. Chopping the Food Corporation's role and decentralising food management will bring down subsidies, avoid needless stockpiling, and rat feasting. The introduction of a futures market ensures a soft landing for sugar decontrol. Perhaps, the boldest move is to remove excise duties on food processing, which could usher a horticultural revolution and transform our fruit exports. My favourite measure is agri-clinics or agri-business centres, financed by NABARD loans, which could unleash thousands of agricultural graduate-entrepreneurs. It leverages knowledge and marks a new era of private farm services--in testing soils, plant protection, seeds, marketing, post harvest handling, etc. Farmers will pay for result oriented, private consultancy instead of free, apathetic government extension service. Just as our IIT graduates become millionaires, it is now the chance for our 17,000 annual graduates of agricultural colleges. Each clinic will need on average 3 graduates and 9 technicians, and this could also create vast employment for the educated in rural areas. I have two criticisms though: One, the absence of a food-for-work program to reduce the present grain mountain, and two, the absence of reform in our mandi or post-harvest system. With 15 per cent of our food (worth Rs. 24,000 crores) wasted, we must at least experiment with a modern system of silos and mechanised, bulk handling. India is not a tiger but an elephant--hence our reform process is frustratingly slow. As a first step, agriculture needed to be placed on the national reform agenda. This Mr. Sinha has done.

IF INDIA CAN, WHY CAN'T WE? 25/03/2001

The English have been surprised by Professor James Tooley's observations that India can teach Britain something about education. This is unusual spin over the usual foreign expert who patronisingly offers us advice on how to improve ourselves. Indeed, when Tooley wrote about this in the Times Education Supplement his editor was so perplexed that he inserted a photo of an impoverished school in Bihar with a caption, "Education in India has a lot to teach the British"--implying, may be, that the good professor had lost it. The professor of education from Newcastle has been documenting a "self help" revolution in Indian towns and villages as education entrepreneurs are opening private schools and creating opportunities for the poor to rise. Most Indians would agree that private schools are indeed mushrooming across India (although they worry about their indifferent quality.) This may explain, in part, why literacy has grown at double our historic rate--1.4 per cent a year between 1992-1998 versus 0.7 per cent between 1950-1990. Professor Tooley argues that India's blossoming spirit has much to teach England's poorer inner city areas. Most of us were shocked 18 months ago when the government sponsored Public Report on Basic Education in India (PROBE) disclosed that teaching was going on in only 53 per cent of government schools in M.P., Bihar, U.P., Rajasthan villages. Teachers were absent in one-third; many had brazenly closed their schools and were busy running shops. Some teachers were found drunk and a few even expected pupils to bring them "daru". A few were asleep; others engaged children in domestic chores, including minding their babies. Given this, is it surprising that parents are turning to private schools in more and communities? PROBE confirmed that village private schools, in contrast, had "feverish classroom activity" and more dedicated teachers. The reason, it said, was that teachers were accountable to managers (who could fire them) and to parents (who could remove their children). Research shows that these private schools charge modestly--from Rs. 35 to Rs. 50 per month in villages and Rs. 65-100 in towns. They are also popular because they teach English. In the slums behind the Charminar, in Hyderabad, a private school exists in every alley. 500 such schools belong to the Federation of Private Schools, and they are mainly in poor communities. They are run on commercial principles charging Rs. 750 per year and do not depend on state subsidies or private charity. Typical parents include rikshaw-pullers and vegetable and fruit sellers, and many schools offer free seats to roughly 20 per cent of the poorest students. Professor Tooley has observed this same phenomenon in Thailand, Columbia, Tanzania, and Chile. Cheap private schools are doing more for the poor since state education has let them down. What should we do? We must not only fix the shocking state of our government schools, but we must also nurture and encourage private schools. Today, private schools face great hostility because we have not got used to the idea that education can be commercial. Indeed, the infamous Unnikrishnan judgement of the Supreme Court prohibits "commercialisation" of education. The bureaucracy exploits society's prejudice and has created a virtual license raj. It makes it impossible to start a new school without paying a bribe. Education entrepreneurs face a plethora of regulations, which limit competition, create artificial scarcity, and allow existing schools to exploit parents. Their major problem continues to be "recognition", which requires that schools have playgrounds among dozens of other requirements. All very well, but private schools for the poor cannot afford these middle class luxuries. Indeed, the PM's Economic Advisory Council has recognised this problem and has recommended that "education must be liberalised and all entry-exit restrictions and bureaucratic hurdles faced by [private] schools and colleges should be abolished." We should also ask hard questions. Given the shocking state of government schools, can we trust the state to deliver education? If we can't trust it to produce bread, how can we trust it with the minds of our young? It is one thing to believe that the state must provide money for primary education, it is quite another that the state must be in the business of running schools. Wouldn't it be better if our state schools were managed by NGO's, education professionals and entrepreneurs on a contract that was renewable based on performance? Indeed, there exist NGOs today who already run parallel schools (inside government schools during off-hours) and they deliver excellent results. This change won't occur overnight, but meanwhile we can make a beginning and become more understanding of these new private schools and fight against the license raj in education.

REVISITING INEQUALITY 08/04/2001

Last week I walked into our neighbourhood chemist's and the shop assistant gave me a look that spoke a thousand words. He looked me straight in the face and his eyes said "treat me as an equal". He sought equality based on dignity and mutual respect, and his disarming expression, it seems, had already got him in trouble. For the Punjabi woman ahead of me complained to the chemist. She used the nice Urdu word "tamiz", which roughly means "courtesy", but in her feudal mind it really meant that the shop assistant was not sufficiently servile. When she left the chemist confided in me, "this boy is good and efficient, but he is a Dalit from Bihar and his manners seem to put off my customers." Walking back I was reminded of George Orwell's description of social equality in "Homage to Catalonia." There he describes the waiters in revolutionary Barcelona "who looked you in the face and treated you as an equal." The Indian middle classes, used to feeling superior to the lower castes, are now going through disconcerting times as Laloo Prasad and Mayawati have given the OBCs and Dalits a new sense of confidence. We are in the midst of a social revolution that has been created by the ballot box. As economic reforms deepen and prosperity becomes widespread this will only accelerate. The latest poverty figures confirm what we are seeing around us. The Planning Commission reports that people below the poverty line have declined in the nineties by ten percentage points. Somehow cold percentages don't quite capture the enormity of the achievement until one realises that 10 per cent of one billion means that 100 million people have been lifted out of poverty in less than a decade. China, incidentally, achieved more or less the same in the eighties. Nevertheless, there exists huge inequality in our society and between rich and poor nations. Leftists claim that inequality has grown in recent times and globalisation is its cause. This is plainly false. In fact, for the first time in two centuries global inequality has actually begun to decline since the 1980s, and this is mainly because living standards in China and India (to a lesser extent) have begun to rise as growth has accelerated in both countries. China has done far better than India because it has taken better advantage of globalisation. Its reforms have gone deeper, its exports have grown brilliantly, and it has received far more foreign investment. Critics of reform and globalisation--such as the powerful voices in the Congress, RSS, and CPM--should seriously learn from China before they force India to turn inwards, and condemn our poor to perpetual poverty. Soon after the chemist episode, I was at a social gathering where people were avidly discussing the six recently minted MBAs at IIM, Ahmedabad, who had won starting annual salaries of more than a crore and the average for the class of Rs. 18 lakhs was not bad either. The gathering felt righteously indignant, and people blamed liberalisation. I felt, like Justice Holmes, that their passion for equality was merely "idealised envy". These two episodes--the equality sought by the Dalit and the inequality created by the IIM graduates--left me vaguely uneasy. The cause of our discontent, I'm increasingly convinced, is that we confuse inequality with poverty. Everyone agrees that there should be equality of opportunity. This means that every child should have access to a good school, primary health care, and safe drinking water irrespective of birth and ability, and we should minimise the headstart that some children have over others based on caste, gender, or birth. This however, is very different from an equality of result or an equal standard of living that leftists seek. Absolute equality is desirable but it is not possible because it goes against human nature. Most of us would happily accept rich people or an increase in inequality among the middle classes provided it leads to even a small improvement in the conditions of the poor and the most disadvantaged. It is more important to raise the poor than worry about inequality. Economic reforms are bound to increase inequality that comes from open and free competition. But that does not mean that they will worsen the situation of the poor and the most disadvantaged. It is stupid to think that every inequality worsens the condition of the worst off. The IIT students' crores are the result of a competitive economy which in the long run will accelerate economic growth and eventually reduce the disabilities of caste, gender, and birth. Hence, economic reforms are not anti-poor, but they must be accompanied by an equal passion for reforming primary education, health and the delivery of our poverty programs.

WERE WE ONCE RICH? 22/04/2001

I am on a book tour of America as I write this column, and Americans sometimes ask, "Was India once really rich? Then why did it become so poor?" I remind them that Columbus had gone in quest of the riches of India but discovered America instead. Thinking he had found India, he called the natives "Indians." The name stuck and so has the linguistic confusion. It took the Portuguese five years to get over the humiliation that Spain, their enemy, had discovered America when it could have been theirs. In 1497, they sent Vasco da Gama the other way round the world. He did indeed find India's legendary wealth. He informed Portugal's King Manuel of "India's large cities, large buildings and rivers, and great populations." He spoke about spices, jewels, and mines. But he added that Indians were not interested in European trinkets and clothes. They made far better fabrics and trinkets themselves. In the European mind "Golconda" became the symbol of the haunting wealth of India. "The discovery of America and the passage to the East Indies by the Cape of Good Hope are the two greatest events in the history of mankind," wrote Adam Smith. At the end of the 16th century, economic historians tell us, India's wealth sustained more than a hundred million people. With plenty of arable land, its agriculture was vibrant with productivity comparable to the best in the world. There was a vigorous and large skilled artisan workforce that produced not only cottons but also luxurious products for the zamindars and the courts. The economy produced a great financial surplus, and the annual revenues of the Mogul emperor Aurangzeb (1659-1701) were more than ten times those of his contemporary Louis XIV, the richest king of Europe. This surplus supported the vast and growing Mughal Empire and financed spectacular monuments like the Taj Mahal. When the English later got to this wealth they found that India produced the world's best cotton yarn and textiles. To this huge industry they provided the powerful stimulus of European demand, and made it even richer. Thus, by the end of the seventeenth century India had a sophisticated market and credit structure and controlled a quarter of the world trade in textiles, according to Paul Bairoch. It had 22.6 per cent share of world GDP (or roughly America's share of the world's wealth today), confirms Angus Maddison. Indian cottons transformed the dress of Europe, and cotton underwear changed the standards of cleanliness and comfort in the West. The Indian peasant, however, was very poor. Francois Bernier, a French physician who spent twelve years in India, wrote about the decrepit houses of the poor, their humiliating lives and the dramatic inequality between the tiny rich and the impoverished many. Because the rapacious Mughal State took away something like half the agricultural product there was little incentive to improve the land. The merchants hid their wealth for fear of the tax collector. There is no easy answer to the problem that the country was prosperous and the people were poor. Lest we forget, 250 years ago peasants everywhere were poor and today's great disparities in income between nations did not exist then. The difference between Europe and India (or China) was 1.5 to 1 versus 20 to 1 today. The English, who learned about textiles from India, soon turned the tables in the late 18th century. They began making textiles with machines and this began the West's industrial revolution, and brought it amazing prosperity. As a result, handloom weavers were destroyed all over the world, including India. We blamed the Britain for impoverishing us, but the question is why did India not experience an industrial revolution? The truth is that pre-British India was significantly behind Western Europe in technology, institutions and ideas. A scientific revolution had not occurred. How to make a poor nation prosperous is a more difficult question. The answer seems to lie in technology and institutions. Since Britain's industrial revolution there been for the first time in recorded history a continuous flow of inventions. Moreover, these have been absorbed commercially as profitable innovations. History teaches that a nation's ability to absorb these innovations and create an industrial revolution depends on having the right institutions in place--for example, property rights, schools, and stable governance. In the second half of the twentieth century, the Far East nations demonstrated that it can be done--a poor nation can become rich, and very quickly. They took less than thirty years to transform their societies, whereas the West needed a hundred. After the reforms India too is poised to do it soon--as long as we keep vigorously reforming our damaging socialist institutions and investing in education

DARKNESS TRIUMPHS 06/05/2001

There is no use pretending that the departures of N.K. Singh and Montek Singh are not going to hurt. They are. Two very different men--Montek is an elegant economist and NK is a natty networker, who knows how to turn every screw in the government's machine. But both are reformers. N.K. Singh has been transferred from the Prime Minister's office (PMO), where he coordinated the PM's economic agenda, to the Planning Commission. Montek is leaving to head the Independent Evaluator's office for the International Monetary Fund. Earlier, he was Finance Secretary, where he had spearheaded many an economic reform ever since the summer of 1991. Both men have fallen victim to the RSS and the swadeshi lobby. Although, Muralidhar Rao and Datta Pengdi may have precipitated N.K.'s recent departure, all anti-reformers are delighted. The communists, the leftists--the Samtas and Mamtas--and the considerable forces of darkness in the Congress would rather live with inefficient and corrupt public sector monopolies than have anything to do with competitive markets. Montek's achievements are well known, but NK too leaves a considerable record of reform, culminating in the recent path-breaking budget with dramatic reforms in labour, agriculture, and industrial policy. It contained both Mr. Vajpayee's and Mr Sinha's reforms, and was a product of teamwork between North and South Blocks, and NK's networking skills with the ministries were crucial. NK has left a mark on many Vajpayee initiatives: for example, the current momentum in building highways, the new "open skies" policy (held hostage for so long by the malicious civil aviation ministry), the decision to lease five major airports, the new energy behind ports privatisation, resolution to the telecom tangle via an excellent telecom policy--the ruckus over WiLL notwithstanding, and the soon to be announced liberalisation of drugs price control. Against these successes is failure in the power sector and the centre's inability to get the states to reform SEBs. The lack of initiative on Enron is also inexplicable. India cannot afford to let Enron blow-up and destroy our credibility with the world. At one go we could lose our reputation for honouring contracts. Remember, Enron's board members, James Baker and Kenneth Lay, are George W. Bush's closest friends. Reforms don't happen without reformers. Even the most reform minded minister needs a reforming officer to help build pro-reform coalitions in the bureaucracy, the party and in parliament. Few realise A.N. Varma's stellar role when he was Prime Minister Narasimha Rao's secretary. His legendary Thursday meetings with economic secretaries became the crucial instrument for the blistering pace of reform between 1991 and 1993. Mr Varma was a terror and ran his committee tightly. No one was allowed to travel on Thursdays. The committee met for only two hours, when the reform in question was openly discussed. Varma summarised and minuted the outcome and the reform proposal was taken to the cabinet for approval, and then on to the parliament. Many of us remember our excitement in those golden years as a new reform was announced every week. Just as Narasimha Rao had Varma, so Manmohan Singh had Montek. Chidambaram had Jairam Ramesh, and Vajpayee had N.K. Singh. These minister-officer partnerships have been crucial in making reforms happen. Those who criticise the PMO for becoming too powerful forget that in our political model ministries are independent and someone has to coordinate our chaotic government. It used to be the cabinet secretary, but when you want strategic management of change, then you require initiative and pro-activity. Who knows, a powerful, hands-on secretary might have been able to prevent the Fifth Pay Commission disaster--the lowest point in our economic history of the 1990s. To our worthy anti-reformers, who are gloating over N.K. and Montek's exits, I ask: how can you oppose the work of reformers who are trying to, for example, reduce the theft of electricity by employees of the state electricity boards? If this theft is reduced from 30 per cent today to only 18 per cent, there will be enough capital to build sufficient new power capacity. But the only way to stop thievery is by privatising distribution, for no private distributor will allow his power to be stolen. Thieves don't steal power in Bombay and Calcutta because distribution is private. Our anti-reformers retort, "don't privatise power, just catch the thieves!" Well, for fifty years we have not been able to catch them. Should we wait another fifty? Think about this--the next you oppose reforms and reformers you vote for public sector thieves rather than competitive markets. Liberalisation is not a matter of ideology. It is common sense to want clean, uncorrupt services. The only losers in privatisation will be thieves and lazy workers. The winners will be the Indian people.

A SENTIMENTAL EDUCATION 20/05/2001

We are well into our Indian summer and for teenagers this is a time to recuperate from the slogging drudgery of tuitions, coaching crammers, computer classes, board exams and college entrance tests. The summer job has not yet arrived in India. So, what does one do for "time-pass" in desi-land? My secret recipe for the enviably happy summer is to draw the curtains, turn on the cooler, sit in a comfortable old cane chair and begin to read. Feel your youth like a nimbus, and start to create a self. You don't inherit a self; you build it. One way to do it is to read the great books. Take a break at noon with lassi. Read some more after lunch and in the evenings treat your friends to dahi chaat and gossip-in part, about the books you are reading. For you never accept a text passively; you interrogate it. Smell the jasmine at night and go to sleep reading. There is no royal road to nirvana but only the many roads large and small, the innumerable curving paths, a thousand steps and turns leading to education. Begin with the Mahabharata, and feel the brute vitality of the air, the magnificence of chariots, wind, and fires; the raging battles, the plains charged with terrified warriors, the beasts unstrung and falling. Like the brilliant first scene in the Oscar-winning Gladiator, see the men flung facedown in the dust, the ravaged longing for home and family and the rituals of peace, as the two sets of cousins, bitter enemies descended from King Bharata, fall into rapt admiration of each other's nobility and beauty. It is an apocalyptic war poem, with an excruciating vividness, an obsessive observation of horror that causes almost disbelief. Since you are unlikely to read it in the original Sanskrit, look for R.K. Narayan's readable translation, and if that is not available try C.V. Narsimhan's version. Feast also on the great books of the West. Begin with Homer's Iliad and Odyssey in the Lattimore translation. Follow it up with the great tragedians--read Aeschylus' Oresteia, Sophocles' Oedipus and Antigone in the Grene translation and Euripides' Electra in the Vermeule translation. Then a bit of history-read Thucydides' History of the Peloponnesian War in Penguin classics. Finally, philosophy-read Plato's Symposium, Apology, and The Republic in the Hackett translation, and end with Aristotle's Nicomachean Ethics in the elegant Ross translation. The magic of an American undergraduate education is that it breathes life into the humanistic classics. Whether your field is chemistry or engineering, you are required to read the great books and learn that life and literature are inseparable. With a good teacher like Edward Tayler at Columbia you learn to read as though your life depended on it, and you are carried along on the crest of excitement and high adventure of ideas that will resonate throughout your life. Indian students are not so lucky. Not only does our traditional insecurity for jobs push our youth early into careers, our silo-like curriculum does not permit cross fertilisation of disciplines. Now, I ask you honestly, Shri Murli Manohar Joshi, isn't this what our mandarins in the Ministry ought to be thinking about? Instead of dabbling in the dubious mysteries of astrology, let's make our students immeasurably richer by breathing life into the great books of the East and the West. To experience the romance of a liberal education, I recommend David Denby's Great Books: My Adventure with Homer, Rousseau, Woolf and Other Indestructible Writers of the Western World. In 1991, thirty years after graduating from Columbia University, Denby went back to college and sat with eighteen-year-olds and read the same books that they read. Not just the ancient classics above, but also modern ones. Together they read Goethe, Kant, Milton, Cervantes, Marx, Conrad, Woolf and others. Denby was certainly a most unlikely student: forty-eight years old, film critic of New York magazine, a husband and father, a settled man who was nevertheless unsettled in someway. Was it just knowledge he wanted? He had read many of the books before. Yet nothing in life seemed more important to him than reading these books and sitting in on those discussions. Denby's book is an account of his journey, sometimes perilous, sometimes serene, through the momentous ideas he consumed with such hunger in middle age. He took the two "great books" courses, devised earlier in the century at Columbia, which spread to the University of Chicago, and in the 1940s to other colleges in America. In India, the triumph of the IIT-IIM culture and our current mania for computers, is producing too many graduates with a tunnel vision. We are not producing leaders for tomorrow's challenges. Reading great books is one way to make it happen.

INDIAN PARADOXES 3/6/2001

India, truly, is a land of paradoxes. For forty years political scientists have been debating how we became a vibrant democracy despite our poverty, low literacy and ethnic violence. Adam Przeworski's empirical study of 135 countries recently concluded that, given everything, India ought to have been a dictatorship (in his "Democracy and Development"). Indeed, the late and gracious Myron Weiner of M.I.T. wrote a charming book called "The Indian Paradox", in which he wrestled with the contradiction of how democratic politics could endure in our diverse and violent society. Now, here is another paradox. By any yardstick, the 1990s have been the best years in our recent economic and social history. Yet, it was also the decade of the greatest political instability. How does one begin to explain this contradiction? Conventional wisdom says that prosperity and stability go together and economic growth needs political stability. Does this mean that our economic sphere is slowly becoming autonomous from the political realm? Is this another example of Indian exceptionalism? There are five good reasons to believe that the last decade was our best, economically. First, our wealth or GDP grew at an average real rate of 6.4 per cent per year (and crossed 7.5 per cent for three years). No wonder President Clinton said the world's best-kept secret is that India has been the second fastest growing economy in the world. Second, our population growth has begun to slow down for the first time in decades--against a 2.2 per cent growth rate it had come down to 1.67 by 1998. Third, literacy growth doubled in the nineties--from its historic climb of 0.7 per cent a year to 1.4 per cent--hence, literacy rose from 52 to 65 per cent during the decade, with the biggest gainers being women and the backward states. Fourth, at least 90 million Indians rose out of poverty as the poverty ratio declined from 36 to 27 per cent between 1993-99--this is almost the same pace as China's in the 1980s. Fifth, we may have finally found our global competitive advantage in our booming software and IT services--what the economists call the "lead sector" that can transform the whole economy. These hopeful numbers offer a dramatic contrast to our political instability. We had six prime ministers in the nineties. Between 1989 and 1999 we changed our government every two and a half years compared to every four and a half years between 1951 and 1989. No single party has won an overall majority since 1984. Roughly half the incumbent representatives lost their seats in the nineties. And the once mighty Congress Party, which ruled the republic for almost forty years, has been humbled. Today, we have forty weak and silly parties and the ruling coalition has around 20 partners. Compared to India's vibrant economic space our political stage is a comedy, peopled by clowns, who do everything except govern. Not only is our economic sphere alive, our social sphere is humming. Lower castes have risen through the ballot box as a social revolution has taken place in the north. (The south experienced its social revolution decades ago.) We may laugh at Laloo and Mayavati, but they have given a new confidence to the backwards, and you can see it in the "walk" of the Yadavs and the Dalits. Cable television and other interventions have also decolonised millions of young, urban minds. Daler Mehndi, A.R.Rehman, Arundhati Roy, and Aishwarya Rai are products of this liberated mindset. More women are working outside and this is gradually liberating them from the old tyrannies of the family, the caste, and the village. We have also lost our hypocrisy about money, as the sons of Brahmins and Kshatriyas are getting MBAs and becoming entrepreneurs--this social revolution is, perhaps, rivalled only by the ascent of Japan's merchant class during the 1868 Meiji revolution. How, then, does one begin to explain the paradox of an economic and social revolution happening in the midst of political instability and poor governance? Professor Devesh Kapur at Harvard has found an answer in our polymorphic institutions which, he says insulate our political system. While the old formal institutions--the bureaucracy, the parties, public enterprises--have decayed or got clogged by interest groups, new institutions have emerged and old moribund ones have been rejuvenated, such as the Election Commission, CVC, the judiciary, NGOs, and the new regulatory agencies. This simultaneous cycle of decay and rejuvenation gives our system a certain resilience when political actors keep changing. Weak parties mean unstable coalitions, but they have also brought more federalism, less misuse of the evil Article 356, and a dilution of the BJP's economic nationalism and identity politics. Certainly, it a believable answer to another Indian paradox!

A HAPPY SURPRISE 17/06/2001

We are a nation so disappointed with itself that we have become immune to good news. So when it does come, we either ignore it or cynically dismiss it with a shrug. The latest census is an example. It has brought the happy news that literacy in India has jumped from 52 to 65 per cent during the last decade. This means that our literacy growth rate has doubled from 0.7 per cent a year in the past to 1.4 per cent. Millions of children have been liberated in the 1990s from the bondage of ignorance, with the greatest gains having come from rural areas, the Hindi states, and among girls. How did this happen? On the demand end, it is parental motivation--parents are increasingly realising, even in the most backward villages, that education is the passport to their child's future. On the supply side, it is a combination of things. First, Literacy campaigns in some states, supported by the internationally funded District Primary Education Program (DPEP) have begun to make a difference. Their central premise is that teachers must be made accountable to local communities to overcome the problem of chronic teacher absenteeism--the scourge of primary education in Hindi rural areas. Because states are bankrupt, they have resorted to employing para-teachers on performance contracts ("shiksha karmi"), and they are outperforming regular teachers. We now have an astounding 500,000 para-teachers in India today! Second, private schools of varying quality, in towns and villages across India have mushroomed. State schools, especially in the Hindi belt, had grown so rotten that people took matters into their hands and pulled their children out of government schools and put them into these private schools, where, at least, the teacher shows up and some teaching does take place. Third, there have been outstanding initiatives in states like Madhya Pradesh, where mass literacy has risen from 44 to 64 per cent in the 1990s. Against this 20-percentage point gain, literacy had risen only 6 points in the eighties, 11 points in the seventies and 6 points in the sixties. Female literacy has also gone up an impressive 22 points--from lowly 28 per cent, it has risen to 50 per cent. Thus, Madhya Pradesh has begun to replicate Himachal's education miracle, and soon it too will stop being a contemptible Bimaru state. Rajasthan and Andhra too are not far behind. Finding the state treasury empty, subversive warriors inside the M.P. government have created an alternative system of 26,000 schools. This is the famous Education Guarantee Scheme, which I wrote about two years ago. Through it, the village creates its own learning space, hires a local teacher on a performance contract, who is accountable to parents through "shala shiksha samitis". Having recognised that "job security" is partially the cause of the disease, the reformers have now ensured that all future teachers in the formal system will be "shiksha karmis" on performance contract. As a result, primary education is gradually being de-centralised and de-bureaucratised, despite resistance from teachers unions. It is becoming community based and this has visibly reduced teacher absenteeism and improved teaching quality. Some critics are dismissive. They see in these initiatives a conspiracy by the state to off-load the burden of primary education to the village panchayats. They rightly point out that para-teachers are sometimes relatives of the village pradhan. They worry that alternative schools might institutionalise dualism. Also, an unscrupulous politician might make shiksha karmis permanent. These are valid concerns. The critics, however, overlook the richness of the achievement. In tests administered by independent experts, children in non-formal schools run by para-teachers in M.P. have consistently outperformed those in the formal government schools. The "joyful learning" curriculum by an NGO, Eklavya, is also making a significant difference in young children's development. The teacher's commitment is turning out to be more important than a B.Ed degree. High salaries and fancy buildings seem to be less important than accountability. The other lesson we are learning is that instead of flaying the state for the umpteenth time for its failure, let us admit the state's limitations in broadly delivering quality education. If it cannot produce bread how can it realistically develop the minds of our young? However, only the state has the resources for universal primary education in our vast country. Hence, the solution is "state aided" schools--government must gradually give up running schools, and become a non-interfering funds provider. Running schools is best left to education professionals, NGOs and "edu-preneurs". Once this happens, new schools will emerge, creativity will blossom, and parents will have choice. The miserable state schools will also improve when they are forced to compete. And if they do not, then parents will pull their children out, and they will either have to close down or be sold off.

HOW THEY GREW RICH 01/07/2001

Contrary to what many believe the economic lives of our ancestors is a story of almost unrelieved wretchedness. Everywhere a small number lived humanely while the great majority lived in abysmal squalor. We forget their misery, in part, by the grace of literature, poetry, and legend, which celebrate those who lived well and forget those who lived in the silence of poverty. The eras of misery have been mythologised and are remembered as golden ages of pastoral simplicity. They were not. In truth, survival was the only order of business. Only recently have progress and prosperity touched the lives of somewhat more than the upper tenth of the population. In the last 200 years the West (and recently the Far East) grew fabulously rich. This miracle was based on harnessing technology and organisation to the satisfaction of human wants, while keeping their economies free from political control, ensuring that private individuals made decisions rather than bureaucrats. The striking character of the West's miracle was its gradualism. There was no sudden change--just gradual year-to-year growth at a rate that somewhat exceeded population growth. The gains at first were not noticeable and it was widely believed that only the rich experienced them. As growth continued through the 20th century, it became obvious that working classes were increasingly turning into middle classes. Poverty also declined from 90 per cent of the population to 20 per cent, or less, depending on the country. The West's prosperity originated in innovations in technology and organisation. As economies expanded, so did their stocks of capital, their expenditures on education and public health, and the accumulation of skills by their work forces. Virtually without thought or discussion, the West delegated to enterprising individuals decision making in the innovation process. But innovations needed to be tested in the marketplace. This required money and competence in engineering, manufacturing, and marketing, especially if the innovator was to capture the rewards of the innovation. These resources came to exist in the ordinary firm. Comparatively free of political and religious controls, markets determined who won the rewards of innovation. The response of the market was the test of success or failure of an innovation. And competition became central to innovation. The market rewarded innovators with a high price for a unique product or service until such time as it was imitated or superseded by others. In the seventeenth century, the West developed a scientific procedure, associated with the names of Galileo and Bacon, based upon observation, reason and experiment. Although artisan inventors invented their own technology in the beginning, the contributions of science to industrial technology became more numerous with time. Did the West grow rich through colonialism? Karl Marx thought so, and he attributed part of the new wealth of the West to its imperialist acquisition of raw materials and markets from overseas. I tend to doubt this because poor, colonised countries did not provide large enough markets. Moreover, imperialist Spain and Portugal did not achieve long-term growth; Switzerland and the Scandinavian countries were not imperialist countries; Germany and United States, which achieved long-term growth, were latecomers to imperialism. And Japan's growth after 1868 totally undermines the case. In India, we have not so far experienced this miraculous transformation. But we will in this century if our economy keeps growing as it has in the last two decades. Compared to the West's historic 3 per cent economic growth we are growing at more than 6 per cent. The key is to keep reforming our institutions. Prosperity is not a matter of national character but of institutions. As East and Southeast Asia have shown, all countries can move from poverty to prosperity. Our economic reforms are creating an autonomous economic sphere from political interference. They are slowly replacing the licence-raj institutions, where bureaucrats made economic decisions with competitive market institutions where entrepreneurs, firms, and markets make economic decisions. In a democracy this process will inevitably be slow unless we can throw up an economic reformer like Margaret Thatcher. However, it will take more than de-regulation to succeed. Widespread prosperity needs the reform of our education and health institutions as well. Even after we replace bureaucrats with competitive markets, we will still need honest constables and efficient judges to dispense speedy justice. Hence, we need to strengthen our administrative institutions. We should not unduly worry that our firms are not delivering innovation, which was at the heart of the West's industrial revolution. We are only ten years old as a free economy, and innovation takes time. Japan has only just become an innovator. Korea and Taiwan are not yet innovators. At this stage we ought to be content to imitate, for innovation often emerges out of imitation. Latecomers have this advantage, and smart nations, like smart entrepreneurs, don't reinvent the wheel.

READERS AND WRITERS 15/07/2001

Since I give my address at the bottom of this fortnightly column, I usually get a fair amount of email and snail mail. And being a diligent sort, I endeavour to read and reply most letters. However, recent events have called into question this process of civilised exchange. One outraged reader wrote recently to say that two of his articles had been rejected by the Times of India. "Why is it," he demanded, "the Times rejects my work, and publishes a fourth rate writer like Gurcharan Das?" I took his letter to a friend at the Times, and tried to sound casual, but my friend could tell that this was no ordinary fan mail. He gave me a sympathetic smile, and clearing his throat, he said, "your writing is not fourth rate--it is third rate, at least". I thought that I had misheard, but he added, "Well, third rate is better than fourth rate, and I hope your head won't get too swollen now" Another provocation came in May, from a reader in Mumbai. In elegant calligraphy, he wrote the most inelegant things. "You disgusting pig, yes, you, Gurcharan Pig. Unfortunately I subscribe to the Times of India, because of which, week after week, I am forced to read the pigshit you punctually keep defecating--glorifying globalisation, free markets, reforms, bullshit, blah blah. Everyone knows that the only real beneficiaries of globalisation are America and MNC's who cheat, exploit and pauperise the rest of the world, particularly, Third World economies. Here is an example of how they cheat…." Strong and dramatic prose, you will agree. My colourful reader went on to give the example of a computer he had purchased, which did not contain the promised software to drive the DVD-rom. He had complained to the dealer, the company, and finally to its headquarters in America. But to no avail. He ended his letter characteristically, "What do you, free market Bastard, have to say about it?" My advice to my reader is that he first cleans his mouth, either with an MNC or non-MNC toothpaste. Better still, like the "nearlynine" Saleem Sinai in "Midnight's Children", he scrub his roof-of-mouth with non-MNC Coal Tar Soap. Next, re-write a straight forward business letter to the same cast of characters, deleting this time all the colourful expletives referring to animals, their excreta, and those that raise doubts about the reader's paternity. I realise that this might sacrifice his natural style, but it might pay-off, and the global capitalist system would also be saved. A reader from Nagpur complains that I am coming between him and his son. "You see, we always read the Sunday paper together as a family under a Banyan tree in our courtyard. We drink tea leisurely and there is harmony in our ancestral home, until we read your column. Then we begin to argue like mad and our peace is shattered. My wife always seems to take my son's side and my brother mine. I fear that my son and I are drifting apart, thanks to you." I wish sometimes that I could write weekly, like Swami Aiyar or Jug Suraiya. The great American columnists, I'm told, wrote five, even seven days a week. I wonder how they had something to say everyday of their lives. Apparently, one of them, Bob Considine, I think, couldn't find anything to write about one day in 1973, and he solved the problem by writing a column, which in its entirety read as follows: "I have nothing to say today." My favourite is the liberal American writer, E.B. White, who wrote for years for the New Yorker. He was more of an essayist than a columnist--the difference being that the essayist's writing seems to endure while the 780-word rectangle, such as this one, loses its appeal in a few days. Flip through the pages of old newspapers and you will find that you are more likely to read the ads than the articles. E.B. White had an endearing modesty and a sense of one's limitations. He taught me to use simple, everyday colloquial English, to adopt an informal and relaxed manner, to claim a deficient memory, and to be flexible--that is, never be afraid to change your mind. The problem with writing in the first person, I have found, is to constantly run the risk of sounding irritatingly egoistic and self-absorbed. George Orwell solved it by pretending to be more modest that one is. He opened his famous essay, "Shooting an Elephant," in a way that both established his importance and downplayed it: "In Moulmein, in Lower Burma, I was hated by large numbers of people--the only time in my life that I have been important enough for this to happen to me."

TWO CONCEPTS OF INDIA 29/07/2001

General Musharraf has come and gone. Whatever maybe the long term impact of his entertaining visit, he did achieve one thing--he made us look within ourselves, and ask once again, who we are as Indians, and how are we different from our neighbour. For the past fifty years, we have grown up with the belief that Pakistan is a monolithic, theocratic state with one religion, one language, and one mind. India is the opposite--with many religions, many languages, many communities and many minds. In the 1990s, with the ascent of the BJP, a second conception of India became popular with, perhaps, a quarter of our voters. Instead of the plural India of the first conception, it views the nation as singular and essentialist, which will be energised by Hindu nationalism. In its view, India has been victim of a thousand years of foreign invasions, and is now threatened by multinationals and particularly American culture. It wishes to restore it subliminally to a pure, pre-invasions, and eternal Hindu past and advance rapidly toward superpower status in the future. The first concept of India, by contrast, is more relaxed, liberal and self-confident. It celebrates the opening up of India in the 1990s to foreign trade, investment, and most importantly to ideas. It thinks of India as a mixture of different peoples and cultures that settled here. In this view, India never had an authentic past; it was always a moving feast and the moments of mixture were in fact the most creative. Historic migrations and wanderings of many peoples and tribes over thousands of years created this India. The subcontinent, in this view, is a deep net into which various races and peoples of Asia drifted over time and were caught. The tall Himalayas in the north and the sea in the west, east, and south isolated the net from the rest of the world and brought into being a unique society. Our caste system may have had its origins in this net, for it made it possible for such a vast variety of people to live together in a single social system over thousands of years. Hence, diversity is India's most vital metaphor--it is a "multinational" nation. It is what plural Europe would like to be--a united economic and political entity in which different nationalities and minorities continue to flourish. In recent years a new generation of historians has enriched this plural conception of India. Their innovative studies have illuminated our regional identities, showing how our national identity is superimposed from above and created usually by the grab for power, with little to do with how ordinary people saw themselves. Moreover, our recent politics are further reinforcing our regional identities. This liberal view, however, does not deny a shared sense of India. It merely warns us to be careful in positing a unifying conception of India based on nationalism. That our minds have finally got de-colonised gives this liberal view of India a quiet reassurance and self-confidence. The year 1981 was the symbolic watershed in this respect, when "Midnight's Children" appeared. The moment Salman Rushdie began to "chutnify" the language of Shakespeare, he opened the minds of the Indian sub-continent. Ever since, contemporary Indian history, "has acquired the air of a fancy dress party…full of chatter, music, sex, tomfoolery, free drinks, and rock and roll, an occasion to which everyone is invited provided they can join in the fun", says Amit Chaudhuri. Dileep Padgaonkar, who produces the worthy 750 word rectangle above mine, reminded us two weeks ago about Sam Huntington's thesis--that an "indestructible fault line" exists along Islamic borders and clashes with neighbours are inevitable. Hence, he says, there will be trouble with the Serbs in Bosnia, the Jews in Israel, Hindus in India, Buddhists in Burma, Chinese in Malaysia, and Catholics in Philippines. Those who hold the second, singular concept of India fully accept Huntington's premise; they believe that permanent peace between India and Pakistan is impossible. Prime Minister Vajpayee is obviously not one of them; otherwise, he would not have invited General Musharraf. Mr. Vajpayee understands better than his colleagues in the Sangh Parivar that India and Pakistan's future will be determined far more by the relentless push of the global economy and communications, supported avidly by our rapidly growing middle classes. The future preoccupations of both peoples will be with rising living standards, social mobility, and the peaceful pursuit of consumer goods. As a result, obsessions with religious identity and fundamentalist attitudes will slowly fade. The issue is not whether Mr. Vajpayee holds the singular or the plural conception of India, but which of the two is likely to prevail? Or will India evolve uneasily from the constant clash of these two competing conceptions?

IT'S ALL ABOUT EXECUTION 12/08/2001

Foreigners often remind us that Indians are a bright people. But foreigners are too polite to add that Indians can also be 'over-smart', and this creates its own problems. We think and argue too much, see too many angles, and don't act enough. It makes hiring and recruiting talent particularly difficult, for all Indians come out sounding well in an interview, and how do you separate the doers from the talkers? National stereotyping can be dangerous and is usually wrong. We have learned this only too well from the history of the violent 20th century. Hence, I prefer to rely on institutions and economic laws to explain human behaviour rather than national character. However, the gap between thought and action is so pervasive in Indian life that I have begun to despair in recent months and I wonder if our weakness in execution is, in fact, a deficit in character. My experience with dozens of Indian companies in the past decade is that while most have acquired a reasonably robust strategy, they implement poorly. I am also associated with a venture capital fund that has invested in 15 Indian I.T. companies, and its experience is that the best firms are not the ones with the best business model but the best executional ability. This may appear tautological--we perform poorly because of poor performance--but it isn't. McKinsey, the respected management consultant, has found the same weakness. In a survey of 35 major companies and interviews with more than 600 executives, it has concluded that "while many Indian companies perform well on strategy, there are lagging in execution". It conducted similar studies around the world, and its international data shows that the best performing companies in the world distinguish themselves from mediocre ones in their ability to execute. High performers, such as General Electric, Sony, and Singapore Airlines, consistently implement better and this is ultimately reflected in their market share, profitability, and share price. Does our national bias against action explain why there isn't a single Indian company with a global presence? Is this also the reason why so many Indian companies are floundering ten years after the reforms? While it is tempting to blame character, the culprit, I am afraid, is more mundane--it is poor skills. And the reason is the historic lack of competition in our market. These skills are learned typically when rivalry is intense and survival is at stake. We have only had real competition in the last decade. So perhaps, it's early. Hence, our business leaders should stop crying for protection, honestly face up to poor execution as the cause of their troubles, and go to real world school of competition and learn these skills. There are outstanding Indian performers, to be sure, but they are exceptions. Reliance owes its consistent success, partially at least, to its awesome project management skills, which allows it to build plants faster than anyone does. A few years ago I was on the jury to select the best among 40 Aditya Birla's companies and I observed the same executional excellence in company after company. No wonder, Hindalco for example, has become a world class aluminium producer. It is the same with Jet Airways. Ask its passengers--they will tell you that it is always on time. HDFC and Sundaram Finance have consistently demonstrated outstanding service levels for decades. A jewel of a company in Bangalore, Himatsingka Seide, is able to command Rs 8,000 per metre for its luxurious silks in Europe and America because it consistently delivers defect-free fabric and always on time. Why do these companies have executional ability when the majority does not? It begins at the top. Their leaders, I have observed, are not content with laying broad policies, but insist on getting into the messy details of the business--monitoring day to day performance, removing obstacles, staying close to employees and motivating them. They reward managers who act and take initiative, and punish those who play safe and behave like bureaucrats. They set clear, measurable goals and create small implementation teams so that people become accountable. Reliance's top management, for instance, monitors daily the number of kilometres of optic fibre that its telecom teams lay on the ground, and motivates them to improve the next day's performance. Thus, these companies get ordinary people to do extraordinary things. Successful executives follow the British scientist, Jacob Bronowski's advice that the world is not understood by contemplation but by action--"the hand is the cutting edge of the mind". The best lesson I learned at Procter and Gamble was how to write its legendary one-page memo, which was its language of action. Good executives, I have observed, do few things. They make sure they are the right things, and they do them brilliantly.

ONE POINT AGENDA 26/08/2001

We commonly make the mistake of blaming our character, or ideology, or even democracy for our nation's failures when the real felon is more pedestrian. The same unhappy inability to translate thought into action that I wrote about two Sundays ago with regard to our companies afflicts our public life with devastating consequences. Nehruvian socialism need not have deteriorated into licence raj had our civil servants possessed better management skills. East Asia grew twice as rapidly as India between 1965 and 1985, not because it saved and invested more, but because it had the ability to make its investments more productive. During the last decade every government has wanted to reform the economy. Yet, why have we suffered heart-breaking delays in implementing the reforms? If we are all agreed about what's to be done, why don't we just do it? We continue to waste our energies on debating "the what" when we ought to focus on "the how". How to reform requires mental application and the ability to implement. And this is precisely what our public figures-both politicians and civil servants-seem to lack. Our hopes rose earlier this year when Mr. Yashwant Sinha announced a brilliant Budget. Mr. Vajpayee said, "People want action, not talk." Finally, we thought, we are going to see the second phase of reforms. But what has happened? The government has been in a repeated state of distraction. First, it was Tehelka, then the stock market scam, then Musharraf's visit, and now UTI's problems. Everything, in short, but the implementation of the Budget, and the Indian people are weary of excuses. Our politicians and civil servants, like our businessmen, seem to be good at defining the broad picture, but they fall apart when it comes to detailed planning, monitoring, readying alternative courses of action, following through and showing the determination to stay the course that eventually leads to delivering results. We don't give enough credit, I think, to Narasimha Rao's executive abilities. The reforms happened in those golden years between 1991 and 1993, not only because Manmohan Singh and he set clear goals, but also because he encouraged his principal secretary, A.N. Varma, to create an executional structure. This was the famous, hands-on Thursday committee of secretaries (of the economic ministries) which coordinated, monitored, gained cabinet consent and implemented reforms week after week. Lest we forget, Mr. Rao's was a minority government at the time, and it too had its share of distractions and scams. Ironically, there appear to be better performers in the states today than in the centre-for example, S.M. Krishna in Karnataka, Chandrababu Naidu in Andhra, Digvijay Singh in Madhya Pradesh. They are quietly transforming their states with the help of handpicked doers from the bureaucracy. One of them, S.R. Mohanty, a civil servant in Madhya Pradesh, succeeded last year in getting patients to pay for services in state hospitals against huge opposition. As a result, the quality of medical care in the hospitals has improved dramatically. Now, as head of the State Bridge Corporation, he has got the country's longest toll road, connecting Indore and Edalabad, going. How he went about it is instructive. Mohanty and his team of three discovered that the PWD had a Rs 120 crore road maintenance fund. With the Chief Minister's support, the team put this money into a sinking fund, and used it to raise Rs 500 crores through bonds with the help of SBI Caps. Having overcome the single biggest hurdle-of financing infrastructure--the team focused only on 3 per cent of M.P.'s roads, which carried 80 per cent of the state's traffic. It opened tenders for the Indore-Edalabad segment on July 2; it got all government clearances by July 11; it issued LoIs by July 18; and developers began constructing the world class highway on July 29. This is implementation. Implementing this Budget (and the second generation of reforms) will need huge administrative skills because of thorny labour, agriculture, and privatisation issues. The Prime Minister has also lost a doer and networker in N.K. Singh, who had so far been quietly coordinating the reform agenda, including the successful telecom reform. Now, Mr Vajpayee and Mr Sinha, if you are serious, you will wake up each morning and remind yourself that nothing is more important to yours, your party's and India's future than implementing the reforms. You will make it your one point agenda as Mr Deng and Ms Thatcher did. You will cancel your six foreign trips because you impatiently want results. Thus, you will bring bite to your Independence promise of making 2001 the "Year of Implementation". Remember, good leaders do a few things, but they bring all theirs and their organisation's energies onto that single focus, and they execute brilliantly. And history does not forget them.

MONSOON IRONIES 09/09/2001

Another splendid monsoon is coming to an end and its effects are lingering in the sultry air. The nights are lazy and green trees rustle pleasantly around the small off-white houses in our compact neighborhood. My mind is uneasy, however, and at odds with tranquil nature. Like many Indians, I am morally outraged that we should be sitting on the largest mountain of grain in the world and yet people go hungry, especially in areas affected by drought. Meteorologists tell us that this is the thirteenth good monsoon in a row, but we know that even in the years of plentiful average rainfall some areas don't get enough rain. The Food Minister is shedding crocodile tears, insisting that he has offered free grain, but "the states are not lifting stocks". The states claim that they are bankrupt and cannot afford to pay for transporting and distributing the food to the poor. Most of us in the cities, despite our reputation for callousness, would be happy to see the poor fed, but we are cynical of the government's ability to implement poverty programs. Rajiv Gandhi's famous warning rings loudly--that only fifteen per cent of the poverty money reaches the poor. Whether it is fifteen or thirty per cent the truth is that a vast sum leaks out. There are two main sources of corruption and inefficiency in our food-for-work programs. One is in honestly distributing food to the poor in return for a fair day's work. The second is in the movement of grain. Now, there is evidence to show that both leaks can be plugged and there are models of success that we can follow. The main disease afflicting food-for-work programs is that the wrong people corner the benefits. Typically, local officials collude with the sarpanch, create bogus rolls, and siphon the food grains. States like Madhya Pradesh have now found an answer--neither local officials nor sarpanches are allowed to decide the food-for-work project or the beneficiaries. It is the gram sabha or the assembly of all adults in the villager. When a food-for-work program is announced, all village men and women assemble together, vote for what asset they want to create in the village--a water tank, or a school building, a road. Those who want to work in exchange for food come forward in the assembly. Although the panchayat executes the poverty project, the gram sabha meets again to ratify the panchayat's accounts. Several sarpanches have already been sacked by their gram sabhas for stealing funds and NGOs in some drought-affected districts of M.P. have confirmed that corruption has declined markedly this year. After the 73rd amendment to the Constitution, one third of the panchayat members everywhere are now women and another quarter or so are also dalits or tribals. Moreover, one third of the sarpanches are also women. Hence, the old upper caste landlords and local BDOs and VDOs are an unhappy lot--they are seeing power and money slipping away. In Rajasthan, corruption has declined thanks to the "right of information" movement, as local officials are forced to open government records to the people. The second source of corruption and inefficiency is in the movement of food. Many welfare experts now advise governments that it is more efficient to give vouchers or food stamps to the poor rather than incur the huge cost of moving, storing and delivering the food to thousands of places. There is evidence from Iraq, U.S., Sri Lanka that vouchers work, and very simply. Instead of food, the beneficiary receives a voucher, which she (or he) exchanges for so many kilos of rice or wheat from her normal store--it doesn't have to be ration shop. The shopkeeper, in turn, exchanges these vouchers for grain when replenishing his stocks. Thus, grains only move through normal retail and wholesale channels. When the state doesn't physically move the food, costs come down and corruption diminishes. And state governments can no longer hide behind the excuse of lack of money for not implementing food-for-work programs. As prosperity has grown in the past two decades, we have learned that the poor are eating other food beside grain. So, a grain-for-work program, if it has to be attractive to the poor, will have to offer far more grain per day's work than in the past. This will increase the subsidy, but it will lower the costly grain mountain faster. With the two biggest obstacles to food-for-work overcome, can we now expect the morally offensive hunger amidst plenty to disappear? Will our leaders now implement massive food-for-work programs? If they don't, rats will get to the food. If they do, the poor might re-elect them. So, they can choose--feed rats or people. It doesn't seem to be a difficult choice since rats don't vote.

A TELLING TALE 23/9/01

This is a tale of two districts, one virtuous, the other vicious. Jhabua, in western Madhya Pradesh, is a success story where forests have regenerated, bodies of water have sprouted, and incomes are growing-all this, because people have learned to help themselves. Kalhandi, in Orissa, is a failure-there is chronic starvation and parents sell their children to pay for food. Both districts are uplands and home to tribal people. Both were once covered with splendid forests, mainly teakwood, but these have been dying in recent years. As forests vanished rains became irregular; village water tanks fell into disuse as government took over their ownership. Increasingly, the two districts became prone to drought, and people began to migrate for six months a year. In the mid-1980s both districts were in the news when Rajiv Gandhi visited them following reports of food riots in Jhabua and the sale of children in Kalhandi. The Centre for Science and Environment reports that in Orissa, the soil conservation department has spent more than Rs. 90 crores in the past 15 years to build 1400 water-harvesting structures. The central government has poured huge sums for constructing micro-watersheds. But these projects have been poorly implemented and massive corruption charges have plagued them. Lazy district collectors allegedly don’t work and the budgeted funds of the drought prone area program (DPAP) and the employment assurance schemes (EAS) are consistently under-spent. Whatever is spent is largely lost in corruption, according to NGOs. “We get complaints of corruption in watershed activities, but the officials belong to the state (rather then the centre) and we can’t punish them,” says N.C. Saxena, former secretary of rural development. It is the opposite story in Madhya Pradesh, where local communities created 706,304 water harvesting structures between February and June alone this year and they will irrigate 52,000 hectares of additional land. The benefits too have come quickly. Decent rains in late June and July filled these village tanks, ponds, and earthen check dams (johads). Madhya Pradesh is succeeding because it is involving people (and NGOs) in managing water and energising institutions of local self-government, while Orissa depends on apathetic bureaucrats to do the job. The people of Jhabua district tell their own story. Residents of Kalakhoont removed three metres of silt from their village tank that had accumulated from the erosion of surrounding hills. The very first rains in June filled the tank and “the stored water will be enough to irrigate more than 61 hectares of land and recharge our old, unused wells,” Nana Basra excitedly told reporters of “Down to Earth.” In neighbouring Datod, villagers built a community dam on the seasonal Mod River to irrigate the surrounding villages. “This is something unheard of in our drought stricken district,” said Balusingh Bhuria, president of the block panchayat. People contributed a quarter of the cost through their labour in these initiatives in Jhabua, and they were ably assisted by an NGO and supported by the state watershed mission. As a result of hundreds of these efforts over the past five years the water table in Jhabua is rising. Satellite pictures confirm that water tanks, lakes, and village ponds have grown visibly and so have trees, shrubs and green cover. The people in Ambakhoda have stopped migrating. “Our hills have become green again and I have crops in my field,” says Manna, a 65-year-old farmer. In Kakradhar “we have plenty of fodder for our cows”, says Jhitra, chairwoman of the village’s forest committee. In Kalidevi, the cropping pattern has changed-villagers get two crops because ground water has risen dramatically and there’s plenty of water after the monsoon is over. The greening of Jhabua district though 218 micro watersheds is an example of people’s participation through watershed committees-its members are water users, self-help groups, and panchayat representatives. And one third are women by law. The watershed committee is ultimately accountable to the gram sabha or the village assembly. For the first time in history, it seems to me, we are dealing with water and drought and water in a different way. Gujarat and Rajasthan have also reported plenty of miracles of community effort during the last drought, but these states are not pushing power down to the people as single-mindedly as M.P. This Gujarat government, in fact, is notorious for sabotaging panchayati raj. The challenge for the future is to look after these people’s water structures, and keep recharging the ground water. Environmentalists tell us that four years is enough for ecological regeneration, and if you maintain a structure for 5 to 8 years then the community will be able to withstand three droughts in a row. That is why I am betting on Madhya Pradesh because it is creating long term, sustainable institutions of local democracy.

Times of India 2000 Columns

Find a dream 12 March, 2000

Not since the heady days of the Green Revolution in the late sixties have we seen the same excitement and fever amongst our people. This time it is the educated young in our largest cities that are leading the charge. The last time around, I remember Daniel Thorner, an extraordinary American academic, used to travel extensively in Indian villages in the 1960s, and he wrote passionately about capitalist stirrings in the Indian countryside. He described how thousands of farmers in Punjab, Haryana, and Western Uttar Pradesh were electrified by the arrival of the Mexican seeds and rushed to adopt the new technology. While leftists complained in the Economic and Political Weekly, these courageous farmers went on to transform India from "a basket case" to a food surplus country. I have just returned from a tour of college campuses, including IITs and IIMs, where I found the same energy and fire that Thorner wrote about thirty years ago. Once again, it is the thrill of a new technology that is electrifying young Indians. This time it is the Internet. Although the subject of my talks was different, students on the campuses wanted to talk only about how to become Internet entrepreneurs (because of my association with a venture capital fund.) They had the most amazing ideas, which they referred to as their ``inner dreams''. I encouraged them to pin their dreams to a business model, and quickly seek venture funding. "`The moment is yours,"' I reminded them, for God's sake, seize it. Some brave ones have found the religion and have taken the plunge. They are beginning to burn the midnight oil as Internet players. And venture companies are falling over each other to grab the best early players. Companies like NIIT are setting aside funds to incubate hundreds of entrepreneurial ventures. You have only to read The Economic Times and Business World to follow this revolution from week to week. My fund alone has evaluated more than 500 business plans in the last three months. Young managers in our industrial companies and banks have also been bitten by the Internet bug and are beginning to leave their secure jobs and become partners in Internet start-ups. These ventures will soon face tough competition from our established companies and from Internet companies from the US, the home of the Internet. This is happening in Japan where Sony and Fujitsu are linking with American dotcoms. NEC has recently acquired a 30 per cent stake in eBay, and Yahoo Japan's share price is quoting at 2,000 times projected earnings for fiscal 1999. I am also associated with traditional Indian firms and the contrast is dramatic. Whereas older members of bania families usually run our established companies, it is rare to find someone over 40 at the head of an Infotech company, and they come from various caste backgrounds. The average age of Internet entrepreneurs is 25. The old companies are tight-fisted; the new ones spread their wealth-typically 15 per cent of the shares are owned by employees in the form of ``stock options''. The older firms are unionised with a thin layer of professional management. Everyone is a professional in the new companies and he feels like an owner. Because of the boom in infotech stocks, many have become rich beyond his wildest dreams. Our industrial companies are generally not globally competitive and they focus only on the Indian market; our new companies in the information economy have their customers overseas and their employees think globally. Many people ask if the Internet is a fleeting fancy or is it here to stay? The answer is that there is hype but there is also solid base in reality. The Internet will change everything we do, and it will revolutionise business. Last year in America 15 per cent of shares and 5 per cent of books were sold on the Web and 40 per cent of car buyers consulted the Net. Traditional travel agencies are beginning to disappear. Although Web businesses have still not any made profit and e-commerce in America is only 1 per cent of retail sales -- no company can afford to ignore the Internet. The mania for infotech stocks, however, is a technology bubble. Their shares are over-valued and 3 out of 4 Internet stocks in America now trade below their issue prices. When dotcoms can raise capital so easily, they will tend to waste it. Having said that, the Internet is like the discovery of electricity and young Indians are right to chase their ``inner dreams''. This moment is theirs, and they must seize it.

American Beauty April 23, 2000

I have just returned from New York, where I had gone to sell my new book to American publishers. The book, India Unbound, is being released this month in India by Viking, and it is the story of how a rich nation became poor and will be rich again. The average American, I discovered, is not interested in India although he is obsessed with China. ``Why couldn't you have been Chinese?'' said one publisher wistfully. There is, however, a growing realisation among a section of America that India is poised at the cusp of history. They understand that the new digital economy is likely to transform India, which will turn increasingly middle class in the early part of the 21st century and might even conquer poverty. Clinton has focused on this theme since he went back home and the New York Times and other papers have run extensive stories on the new Indian and Indo-American entrepreneurs. Americans instinctively understand this message because they have experienced the power of the new information revolution. They have seen their productivity surge in the last five years. As a result, the American economy today carries the rest of the globe on its shoulders. It is the world's market, and its dynamism exerts a strong pull on economic activity around the world. After the Second World War, America experienced unprecedented prosperity and all income groups shared in it. This pattern changed after 1970 as the growth in American productivity slowed down. Rich Americans in the top 20 per cent bracket continued to get richer while the incomes of the bottom 40 per cent stagnated or declined. This disparity in incomes continued until late 1995 when suddenly American productivity began to surge again, reaching an astonishing 6.4 per cent annual rate in the last quarter of 1999. At the same time, unemployment fell to its lowest levels for decades, inflation remained low and wages of the poorest began to rise. The ranks of the long-term jobless plummeted from almost 2 million in the 1993 to just 637,000 today. The unemployment rate of high-school dropouts declined from 12 per cent to 7 per cent and among blacks it came down to 7.3 per cent, the lowest since 1972. In the face of these promising numbers Americans are for the first time in decades cautiously optimistic that perhaps inequality may finally have been tackled and the rising tide of the new economy may lift up all the boats. The question is whether America's productivity revolution is exportable, and can the new digital economy do the same for India. Many are sceptical. They argue that only a tiny minority will have access to computers and the Internet. Instead of broadly lifting the masses, the new economy will create a digital divide between the haves and the have-nots. ``When there aren't enough blackboards, how can we expect all Indians to become computer literate?'' they say. The answer may well lie in a little known experiment by NIIT in 371 schools in Tamil Nadu where NIIT instructors are providing subsidised computer education to school children. After school hours, NIIT's school facilities are thrown open to the residents of the town to enable NIIT to make up for profits lost during the day. If the Tamil Nadu experiment succeeds, the country might have found a model for taking computer education into government schools, and computer literacy could explode across the country. If there is profit to be made, competing education companies like Aptech will scramble to replicate this across the country. Punjab and Karnataka have already started the bidding process. When the Prime Minister Vajpayee's IT Task Force offered us the dream of making all school children computer literate by 2010 we thought it was a pipe-dream. If this model works, that dream might well come true. If we can solve the education challenge the rest will be easy. The Indian economy is embarrassingly sound today with high growth, low inflation and swelling reserves. And the forces of the information economy are relentless, profound, and are spreading like virus. Capital is no longer a hurdle, and capital-rich nations do not have an inherent advantage. Neither does inherited wealth. Nor does it help to be white. Anyone with a powerful idea can succeed. One-third of the new economy millionaires in Silicon Valley are reportedly Indian or Chinese. Thus, the new economy is far more democratic. Indians will undoubtedly succeed in the new economy, but will the masses be able to ride on the wave? The answer to that question lies in the quality of our governance, which remains the soft-underbelly of India.

DESPERATE LOVERS 7 May 2000

V.S. Naipaul was in India recently and he was speaking once again on his old theme-the Muslim invasions of India. This is a delicate subject, and it takes courage to confront it in these inflammatory times. But Naipaul has never lacked courage. His thesis is that the creative urge dried up on the subcontinent with the Muslim invasions as all our talent was slaughtered. It disappeared so completely that it took us five hundred years to recover from this terrible tragedy. Naipaul may well be right, but I think he overlooks at least one powerful example of creative flowering in the interface of Muslim Sufis and Hindu saints. I refer to the bhakti movement, which swept across India after 1400 and touched the lives of ordinary people as nothing did since Gautama Buddha. The central idea of bhakti is the passionate belief that I can be united with God through unconditional love and devotion. Love has long been a metaphor for religious experience in India. An ancient passage in the Brihadaranyaka Upanishad compares the attainment of freedom and enlightenment to the experience of a man in his wife's embrace. A person, it says, 'in the embrace of the intelligent Soul [knows] nothing within or without…[H] is desire is satisfied, in which the soul is his desire, in which he is without desire and without sorrow'. Tamil saints first popularised this idea of bhakti, and later it was spread across India by a galaxy of medieval bhakti saints-Kabir, Mira, Nanak, Tulsidas, Lalla, Chaitanya, Tukaram, Ravidas, and many others. The chief mood of bhakti poetry is erotic (sringara), as seen from a woman's point of view, whether in its phase of separation or of union. When Mira addresses love poems to Krishna she adopts the feminine personae of a wife, illicit lover, a woman with a tryst, even Radha herself. Krishna is her god but he is also her lover. The most common sentiment is the pain of separation from the lover and the constant theme is self-surrender of the beloved. In classical times Indians sensibly pursued multiple ends in life. These were virtue or righteousness (dharma), wealth and power (artha), pleasure and sex (kama), and release or enlightenment (moksha). During the prime of life a worldly householder (grihasta) pursued wealth, power and pleasure. Only later in life did he turn to moksha. Thus, in antiquity there was a nice balance in the aims of life and Indian civilisation was not as "other-worldly" as it became later in medieval times when a fifth objective (pancham purushartha) swept the minds of hearts of men and women. This was love and it supplanted the other goals, becoming the highest, higher even than moksha. By reaching out to the masses in their everyday languages, the bhakti saints created a veritable social revolution. By offering entry to the lower castes they forced reform on Hinduism and prevented mass conversion to Islam. Since boundless love of God was the only requirement all were rendered equal. By promoting a direct relationship between the soul and God, the bhakti saints eliminated the priests (as Martin Luther did in the Reformation and Buddha did two thousand years earlier). They offered confidence to the poor masses and helped bind together the diverse elements of the subcontinent into a single functioning society. A new form of musical composition also took shape in their songs, which continue to be performed even today in concerts, on the radio and television. Although saints like Mira subverted the traditional ideals of Indian womanhood and challenged the social order, her mystical love for Krishna did not create the sort of problems for her as Saint Joan's visions did in the West. The conservative Rajputs thought she was mad, or a liar or a sorceress but she was not burned at the stake. (Joan was burned, remember!) Critics contend that bhakti flowered because Muslim rule prevented most men from pursuing worldly power. Society had become more rigid, the caste system more entrenched, which checked the ambitions and mobility of men. Turning inwards was a natural response, allowing people to accept their unhappy material condition. They argue that bhakti permanently damaged the Indian psyche by making us ambivalent about the value of human action in this world, and this places us at a competitive disadvantage today. Personally, I am shy of such cultural explanations. I do believe, however, that whether one is a believer or an agnostic, these desperate medieval lovers made a great contribution to world civilisation, and traditions like bhakti provide us today with a safeguard against the onslaught of the mindless global culture.

HANG DOWN YOUR HEAD AND CRY 21 May, 2000

One evening last week, as I sat down to watch the news on television, I was assaulted by a series of confused images: there were heart-rending faces of the drought in Saurashtra, confident youngsters in Chennai preparing to launch a dotcom company, a corrupt bureaucrat caught stealing from tribals in MP, and Lara Dutta beaming under her crown. I asked myself, how does one begin to make any sort of sense out of all this? We are used to thinking of India in terms of dualisms-the rich vs the poor, upper vs lower caste, illiterate villagers vs sophisticated urbanites. But the real dualism that these TV images portrayed, I thought, is the contrast between the vibrant private space of India and the impoverished and callous public space. And no single institution has contributed more to our disenchantment with public space as our bureaucracy. No single institution has disappointed us more. When we were young we bought the cruel myth of the 'steel frame.' We were told that Britain was not as well governed because it did not have the Indian Civil Service. Today our bureaucracy has become the single biggest obstacle to development. Indians think of bureaucrats as self-servers, rent-seekers, obstructive, and corrupt. Instead of shepherding economic reforms, they are responsible for blocking them. Experts widely believe that East Asian bureaucrats helped in engineering their economic miracle. Why did they succeed and Indian bureaucrats fail? A Korean businessman told me that man for man your bureaucrats are smarter. 'But, whereas your bureaucrat is a know-it-all, ours listens to us and collaborates with the citizen.' Secondly, East Asian bureaucrats are specialists, who are not shifted from job to job, and they acquire expertise and commitment. Third, their bureaucracies are smaller, with shorter lines of authority and this makes for quicker decisions. Fourth, when you bribe, your work gets done; in India, even after a bribe you are never sure. The competitor is the enemy of businessmen in other countries. In India, it is the bureaucrat. Compare this with China. Mr. Sahgal, an executive of Phillips Carbon Black, visited China two years ago to set up a plant. A senior Chinese official met him at the Shanghai airport. He was short of time; so the bureaucrats came to see him at his hotel. The land officials promised him a plot within thirty days. The tax officers in their uniforms and epaulettes patiently explained their seven-page income tax code and three-page excise code. The head of the electricity board agreed to give a two-km transmission line in thirty days. The mayor came in the afternoon to take him in his car to his factory site in Wuxi, 200 km away-a distance they covered in two hours on the new highway. In contrast, Phillips Carbon Black took nine months and a half dozen bribes only to acquire the land in Durgapur and six months to get an electricity connection, with a full-time person chasing after the officials. It is too easy to blame politicians in a democracy. The idealistic Mr. Nehru wanted a regulatory framework for his 'mixed economy,' but the bureaucrats gave him License Raj. In the holy name of socialism they created a thousand controls and killed our industrial revolution at birth. In my 30 years in active business I did not meet a single bureaucrat who really understood my business, yet he had the power to ruin it. In the end, our failure has been due less to ideology and more to poor public management. In the summer of 1991 we did finally get rid of the License Raj. We put DGTD out of the way, but we did not get rid of the DGFT, which together with Customs continues to destroy our exports. The Inspector Raj is also well and alive, and its victims are not only businessman, but the poorest rikshaw-pullers in our city. Since the reforms began, the bureaucracy has blocked investment in infrastructure because it does not remove the policy infirmities in the way. Liberalisation is the economic independence of the nation, not from foreign rulers but from our own desi rulers. If I were a bureaucrat today I would hang down my head and cry because my son is ashamed of me. What is the answer? Clearly, it is not to abolish the bureaucracy. Every country needs governance. But we must cut down our government and make it results oriented. The Vajpayee government must understand that the second-generation reforms will not take off without serious administrative reform. It can be done as Britain has shown-it has 40 per cent less people in government than in 1979, saving a billion pounds a year.

The goodly middle class June 4, 2000

It has been a long hot summer and almost everyone seems to be having fun criticising the economic reforms. The Congress party has taken leave of its senses and wants to undo all the good work of its worthiest member, Manmohan Singh. The RSS continues to make noises against globalisation. The Left parties want to protect the labour aristocracy in the public sector against the interests of the labouring masses. Sharad Yadav has shamelessly given away free telephones to all telephone company employees. That leaves only the Prime Minister to fight for India's future all alone, with only a handful of reformers to depend upon. The reforms are anti-poor this is the constant refrain of the critics. Talk of the poor, I am convinced, confuses the debate on reforms. In the short term, the reforms will have no impact on the poor. In the longer run, the reforms will pull up the poor into the middle class. In any society, the top 15 per cent of the people will do well and look after themselves. The bottom 15 per cent will fail and will need to be looked after. In between is the 70 per cent or the vast majority of the people, which in successful economies becomes the middle class. Our real tragedy in the last 50 years is not our poverty but that we did not create the middle class. Our socialist policies suppressed initiative, jobs, economic growth and middle class opportunities. Hence, our middle class was barely eight per cent of the population in 1980. After the economy started seriously growing from the 1980s, the middle class has tripled, according to the National Council of Applied Economic Research, and is now 18 per cent of a much larger population. Given the right incentive system, the middle class invariably pulls itself up through hard work, self-help and education in a competitive society, and the task of the economic reforms is precisely to create such an incentive system. If the reforms are successful, they will succeed in making a majority of India's population middle class within a generation. And then, it will also be easier to look after the poor when they are 15 per cent of the population rather than forty. Who have the reforms hurt so far? Scrapping licensing has only hurt the corrupt bureaucrat and businessman. It does not immediately affect the poor. Similarly, opening the economy to trade and investment has only hurt the inefficient Indian producer and his labour. Neither of them are the wretchedly poor. Reducing controls on the economy has only brought efficiency, removed monopolies, and liberated new entrepreneurs. It is true that the second phase of reforms will cause job losses and pain. But these jobs belong to our pampered organised labour, primarily in inefficient public sector companies. This labour has amongst the lowest productivity in the world, is insensitive to consumers, and gives Indian industry a bad name. By no stretch of the imagination can we call it poor. Nor will cutting subsidies significantly hurt the poor. Experts are unanimously agreed that over 75 per cent of the subsidies do not reach the poor. Fertiliser and power subsidies are enjoyed by the rich and the middle class farmers the rural poor are mainly landless labour. Similarly, the food subsidy through the PDS does not reach the poor, especially in Bihar and UP. Food subsidy has largely been enjoyed by the urban middle class. Economists around the world have been arguing that subsidies are the worst way to help the poor because they distort the price mechanism for the whole economy and misallocate society's scarce resources. Instead of subsidies it is better to give money to the poor (which, of course, has its own problems, for all Indians, including millionaires, will stand in a queue to be counted among the poor). The reforms, thus, do not hurt the poor. Unlike our past policies, the reforms focus on prosperity and not on poverty. They assume that the poor do not want handouts; they want viable jobs so that they can pull themselves up into the middle class. By making the economy efficient and productive the reforms will create jobs, growth, and the middle class. Our politicians need to understand this, and proclaim from the rooftops: "The reforms are not anti-poor!" Meanwhile, the experts in the academia, the NGOs, and the development institutions need to dig deeper into the explosive growth in our middle class to gauge the success of the reforms (and not be mesmerised by our controversial poverty figures). Finally, let us remember what Aristotle said: "The most perfect political community is one in which the middle class is in control and outnumbers both of the other classes."

THE TRUTH ABOUT KERALA 18 June, 2000

Ever since Amartya Sen we have come to believe that Kerala is a model of successful government policies in education. We avidly read V.K. Ramachandran's essay on Kerala's achievements in Indian Economic Development-Selected Regional Perspectives, edited by Sen and Dreze, and we discovered that the communists at least educated their people. We concluded that the answer was for the state to raise its spending on education and everything would look after itself. Thus, our battle cry throughout the 1990s was to lift India's spending on education to 6 per cent of GDP. Now we learn that we were wrong. Digging deeper we have found that the real reason for Kerala's success lay not in government policies but in community action. The initial spark for the spread of education began more than hundred years ago with the Christian missionaries who set up the first modern, open-to-all schools in the old state of Travancore. This spurred the Nairs, led by Mannathu Padmanabhan, to set up a vast number of community schools. Muslims and Ezhavas did not want to be left behind and they followed the example. Kerala's community initiatives also led to the famous reading room movement and libraries came up in the smallest villages. After Independence the Left parties unionised the teachers, brought the schools under state control, and forced the government to pay their salaries. But even today 65 per cent of Kerala's 12,400 schools are in private hands. The lesson from Kerala is that success in education usually comes from private and community efforts, and not from the state. Americans have learned the same lesson. Their best schools are in communities where parents are involved and Parent-Teachers Associations are strong. Even a few volunteers can make the difference. Wherever this American idea of community initiative been tried, such as in gram shiksha samitis in Madhya Pradesh and Andhra or by NGOs in other parts of India, it has made all the difference-despite enormous opposition from the bureaucracy. We have learned from painful experience that the state is highly inefficient in providing education, just as it is inefficient in producing steel, watches, power, or banking services. The Indian state spends Rs 3000 per child per year in primary education, but a third of our children are illiterate. Teachers earn Rs. 10,000 to Rs. 15,000 per month but a shocking number don't show up in classrooms. The ones that do are uninspired and pour rote learning into students. The reform of Indian education has to begin with the conviction that schools have to become accountable to parents and neighbourhoods instead of to bureaucrats at state capitals. We have to fight for the autonomy of our schools and make teachers responsible to parents. Since the state has failed as a producer of education, its role should change to one of enabler. Parth Shah in his Agenda for Change suggests that the state should completely get out of classroom teaching and NGOs or panchayats or the private sector should run schools and charge fees. The state should give parents coupons worth Rs 3000 per child per year. The central idea is competition among schools and choice for parents. If their neighbourhood school is bad they should be able to move their child to a competing school. Some schools will charge the basic price of Rs 3000 a year; others will charge more and offer higher quality education; and some parents will be willing to supplement coupons with their own funds. Thus, schools will compete for students and become innovative in providing better education. Parents will be empowered, teachers will be forced to become 'customer friendly' and Indian education will blossom. This may sound radical but the idea of putting parents in charge of the Rs 3000 per child per year that we spend on education today is sensible. The key is that we don't need to increase spending to dramatically improve the quality of education. But will our parents return the compliment and get involved in Parent-Teacher associations? I think they will because they want their children to get ahead. Murali Manohar Joshi, our minister for human resource development, thinks that education is about Saraswati Puja, packing research bodies with saffronites, and deleting Marx from history books. All of this has nothing to do with educating our young. He should be aware that in the 21st century winners will be divided from losers, not on the basis of capital or natural resources or skin colour. They will be divided on the basis of useful knowledge. This applies to individuals and to nations. Hence, smart nations are racing to reform their education systems, and we too should bring education centre stage in our second phase of reforms.

ONCE AGAIN, DEMOCRACY VERSUS CAPITALISM 30th July, 2000

It is the height of our monsoon season, the air is heavy with dampness, and our reactions are slow. Fortunately, our economy is moving nicely it continues to be among the fastest growing in the world which is why it is so difficult to understand the behaviour of our capital markets. Our weakness, however, is governance. This is ironic, for we have had much greater experience with the institutions of democracy than of capitalism. We began our schooling in democracy fifty years ago, but we did not give a free play to the market until a decade ago when our reforms began. Yet, governance at all levels is appalling, all our states are bankrupt, and our confidence in government institutions is at its lowest. We need both economic growth and robust political institutions to be a successful nation. Although we now rely more on markets, we still need clean and efficient civil servants to regulate them. The slow pace of the reforms is also a symptom of the weakness of our politics, which allows vested interests to hijack policies for the common good. Politicians blame our failures on the reforms and the ordinary person confuses the ills of government with those of the market. At the best of times it is difficult to appreciate the market system. Over the centuries human beings have dealt with the problem of survival through tradition or command. They organised society around custom and usage, the son following the occupation of his father from generation to generation. Adam Smith tells us that in ancient Egypt, every man was bound by a principle of religion to follow the occupation of his father. In India, as we well know, our caste system assigned us occupations in the same way. The whip of authority has been the other method of organising the jobs of society. The pyramids of Egypt and the temples of India were built by the command of pharaohs or maharajas. More recently, the Five Year Plans of the Soviet Union were carried out by the command of the Politburo in the same manner. It is only in very recent times that human beings invented a third solution to the problem of making a living. Called the market system or capitalism, it gives individuals the freedom to follow their inclination to do what is in their best interest. And the lure of gain (not tradition or authority) steers a person to his task or occupation. And yet in this interplay of self-interested individuals, the tasks of society get done by an invisible hand, as Adam Smith called it. Because it is invisible, this system is more difficult to grasp. It lacks the simplicity of custom or command, which are visible for everyone to see. It is harder to understand how a society can function or how the dirty jobs in society get done cleaning toilets, for example if there is neither a ruler or tradition to command it. Banias and bazaars have been around for thousands of years, ever since there was an agricultural surplus. Historians tell us that this began between 8,000 BC and 10,000 BC, when the first towns emerged as centres of exchange. But markets are not the same thing as the market system. For one thing, it requires that money making be regarded as respectable, and we know thathistorically, commerce has had a bad odour in all societies, including India. Although we see today the wondrous spectacle of thousands of young Indians, starting new business ventures all around us, the idea that their struggle for personal gain might actually promote the good of the whole society is too bizarre for most people. Even the most sophisticated Indians distrust the market because no one is in charge. Hence, politicians find it difficult to win votes by appealing to economic reforms. No wonder Samuel Johnson said, There is nothing which requires more to be illustrated by philosophy than trade does. Democracy, in contrast, is easier to understand, but it is more difficult to achieve. Capitalism is easier to achieve (because exchange is natural to human beings) but more difficult to understand. The irony in India is that we have established the more difficult political institutions of democracy over the past fifty years. But it is the younger institutions of capitalism that are currently more successful. Sadly, it is our political institutions of governance that are letting us down. The lesson in all this is that we cannot take democracy or capitalism for granted. Neither do they necessarily go together, even though they have human freedom in common.

THE USES OF NATIONALISM 27 August, 2000

For good or for bad we have a nationalist government in power. Nationalism is generally not a pleasant virtue and the world has grown rightly suspicious of it after all the damage it has inflicted during the last two centuries. Nationalism drove the European nations to colonise the world; it made Germany and Japan militaristic and this caused two world wars; it led to the murder of six million Jews in the holocaust. These were terrible tragedies of nationalism. However, nationalism also has its uses when a nation is young. It can help a country modernize and develop with a sense of urgency as Japan did after the Meiji Restoration in 1867-1868. It can help a people to unite to throw out a foreigner as India did in the years before Independence. Nationalism can also help a country become cohesive, which is useful for a diverse and plural country like ours. We have suffered heavily in the past because we were disunited and did not act as a team. India was lost, first to Babur and then to the British because of parochial quarrels and intrigues among our divisive rulers. Independence too might have come a dozen years earlier if Gandhi, Nehru and Jinnah had been able to work together as a team. Bernard Lewis once observed that "when people realize that things are going wrong, there are two questions they can ask. One is, 'What did we do wrong?' and the other is 'Who did this to us?' The latter leads to conspiracy theory and paranoia. The first question leads to another line of thinking: 'How do we put it right?'" In the second half of the nineteenth century Japan asked itself "How do we put it right?" Contrary to what many believe Japan was not always unified. Before the Meiji revolution the feudal Shogunate was divisive. There were dissension and dissents, often violent. The lords of the great fiefs of the Far South and the West, once enemies, finally united against the Shogunate. After the emperor replaced the shogun, the Japanese decided to become one, under the slogan. "Honor the emperor!" The second thing they decided was to catch up with the West. So, they hired Western technicians and sent Japanese agents abroad to learn Western technology. They did not complain. Japan began to modernize by sending a high level delegation, including Okubo Toshimichi to Europe and the United States, visiting factories and schools to learn how the West had modernized. The delegation returned to Japan after two years "on fire with enthusiasm" to reform. One of the reforms that it implemented with characteristic intensity was to give universal schooling to boys and girls. The schooling imparted knowledge but it also instilled punctuality, discipline and a sense of national unity that helped create the modern Japanese personality. In contrast, Latin Americans and some Indians complained. They said that our poverty and backwardness were the misdeeds of world capitalism. Multinational companies replaced the colonial rulers in their script. Raul Prebisch, the Argentine economist, who created the "dependency theory," argued that poor nations would always remain dependent on Western nations because of unequal terms of trade. After the Asian miracle in the 1980s this second rate theory was rightly discarded. It is always easy to blame the "Other". It feeds into the hands of narrow nationalists who want India to return to isolationism and become a cocoon economy once again, cut off from competitive stimuli and opportunities for growth. Our nationalist government should reflect deeply on Japan's experience with modernity. It will quickly realise that the first thing it must do is to redefine its nationalism and become inclusionary and shed its antipathy for the minorities. The idea is not to be Hindu but to be Indian. Only then will it realize the power of national unity. Meiji Japan did the job so well that Japanese teamwork has become the envy of the world. Next it should be "on fire with enthusiasm" to reform the economy like Okubo Toshimichi. Third, it should with equal intensity overhaul our education system and not only ensure education to all Indian boys and girls but improve its quality. Finally, it should remember that all nationalisms run the risk of becoming militaristic and it should create powerful safeguards against that eventuality, including giving up the nuclear bomb in a negotiated settlement with Pakistan and China. Only thus will India realize the positive benefits of nationalism. If it were my world I wouldn't have nationalists, but since it isn't, the second best thing is to make the best use of what we have

THE LIBERAL FALLACY 10 September, 2000

I find it difficult to understand why there has been almost no appetite for education reform in India when there is universal consensus that education is not only good in itself but it also helps a nation to become competitive. It is just as incomprehensible that India, which followed a socialist path before 1991, progressed so slowly in education over its forty socialist years. After all, education is one of the few things that socialists around the world generally did fairly well. My historian friend, Sabyasachi Bhattacharya, reminds me that I am guilty of the liberal fallacy--that is, I naively assume that reasoning will prevail over interests. Hence, I tend to get surprised when the opposite happens too often in the real world, whether in democracies or autocracies. The road to power is through satisfying interests, Jeremy Bentham tells us. It is not enough to point out what the wrong policies are, as liberals tend to do, but one has to go beyond the irrational policies and trace them to the interests--both economic and political. The agenda of the state is set by interest equations and the discourse of knowledge is effective only to the extent that it is congruent with the discourse of power. Reasoning about right and wrong policies, while not entirely irrelevant, is of limited use if one's agenda is, in fact, to shape a new reality. India's democracy has an overwhelming majority of poor voters. This too makes a difference to the way things work. The journalist, T.C.A. Srinivasa-Raghavan, points out that in the long run the forces that drive markets and democracy will converge; in the short run these forces often tend to pull in opposite directions. Since politics is a short run game and growth is a long run one there will never be a situation that is completely optimal, with the result that at every point in time most of the people will be disappointed. Hence, no one bothers about education because results take a long time to come. When a politician promises rice for two rupees a kilo when it costs five, he wins the election. N. T. Rama Rao did that in the 1994 state elections; he won the election, became the chief minister, and went on to bankrupt the state treasury. He also sent a sobering message to Prime Minister Narasimha Rao in Delhi, who slowed India's reforms because he realized that votes resided in populist measures and not in doing what is right for the long term. Since the 1980s politicians have vigorously competed in giving subsidized electricity to farmers--in Tamil Nadu and Punjab, they have actually given it away free. When politicians do that, where is the money to come from for creating new schools or improving old ones? But there are now some signs of hope. At least two reforming chief ministers might have won their elections as a result of reforms. Digvijay Singh in Madhya Pradesh opened schools with vigour and made them accountable to village panchayats. Chandrababu Naidu in Andhra, among other things, turned over the management of water to its users in villages; he also raised electricity rates to farmers and brought transparency in governance through the use of information technology, much to the annoyance of his bureaucracy. It is exceedingly important for political scientists to study these two elections and tell us exactly what happened. If it is true that the reforms won the elections, then it might embolden political leaders in other states to pursue education and economic reforms. George Bernard Shaw wrote, "Reformers have the idea that change can be achieved by brute sanity." He was telling us the same thing--reformers must create a coalition of interests behind sensible policies if they want to succeed. This seems to be happening in many countries. Politicians everywhere are realising that their countries will be left behind in the globalised knowledge economy unless they improve their education systems. In the United States, both candidates are competing to demonstrate to American voters that if elected they will undertake the biggest education reform in American history; to prove it, they have each visited over a hundred schools since their campaigns began. Recent surveys show that mothers in India, including the poor, also understand that the passport to their children's future is good schooling. They seem to care more about literacy than promises about free electricity and two rupee rice, which they know to be false. This may be why they have been booting out the incumbent politicians at regular intervals. Now is the time for our geriatric political class to get smart, tap the huge unsatisfied demand for schooling among voters, create a coalition behind education, and start winning elections

OF LIFE AND DEATH 24 September, 2000

Early this month I read in the papers that a celebrated and attractive couple had killed themselves in Bristol, England in a death they had planned for forty years. It was a tragic and haunting love story: the wife had terminal cancer, and instead of being divided by disease the couple chose to be united by death, taking a lethal overdose and breathing their last in each others arms. The news item caught my eye because one of them, Stephen Korner, was the author of a book on the German philosopher, Immanuel Kant that I read as an undergraduate in college. The book had made me reflect on my own beliefs about right and wrong and had taken away some of the pain of reading the almost unreadable Kant in the original. Ironically, Kant had argued that it was wrong to take one's own life. I discovered from Anajana Ahuja's moving account in the London Times that this was not an ordinary couple. They were both handsome and brilliant. They had fled to Britain from Czechoslovakia, met in London, and married during the war, and then rose to distinguished positions in British public and academic life. She became a pioneer in the National Health Service and an eminent magistrate and he a famous professor of philosophy. When their daughter was twelve they told her about their suicide pact. It was an unusual conversation to have with a child, but the Korners had always treated their children as adults. Their daughter grew up to become a molecular biologist and married the Noble laureate, Sidney Altman at Yale. When the suicide finally happened, the daughter was devastated. Her parents had left a note for the police and Schubert's Trout Quintet, their favourite music, was played at the funeral. She exclaimed that no one should ever emulate her parents. Suicide is an old subject and people have debated it over the centuries. In recent years, however, it has acquired significance because modern medicine has made it possible to live far beyond one's useful life. Doctors can keep one alive even when all other organs have stopped. This has raised the question of social cost. Experts calculate that sixty per cent of Western society's health care costs occur in the last nine months of a person's life. Is it fair, people ask, to prolong someone's life at the expense of the rest? Activists of the "right to die" movement strongly advocate that a person has the right to end his life rather than face the indignity of life support systems at a hospital. This issue has got connected in America to the debate on abortion, where "pro-choice" liberals support the individual's right to choose to have an abortion; the "pro-life" conservatives counter that the foetus is alive, and they would jail the mother for terminating a pregnancy. One of my readers, Dr. Pankaj Shah, an orthodontist in Rajkot, has written an unusual letter. Many of mankind's problems, he says, would be solved if men and women were to know their date of death in advance. They would plan their life better, would not indulge in misdeeds, become religious, and love their families and friends. However, Dr. Shah says that his friend doesn't agree. The friend says that on his last day he would get an AK47 and finish off not only his enemies but all the politicians. As a liberal, I certainly think that a person ought to have the right to commit suicide. It is his or her life after all. The stigma that attaches to suicide in most societies is unfortunate. But, perhaps, it would go away if the legal framework were changed. In the abortion debate I am also strongly pro-choice, and I think it is disgraceful that the extreme right in America has forced this onto the Republican agenda. As a social democrat, I could never vote Republican, in any case. Neither do I have a desire to live a long life-and certainly not in the humiliating surroundings of hospital. I have always desired a short and intense life. Like most people, I would prefer to die a natural death. But if it meant prolonging life unnecessarily I would not hesitate to pull the plug. Yet, I am a conservative when it comes to re-engineering human beings. I like people as they are--with their foibles. Like George Kennan, I wouldn't want human beings to be perfected or tampered with. (Sorry Dr. Shah!) Who knows what we might unleash if we started on that genetic route? I'd like human beings to remain "cracked vessels" in Kennan's words or "crooked timber" in Kant's famous description. In the same vein, I would resist attempts by science to meddle with our imperfect weather.

THE WILL TO LIVE 8 October, 2000

The Korners' suicide last month, and my column on it, has brought an unusually large amount of mail, and some phone calls, as well. My mother admonished me, saying that no one has the right to take his life-it is God's gift, she says. Another reader reminds me that one's life is not one's own, but it also belongs to one's family and society. If one commits suicide, then not only does one place one's parents' old age in jeopardy, but also infringes on the rights of one's children and grandchildren to whom one owes the sharing of one's lifetime of experience, thereby ensuring that culture is passed on. The most moving letter came from Gujarat, and it reminded me of King Lear. After leading an honest life and discharging his obligations, my middle class correspondent retired to live with his children. But now he finds that he is unwanted by his children for whom he sacrificed everything. He feels humiliated and wonders if it might not be better to opt for mercy killing. There is but one truly serious problem, wrote Albert Camus, and that is suicide. Judging whether life is worth living or not amounts to answering the fundamental problem of our existence. Since the beginning people have debated whether it is natural or perverse to escape from life's difficulties. As for me, I have come to believe like Montaigne, that to die well requires greater moral stamina than to live well. Heroism consists in facing death with equanimity, and this reflects the highest qualities of a well-resolved life. I want to comfort my letter-writer and tell him that human life is the mystery of undeserved suffering. The innocent always suffer. This is not only the central problem of the human condition, but it also gives birth to tragedy. I commend to my Gujarati friend Nietzsche's famous definition of tragedy: "a reaffirmation of the will to live in the face of death and the joy of life's inexhaustibility when so reaffirmed." Nietzsche had Greek tragedy in mind, especially that of Aeschylus, the first writer of tragedy, who revealed to the world the strange power that tragedy has to present suffering and death in such a way as to exalt and not to depress. The ancient Greeks had a wonderful ability to see the world clearly and think it beautiful at the same time. They thought freely and deeply about human life, without the burden of religion and priests, and were willing to confront the giant agony of the world. In India, the Buddha also saw that the world is made up of individuals, each with a terrible power to suffer and there is this awful sum of pain in the world. His solution to sorrow was to turn inwards and deny our everyday world of experience. The Greeks were aware that injustice was built into the nature of the world, but they dealt with it in the spirit of enquiry and poetry. And when enquiry met poetry tragedy was born. We tend to misuse "tragic" in everyday discourse. We confuse the word with disaster. Tragic pleasure, as the Greeks knew it, and as Aristotle defined it, is the emotion of pity and awe, which purges and purifies us in the end. The result is a feeling of exaltation that Nietzsche spoke about. Aeschylus' Prometheus is an innocent sufferer, who passionately rebels and defies the gods and the powers of the universe. To the messenger of the gods who bids him to yield, he replies that he cannot, just as the wave in the sea cannot fail to break on the sand. With these last words, the universe comes crashing upon him, and he proclaims, "Behold me, I am wronged!" Thus, the tragic poet shows us that mankind can meet disaster grandly, forever undefeated. The same is the case with Sophocles' Antigone, the high-souled princess who goes with open eyes to her death rather than leave her brother's body unburied. Rather than give in to her uncle's unjust law, she cries out, "Courage! The power will be mine and the means to act." In another play, Euripides' Trojan Women, Troy has lost the war to Greece and a handful of women are waiting for the victors to carry them away to all that slavery means for women. The Greek messenger comes to tell the Trojan queen, Andromache that her son is to be thrown from the wall of Troy. She says to the child: "Go die, my best beloved…" When we see Prometheus, Antigone and Andromache on stage, we feel pity and awe; as we identify with their defiance and affirmation of life, we feel purified and freed and better able to face life and death.

THE ENEMY IS INSIDE 22 October, 2000

ur old family companies are woefully depressed. What a contrast to the heady days after 1991 when they were exhilarated-finally, they thought, their day had come. Now, no one gives them respect. The stock markets have punished them, and any corporate raider lurking in the dark can take over their company at a fraction of its book value. The raid on Mr. Nusli Wadia's Bombay Dyeing has sent a shiver. The economy, too, has irreversibly changed from a sellers' to a buyers' market and is moving, like the rest of the world, from manufacturing to services. Globally, competitors have increased the gap by re-engineering, downsizing, and other harsh measures. Many of our industrialists' problems are, unfortunately, of their own making. For the past decade they have been screaming for protection against foreigners when all along the enemy was inside. The fault is not with external liberalisation-our import duties are still among the highest in the world. The real problem is that India is still not a good place to do business. And the reason is that we have not had enough domestic reform. Indian companies do not have the freedom to downsize, restructure and close companies. Our road transport is hugely inefficient and expensive, but there is no alternative because railways are even worse. Truckers can put up with bad roads but not with the delays and bribery at octroi and police posts. Thus, it costs more to ship some products from Haryana to Mumbai than from Mumbai to London. Industry would not mind our absurdly high cost of power-as high as Rs. 6 per unit-but it is unreliable and leads to work stoppages. Fortunately, thanks to the Prime Minister, we have substantially reformed our telecom, but we shall not have quality communications until the timid TRAI decides to protect the consumer rather than DOT. At a 13% prime leading rate, our cost of capital is 50 per cent higher than it should be. Most Indians cannot begin to fathom how we have suffered from reserving more than 700 industries for the small-scale sector. Our policy rewards a small manufacturer for remaining small and prevents him from achieving economies of scale. Ironically, Chinese small industry is sweeping the world because their policy encourages them to mechanise, grow, and become large. Foreign buyers give credit and take equity in small Chinese firms and focus them on exports. Our competitors don't have to put up with our venal "inspector raj." The excise inspector frivolously hauls up industrialists. The customs inspector stops their shipments for insufficient reason. Even software exporters suffer because labour inspectors walk into their offices and demand a bribe in order to allow their employees to work more than eight hours a day. The factory inspector challans them up for not whitewashing their staircase. This harassment is a terrible distraction for top management, especially in smaller companies. Whereas our competitors are focused on building customer relationships and supplier networks our top managers continue to worry about the "midnight knock". Other countries also suffer from corruption, but nowhere does it lead to inefficiency the way it does in India. Foreigners say that it takes nearly twice as long to start a factory in India than it does in other countries. When asked why his company preferred Malaysia to India as an export base for the manufacture of electronic products, a multinational executive bluntly replied that India is still not reliable because of uncertainties and delays related to customs, excise, power, octroi, and a host of bureaucratic hassles. Hence, smaller countries like Vietnam, Thailand and Malaysia receive more foreign direct investment that we do. Of late, people insistently ask why Indians are doing so well abroad and foreigners, including the largest multinational companies, are doing so poorly in India? The answer, I am afraid, is that India is still not a good place to do business despite a decade of reform. Hence, our ranking is 49th out of 59 countries in the Global Competitiveness Report 2000. The irony is that the BJP recognised this in its last election manifesto and promised vigorous domestic reform, but our own industrialists, backed by swadeshi-wallas diverted its attention towards protection. The lesson for our industrialists is blindingly clear-the next time you are tempted to open your mouth to complain about foreigners and imports, stop; take a deep breath; instead of asking for protection, ask the government for domestic reform. Every well-meaning swadeshi person that wants his nation to be great should stop whining about multinationals and demand domestic reform. There are no shortcuts to creating competitive advantage-you have to become the lowest cost producer, make outstanding products, and give unsurpassed service. But Indian business will only be able to rise to that challenge when we conquer the enemy within.

ANOTHER REVOLUTION IS COMING 5 November, 2000

What wondrous times we live in! A bolt of rationality seems to have struck the planet, and our world is beginning to turn into a freer, democratic, and a more humane place. More than fifty per cent of the world's people live under market based democracies today compared to less than twenty per cent in 1975. The liberal revolution that is sweeping the world is being fed in turn by a series of technological revolutions. In the 1980s it was the telecommunication breakthroughs which destroyed the old state monopolies and are liberating us from state control. In the 1990s it was the Internet which is leading to a digital economy. Now, we are on the verge of an electricity revolution, which holds the promise of producing power, quite literally, in every backyard over the next two decades. In a recent cover story, the Economist described dramatic breakthroughs in "micropower" technology, which will allow the generation of clean electricity from small fuel cells and small gas turbines. Because of large inflows of venture capital funds (estimated to be $800 million dollars in 2000) and the involvement of multinationals like GE and ABB, micropower could soon become a commercial reality. Experts predict that the world market for these backyard generators will be $60 billion a year in a decade. Localised power generation has finally become economically competitive, partially because there are few transmission losses since power does not have to travel across distances. The biggest advances have come in fuel cells, which consist of two electrodes separated by an electrolyte; in the cell hydrogen combines with oxygen from the air to produce power; and water is the only waste product, much to the joy of environmentalists. Companies working on this technology expect that the cost of these fuel cell systems will come down to Rs. 25,000 per kw within eighteen months compared to Rs. 50,000 per kw currently achieved by coal-fired power stations around the world. The second advance is in micro-turbines that are powered by natural gas. Because these turbines have only one moving part-a compressor-cum-rotor that moves at very high speed-it now costs only one-third of the running cost of a comparable diesel generator. The third advance is in photovoltaic solar cells where high equipment costs have so far hindered commercialisation. Here, too, costs have finally come down to a fourth of what they were twenty years ago and are likely to further decline because of breakthroughs in making silicon wafers. Solar energy is everyone's dream fuel because it is clean, reliable, and the fuel is free. The whole world will benefit from the electricity revolution, but India will be one of its biggest beneficiaries, because we have failed to deliver decent conventional power. Before we can be worthy of this revolution, however, we have to do further reform. We have to allow private trading of power for every "backyard" generator will produce more energy that it needs. Even today, many of our power plants have surplus power at various times. But government holds the trading monopoly and it is making a mess of it. A smart trader would hustle, make forward contracts and take risks and a spot and futures market in energy would develop. By recently refusing Enron permission to trade in power, the government has lost a huge opportunity. Power trading entails taking big risks, and bureaucrats are incapable of taking risks. Instead of becoming a trader, the government should run a "power stock exchange", which allows buyers and sellers of power to transact in an orderly manner. The promise of micropower should not slow our resolve to implement our current power reforms. Unlike in telecom and insurance, where there is light at the end of the tunnel, power reforms have failed to take off. The key is to privatise distribution, and some states are indeed moving forward--for example, Orissa, Karnataka, Andhra, Delhi and Maharashtra, and U.P. The other states may soon go dark if they don't act. Unless politicians learn to say "no" (to free or cheap power for farmers) and bureaucrats learn to say "yes" (to liberalising and creating a free market for distribution, generation, transmission and trading of power) there will be little hope. Most of the world is currently liberalising its power markets. Roughly half of America's states have broken power monopolies and created competition. As energy markets liberalise, consumers are winning the right to select their suppliers. The next step is energy trading and spot markets as hundreds of micropower units will get linked together in microgrids. ABB is currently building microgrids that will be operating by 2001 in Europe and America. Just as competition in telecom has led to furious investment, jobs and innovations in India and abroad, the same should happen in power.

THE WATER OF LIFE 19 November, 2000

"It has no taste, no colour, no smell, no definition in fact, yet it is life itself," wrote Saint-Exupéry on the wonders of water. What could be more fundamental to life? Yet a third of our people do not have access to safe, drinking water, and this is the most damning measure of our failure. And the main reason is the myth that water must be free. Because we get it so cheaply we tend to squander it. The myth in our collective unconscious harks back to an idyllic past when few people inhabited the earth and they would drink from the streams. Hence, the Biblical saying, "Whoever will, let him take the water of life freely." Today we are a billion people and it costs money to bring water to people. Unless we learn to pay what it costs, we will continue to waste it. The controversy over the Sardar Sarovar Dam has recently focused attention on the charmed liquid. I shall not enter into the dams' debate today, but only point out that we need large storage spaces because water flows unevenly in rivers. During the rains river basins overflow and run off. In the dry months the flows slow down. But people need water year round; hence, storage of river water is a necessity, especially as our need for water is expected to double over the next fifty years. The answer to the Gujarat dam is to resettle the 41,000 displaced families brilliantly and get on with the job of creating more reservoirs in the future. There is a saying that we never know the value of water till the well runs dry. The starting point of the political economy of water is to appreciate that we are running out of fresh water and the greatest scarcity in the 21st century will be of water-not of oil or fossil fuels. The second point is to acknowledge that we waste much of our water today. Despite great shortages in many parts of the country we do not meter homes or farms so there is no incentive to turn off taps or pipes. Worse, we charge only a fraction of what it costs. Though our local governments spend thousands of crores on water, the main benefits flow to the middle and upper classes while the poor rarely get piped water. Our wonderful old canal systems are falling apart because water rates to farmers (like electricity rates) are so low that there is no money to maintain the canals. Because of these subsidies farmers over-pump ground water to grow water guzzling crops like rice and sugarcane. Cheap water is inevitably overused and this has turned vast stretches of land into water logged and saline wastes. Economists have always argued that subsidies are bad. Subsidies distort prices in the whole economy, send wrong signals to producers, who go on to produce the wrong things. Subsidies also eat away funds meant for investment in infrastructure. Worse, the benefits of subsidies go mainly to the rich and the middle classes. Thus, it is always better to give money or vouchers to the poor rather than subsidise products and services. The answer is price to water properly to reflect its true cost. Once this happens, people will conserve it. It will also attract efficient private firms to invest in improving water delivery and give access to safe drinking water to many more, including the poor people. The poor will pay for water-even today they often pay while the rich get it free. Private supply of water may seem radical, but in France private firms have managed water for more than a century. Britain handed over its water assets to private companies a decade ago. From Indonesia to Mexico, private firms are helping governments to improve bill collections, reduce leakage, and expand water supply to the poor. Buenos Aires has recently handed over its water works to a private company, which invested $1 billion to upgrade equipment and this has given water to 1.6 million additional people without significantly raising water rates. Where did the money come from? From cutting out the huge, corrupt and costly municipal bureaucracy. Country after country is learning that it is easier to get efficiency and good behaviour from private companies than from its own bureaucracy. Besides, governments today do not have the funds to improve water supply. Private companies, on the other hand, have the money and the management skills. The answer, then, is to begin the liberalisation of water. This means that we must transfer the management of water from populist politicians and corrupt bureaucrats to professional managers. If we learn from the best practices in the rest of the world we too will begin to give our thirsty the fountain of the water of life.

WILL JUSTICE PREVAIL? 3 December, 2000

I have always believed that individuals make history rather than other way around. Our Green Revolution would not have happened without C. Subramanium's wilfulness. England would not have possessed Bengal without Clive's stubborn wish to teach Siraj a lesson. In the same way, the Lok Adalat in Chandigarh would not have cleared 20,000 court cases in 17 months without S.K. Sardana. And, the Supreme Court would not have disposed of 76,000 cases in 12 months were it not for justices Venkatachalliah and Ahmadi. We have long despaired over judicial delays, but we did not know how bad things were until Bibek Debroy, an economist, collected the data. Soon after the 1991 reforms, we began to realise that a market economy could not succeed unless contracts between buyers and sellers in a free market could be speedily enforced in the courts. Debroy headed a project in the Ministry of Finance and discovered that the backlog in our legal system is more than 25 million cases. It takes up to 20 years to settle a dispute, and it would need 324 years to dispose the backlog at the current disposal rate. 1500 out of 3500 central laws are obsolete and should be scrapped, and half the 30,000 state laws as well. Digging deeper, Debroy found that things were not quite as alarming as they first seemed. He found that the average civil case is, in fact, settled in two years once you exclude tax disputes, land and tenancy quarrels and government to government litigation. When the VAT comes into force, the tax area will come under control. With computerisation of land records, land disputes too will get sorted out eventually. What has shocked the nation's conscience is that the main culprit behind judicial delay is the government, which appeals automatically all judgements and proceeds to lose them again. Thus, it crowds out the private individual. This happens because the decision to litigate is made at the lowest level in the bureaucracy but the decision not to litigate is made at the highest level. If this process were simply reversed, government litigation would come down. Pressure is building to punish bureaucrats who launch frivolous litigation, but nothing will come of it because of poor accountability. Another practical solution is to remove the disputes between government departments and settle them outside the court system. This was agreed, in fact, in the 1994 conference of state law ministers. Lawyers are the other reason for judicial delay. They have been fighting the amended Civil Procedure Code. It is not ideal, but it will speed up the system. It permits summons to be sent by registered post (rather than via a corrupt bailiff); it introduces pre-trial hearings, which disciplines both lawyers and judges; it shortens verbal arguments in favour of written submissions; it reduces adjournments, and speeds up post-trial decree. The new code has passed both houses of parliament, and if Mr Jaitley is courageous and honourable, he will notify it immediately, and score six runs for speedy justice. How did Lok Adalat Sardana and chief justices in the Supreme Court achieve their miracles? First, they computerised the cases. The computer found that most pending cases were related. The chief justice then made the judges specialise-e.g. all environmental cases went to justice Kuldip Singh. Computerisation ensured that all related cases were scheduled on the same day. If the Supreme Court can do it, so can the High Courts. Wilful Sub Division Magistrates (SDMs) can also achieve the same miracles in the lower courts. Why don't they just do it? S.K. Sardana also discovered that the computer was his best friend. He found that most of the 100,000 cases pending in the union territory related to landlord-tenant, motor traffic, and divorces. He brought together retired judges and social workers, gave them desks, called in the feuding parties and they conciliated and mediated between them. Since lawyers were the reason for delay, he forbade lawyers and court processes, and pressured the parties to reach a voluntary agreement, which was final and could not be appealed. In the same way, mediation has dramatically reduced the backlog in Andhra, indirect tax cases in Tamil Nadu and land cases in Gujarat. We have Lok Adalats in most states, and if S.K. Sardana can do it, why can't they? I have learned from long years in business that it is not intelligence but will that moves the world. The more you believe in a thing, the more it exists. If we want justice to prevail we need wilful men like Sardana, Venkatachalliah, and Ahmadi. Better still, hundreds of SDMs across India should say, "we too can do it." Remember, the feeling of injustice born of delay is insupportable to the human spirit and when justice does not prevail the judge is condemned.

STOP THIS WICKED BILL 17 December, 2000

The principle of competition, Hesiod pointed out long ago, is built in the very roots of the world. There is something in the nature of things that calls for a real victory and real defeat. The competitive spirit is at the heart of a vibrant economy, and it is precisely what we have been trying to foster through our economic reforms. In the end, competition guarantees individual liberty far better than laws or regulators. Now a Competition Bill is being introduced in Parliament this winter for fostering competition, but ironically, it will result in having the opposite effect. With all good intentions, it wants to ensure that no company becomes dominant in the market and abuse its monopoly power. The bill gives a proposed Competition Commission the power to investigate any acquisition or merger between companies whose combined assets exceed Rs. 1000 crores or turnover exceeds Rs. 3000 crores. According to Omkar Goswami, 144 of our listed companies already exceed that asset limit, and among them are our best companies, the very ones with the potential for building infrastructure and competitiveness. The Commission can also investigate an acquisition by an "industrial group" whose assets exceed Rs. 4000 crores. The bill has revived foul memories of the MRTP days because it gives "experts" (read retired bureaucrats and judges) once again the power to decide the fate of our successful companies. They will be able to stop, for example, companies like Reliance or Infosys from acquiring other Indian or foreign companies to become competitive in the global market. Mergers are an essential part of a vibrant economy and they are just beginning to bloom in India. They are already subject to clearances under SEBI's take-over code and the Companies Act. Do we really need a third hurdle of a Competition Commission? If we are worried that an Indian company may become monopolistic, the simple answer is to protect the consumer by opening our markets to imports and lowering tariffs. We live in a global economy and market dominance can no longer be measured in simplistic terms. We are also a small economy-a little larger than Belgium-that has only recently found its path to growth. Only growth will help us to escape from poverty, and growth will come if we allow our companies to grow larger and efficient so that they compete in the world. The new bill will only cut them down. Fifty years ago other developing countries envied us because we had robust companies belonging to Tatas, Birlas, and others. But the MRTP commission came and destroyed their drive and ambition. Meanwhile, our competitor countries created giants with global empires. Do we want a repeat performance? People assume that market concentration inevitably leads to monopoly profits (following Bains' work). This assumption has been thoroughly discredited by recent empirical data (including the idea that economies of scale and advertising create barriers to entry for new firms.) Baumol's theory of "contestable markets" reaches the same conclusion. Even where there is only one firm left, its behaviour is not necessarily monopolistic. On the other hand, Stigler has shown that companies inevitably capture government regulatory agencies that regulate them. Thus, a Competition Commission could actually create entry barriers. Having said that, this bill has laudable provisions related to unfair and restrictive trade practices. These are needed, but they can be incorporated in the Consumer Protection Act. We don't need another bureaucracy for that. America, with its giant multinationals can afford the luxury of chopping down its companies in the name of dominance. It has mature policy makers who can be trusted not to destroy the institutions that create wealth. India's bureaucrats, however, have been destroying wealth for fifty years. This bill could seriously undermine investor confidence. America does not have the same worry--it is the investment destination of the world. It was able to withstand Microsoft's shock. But our investment confidence is fragile. As it is, we do not receive enough foreign investment, and a poor judgement by the Competition Commission could totally undermine our frail edifice. The only benefit, as far as I can see, of this law is to reassure people who are opposed to liberalisation. But a law that could undermine our fragile companies, stifle liberty and prosperity is a huge price to pay for this reassurance. It is sad! Here is a huge country with a potential to grow 10 per cent a year, and it is held back because it gets diverted by irrelevancies like competition laws. India should focus single-mindedly on growth. It should concentrate one-pointedly on fixing infrastructure, liberalising agriculture and reforming education. India needs more competition, but a competition law will not create it. It will come from freer trade and an investor friendly environment.

THE INDIAN WAY 31 December, 2000

Tomorrow really is the first day of the new century, experts tell us, but it is also a second chance to sit back and look at the big picture. It is now plausible that India will solve its economic problem in the first half of the 21st century. The problem, of course, is our age-old worry that there is not enough to go around. Some parts of Asia are already affluent and others have seen the light. For the first time in history Indians will also emerge from the struggle against want, and it will not happen evenly. Some regions will get there before others-e.g. Gujarat will be twenty years ahead of Bihar. The reason this will happen is simply a matter of arithmetic. India has experienced five to seven per cent sustained annual economic growth over the past two decades, which has more than tripled the middle class. More recently, population growth has begun to slow, and in 1998 it was down to 1.7 percent compared to our historic 2.2 per cent. Literacy has also begun to climb-it had reached 62 percent in 1997 compared to 52 in 1990. If our economy continues to grow at its current par rate of seven percent for the next two to three decades-and there is no reason why it should not--then half of India (that is, the west and the south) should turn middle class in the first quarter of the century and the other half should get there in the second quarter. If growth accelerates to say eight per cent with greater reforms, then this happy day may well arrive sooner. At that point poverty will not vanish, but the poor will become a manageable fifteen per cent of the population, and the politics of the country will also change. The question is, then what? Once anxiety about making ends meet diminishes, then people's thoughts will turn elsewhere, perhaps to culture. Some believe that by then India, like the rest of the world, will have turned into "McWorld", the phoney and fictitious global culture of American consumerism. I disagree. The Indian way is robust, and has been built into our psyche for centuries. The antiquity of Indian tradition is less impressive than its extraordinary continuity, and this is because it has been able to adapt to alien virtues. We survived the Mughals, the British, and we will survive Coca Cola (although, the latter's challenge is far stronger.) What is the Indian way? An American scholar, John Koller, writes that its central idea (at least, for 85 per cent of Indians) is the possibility of human liberation from our fragmented, finite and suffering existence. It is based on the insight that the basic energising power of the cosmos and of human beings is the same. Because we have an impressive capacity for thinking, imagining, and acting to shape our world, the writers of the Upanishads believed that there must be a link between the dynamic energy of human beings and of the universe. Our world of distinct and separate objects must be manifestation of a more fundamental unity. Initially developed in the Vedas and Upanishads, this idea of undivided wholeness went on to inspire various Indian ways of the Buddha, the Jains, the Yoga systems, and even the Sufi and Bhakti saints. Indians have always known that their gods and goddesses are symbols of reality rather than reality itself. As symbols they point beyond themselves to the ultimate. That is why a Hindu can say in the same breath that there are millions of gods, but only one God. Within a family the father may be attached to Ganapati, an uncle may worship Vishnu, the mother Krishna and the son could be an atheist. In this syncretic attitude originates the spirit of tolerance of the Indian way. Although Indians are fond of rational argument, they all seem to agree that reason is limited when it comes to comprehending the deepest reality. Reason differentiates and compares and is thus a good faculty for exploring the empirical world. It fails when it comes to comprehending undivided and undifferentiated reality. Hence Indians of various persuasions look to meditation and direct insight. We regard our day to day life as superficial and in bondage to the law of karma, which determines mundane happiness, suffering and repeated births and deaths. We can free ourselves from karma in various ways-by knowledge according to Jains, by self-less action according to Gita, by devotion according to bhakti saints and Sufis. Whatever way one chooses, the Indian way is a way to freedom from human bondage based on the wonderful potential for perfection of ordinary human beings. It is also our strongest defence against "McWorld".