Friday, October 27, 2006

Saaf Aangan Dreams October 22, 2006

In the late seventies I lived with my family in Mexico City, where I noticed that our neighbours would wash the foot path outside their house every day. But we, being good Indians, swept our home, washed our driveway but left the pavement to the municipality. As a result, the walkway outside our neighbours’ homes sparkled proudly while ours remained dirty and sad. It didn’t take long before we felt ashamed and followed the good ways of our neighbours.
While we were learning civic virtue in Mexico, a flight lieutenant in the Indian Air Force, Madhu Sawant, had the same idea. He asked himself, what if each Indian took care of the little space outside his home, office or shop? So, when he retired he set up an NGO called “I Clean Bombay”. Redefining the charming, wistful Hindi word, aangan, to mean the space between one’s boundary wall and the middle of the street, he created the “Saaf Aangan Scheme”, which was formally adopted in 2002 by Mumbai’s municipality. The scheme allows an individual to lease the footpath outside his home from the municipality for Rs 3 per year, and makes him officially responsible for keeping it free of garbage, hawkers, and squatters.
In 2005, the NGO Council of Mumbai persuaded the municipality to convert Saaf Aangan into enforceable Rules, which provide a fine for littering of Rs 1000 on citizens and Rs 100 for house owners, and also encouraged home owners to keep litter bins on footpaths. In August 2006, the municipality decided to upgrade Saaf Aangan rules into Bye-Laws to cover hawkers, who are also responsible for keeping the surrounding space around them clean. There are 300 Nuisance Detectors to enforce the fines. “Even a paanwala can apply to the municipal ward office to lease the area around his stall,” says Sawant.

Like many Indians I despair over the filth in our public spaces. But I am embarrassed to complain as there are so many ills more pressing. In Saaf Aangan, however, we may have the makings of a big idea for our grimy towns. Its attraction is that it doesn’t depend on the state but on individual initiative. It also feeds on self-interest rather than altruism because one wants to return home to a clean doorstep. Any group of individuals in any town in India can make it happen. It helps to rope in a sensitive municipal commissioner, but that is not necessary. Before BMC got involved, 500 municipal schools and 83 police colonies were practicing Saaf Aangan. So were citizen in neighbourhoods like N. Dutta Marg in Andheri (west), which is now lined with trees and has flower beds along the boundary walls of all its 35 residential complexes. Once a few get going it doesn’t take long for neighbours to emulate as we learned in Mexico City.
Saaf Aangan should be easier to implement in smaller towns where the word spreads faster, enforcement is easier, and there is greater sense of belonging. Tanya Mahajan, a volunteer with says, “Belonging and ownership are an intrinsic part of this concept, and schools are a good place to start”. So tomorrow, when you sweep your house, why not absent-mindedly sweep the pavement in front of your door. You might create a revolution. But remember, man is the only creature on this planet who is truly dirty. And when we haven’t taken civic responsibility for two thousand years, it won’t happen overnight.

India’s mystifying rise, October 8, 2006

There were many smiling Indian faces last week. Our economy again beat forecasts and grew 8.9% in the April-June quarter. India’s economic rise bewilders Indians. No one quite understands why this noisy and chaotic democracy of a billion people has become one of the world’s fastest growing economies. This is the fourth year we are looking at around 8% growth, and this follows 22 years of very respectable 6% annual growth. With 25 years of high growth per capita income gains have been huge: from $1,178 in 1980 to $3,051 in 2005 (in ppp).

What puzzles everyone is that India is not following any of the proven paths to success. Compared to the classic Asian strategy—exporting labour-intensive, low-priced manufactured goods to the West—India’s economy is driven more by consumption than investment, domestic markets more than exports, services more than industry, and high-tech more than low-skilled manufacturing.

With consumption accounting for two thirds of GDP, ours is a people friendly model; hence, inequality has grown much less. Our Gini index is 33, compared to 41 for the United States, 45 for China, and 59 for Brazil. (In a perfectly equal society Gini is zero.) Our domestic orientation has meant that our economy is far more insulated from global downturns, and is less volatile. More importantly, thirty to forty percent of our GDP growth is due to rising productivity rather than mere increases in capital and labour. Ironically, while high end, capital intensive manufacturing is succeeding, we have failed to create a broad based industrial revolution based on low end, labour intensive manufacturing. Hence, we are not creating enough jobs. This is a real worry--how will we move our vast army of people from the rural to urban areas?

Even more perplexing is that rather than rising with the help of the state, India appears to be rising despite the state. The entrepreneur is clearly at the centre of our success story. We have highly competitive private companies now, a booming stock market, and a modern, well-disciplined financial sector. Competitiveness runs deep. More than hundred companies have a market cap of over a billion dollars. Foreign institutions have invested in over 1000 Indian companies via the stock market. Of 500 Fortune companies 125 now have R and D bases in India, and 380 have outsourced software development to India.

Our economy may baffle us but we are agreed on one thing. India is succeeding because the state is gradually stepping out of the way. The pace of reform is frustratingly slow, but incredible as it seems, every succeeding government after 1991 has persisted in reforming. And even slow reforms add up. Yet, the state has not lived to its side of the 1991 bargain. It hasn’t built enough roads; nor given us uninterrupted power and water. Government schools and health centres are rotten. The police are corrupt. In short, we don’t get the services that citizens in other countries take for granted. The Indian state is so riddled with perverse incentives that accountability is impossible. The tragedy is that there are so many in this government, supported by Left allies, who want to bring back state control and kill our growth. One of them is RBI which is itching to raise interest rates. I sympathise with Chidambaram’s poignant plea to these growth killers—“give us some political space to reform” so that the UPA might take some minimal credit for this great achievement.

Lalu is our Ronald Reagan, September 24, 2006

Train journeys have increasingly become a part of my life. My ancient mother had been ailing in an ashram on the banks of the Beas River in Punjab, and I would try to visit her as often as I could. But she was 91 and age finally caught up with her. She passed away one night after living a life that I expect was better than that of most of my countrymen.
Visiting her meant lots of journeys and before I knew it I was addicted to the railway. I can now make a reservation sitting at home on my computer, pay with a credit card, and print my own e-ticket. If I don’t have a printer they deliver it in 24 hours. It is quite wonderful when something outstanding emerges from our public sector. Soon, I will be able to track my train’s progress at home or on a screen at the railway station via a satellite system.

In the early days of the Internet I predicted that computers would only take off in India when computer prices dropped to Rs 10,000 and when you could buy a railway ticket on the Net. Well, both have happened! And so, a revolution is underway and it is likely to be more profound than the mobile phone. The minister of HRD is, of course, oblivious of this because he is too busy dividing Indians. He doesn’t realise that India’s real divide is not caste but the English language and computers. Instead of trying to bridge these he is on his own casteist power trip.

The electronic ticket has left an army of reservation clerks unhappy. My South Indian friends used to complain that they couldn’t get a ticket on the Tamil Nadu Express during holidays without a bribe. This explains why the Railway unions have opposed e-tickets for years. But e-tickets are only a small part of a genuine renaissance in the Indian Railways. The bigger story is freight. In the past no one wanted to ship goods by rail because rail freight was expensive, inefficient and corrupt. Now a modern managerial mindset has set in and all sorts of innovative public-private partnerships are underway. The private sector is investing in wagons, container trains, new railway lines, and freight terminals. Meanwhile, a booming economy, competitive freight rates, and productivity gains have transformed profitability of the Railways.

Do we give the minister, Lalu Prasad, credit for this revival? He took over when the Railways were tottering financially, and if they had sunk we would have blamed him for “Biharing the railways”. Yes, he should get credit. Lalu’s success is not in what he has done, but in what he has not. He has surrounded himself with good people—Sudhir Kumar is one of them—and he has left them alone to run the show. This was also Ronald Reagan’s secret of success. Great managers have often led from the back.

The Indian Railways sell 4.8 billion tickets a year. This works out to 4.4 journeys per Indian. We are thus a nation on the move. When we are unhappy, we just pack up and go. Caste ties loosen when people travel and this is why Bihari migrants have united and are making a bid for power in the Punjab. Internal migration is our great safety valve against regional inequality, and because of it even Bihar will catch up one day.

Don’t despair over integrity September 10, 2006

One ought to read a great book twice, at least. When I first read Leo Tolstoy’s War and Peace I was too young. I was only interested in the plot and the relationships between Natasha, Andrei, and Pierre. When I read it again in my forties, I was deeply moved by its moral concerns. I realised that the novel is really about the way we deceive ourselves, how we are false to others, how we oppress fellow human beings, and how we’re deeply unjust in our day to day lives. Most of this moral blindness seems man-made and avoidable. It makes one wonder if this is an intractable human condition, or can we change it?

It seems to me that ordinary human lives should not have to be so cruel and humiliating. Is it not possible to be more honest, fair, and kind in our relationships? Some of our misery is the result of the way the state treats us. Can we not reduce at least some of the grief that public officials inflict on us? It is in pursuit of these questions that I began to write this column more than ten years ago. The same questions sent me to the Mahabharata, and I tried to find answers in the epic’s elusive concept of dharma. I have concluded that we can reform our institutions, and this can change the morals and character of our people and deliver greater happiness to our society.

We are hopelessly addicted to the belief that corruption in India is caused by the crookedness of Indians. This is just not true. The truth is that India has far more red tape than other countries; red tape leads to corruption and distorts a people’s character. According to the World Bank’s “Doing Business” database, it takes 89 days to start a small business in India while it takes two days in Australia or Canada. There are more entry procedures in India; each procedure is a point of contact with an official; each contact is an opportunity to extract a bribe. Empirical studies show that burdensome entry regulations do not improve the quality of products, make work safer, or reduce pollution. They only hold back investment or force people into the informal economy. Hence, the Copenhagen Consensus of expert economists concluded in 2004 that easing start-up rules is more important for development than investing in infrastructure or health care.

In India it also takes longer to register a property, enforce a contract, and close a business. Indian managers spend more time on regulatory issues than managers in other countries. Thus, India ranks low among the 145 countries studied by the World Bank in the ease of doing business. Fortunately, reforms can quickly change country rankings. In 2005, 58 out of 145 countries cut red tape and simplified their regulations in some way. India was one of these—it improved its credit markets. Although it has been moving up since 1991, India remains a hostile business environment.

Civilized societies are less corrupt not because their character is superior but because their institutions are better at aligning the incentives of their citizens. There is nothing wrong in the character of Indians. The same Indians behave differently when they cross the immigration line at Heathrow airport. So, let us not despair about our integrity. Let’s focus on reforming our institutions, cutting red tape, and become a good place to do business. Our moral character will follow quickly. And yes, do read War and Peace, again.