Monday, December 17, 2007

Blueline solution in Indore, Dec. 16, 2007

To be able to kill 113 persons in less than 12 months in broad daylight is something of an accomplishment. The distinction belongs to Delhi’s Blueline buses. Desperate citizens tend to blame drivers, police, politicians, or transport officials. They are all guilty, of course. The real problem, however, lies elsewhere. A few months ago a prominent public figure even blamed ‘privatization’. A staggering comment, I thought, considering that major cities in the world (including in France and England) have excellent, privately run bus services.

Closer to Delhi lies Indore, a city of 20 lakh people. Vivek Aggarwal, a 34 year IAS officer, became its Collector in 2005. He had a hobby—he studied bus services in different cities. With a tiny capital of Rs 25 lakhs, he launched a public-private bus partnership in Indore based on best practices in the world. Two years later Indore has a fleet of 98 modern, low-floor buses with computerised ticket-vending. Electronic signboards at bus stops announce when the next bus is due based on satellite data. Investment in the system has risen to Rs 40 crores, all done privately. The city has made a profit since inception; so have its 6 private partners who run the buses. Soon it will have a 500 buses Indore is now quoted (with Bogota) as having the best bus service in the world.

What can Delhi learn from Indore? First, it must ditch the old socialist idiocy of ‘one bus one owner’--a product of the ‘small is beautiful’ thinking of the eighties. This same stupidity made India reserve 800 industries for the ‘small scale sector’. Economists believe this was perhaps the most harmful industrial policy of the past fifty years, which and has effectively prevented our industrial revolution. Indore did not have such socialist hang-ups—it selected the most capable entrepreneurs and companies to run its buses. Secondly, Delhi must not allow two operators to compete on the same route. This leads to speeding and accidents as drivers scramble to maximize revenue. Bus owners must get exclusive routes and earn revenue based on distance traveled, and this can be easily monitored by an affordable satellite system that tracks bus movement. Indore has a daily and monthly electronic pass, whose revenues are shared between companies. Tomorrow, if Delhi switched to a system where Blueline buses earned revenue per kilometer, traffic deaths would disappear.

Delhi must also have a regulatory body which assesses demand, plans routes, fixes fares, gives out tenders, and monitors daily performance. Indore has a five person team which does this continuously, and this is the secret of its success. Delhi is finally planning to have a Unified Metropolitan Transport Authority, but unless it gives it teeth, it won’t succeed. Some will argue that Indore is too small to be an example for Delhi. These are the same second rate minds who scoffed at Japan’s miracle in the sixties and Korea’s in the seventies, arguing that these countries were too small for India to copy. Just think of Delhi as ten Indores!

Another painful lesson from this tale of two cities is that it takes a bit of luck to throw up officers like Vivek Aggarwal, who have the knowledge and the will to deliver. The average IAS officer spends a lifetime pushing files and still gets promoted. Vivek Aggarwal, I fear, may actually be punished by a system that puts down achievers. But before that he would have had the moral satisfaction of bringing a smile on 20 lakh faces in Indore--something that most of his colleagues will never experience in an entire life time.

Tearfully yours, bania-ji, Dec 2, 2007

India is a land of ironies. Even so, the prospect of the Left shedding crocodile tears for the petty trader is truly bizarre. For sixty years the Left bashed the bania--every time food was short, it wanted to nationalize the grain trade and send the ‘profiteer’ to jail. In the early 1970’s it almost succeeded. Now, when the nation has begun a historic transition from small, unorganized retailing to supermarkets, the Left wants to stop it in the name of the bania

There is a legitimate concern, however--what will happen to the millions of jobs in the neighbourhood grocery stores as supermarkets like Reliance Fresh open across the country? The answer to that question has just come in. Thomas Reardon, a world authority in retailing, and Ashok Gulati, India’s premier agricultural economist, conclude in a recent study that the number of employees per square metre in organized and unorganized retail is almost the same. The difference is that employees of supermarkets are better paid, have pension benefits, are trained on computers, and have the opportunity to rise economically and socially. Hence, millions of youngsters are all set to benefit. With franchising, thousands of traders will also gain simultaneously.

This is not the first time that the Left has tried to stop history. When Rajiv Gandhi wanted to introduce computers in banks and railways, the unions went on massive strikes. This delayed our computer revolution by 15 years. A union leader confessed later that computers had actually increased jobs, not reduced them. The same virtuous circle will repeat itself in a bigger way in retailing as the benefits will touch the entire society. The farmer will get a higher price for his produce when he sells directly to supermarkets and is freed from the clutches of our corrupt mandi system. The housewife in the city will also pay a lower price at Reliance Fresh stores because the middlemen have been removed.

Yes, wholesalers and artiyas will lose, and they are the ones behind the current agitation in Uttar Pradesh, Bengal and Kerala. As often happens, the young, idealistic Leftist ‘jhola-walla’ has been captured by these vested interests and has ended on the wrong side. Politicians have also got into the act. If Mukesh Ambani hired and trained 10,000 Dalits for his Reliance Fresh outlets, he would get Mayavati on his side.

The epic, Mahabharata, seems to have been aware of our Indian ironies. It tells the story of Jajali, an arrogant Brahmin, and Tuladhara, a trader of spices in Varanasi. Jajali observes the shopkeeper as he weighs his spices disinterestedly, treats his customers alike, and lives “like a piece of wood flowing in a stream”. Ian Proudfoot, the Sanskrit scholar, explains in Ahimsa and a Mahabharata Story that the trader, with multiple suppliers and buyers, doesn’t depend upon anyone’s favour. His gains and losses are the result of impersonal market forces. He pursues his own interest (like the stick) and this leads to the common good through the “invisible hand” of the market (the stream, in this case). Tuladhara’s life is in contrast to those who doggedly strive for social advancement and influence.

There is an ironic twist in a trader teaching a (Leftist?) Brahmin on how to live. The Mahabharata holds up a worldly merchant as model of detachment before an egoistic, forest dwelling ascetic. Is it the epic’s way of telling the Leftist and RSS Brahmins that sometimes it is better to go with the flow, like a stick in the river, rather than impose your will on history? Think of an India without computers.


Tuesday, November 20, 2007

Struggle for Gujarat’s soul November 18, 2007

Not long ago we thought of Gujarat as the land of non-violent Mahatma Gandhi and hard working merchants. That picture has grown more complicated. Gujarat has emerged as an Asian tiger—the fastest growing Indian state with the lowest levels of unemployment, the most investor friendly, with the shortest red tape and least petty corruption. It is hailed by migrants from Bihar and MP as a land of opportunity.

Gujarat, however, is also the Indian state which hosted a genocide under broad daylight in 2002. Those who presided over the killings were elected to power. Their complicity has now been confirmed by the recent Tehelka exposé. The political class, however, has greeted the exposé with silence. Ashish Khetan, author of the report, must feel a bit like Draupadi in the assembly of the nobles at Hastinapur, when no one, not even Bhishma, stopped her from being disrobed. For five years we have heard charges and counter-charges in Gujarat.

Next month Gujarat’s voters will have to decide. Should they reward Narendra Modi for a genuine economic miracle that is lifting so many out of poverty? Or should they draw a line, as India’s voters did after Indira Gandhi’s Emergency, and roundly punish him for the terrible communal violence of 2002? A new book by an eminent American philosopher helps one understand Gujarat’s dilemma.

Martha Nussbaum’s, The Clash Within: Democracy, Religious Violence, & India’s Future (Permanent Black) argues that the post 9/11 world is not some mythic “clash between civilizations” (as Samuel Huntington has argued) between a violent Islam and peaceful democracies in America, Europe, and India. It is a clash within the mind of each one of us--each human being--as we oscillate between self-protective aggression and our ability to live with others. Nussbaum points out that there are two sorts of human beings, and they can be found in all nations. The first (and I think the majority) are self-confident, and like Mahatma Gandhi, they do not fear differences. They respect those who are dissimilar and are happy to let them flourish; self-assured in the robustness of their own way of life.

The second, however, are like another Gujarati, Narendra Modi, who fear religious and ethnic differences and the idea of a plural society. They believe that minorities are a deep threat to order and safety, and are anxious to control them. Congress’ politics of appeasing minorities has given space to the second type to rise in India’s democratic politics. The memory of Ghazni is also strong in Gujarat, and even Mahatma Gandhi’s example has been unable to erase it. Why don’t we condemn Godhra’s massacre in the same breath, they ask rightly? Yet, the second group’s ethos is so un-Indian in our astonishingly diverse society.

What is at stake in the upcoming Gujarat election is thus a clash inside each citizen’s imagination, and it comes down to how we view other human beings. Politics makes one adopt polarized positions. The reality is that Gujarat is both prosperous and genocidal. One wants Gujarat to flourish but also to be decent. Nazi Germany was very efficient. The choice in the end is easy—vote out Modi! For a person who has just climbed out of poverty, however, it may not be so easy. Ideally, one should throw out the rascals but keep their good policies, but one can’t trust Congress to do that. Gujarat, like India, is in the midst of a hundred flowerings. Some of these have turned out to be noxious and the only way out in a democracy is to remove the toxic ones at the polls.

Let biotech crops bloom November 4, 2007

Let’s begin this Sunday morning with a statement of unimpeachable reliability: India has doubled its production of cotton in the past five years. It crossed the United States last year to become the world’s second largest producer and is expected to overtake China in 2009 to become world’s number one. India’s cotton revolution is the subject of constant discussion at global agricultural forums, but in India almost no one has heard of it. Our media talks only about the suicides of cotton farmers. This is because environmental activists have been spreading disinformation and misleading the public.

Norman Borlaug, the Nobel Prize winner, who invented the dwarf varieties of wheat and helped create India’s first green revolution, predicted that science would also drive India’s second green revolution. He is turning out to be right. Biotech (Bt) or transgenic cotton is the miracle seed that resists bollworm—an insect which used to destroy a third to half of our cotton crop each year. By planting Bt cotton farmers have successfully fought the insect and delivered the highest production and exports in India’s history. Production has risen from 158 to 279 lakh bales per year from 2002 to 2006. Net income per farmer has increased by Rs 17,500 per hectare for India’s 23 lakh cotton farmers. From an importer, India has become the third largest exporting nation.

Borlaug wrote in some agony in 2002 that “the approval [of Bt cotton] has been a long, slow, painful process, effectively delayed…by the lobbying of Vandana Shiva and her crowd. Now that the door has been opened for the use of transgenic biotechnology on one crop, I hope it will soon be approved for other crops. As an enthusiastic friend of India, I have been dismayed to see it lagging behind in the approval of transgenic crops while China forges ahead”. His worst fears have come true. Five years have passed since Bt cotton’s approval. Nothing has since been approved. Farmers are anxiously waiting for biotech soya, rice, corn that are flourishing in other countries. Bt mustard was tested to death here and the inventor left India in disgust after 7 years.

The scandal is that government approval takes 18 months in China and 6 years in India. The reason is that transgenic seeds are an invention of private sector science and both government and activists distrust private seed companies. Environmentalists are hostile to these seeds on ideological grounds and delay each trial by taking the government to court. Each time they lose in court (because their case is flimsy) but policy makers and babus get scared and insist on more trials. Ministers are apathetic because there are no photo opportunities for inventions of the private sector. Thus, our second green revolution is delayed. Misguided activists, timid bureaucrats, and apathetic politicians are all conspiring to rob our farmers’ future.

It was bold leadership of C. Subramanium and Lal Bahadur Shastri that created our first green revolution in the 1960s. Had India waited for endless field trials and deliberate delays by environmentalists, it would not have happened. Fortunately, this government has vastly improved its regulatory capability in biotechnology. Now is the time for Manmohan Singh to proudly proclaim our farmers’ achievement in cotton and fast track the approval process for other miracle seeds, especially those tolerant to drought and ideally suited for our rain fed, non-irrigated areas like Vidarbha. He should tell Babus to follow China’s sensible approach and stop reinventing the wheel. Finally, he must also tell off activists (who are called eco-terrorists in some countries) to stop disseminating disinformation and diverting attention from science to suicides.

Dirty hands 21 October, 2007

When Robert Fullenwider compared politicians to garbage collectors, he did not have the former prime minister of India, Deve Gowda, and his ‘kumara’ in mind. He only meant that we should expect both vocations to stink. On October 3, 2007, however, the stench of Karnataka’s politics made even the most putrid muck smell sweet. On that day Deve Gowda’s son refused to vacate the chief minister’s seat after enjoying power for 20 months and reneged on the commitment to transfer power to its BJP ally. Newspaper headlines screamed ‘betrayal’ and then forgot about it.

My friends in Karnataka tell me that they were not surprised. Deve Gowda has a reputation for betraying friends. Before Yediyurappa, he betrayed Dharam Singh, and prior to that Bangarappa. Earlier he ditched Ramakrishna Hegde to become the astonishing candidate for prime minister. My friends said, ‘what were the BJP fools thinking when they made the deal!’ Deve Gowda remembered suddenly that the BJP was ‘communal’. With this act of treachery he joined the august company of Charan Singh and Devi Lal, who also forced untimely elections on innocent citizens.

How do Karnataka’s proud citizens feel about this act of betrayal? Citizens are vulnerable and they place trust in their rulers. When this trust is betrayed, psychologists tell us that citizens feel angry and in extreme cases suffer from ‘political betrayal trauma’. This happens, for example, when a person is wrongly arrested by the state or a soldier is sent to fight in an unjust war. When a trusted leader, a former prime minister, behaves immorally, the betrayal can be as devastating as a spouse’s infidelity.

Lest the children of my Kanadiga friends grow up thinking that this is how grownups should behave—break promises and betray friends--I want to remind them of Karna in the Mahabharata. When Karna discovers his real mother and realises that he is on the wrong side in the war, he refuses to switch sides. He has given his word to Duryodhana and he must be loyal to his commitment. He adds that one’s identity is not determined by birth but by upbringing (a nice thing to remember in these casteist times). Thus, he does not exchange his adopted, low born parents for genetic royal ones. His own charioteer, Shalya, on the other hand, is in Deve Gowda’s mould, and has no problem in betraying Karna.

Ever since Sartre’s play, Dirty Hands, we have got used to thinking that our politicians are exempt from the moral rules that apply to us in private life. The vocation of politics requires one to have ‘dirty hands’ for public figures must fulfill an impartial role, which authorizes them to use violence forbidden to individuals. If I stick a gun to a rich man to collect Rs 20,000 from his pocket, I am guilty of robbery. But when P Chidambaram collects Rs 20,000 from me to improve schools, it is an education cess. Thomas Nagel, the philosopher, makes this point forcefully. Is this why the world forgave President Truman, with dirty hands, for dropping the atomic bomb on Hiroshima?

A fresher feeling of betrayal is what many Indians will feel if the Indo-US nuclear treaty is aborted. Worried over Pakistan’s military alliance with China, they will consider the national interest betrayed for political expediency, not only by the Congress but also by the BJP (the party that achieved the initial rapprochement with America). Perhaps it is true--politicians must have dirty hands. But unlike Deve Gowda, Manmohan Singh was supposed to have hands as clean as Mahatma Gandhi’s. Hence, the sorrow will be greater.

My Chak De! moment October 7, 2007

To get to the playing field where children play in our neighborhood, you must turn right at the market and then take a sharp left. A bhuttawali sits at the corner. Go past her another fifty metres and you can’t miss it, especially in the evening when the occasional roar of ‘Chak De’ will announce that someone has just scored a boundary. The Hindi film, ‘Chak De India’ with Shah Rukh Khan, has given us a new slogan that at once unites us and captures the exuberant mood of a confident, young India. Amrita Shah put it nicely, ‘Part exhortation, part exaltation—it has just amount of zing and energy to work in a stadium or on the street’.

Our sports teams have also won in recent months and returned the compliment. Vijay Santhanam, is right when he says, ‘Vishwanathan Anand’s becoming the undisputed world champion of chess is a bigger Chak De moment for India than either winning the 20/20 Cricket World Cup or the Asia Hockey Cup. Chess is played in 166 countries; field hockey is played in 61; cricket in less than 20. But my proudest Chak De moment came last Tuesday when our local 14 year old hero, Arjun, whose cricket bat rains sixes like Yuvraj Singh’s, did an amazing thing. He offered to give up his place on the team to a young urchin who had been hanging around for weeks, drooling to play and no one would let him. Arjun’s was an act of unbelievable kindness from one 14 year old to another. At one go, he washed away some of the stain of mean hearted Dronacharya’s against Eklavya in the Mahabharata.

Arjun’s act is a lesson for another reason for the millions of young Indians caught in today’s rat race where only money matters. I enjoyed the cliffhangers in South Africa as much as anyone, but I was offended by the vulgar display of public cash rewards and the Porche afterwards. Although the pursuit of success is hard wired in our genes, I do wish that higher status would attach to being kind and considerate, to compassionate acts like Arjun’s. I have no problem with money. Unlike our hypocritical socialists, I do not rail against the culture of consumerism. Competition, Hesiod pointed out long ago, is built into our natures, and it calls for real victory and real defeat.

This is where a liberal education comes in handy for it allows one to cope better with the rat race. The education systems of some nations do a better job of inculcating values that produce Arjuns. When English teenagers were asked, ‘Are most of your classmates kind and helpful?’ only 43% said ‘yes’, according to Richard Layard of the London School of Economics. On the other hand, 75% of Scandinavian children said ‘Yes’.

I think our neighborhood hero was given the wrong name by his mother. She should have called him Yudhisthira, not Arjuna. Recall, great souled Yudhishthira, tormented and embattled, refuses to enter heaven at the end of the epic. He insists that an unclean, stray dog, who had been following him, is admitted into heaven as well. It turns out to have been a test, and Yudhishthira and his ethical goal of anrsamsya or compassion, are paid the highest compliment. He is told, ‘Great king, you weep with all the creatures!’ I wonder why no Indian mother calls her son, Yudhishthira. There are millions of Arjuns. It is not because it is difficult to pronounce. The fact is that Arjuna is a winner in the self-defeating kshatriya rat race of life. We prefer winners to goodness.


All about my mother 23 September 2007

One night in 1987 a biochemist from New Zealand, Allan Wilson, and his American colleague Rebecca Cann were examining a so-far ignored part of human DNA at the University of California, Berkeley, and they made the astonishing discovery that all human beings have the same parents. This DNA in our bodies remains intact through the generations and is passed on from mother to daughter, but also leaves behind traces of the changes or mutations. When these scientists examined this DNA component in the family tree of each of the continents of the earth, they could trace it back to one woman who lived in Africa about 200,000 years ago.

The Nobel Prize winner, James Watson proclaimed, ‘she was the great-great-great….grand-mother of us all’. Obviously, she was not the only woman alive at that time: she was just the luckiest because her children survived to populate the world, while the lines of the descendants of other women became extinct. One of her three lines, which carry the cells of her daughters, is called Manju because scientists believe that this line evolved in India

When I read this in Nayan Chanda’s lively new book, Bound Together: How Traders, Preachers, Adventurers, & Warriors Shaped Globalization, I exclaimed excitedly, ‘I have found my mother!’ This thrilling history of globalization describes how human beings have been moving and connecting ever since we evolved from the apes. Chanda goes on to explain that in 2000, the Italian geneticist, Luigi Luca Cavalli-Sforza and Peter Underhill found that our father had also come from Africa. They proved this in a study of the Y chromosome which determines the male sex. Our ancestors left Africa only fifty thousand years ago and we can track their genomic journey as they crossed many Ram Setu-like land bridges that are now submerged in the sea. The most famous of these connected Russia with Alaska and explains why American Indians have Asian features. Our migrant ancestors tended to settle down in a region, and hence geneticists can trace the Y chromosome to that region.

If an enterprising Indian reader of this column has his DNA examined he will find that it contains M52 Y-chromosome which dominates on our subcontinent. Nayan Chanda did that. He ordered a kit from National Geographic, dutifully swabbed DNA from his cheeks, and mailed off the vials labeled with a serial number. A few weeks later he logged in his serial number on their website, and discovered that indeed he was from India. But he also found that he had left behind ancestors in Ethiopia, Middle East and Central Asia and other places. ‘It was like finding my family passport with stamps of the countries my ancestors passed through’, he writes.

This is because migrations came in successive waves and hence Wilson’s team has found that all human beings have multiple origins. We are all time-walkers out of Africa and can now trace our ancestors around the world. We are mongrels, and this evidence has finally destroyed the ugly theory of distinct races. Some of us are white, others are black because we have had to adapt to different climates; the Chinese have narrow eyes because their ancestors had to protect them from the blinding sunlight of the snowy Arctic lands. It is quite wonderful I think how science has confirmed the splendid aphorism of the Panchatantra: ‘Vasudhaiva kutumbakam’ or ‘the whole world is a family’. I try to remember this when I get angry with the U.S. for invading Iraq, or upset with Prakash Karat for obstructing the nuclear treaty, or enraged by foreign Islamists for bombing our trains.

Our Achilles heel 9 September 2007

A friend of mine, who hikes frequently in the Himalayas, showed me a solar torch the other day which gives light for seven hours before you need to recharge it in the sun. It has a hook for hanging and can light up a small room. My friend uses it for camping. But what a boon, I thought, for our 250,000 villages without electricity and the millions of school children who can’t do homework at night and village women who fear walking after dark. I googled the maker of the torch and discovered an inspiring story about how to be both a good and an effective human being.

Mark Bent, an American, worked for 20 years in Africa and saw the waste behind government aid programs. He came home and invented what he calls the BoGo solar torch. BoGo means ‘Buy One, Give One’. When you buy one flashlight for Rs 1000, Mark gives one at half price to NGOs in Africa, who give it to villagers at a nominal price. Mark makes the torches in China to keep costs low. The story is remarkable not because Mark is a ‘do-gooder’ but because he has found an innovative and sustainable way to profit from the rich and benefit the poor. Rich campers bring light to African villagers. I hope some NGO in India will google Mark and begin distributing these torches here.

Now, why couldn’t one of our boys or girls invent and market this lamp? The answer, of course, is our education system which stifles all creativity through rote learning. It was modeled on the British system, but the British have moved on and reformed theirs, partly under American inspiration. But our kids are still stuck in a world of cramming and coaching classes. The disease lies in the lack of autonomy. The ministry of HRD and its children, University Grants Commission (UGC) and All India Council for Technical Education (AICTE) have a stranglehold. A college cannot decide what courses to teach, what fees to charge and what salaries to pay its professors. How could creativity emerge from this servitude? Creating new universities, as the PM proposes, is not the answer unless you give them autonomy.

Forget creativity, Indian companies are frightened by the shortage of basic skills which is currently driving up salaries unhealthily. Of the 400,000 new engineers that graduate each year, roughly 100,000 have the skills to enter the job market. It is tragic that 420,000 students strive for 6000 IIT and IIM seats annually. The answer, of course, is to increase the supply of good colleges. As it is, we lose 160,000 students to foreign universities and parents pay $3 billion in fees and costs. Indian ‘edupreneurs’ and foreign universities have repeatedly tried to start high quality campuses but the HRD ministry’s ‘license raj’ drives them away. AICTE even wants to close down the prestigious, private Indian School of Business which offers a better education than an IIM. The draft foreign universities bill doesn’t provide autonomy either and ensures that no decent foreign university will enter India.

Our education system is our Achilles heel and we will not spawn Mark Bents until we do a 1991 on HRD and unbind India’s education. Meanwhile, I console myself in knowing that there are individuals like my friend, N.S. Raghavan, who is using part of his Infosys fortune to incubate entrepreneurs at the IIM Bangalore. He will make a difference and modest breakthroughs like Mark Bent’s will contribute more to human happiness than either the massive aid programs of governments or the soul killing mediocrity of our universities.

Monday, September 03, 2007

Do a 1991 on cricket August 26, 2007

Not unlike other unrepentant fans of Indian cricket, I have been feeling pretty low ever since our ignominious exit from the World Cup. Although we managed to defeat England recently, there is something rotten with our cricket and it lies in the monopoly of our cricket board (BCCI). I am no cricket expert but I do know something about how organizations work and the damage that monopolies can cause.

BCCI is reminiscent of the ugly days of License Raj when you could choose any TV channel as long it was Doordarshan and fly any airline as long as long as it was Indian Airlines. You could queue up and wait forever for a telephone, a gas connection or an Ambassador car. Our lives changed after 1991 because economic reforms brought competition. Waiting lines disappeared, prices came down, quality went up, and service improved. If there is one lesson we have learned as a nation, it is that competition can transform the lives of citizens, producers, and even regulators.

Some areas have not experienced reform, however. One of these is electric power; another is cricket. Like the old department of telecom (DOT), our cricket board is both a player and an umpire. It is the only buyer of cricket talent, the only supplier of matches, the monopoly controller of cricket infrastructure and the sole regulator. Despite its tall talk, BCCI has never bothered to nurture talent. If it had there would be a hundred Kanga Leagues in a hundred Indian towns. BCCI is mainly focused on 11 players for the national team. This is why no one watches Ranji Trophy. Thus, the market for cricket players remains tiny, much as the telephone market was before the reforms. In 1990, there were only 5 million telephones in the whole of India; today there are 200 million, growing by 8 million a month. The old DOT was politicised—you needed a political connection to get a telephone. So is the BCCI, whose corrupt and dysfunctional state cricket associations are run mostly by politicians. With Indian agriculture in deep trouble should the honourable minister, who is the head of BCCI, worry about 11 men in whites? No wonder a nation of a billion people can’t produce a decent cricket team.

Things are about to change, however. A new venture, the Indian Cricket League (ICL), will soon begin playing cricket with six local teams, and this will grow to sixteen in three years. When 176 players play on television night after night, millions of viewers will judge them. Talent will no longer remain hidden. Rishwat and sifarish will not get you selected by state cricket associations. ICL will become a nursery for talent like the professional sports leagues in America and Europe, and India might even field a world beating cricket team soon. BCCI will fight tooth and claw to defend its monopoly, of course, but it will fail in the end. For Subhash Chandra, the man behind ICL, knows how to break monopolies. It was his Zee Televison that broke the Doordarshan’s monopoly in the 1990’s.

India was a sick economy in 1991. It took the medicine of competition and went on to become the second fastest growing economy in the world. The same could happen to Indian cricket. Competition is like a school in which companies learn to improve. Competition created excellent companies like Infosys, Airtel, Jet Airways, and ICICI Bank. Indian Cricket League could also become a world class brand as international players vie to play in it. So BCCI, don’t play spoilsport. Let’s do a 1991 on Indian cricket.

It’s time to free our schools August 12. 2007

A dear friend of mine has grown weary. He runs five schools in the slums of Delhi which provide a fine education to 13,500 poor children with 250 motivated teachers. But his idealism is frayed from fighting the ‘license raj’ for 20 years. He has been unable to gain accreditation for his schools because he is unwilling to bribe. Instead he is humiliated daily as he runs from one official to another. Ironically, ‘license raj’ went away in industry in 1991 but it still thrives in education. You need 11 licenses to run a school and each comes with a bribe. The most egregious one is an Essentiality Certificate by which a bureaucrat decides if your school is ‘essential’.

The answer to corruption is institutional reform--get rid of licenses and Essentiality Certificates and create massive disincentives against corruption. The new science of sociobiology explains how this works and how to get people to behave honestly. Evolutionary scientists teach us that human beings have evolved through a long struggle in which only the fittest have survived. The fittest are those who pass on their genes. But it is a mistake to believe that life is a tooth and claw struggle where only the selfish survive. Yes, we have evolved from animals—we share 98.6 percent of our genes with chimpanzees—but nature is replete with dharma-like goodness. Wolves and wild dogs bring food back for their young who cannot hunt. Dolphins will help lift an injured companion for hours to help him survive. Blackbirds and thrushes give warning calls when they spot a hawk even if it risks their own lives. Similarly, human parents make huge sacrifices for their children with little expectation of return. So, it is wrong to view nature as an amoral law of the jungle.

But how do you get human beings to behave as nicely with strangers as they do with their children? Two weeks ago I wrote in this column about two prisoners who would go free if they cooperated and how dharma-like behaviour emerges from reciprocal altruism. In The Descent of Man, Charles Darwin wrote that each person ‘learns from experience that if he aided his fellow-men he would receive aid in return’. However, if a person is mean, he will receive ‘tit for tat’ according to the principle of reciprocity. This is sociobiology’s answer to corruption: reciprocate corrupt behaviour with exemplary and quick punishment. Even Yudhishthira in the Mahabharata, who is inclined to turn the other cheek, realizes this and finally declares war on the Kauravas.

We have forgotten this lesson in India and this is why Gunnar Myrdal called us a ‘soft state’. Our idealistic approach to labour prevents quick punishment of the guilty. We have all the laws in place but our administrative processes are so ‘soft’ that they allow both the bribe taker and giver to get away, and this in turn sends a signal that corruption pays. Western countries were able to eliminate corruption because they punished it ruthlessly at various moments in their history. The message, ‘corruption does not pay’, became encoded in their culture, and their citizens over time acquired virtuous habits.

The answer to my friend’s problem is thus two-fold: first, liberalize and get rid of most licenses in education. If you do this, honest professionals will start good schools. More schools will mean more competition and this will improve quality all round, and good schools will drive out bad schools. Second, bribe-taking bureaucrats will behave decently if you vigorously inflict massive, rapid punishment on the guilty in accordance with sociobiology’s principle of reciprocity.

Tit for tat make sense July 29, 2007

The police investigation into the botched terrorist attacks in Glasgow and London reminded me of the classic Prisoner’s Dilemma. In this famous game, police don’t have enough evidence and are trying to get two prisoners, say Bilal and Sabeel, to confess. If one of them confesses he will be let off but the other will spend his life in jail. If neither confesses, both will go free. If both confess, then both will have to spend seven years in jail. The logical selfish strategy is to confess, betray your partner, and hope that he won’t. The altruistic path is not to confess. The best strategy is to collaborate--neither should confess.

Oddly enough, Prisoner’s Dilemma is relevant to our nation’s hazy moral health—to Pratibha Patil’s ambivalent record; to government employees who insist on bribes; and landlords who renege on promises—indeed, to the question I posed in my last two columns: ‘Are people good only because of the fear of punishment?’ Draupadi asked this question in Mahabharata and Robert Axelrod, the American social theorist, speculated in the early 1980s about how to get strangers to cooperate and be nice to each other in capitalist democracies. He used this game to show that if people only pursue the selfish strategy they undermine the collective good.

Axelrod conducted a Prisoner’s Dilemma round robin tournament in which contestants played 200 games with one player and then moved to the next, the objective being to minimize the time in jail. The reason for repeating the game was to simulate real life where people meet each other repeatedly. The winner was Anatol Rapoport, whose strategy was neither altruistic nor egoistic but ‘tit-for-tat’, what we call ‘nehle pe dehla’. ‘Tit-for-tat’ means don’t confess (be nice to the other prisoner) on the first move, but after that do what the other player does. Axelrod re-ran the tournament; ‘tit-for-tat’ always won; cheaters always lost.

What this game teaches about life is that one ought to be nice when one encounters strangers. ‘If you are nice, others will be nice to you’, my aunt used to say. If the other person is not nice, then ‘tit for tit’ is the wiser response so as to not to be taken advantage of. This principle of reciprocity keeps cheats in check in society, whereas Gandhi’s (and Jesus’) teaching about turning the other cheek sends them a wrong signal that cheating pays. All societies have evolved principles of dharma in part to make people cooperate.

Moral rules are grounded in human self-interest; they teach one to adopt a friendly face to the world but not allow oneself to be exploited. Reciprocity does not apply to those one loves, of course. If the prisoners care for each other like brothers they will instinctively think of minimizing the time both will spend in jail. But in large cities like Delhi or Mumbai, where we are surrounded by strangers, the principle of reciprocity is the guiding principle of civilized existence. This pragmatism also runs through the Mahabharata but is absent in the Left’s moralizing.

It’s a pity we use ‘tit for tat’ in unflattering ways. Congress used it last month to defend its retaliation for the BJP’s smearing of its presidential candidate. This newspaper’s headline read on August 6, 2006: ‘Tit for tat: India, Pak play spy games, expel envoys’. New York Times called Pakistan’s firing of the Abdali nuclear missile ‘tit for tat’ in response to India’s Prithvi on March 26, 2003. It’s a pity I say, because ‘tit for tat’ is the reciprocity inherent in decency, friendship, trust and eventually civilization.

Capitalist morals 15 July 2007

In a meeting of the board of directors that I joined recently, the company disclosed that it had paid a bribe to recover an overdue payment from the government. My first reaction was: Holy cow, how did I land in this unholy mess! I thought about my responsibilities as an independent director. Should I resign from the board? Do we sack the managing director (MD)?

Seventy percent of the company’s sales came from this government customer, who had always received 2% of the invoice under the table for expediting payments. The bribe was shared by many state employees. Our new MD, who had joined a year ago, refused to pay the bribe. As a result, the company’s bills were not paid for nine months. The MD tried everything—cajoling, political influence, cutting off supplies—but nothing worked. One painful morning he found that the company was bankrupt and would cease operations in 48 hours and 829 people would lose their jobs. He closed his eyes, said a prayer, and ordered the bribe to be paid. Thus, he saved the company but disclosed the improper payment to the board’s audit committee.

‘Why doesn’t this problem occur with your private sector customers?’ I asked. The MD replied that in the private sector, it is somebody’s money--the founder’s or shareholders’. Hence, accountants and auditors are vigilant, and no one dares. But it is no one’s money in the government. If supplies stop because of non-payment, no one cares. No one is accountable. He is right, I thought. I have been a director or consultant to lots of companies. I have never heard of bribing a private sector customer. If you are unlucky enough to do business with the government, you always have to bribe someone.

The board decided that morning to close its government business. Sadly, 390 workers lost their jobs. I felt guilty, but I think we did the right thing. If you have to work, you might as work honestly. We are aware of the missed opportunities and the economic loss from Nehru’s decision to place the state at the ‘commanding heights’ of the economy. We don’t realise how much damage Nehruvian socialism has done to our moral character. Our reforms are rightly shrinking government’s role in business, but it will take much longer to rebuild character.

Are people honest only because of the fear of punishment? Without checks would people behave like Duryodhana in the Mahabharata? Modern social scientists assume that people are only motivated by ‘self interest’. But is that true? If a child is in danger, don’t we have a natural desire to rush and save it? Adam Smith called this sentiment ‘sympathy’ in his Theory of Moral Sentiments. Rousseau called it ‘pity’ in his classic, Discourse on the Origin of Inequality. We are not purely selfish, but our public institutions have to hold individuals accountable. In our case accountability is eroded because our idealistic labour laws relied on the worker’s ‘good’ nature and his superior’s ‘bad’ nature. Hence, there isn’t quick punishment for corruption in the government (while you are sacked in the hour in private companies.)

Institutions have to depend both on the ‘good’ and ‘bad’ in human beings. If one is cautious and re-designs government only on selfish motives, you might erode whatever public spirit that exists. But ours was the opposite mistake--we relied on too much public spirit. To restore accountability now you don’t need new solutions. Just adopt the accountability systems of high performing governments like Canada and Australia. Even better, follow the recommendations of our own administrative reforms commissions.

Thursday, July 05, 2007

Public ethics, July 1, 2007

We have been feeling pretty down recently after perhaps the most popular president in Indian history is about to be dethroned in unseemly backroom horse-trading. We have tried to console ourselves, saying that politics is competitive by nature and what else can you expect from political parties who are only ruled by self-interest. What finally lifted our spirits, however, was the news that our niece had landed a good job. She called to say that she had signed a lease for a lovely room at an ‘unbelievably low’ rent. But after two weeks she was in tears. She had arrived bag and baggage at her ‘new home’ to find that the villainous landlord had given away her room on a much higher rent. She blamed her plight on the ‘greed of capitalism’.

I told her that the landlord is not at fault for wanting more rent; he is guilty of breaking an agreement. She could go to court but it would take a lifetime to get justice. What had failed my niece was governance not capitalism. If our courts enforced contracts speedily, the landlord would not have dared. People behave more morally in the capitalist countries of the West because the rule of law allows one to be good. On the other hand, millions of workers in the government of India do not work because they have the ‘socialist’ guarantee of a lifetime job. Their moral failure, it seems to me, is far greater than the landlord’s.

My niece’s room hunting woes soon got submerged by murky reports that had the potential of gravely damaging the highest office in the land. Indeed, what should we make of the news that the front runner for the President, Pratibha Patil, had started a cooperative bank whose license was cancelled by the Reserve Bank four years ago? The bank, it seems, gave Pratibha’s relatives ‘illegal loans’ that exceeded the bank’s share capital. It also gave a loan to Pratibha’s own sugar mill which was never repaid. The bank waived these loans, and this drove the bank into liquidation. The government liquidator of the bank, P.D. Nigam, said this week, ‘The fact that relatives of the founder chairperson (Pratibha Patil) were among those indiscriminately granted loans and that some illegal loan waivers were done has come up in our audit’. Six of the top ten defaulters in Pratibha’s bank were linked to her relatives.

If these facts are true, then it is a serious moral lapse. If allegations against Pratibha Patil are just ‘mudslinging’ as the Prime Minister says, then the charges will not stick. However, if she does become President and the charges turn out to be true, then the citizens of India will punish the UPA government in the only way that they can, and that is by throwing it out at the next elections. In the meantime severe harm would have been done in diminishing the President’s office as well as the Indian nation.

Whether it is presidential or capitalist ethics, the starting point is the recognition that both democratic politics and capitalism are based on competition and this is what keeps people honest in the long term. Both democracy and capitalism are decentralized systems where no single person is in charge. Adam Smith wrote more than 200 years ago that when millions of self-interested individuals act in their own interest in the marketplace, an ‘invisible hand’ promotes the common good of society. However, institutions are not perfect and the examples of my niece’s landlord and the UPA presidential candidate teach us that ethics matter profoundly in our democratic capitalist system.

SEZs : A tipping point June,17, 2007

Budhadeb Bhatattacharjee, chief minister of West Bengal, must wonder what he did in his previous life to deserve Mamata Banerjee in this one. All his good work to make Bengal attractive to investors is beginning to unravel. Companies have begun to shy away from Bengal for safer, more attractive destinations. After Mamata threatened a few weeks ago to pull down their boundary wall, even the Tatas are worried and must rue their decision to build a car factory in Bengal. Most Indians, however, are confused by this debate, especially this animal called Special Economic Zones (SEZs).

SEZs are export zones to get around the problem of our bad infrastructure. Why do we need special zones--why not reform the whole country? It is not easy to reform in a democracy with vested interests; at our current pace, it will take 20 years to get there, and by then we shall lose another generation. But why restrict SEZs to exports? In an open economy with low tariffs, shouldn’t domestic activity be as valuable as exports, especially when we have plenty of foreign exchange reserves? True, but history teaches that industrial revolutions in all countries were led by exports. No country, not even China, has a large enough domestic market to shift its people rapidly from farming to industry.

Why not locate SEZs on India’s wastelands? The standing committee has also recommended it this week. SEZs should, in fact, come up on vast government lands beside ports and railways for easy shipment of goods. But why limit the size of SEZ’s to 5000 hectares? This is typical of the ‘license raj’ mentality-- keep Indian companies puny. Why give tax concessions in the SEZs? Our exporters suffer far more from poor roads, ports, power shortages and monthly bribes to rapacious inspectors. If you solved these problems, you wouldn’t need tax concessions. The global economy, alas, is not a level playing field. China’s exporters have a huge advantage with an undervalued currency, lower interest rates, and lower power and freight costs. Think of export tax breaks, therefore, as a way to level that field.

SEZs became controversial because the state acquired land from farmers and sold it to industry. Until Nandigram we did not realize how unfair this system was to the farmer. This is now set to change. Governments will not acquire land in the future. Although a new rehabilitation policy has not been announced, companies have taken the cue. Many have offered employment to one member of the displaced farmer’s family, and in a few cases even shares. Creating a market in land is a gut-wrenching process. Highland Clearances in Britain led to great misery, and our SEZ debate is a great tribute to our democracy.

In the end, however, the SEZ policy smells of the crony capitalism. Why should a minister have to give a SEZ license? We ought to have transparent policies instead of case by case approvals which only encourage bribes. Anyone should be able to start an SEZ, and then one day maybe India will become one big SEZ. Yes, the SEZ policy is deeply flawed. Nevertheless, I support it for it may be our ‘tipping point’ for a genuine industrial revolution. SEZs could create millions of jobs. When it comes to a choice between implementing a policy that is ‘75% right’ versus waiting for 100%, it is better to do something than nothing. This was also Krishna’s advice to Arjuna in the Gita. Action is better than inaction. Babus usually prefer inaction to action, but Krishna was not a babu—he was a charioteer.

Thursday, June 07, 2007

A sobering lesson for Mayawati June 3, 2007

Now that the dust has settled and the instant pundits have had their day, this may be a good time to sit back and reflect on the significance of Mayawati’s amazing victory in Uttar Pradesh. For the first time in independent India a Dalit has won an absolute majority, anywhere. U.P. is, of course, not anywhere—it is 15 per cent of India and home to the largest upper caste population. The people of U.P. are euphoric. They finally have a government that will not be at the mercy of coalitions. Many Indians—and not just Dalits—see in Mayawati a future Prime Minister leading a national party. No wonder she has lit a fuse under every political party.

Meanwhile, we have heard plenty of explanations for her win. The most common is that it was a vote against the ‘goonda raj’ of Mulayam Singh. Another is the Left’s typical knee-jerk reaction—it was a revolt of the poor against the rich. A third view sees in her victory a decline of casteist politics; a trend that began in Bihar a year ago. Then there is is Yogendra Yadav’s conclusion—poor Dalits, poor OBCs, poor Muslims, and poor Brahmins have stitched together a ‘rainbow coalition of the downtrodden’. The RSS has explained the BJP’s debacle as the softening of Hindutva ideology. As for the Congress’ position, the less said the better.

There may be some truth in all these explanations, but none of them goes to the heart of the matter. In Barabanki district, an OBC woman was slapped by her uncle for voting for Mayawati. In her defence she told the reporter that the village patwari, a Mulayam supporter, refused to transfer her land in her name unless she paid him a hefty bribe. A group of auto-drivers in Muzzafarnagar told a Hindi news channel that policemen pocketed a fifth of their daily earnings. By voting in Mayawati they hoped that the police’s share might come down to a sixth. People thus vote sensibly for the things that matter to them.

A woman needs a title to her land. Auto drivers expect to ply their autos without harassment. A sick patient wants the doctor to treat him when he visits his primary health centre. A mother wants her child to learn something in the school. This is how government touches ordinary people’s lives. All governments in India are so eaten away by corruption and mismanagement that they cannot deliver the simplest things that people in the Far East and the West take for granted--drinking water, sanitation, roads without potholes, honest policemen and revenue officials, and decent schools and health centres. Hence, Indians do the only thing that they can—they boot out one set of incompetents just to bring in another.
‘Anti-incumbency’ is thus a code word, and it means: ‘You good for nothing bungler-- you have failed me, and I am kicking you out, knowing full well that I may have to kick him out too.’ This is a sobering lesson for Mayawati and a wake-up call for the Congress. Unless the UPA government implements administrative reforms and improves governance, it faces the same fate as Mulayam Singh. When the euphoria is over and the hard light of the day begins to stare her in the face, Mayawati will have to remember that voters want basic services rather than Ambedkar statues. Then her leadership skills will be tested. A good leader sets clear goals for her officers, monitors progress, encourages high performers, and helps remove obstacles in their way. This is how things get done. I fear that Mayawati will probably fail this test, but I shall be happy if I am proved wrong.

One crore micro-capitalists May 20, 2007

Chinamma was born a Devadasi but she refused to become a prostitute. She would collect neem seeds in the forests of Raichur district in Karnataka and earn Rs 12 a day. Her life changed completely when she joined a self-help group which helped her with a loan. She makes fertilizer today from the same seeds and employs 10 women. Her sales are Rs 250,000 and profits Rs 50,000. Rising demand from businesses like hers have lifted wages three times for the 12,000 women who collect neem seeds.

There are 1.2 crore poor women like Chinamma across India who take small loans to start businesses from microfinance institutions, banks and NGOs. They buy a cow and sell milk or invest in a sewing machine and stitch clothes. They may open a vegetable shop or begin hundreds of other businesses. Many of these micro-capitalists are the landless poor. What started as NGO charity work has now become a self-sustaining business with the entry of banks and microfinance companies, who find the women have an excellent record of loan repayment. Inspired by Bangladesh, this idea first caught on in Andhra, and is spreading across India, gradually replacing the village moneylender.

Chinamma’s story teaches us two ways of conquering poverty. In the first, government gives money to the poor--free electricity, subsidised food through the PDS and rural employment guarantee schemes. In the second way, the state creates conditions for people to help themselves. It builds roads and connects people to markets; makes it easy for the poor to get titles to their land and take credit against them. It provides vocational training so they can get a job; it ensures reliable power so that factories can run; and it reduces licenses and permits so that people can easily start businesses. The first way gives people fish; the second way teaches them to fish.

Chinnama’s sensible way, however, is under attack. The Andhra government closed 50 branches of two microfinance institutions (MFIs) last year for charging high interest rates. MFIs argue that it is expensive to provide weekly service to the poor in the rural areas. Their women customers prefer MFI loans rather than cheaper, subsidized loans from the government’s MFI for which “you must either have contacts or pay a bribe and then wait 6-9 month for the loan”. In contrast a young, dynamic MFI like SKS Microfinance delivers transparent loans at their doorstep in 7 days.

The Reserve Bank agreed with the MFIs. It argued that competition was growing among micro-lenders and interest rates had begun to fall. It also observed that countries that had tried to control loan rates had killed their microfinance business. For this reason the micro-loan business is four times bigger in Morocco and Bolivia where interest rates are ot controlled versus Tunisia and Columbia where they are controlled. Chinamma’s way will always be threatened in a populist democracy like India. Micro-lenders will have to fight the political power of money lenders, survive the envy of bureaucrats who run government financial institutions, and battle unscrupulous politicians who will find votes in capping interest rates on micro-loans.

Chinamma thinks it criminal that chief minister Karunanidhi gets away by waiving loans worth Rs 7000 crores while she pays interest on her loans diligently. She wonders when voters will realize that there is more dignity in her way of life because it doesn’t depend on the false promises of politicians or the charity of NGOs. Perhaps it will happen, she muses, when the middle class begins to vote and takes a more active role in politics.

The reek of India 6th May, 2007

There is something a little sad in my encounters with non-resident Indians. I don’t quite know why this should be. They are invariably successful. They have lovely homes and bright children who go to the best schools. Most have fitted in confidently and some have assumed positions of leadership in their adopted countries. But there is something missing at the core.

I often lecture abroad and I run into Indians in the strangest places. The more exotic the city, the more we are drawn to each other. They invite me generously to their homes where they only want to talk about India. They ply me with samosas and hungry questions about our recent economic rise. I discover that their memories are frozen, and they hide a shame of a fearful past that forced them to leave home. India has, meanwhile, moved on. Their poignant heart-weariness for their lost homeland leaves me in gloom.

I recently read the biography of Princess Sofka Dalgorouky, and it seemed to throw light on this cheerless subject. She left Russia to escape the Revolution in 1919 and lived all her life abroad in the long grief of exile. Nobokov called it ‘the animal aching yearn for the still fresh reek of Russia’. Yes, that’s the phrase that I have been seeking. The sadness of the NRI’s world is the painful yearning for the ‘reek of India’. Strong, traditional cultures like India and Russia are not easy to forget.

Princess Sofka lived in interesting times. She began life as scion of one of the great ruling families of Russia. She played with the Tsar’s daughter. Her grandmother, like the Countess in Pushkin’s The Queen of Spades, did not know how to dress herself. But Lenin cut short Sofka’s childhood at 13, and she grew up abroad into a beautiful, vivacious woman. She loved parties, conversations and books. She took lovers, enjoyed herself, married and remarried. Then she did something shocking. She became a communist and a social pariah overnight in her Russian émigré circles.

Indian NRIs, alas, don’t live such lives. They are bourgeois to the core and if Sofka were to appear in their midst, they would simply dismiss her as ‘promiscuous and irresponsible’. But their nostalgia is the same as Sofka’s. It not for an abstract India but for a definite place and time, and Jhumpa Lahiri catches it nicely in her stories. Mira Nair has portrayed it with panache in her recent masterly adaptation of The Namesake. The hero says that to be an NRI ''is a sort of lifelong pregnancy -- a perpetual wait, a constant burden”. Even in the second generation, his son feels a sense of apartness, a detachment. Others like him-- heart weary Bengali expatriates--are oppressive.

Babubhai Katara will never comprehend the distress and guilt in The Namesake. But what about those innocent boys from Jullunder, who take such risks in escaping from India? It must be worth it, I suppose, when lives at home are even more oppressive. The prize, even of a lovelorn NRI life, must seem like liberation. There was a time I used to believe like Diogenes the Cynic that I am a citizen of the world. I used to say that a blade of grass is the same anywhere. Now I think that each blade of grass has its own spot from where it draws its strength. So is a man rooted to a land from where he draws his faith and his life. Yet, there is struggle to extricate oneself from one’s past--from family, obligations and the “curse of history”.

The Killing of 24 x 7 water April 22, 2007

It came as a shock to me that India’s cities have more water than most cities in the world. Delhi has 300 litres per person per day of treated water compared to Paris with 150 or London with 171. Then why do people in Paris and London get water 24 hours a day while Delhi’s residents get it only for four? Gauhati sits on the Brahmaputra River but people get water for only two hours. The poor in our cities have to depend on tankers. When the tanker is late there is a scramble and even a riot. Recently, a tanker driver fearing for his life took off at a high speed, and a child died in the chaos.

Because water comes intermittently, Indians have to store it. Storage tanks cost money and are not cleaned regularly. This brings disease. Since water pipes are not under continuous pressure, they get broken when pressure is released–it’s called the ‘hammer effect’. Vacuum also develops in the pipe, and ground and sewage water enters through the cracks, thereby contaminating drinking water. It takes 90 minutes to re-pressure, dump the contaminated water, and lots of clean water is thus wasted.

Everyone has a diagnosis. Delhi’s Jal Board says that 40% of its water is stolen. Its zonal engineers want more pipes and infrastructure. (Lucrative contracts bring prosperity to engineers.) Economists say that Paris charges properly for its water; hence Parisians don’t waste it. Delhi’s water charges are so low that there is little incentive to conserve. Besides, low tariffs help mainly the rich because the poor don’t have taps. All these facts are true but the main problem is the Delhi Jal Board. It is a fiefdom of politicians with 20,000 employees when it should have 5000. It doesn’t meter properly, encourages theft, and is not accountable to customers.

Delhi’s government, to its credit, recognised the problem and decided to fix it. It tried to insulate the Jal Board from politicians and test a plan to give water 24 hours a day in two out of its 22 zones. It offered management contracts to experts, who would motivate Jal Board employees to reduce theft, extend taps to poor areas, and be responsive to customers. It also decided to take a loan from the World Bank for this project. This is when its problems started. A well meaning but ideological NGO, Parivartan, claimed that the process of hiring consultants was manipulated. It raised the fears of privatization, mobilized public opinion, and killed the reform. With it died the prospect of 24 hour water for Delhi.

The Greeks were suspicious of democracy. They felt that people often made bad decisions that went against their interest. People could be manipulated by demagogues and vested interests. In this story, vested interests were the local politicians, bureaucrats and Jal Board employees. They manipulated Parivartan to become their demagogue. They scared Delhi’s people and a workable reform failed. Sad, indeed, for it kills 24x7 water in other Indian cities as well.

The lesson from this sad story is that it is not easy to reform in a democracy. Reformers have to win over the people when they change institutions. If Sheila Dikshit had worked as hard to “sell” this reform as she had to conceive it, she might have saved it. We are facing another summer of water and power shortages and politicians have begun to make ridiculous promises. The answer is “not to fix the pipes, but to fix the institutions that fix the pipes”.

Saturday, April 14, 2007

Bureaucracy, heal theyself, April 8, 2007

I come from a family of government servants. So it was not a surprise when an old friend of our family, a senior IAS official, dropped in the other day. He was almost in tears because he said his college going son was ashamed of him. Father and son had been discussing potential careers the night before, and when the possibility of the IAS came up, the son shot back, ‘Dad, only corrupt, inefficient, and negative people join the IAS.’

It was a devastating verdict on the nation’s premier service. The provocation was the recent scandal over Fulbright scholars. Himself a Fulbright candidate, the son was disgusted at the way our bureaucracy had summarily rejected research proposals of some US Fulbright scholars, delayed visa applications of others from 6 to 21 months, and had even asked a few to change their subject!

Many years ago my friend, Ralph Nicholas, the charming American anthropologist, had told me that foreign scholars who wanted to do research in India often faced such humiliations. Some foreign professors even went as far as tell their students, ‘Don’t bother with India-- choose another country’. The problem, in fact, goes back to the dark days of Indira Gandhi when every American was considered a CIA spy. One of her ministers, it seems, had once been denied a US visa, and he had tightened India’s visa rules to take revenge on ‘all American scholars till eternity’. It is a pity that we have forgotten how much we owe foreign scholars for India’s intellectual re-awakening in the 19th century. Academic black humour has it that Megasthenes, Hiuen Tsang, and Alberuni would all have been denied visas today!

Evidently, visas are delayed because the scholar’s file is sent to the much burdened Intelligence Bureau (IB). Since the file is not an intelligence priority, IB sits on it for months. Meanwhile, the applicant’s career goes for a six. For thirty years, no one has dared to ask why should the IB be involved? Wouldn’t it be easier for a terrorist to come in as a tourist or for a CIA agent to come as a diplomat? Why masquerade as a foreign scholar and face humiliation? As a result of the Fulbright scandal the government has now instituted a red and green channel. But the new system is not working because the inter-ministerial committee of bureaucrats is too petrified to take a decision and routinely passes the buck to the IB.

Now we cannot have our children being ashamed of our highest civil service. The son’s remark does, however, capture the irony of a rising, confident India of the young sitting alongside an insecure, oppressive India of our malfunctioning bureaucracy. This is not about foreign scholars but the attitude of Indian bureaucrats. They get away by heaping indignities daily on Indian academics, but when their visa policy cannot distinguish terrorists from scholars then their competence is an issue.

The only way to save our bureaucracy is to reform it. When our Prime Minister took office, he said that administrative reform was his top priority. Three years later he appears to have given up. Bureaucrats, we are told, have sabotaged his well-meaning efforts. We inherited our bureaucracy from Britain, but Britain has gone and completely transformed its own civil service, making it far more accountable to ordinary citizens. Australia and New Zealand have done an even better job of administrative reform. The message is clear. If Indian bureaucrats want to earn the respect of their children, they better seize the initiative and reform their rotten system.

Wednesday, March 28, 2007

Tata buys Chrysler for $1 March 25, 2007

‘Tata buys Chrysler’ was the headline in the online daily, The Globalist, on 23 February. Its author imagines a scenario in which Ratan Tata buys the Chrysler subsidiary from DaimlerChrysler for a dollar. The famous American car company is cheap because its employees’ health care and pension liability of $20 billion has bankrupted it. The story also has a message for Indians who don’t know quite what to make of the global ambitions of their companies.

When Ratan Tata bought Corus last month, he got the entire steel industry of Britain and Holland and earned the applause of an India bent on assuming a place in the world. He paid too much but he called it ‘a moment of great fulfilment for India’. Two weeks later, Kumar Birla bought Novelis to become the world leader in rolled aluminium from which cans of Coke and Pepsi and cars are made. Once again national pride was on display. Are these purchases smart business buys? Or is it about personal egos and national honour?
After the deals the shares of both companies fell 11% on stock markets. Standard & Poor’s placed Tata Steel’s long term rating on ‘credit watch’. What would Tatas do with 30,000 expensive European workers? Others asked how Birlas would discharge Novelis’ mountain of debt. The stock markets are telling the companies that their earnings will decline in the short term even though their acquisitions may be good and strategic in the long term. What matters now is that Tatas and Birlas bring their considerable skills to Corus and Novelis and run them better.
No one could have imagined even five years ago how quickly Indian companies would burst upon the global stage. For all the hype about China, it has only a handful of truly world-class companies. By contrast, India has a much deeper and broader stable. Indian companies have also been remarkably sensible in the way they have gone about buying assets abroad. They have ventured out from a position of strength after winning victories in the domestic market. They have usually bought smaller companies to gain access to new customers or technologies or to leverage their low Indian costs. Quite unlike the Chinese electronics firm, TCL, which was so influenced by the prideful ambitions of its government (rather than business logic) that it bought parts of two famous French companies, Alcatel and Thompson. It is in trouble today as the acquisitions have drained it of cash.

The Globalist headline is a warning to Indian companies to beware of hubris. The next time they raise their mighty chests to make a big foreign acquisition, they should remember that only one out of two acquisitions succeeds and the failure rate rises with size. Only four acquisitions did well out of all those made by the 15 largest Japanese firms between 1980 and 2001. This is a sobering lesson from McKinsey’s research department. A foreign target will always appear more attractive from far away Nariman Point, and a brand is up for sale precisely because it is in trouble.
India is still an enigmatic rope trick where great companies perform magic amidst unwashed masses, corrupt politicians and negative bureaucrats. We have the largest billionaires in Asia, but the point is they are creating untold wealth for India. One of them, Mukesh Ambani and his gas discoveries could reduce our dependence on foreign energy—something that the state failed to do. Indians only need good schools, health centres, and infrastructure from the state, and they will respond with amazing prosperity for all.

A tale of two numbers March 11, 2007

Our ruling Congress Party led coalition genuinely wanted to use this year’s budget to shrink the rich-poor divide. But it failed, of course. Hidden in the budget were two items that almost escaped notice. One was the provision to hire 200,000 teachers and the other was to give 100,000 scholarships to schoolchildren. In the differing stories of these two numbers lies the answer to the question why every Indian government keeps failing to help the poor.

Although India’s booming economy is doing its bit in raising the poor, the poor also need good schools and health clinics to enjoy the benefits of high growth. It is not the lack of money that prevents them from having the most basic public goods. India spends a respectable 4 percent of GDP on education and even in this 2007 budget, spending on education (and health and rural employment schemes) has increased 35%. The failure is the result of deeper disease. Surveys show that one out of four school teachers is absent in state primary schools, and of those present one out of two is not teaching. Similarly, two out of five doctors and one in three nurses is absent from government primary health centers. There are over a million primary school teachers in India’s state system, and going by surveys, it means that 670,000 teachers may not be doing their job. So, when Mr Chidambaram proposes an additional 200,000 teachers, how can one feel cheerful?

What do parents do when teachers don’t show up? As with so much about India's success story, they find their own solutions. They enroll their kids in cheap private schools which charge only Rs 70-100 a month in fees and which are spreading rapidly in slums and villages. Even though private schools pay one third the salary of the unionized government teachers, they deliver better results. Hence, 53% of urban Indian children (and 18% of rural children) are now in private schools. This is very high by world standards. Even Chile, which privatized education in 1981, has achieved only 46.5% share of private enrollment after 25 years.

For this reason, the second number—the promised 100,000 scholarships--in this year’s budget is excellent news. It will empower parents to choose schools based on merit and give state schools an incentive to improve. Merit testing will also help to assess the quality of government schools. It might even improve the “anti-merit” image of this UPA government. I wish we could give a crore instead of a lakh scholarships!
How does one explain the discrepancy between the government’s desire to spend more on elementary education and health with the reality that more and more Indians are embracing private solutions? Let’s face the fact that our politicians have captured the bureaucracy and use the system to create jobs and revenue for friends and supporters. In many states politicians sell teaching jobs for a handsome price. Teachers, who are thus appointed for life, believe they don’t need to teach. As a result, the state is so riddled with perverse incentives that accountability is gone.

But none of the solutions being debated will bring accountability unless we recognize that the government’s job is to govern rather than run everything. The state may have to finance primary services such as health and education, but the providers could be NGOs, teachers, ‘edu-preneurs’, and they would be accountable to parents and not to a bureaucratic hierarchy. This tale of two numbers teaches that the hope for decent services for the poor may lie in such public-private partnerships.


Friday, February 23, 2007

Heroic Buddhadev 25 February, 2007

When you have been teaching bad ideas to people for a couple of generations, they tend to catch up with you. This is poor Buddhadev’s Bhattacharya’s dilemma, as he attempts heroically to break with his desperate past. To begin with, he has to contend with the pervasive envy of peasant societies in places like Singur and Nandigram. Peasants believe that society’s wealth is more or less fixed so that one person’s gain must be another’s loss. They view the social system as a zero sum game and it is hard to imagine that the overall pie may actually grow in a way that everyone will be unbelievably better off through mutual cooperation (by selling land, for example, to Tata’s car factory).

Furthermore, Buddhadev must deal with the communist cadres’ suspicion of the market, which is now so built into Bengali genes, and it is exceeded only by their general hatred of businessmen. In the 1980s, I used to work in Mumbai and I worried that our factory was next door to that of a famous European company that had been on strike for almost a year. Their Marxist trade union leader had the dangerous psychological make up of Duryodhana. Once he said at a gate meeting: “I don’t care if we sink this factory as long as the European manager goes down with us.” When this kind of attitude gets institutionalized in the mental make-up of a militant movement, the result is de-industrialization. This is what happened in West Bengal in the 1970s. Company after company left the state as the unions preferred to sink the economy rather than come to agreement with industry.

Like Deng in China, Buddhadeva is determined to make a break with this self-destructive past and bring prosperity to his people--despite themselves. He sees in the Special Economic Zones (SEZs) his chance to bring about an industrial revolution in Bengal. He realises that SEZs will only create pockets of world class infrastructure. Ideally, he would like the whole of Bengal to have world class roads, ports, power plants, but reforming is slow business in a democracy. So, you create pockets and hope the effects spill over. But in a democracy you must also face your Nandigrams, something that Deng didn’t have to think about in China.

The significance of Nandigram is that it has brought home to everyone the unfairness of our present, inhumane system of forcibly acquiring land from farmers. As Swaminathan Aiyar has eloquently pointed out, government should not be in the business of acquiring land. It ought to be a voluntary transaction between farmers and industry. And if there is a deadlock--say if five percent of the farmers refuse to sell, then it should be put to a community vote. I do hope that this is the sort of model displacement policy that the centre is working on at the moment. Because of competition between so many SEZs, I think our farmers are going to get rich beyond their dreams in the months ahead.
We are now at a tipping point, and if we don’t seize the moment, history will not forgive us. With all their flaws, SEZs will create millions of jobs and eventually lift the poor into the middle class. Fifty years hence when India’s per capita income is $25,000 per year, historians will remember Buddhadev’s vision of a vibrant, prosperous, and forward looking India. In comparison, Mamta Banerji, V. P. Singh and Medha Patkar’s India is a perpetually victimized peasant society that belongs in the garbage dump of history

Check naka blues 11, February, 2007

In my last column I described a wondrous journey along a world class highway on the Golden Quadrilateral. What I didn’t write about is the continuing, unhappy plight of truckers that I saw parked on the way, waiting to pay bribes at check nakas. It is such a common sight that I didn’t notice it until a foreigner asked, “What are all those trucks lined up for?” I had to explain what an octroi post is. We walked over to an idling truck driver, who told us that he had been waiting for six hours, and it looked like the bribe was going to double this time because the Sahib’s daughter was getting married. He also has to worry about police posts, and a normal journey, which should take 24 hours, takes 44 hours. He spends half of it waiting and negotiating bribes.

So, a new irony is upon us--the speed of trucks has risen 40 to 60 percent with good four and six lane highways, but we remain mired in the old inefficiencies of bad governance. A transport system is at the heart of global competitiveness, and for a country with the second highest growth rate in the world, octroi nakas are a huge drag. They also prevent India from becoming a common market. Municipalities levy octroi in order to earn revenues, but it is an inefficient and obsolete tax that has been phased out in all modern nations.

Vijay Kelkar had held out the hope of eliminating octroi. He proposed sensibly that all indirect taxes should be merged into a single, universal Goods and Service Tax (GST). From this tax, municipalities would be compensated for the loss from octroi. Mr Chidambaram followed up by announcing that the GST would come into force in 2010. The nation took the historic step towards GST by enacting state Value Added Tax last year. Since there are huge legislative changes and negotiations required if we are to meet the 2010 deadline, the government shouldn’t lose time and it should set up an Empowered Committee on GST in the coming Budget.

Check nakas not only slow down the movement of goods across the nation, they destroy the moral character of our people. Transparency International reports that India’s trucking industry pays Rs 22,200 crores in bribes each year. This is equal roughly to what India’s truck drivers earn annually by way of salaries. If you are a truck driver, how do you explain this to your son? Is this the India in which he will grow up? Our governance failures are not only the failures of institutions--they also have a moral dimension.

“The Sanskrit Mahabharata came to be the continuing repository of crisis in the public discourse of classical India" writes the scholar, David Gitomer. Our contemporary world is also “in permanent crisis, a world whose karmic dominoes of human weakness reach into past and future horizons until bounded by creation and apocalypse”. Just as the Mahabharata had a problem with the self-destructive kshatriya social institutions of its time, we have a problem with all our governance institutions. The great insight of the science of economics is that people respond to incentives. Smart governments are able to reward the good and punish the bad behaviour of its employees. Britain, which gave us many of our institutions, has quietly transformed its governance institutions in the past 20 years. We must do the same. Reforming is never easy—it is like waging a war at Kurukshetra—but it must be done.

Don’t say ‘what’, tell me ‘how’ 28 January 2007

I was driving down from Jaipur to Ajmer. But I could have been anywhere. The six lane highway was a smooth beauty and the pot-holed India of the PWD was a hazy memory. Then the wondrous colours of Rajasthan appeared and for an instant I thought I had entered a certain paradise, which seemed to unite modernity with tradition, world-class infrastructure with the ineffable loveliness of old India.

What makes the Jaipur-Kishangarh section of the golden quadrilateral special is that it is a true public-private partnership based on transparent legal contracts that might be a model for the world. Such contracts have created a new level of trust and are enabling India to access funds, skills and technologies from the best companies in the world, who will build and operate our roads, ports, bridges, airports, and container trains, and transfer them to the state in 15 to 30 years. Gajendra Haldea, an unusual economist-lawyer of integrity and conviction, drew up these model contracts at the Planning Commission. As a result he is the most hated man in Delhi’s infrastructure ministries. This dharma warrior has demolished opportunities for corruption. Soon we shall have 20,000 km of highways, hundreds of private container trains, and many private ports and airports—all in public private partnership. These quiet steps teach us that reforms are not about the ‘what’ but the ‘how’. They are less about economics and more about law.

Before 1991, we believed that infrastructure was a natural monopoly of the state. If a road had to be built, the PWD would do it. In that era of ‘high bureaucratic modernism’ private contractors were treated like scum to be bilked. So, we got roads with pot holes. The same mentality obtained in ports, telephones, and power plants. In 1991, the government was bankrupt and it turned to the private sector to build power plants, highways, and telecom. But it did not know how to manage the process. Neither did many officers and ministers have honest intentions. We lost a decade in a bungled era of licence fees, crony capitalism and sweetheart deals whose symbol is Enron. Serious infrastructure companies came and ran away.
A new era of genuine public-private partnerships began with the new telecom policy based on ‘revenue sharing’ and the excellent Electricity Act of 2003. These two landmarks showed that we had finally learned the principles of open access, free competition, transparent bidding, and a level field for all players. We also chose some good regulators, who understood that the state ought to be an enabler and an umpire and not a protector of its own monopolies. Haldea’s contracts for highways and freight trains were the next logical step. Whereas the telecom policy has released an amazing revolution, bringing untold benefits to millions, the Electricity Act sadly remains unimplemented. Aside from this one depressing sector, we seem to have found the answer for our physical infrastructure. It is time now to extend public-private partnerships to social infrastructure, and give the poor some reprieve from failed government schools and hospitals—let them choose their provider.

Indian public officials are good at talking but bad at delivering results. But even if they possessed the implementation skills of a Sreedharan at Delhi’s Metro, I would still opt for public private partnerships. The reason is that they focus the state’s attention on governance and the private sector’s on building national wealth. Moreover, it is an idea uniquely suited to our democracy where ordinary citizens can do extraordinary things if the state will let them.

Saturday, January 13, 2007

If good men do nothing, January 14, 2007

Considering that the year gone by was one of our best, it is dismaying that Indians continue to be so down on politics. 2006 was the fourth successive year of unprecedented prosperity. India emerged on the global stage, and its arrival was hailed in part by the Indo-U.S. treaty, which finally de-hyphenated it from Pakistan. Justice caught up with three murderers of high status who had subverted it with rishwat and sifarish. Many states began to implement the Right to Information Act. And the new SEZ policy raised hopes for a true industrial revolution.

Yet Indians continued to believe that their politicians are mostly ugly. For good reason. 25 percent of MPs have a criminal record. In 2006, politicians hit India where it hurt the most. By introducing OBC quotas in education, they cynically continued to divide and rule us, undermining the little excellence that we possess. When they sneaked in the creamy layer, true nastiness was revealed.

It is not healthy for the world’s largest democracy to have such a poor opinion of its political class. It devalues public life. As it is, Indians are mesmerized by the figure of the Renouncer, who stands “tall and splendid, a theatrical figure in ochre robes” as Louis Dumont described the sanyasi. I know too many fine Indians who could make a difference but they refuse to join politics.

Western philosophical tradition also devalued the political life. Plato was the chief culprit. In The Republic, he describes the world of human affairs in terms of shadows and darkness, and instructs us to turn away from it and pursue the sublime life of contemplation. Aristotle, however, tried to redeem politics. The basic fact of human life, he said, is that we are not alone and must learn to live sensibly with others in society. Thus, attending to civic matters was central to his idea of the virtuous life. But Aristotle’s thinking got submerged by the contemplative spirituality of the Christian Middle Ages, until the 14th century when Petrarch found merit in politics, and this marked a transition to the active political life of the Renaissance.

In the 20th century Hannah Arendt attempted the formidable task of rescuing the worldly life from the depredations of philosophy and religion. She had also to contend with Marx, whose politics exalted ‘labour’ at the expense of an equal commitment to all members of society. Communism as practiced by Lenin and Mao did untold harm to the idea of a civic life of mutual respect among equals.

In India, the Gita and later Gandhi rescued the political life. Gita’s notion of karmayoga gave new meaning to the life of the ordinary householder, who has to make a living, look after his family, and live as a citizen in society. Gita tells him to live in this world selflessly with the renouncer’s “attitude”. It’s ideal of a “secular ascetic” was a fitting reply both to the rituals of the Brahmins and the Renouncer’s life.
We find it easier today to nostalgically admire vanished heroes of an earlier generation who had fought for freedom. But the practice of democracy continues to require the same heroic qualities. Decent Indians need to look into their hearts and take the plunge before criminals completely swamp our politics. If the best shun politics, they will leave it to the worst. All that is necessary for evil to triumph is for good men to do nothing, Edmund Burke reminds us.

An Indo-Chinese curry December 31, 2006

My son lives in Shanghai and I recently spent two weeks with him. It gave me a chance to meet and talk to ordinary Chinese people. What came through in my conversations was their passionate desire for business success. They feel that even the poor are gaining from their commercial triumphs in the global economy, and are proud that China will soon become a great, middle class nation.

I also met a local communist leader and businessman, who had recently returned from India. He asked me confidentially, “Is India’s bureaucracy as bad as all that?” He said that Chinese businessmen in India only talked about India’s red tape. He admitted Chinese officials were also corrupt, but he couldn’t fathom why Indian officials put up so many hurdles. He was amused by India’s communists as well. He joked that if you mixed Chinese and Indian communists into an Indo-Chinese curry, it would improve the Indians but it might deteriorate the Chinese.

The evening after I returned to Delhi I turned on the news on television. In two separate programs, I caught prominent leaders of the Left and the Congress talking about India’s future. What came through unfailingly was their deep and fundamental hostility to business and the middle class. Our Leftists did not give two hoots about what would make Indian companies successful. Neither did they care if our entrepreneurs failed or succeeded. Unlike the Chinese, they felt no pride that India had achieved one of the strongest economies in the world. These debates, like so many in India, had a strange 1970s air, discussing issues that were settled in the world long ago with the fall of communism. One of the reasons for our confusion is that none of our leaders has really bothered to explain to the common voter how 15 years of slow but consistent economic reform has changed the lives of our people. And how they have added up to make India one of the world’s best performing economies.

Perhaps the greatest failure of our reformers is that they have not clarified how the reforms are helping the poor. Chinese leaders do not face this problem, but we are a democracy and our leaders need to remember that much of Margaret Thatcher’s energy went not into creating reforms but into educating her constituents that reforms were good for the whole of Britain. I sometimes wonder why Manmohan Singh and his dream team of reformers don’t go on television and educate us similarly night after night. Because they fail to do so, people fall hostage to the bad ideas of the populists. It is not enough to talk of “inclusive growth” or assert that we must grow at 10 percent—you must explain how this affects ordinary lives. Only thus will you create a constituency for thorough going reform. They must also admit honestly that India’s pre-1991 controls and subsidies were the chief causes of our poverty, and there is no point in bringing them back. An honest nation must come to grips with its past.

I am glad that the prime minister finally broke his silence this week about India’s notorious red tape. He realises that the inability to implement administration reforms is the other big failure of his government. As one of the best years in our economic history draws to a close, action on these two fronts would be the PM’s finest New Year resolutions.