Let there be Million Indias but No Hungry Child in One India

Huston we have a problem! However, this one is not for Huston to resolve.  It is a Himalayan problem, that we, the dweller in the shadows of Himalayas, have to comprehend, come to terms with and fix.

The problem is "Unity in Diversity". I expect a question, why is that a problem, is that not a virtue? Exactly, that is what we have been told and taught all thru' our school, and is now ingrained in our brains. We are a land of diverse cultures, multiple languages, different faiths, blah blah blah and yet we are united. Really? Common, really?

Even at the height of India's dominance of the world (at that time India controlled approximately 33% of World's GDP), India was not the geographical India as we know it today. India was multiple independently ruled states that stretched from Indian Ocean in the south, to Himalayas in the north, and from today's Afghanistan on the west, to today's Bangladesh on the east. That kind of independent states structure did two things to our region (if I were to call India as a region rather than a country)

a) it brought a lot of prosperity to individual states, within this region, and the region as a whole.

b) From time to time it allowed external forces to invade this region and loot the wealth, since individual states were not all very militarily strong, and sometimes played one against the other, ultimately leading to Britishers subjugating the entire region.

So, what is the take away from history?

a) By uniting we have solved the problem of security, we are a much more secure region, that can not be subjugated in bits ad pieces, as was possible earlier, when the region was divided

b) Uniting these diverse parts, means we are living a common minimum program. Which essentially means, we as a united nation, only do those things, run those programs, that are acceptable to all.  In a setup where there are diverse set of cultures and creeds and faiths and different development levels, you know what happens, there is very less that come out as common, and lot of good things of different geographical areas, cultures, faiths are left out, since they are not acceptable to others. So, what has it done to the region? Well, it has left us with sub optimal growth. It has wasted multiple generations in this region. It has spread poverty equally!

It wont be an exaggeration, if I were to say,  we are not united, we are bound together. We have tied our hands and feet to each other so that all of us can sink together!

What we must do. We must overhaul our federal structure. Make each state autonomous. In the new structure, center should have control over only three things - Defense, Foreign Relations and Monetary Policy for the region's currency, everything else should be run by the States. Each State must choose its Prime Minister, these Prime Ministers can then choose a President for the entire nation. With a center that is only responsible for Defence, Foreign Relations and Monetary Policy, the buck will securely be with the respective States so as far as development and growth is concerned. Let there be no ambiguity in who is responsible for children going to bed hungry.

Cutting the nose to spite the face

If there is one word for the phrase "Cutting the nose to spite the face" it is "Bandh".  Who loses the most - the weakest in the society - daily wage earners. They just won't earn anything on this day. They have to depend on their savings, if any, to scrape through. Common man is the next, as the factories shutdown, they produce less and the produce gets costlier, we don't feel it immediately, but that is the net effect. However, Bandhs do not just mean stopping activity, it is in fact a license to destroy what we have. Bandhs are not considered successful until, a few buses and trains are burned, few shops are looted,  pitched battles are fought with the police, a few firing incidents happen. Band is historic when a few die! Netajis on their part court arrest. They are very respectfully taken in special police vehicles and put behind bars. They are fed and then given a drop to their residences before their favorite prime time serial starts in the evening.

Government registers a case of sedition against the cartoonists for disrespecting the national symbols. What about the netas and political establishment that disrespects the humans and takes away from them their lively hood.

Estimated loss to the economy because of today's Bandh - Rs2000 crore. If we add up all the losses that the country has suffered because of negative political activism till date, it will put to shame all the losses from all the scams put together. 

Mamta Vs Manmohan - economically speaking

When it comes to politics, Mamta wins hands down. 

I watched her press conference announcing withdrawal of support to UPA. Trigger for the decision, as she mentioned, were two issues - diesel price hike and FDI in multibrand retail. Both the issues economic in nature. 

Question -  does she know more about economics than Manmohan Singh? Should Mamta decide country's economic policies?

A quick comparison, (from wikipedia)-

Mamta's educational qualification - 

Banerjee graduated with an honours degree in History from the Jogamaya Devi College, an undergraduate women's college in southern Kolkata. Later she earned a master's degree in Islamic History from the University of Calcutta. This was followed by a degree in education from the Shri Shikshayatan College. She also earned a law degree from the Jogesh Chandra Chaudhuri Law College, Kolkata.

Manmohan's educational qualification -

He attended Panjab University, Chandigarh, then in Hoshiarpur, Punjab, studying Economics and got his bachelor's and master's degrees in 1952 and 1954, respectively, standing first throughout his academic career. He went on to read for the Economics Tripos at Cambridge as a member of St John's College. He won the Wright's Prize for distinguished performance in 1955 and 1957. He was also one of the few recipients of the Wrenbury scholarship. In 1962, Singh completed his studies from the University of Oxford where he was a member of Nuffield College. His doctoral thesis "India’s export performance, 1951–1960, export prospects and policy implications" was later the base for his book "India’s Export Trends and Prospects for Self-Sustained Growth"

Mamta's early career - 

Banerjee became involved with politics while still in school, joining the Congress (I) Party in West Bengal and serving in a variety of positions within the party and in other local political organizations. As a young woman in the 1970s, she quickly rose in the ranks to become the general secretary of the state Mahila Congress (1976–80).She was a college student in the mid-1970s.

Manmohan's early career - 

After completing his PhD, Singh worked for the United Nations Conference on Trade and Development (UNCTAD) from 1966–1969. During the 1970s, he taught at the University of Delhi and worked for the Ministry of Foreign Trade with the former Cabinet Minister for Foreign Trade, Lalit Narayan Mishra. As the Minister of Foreign Trade, Lalit Narayan Mishra was one of the first to recognize Singh's talent as an economist and appointed him his advisor at the Ministry of Foreign Trade. Singh and Mishra first met, coincidentally, on a flight from India to Chile. Mishra was on his way to Santiago, Chile to attend an UNCTAD meeting.

In 1982, he was appointed the Governor of the Reserve Bank of India and held the post until 1985. He went on to become the deputy chairman of thePlanning Commission of India from 1985 to 1987. Following his tenure at the Planning Commission, he was Secretary General of the South Commission, an independent economic policy think tank headquartered in Geneva, Switzerland from 1987 to 1990.

Mamta's track record  -

In 2009, Mamata Banerjee became the railway minister for the second time. Her focus was again on West Bengal. She neglected her duties as a railway minister to concentrate on electioneering in West Bengal.

She led Indian Railways to introduce a number of non-stop Duronto Express trains connecting large cities besides a number of other passenger trains, including women-only trains. The Anantnag-Qadigund railway line of the Kashmir railway that has been in the making since 1994 was inaugurated during her tenure. She also declared the 25-km long line-1 of Kolkata Metro as an independent Zone of the Indian Railways for which she was criticized.

Reuters reported that "Her two-year record as railway minister has been heavily criticized for running the network into more debt to pay for populist measures such as more passenger trains."The Indian Railways became loss-making in her two-year tenure. Even before stepping down as railway minister to become the Chief Minister of West Bengal, she declared that she would be able to handle both the portfolios together. Her nominee Dinesh Trivedi from her party succeeded her as railway minister.

On 14 March 2012, Dinesh Trivedi announced the annual rail budget 2012 that included an all over hike in passenger fares, ranging from 2 paise to 30 paise per kilometre for reasons of safety, along with network expansion and associated modernisations. The rail fare had not been hiked for nearly a decade  putting Indian Railways in ICU as far as its financial viability was concerned. The proposed fare hike would have added 4200 crores to railways income, which while paltry compared to its expenses, would still have saved railways from becoming bankrupt. The budget received enthusiastic support from a wide cross section of society including the general public, industry groups and all five Rail Unions. However, the fare hike proposal in the budget was fiercely opposed by Mamata Banerjee. Although Trivedi initially tried to defend the budget by pointing out that it was necessary for making Indian Railways stronger, Mamata Banerjee forced him to resign as Railway Minister on 18 March 2012

Manmohan's track record -

Following the advice of International Monetary Fund in 1991, Singh as Finance Minister, freed India from the Licence Raj, source of slow economic growth and corruption in the Indian economy for decades. He liberalized the Indian economy, allowing it to speed up development dramatically. During his term as Prime Minister, Singh continued to encourage growth in the Indian market, enjoying widespread success in these matters. Singh, along with the former Finance Minister, P. Chidambaram, have presided over a period where the Indian economy has grown with an 8–9% economic growth rate. In 2007, India achieved its highest GDP growth rate of 9% and became the second fastest growing major economy in the world.

Singh is now a strong supporter of globalization, seeing India's immense labor capacity as a path to delivering Indian goods in a worldwide market and eventually relieving large-scale poverty.

Singh's government has continued the Golden Quadrilateral and the highway modernisation program that was initiated by Vajpayee's government. Singh has also been working on reforming the banking and financial sectors, as well as public sector companies. The Finance ministry has been working towards relieving farmers of their debt and has been working towards pro-industry policies. In 2005, Singh's government introduced the value added tax, replacing sales tax. In 2007 and early 2008, the global problem of inflation impacted India.

Now, I let the readers draw their own conclusion. A litmus test for each one of us though, if you were to send your kids for economics education, who would you send them to - Professor Mamta or Master Manmohan? 

True Federalism

Is India not too big, too complex, too diverse, too varied to be driven by one set of policies and one vision.

Different parts of India are at different development levels, they are grappling with different set of problems, priorities are different. Trying to impose same set of policies whether economic, or for social development,  from a central command and control structure is not working. It is slowing those parts of the country that can grow faster and is compromising those parts of the country where focus has to be on the basic social development.

There is too much control with the center, it is time to restrict that and give states the authority  and responsibility to chart out the course that suits them the best and hold them accountable.

Let the center only handle defense, foreign affairs and ministries related to strategic research and development, for the country as a whole, rest everything including the finance and economic policies should be with the states. There is perennial fight going on between the center and the states with respect to dividing the tax money. Let the center only levy the minimum that is required to maintain the  ministries under its control, rest of the taxes should accrue to the state that is generating the commensurate revenue.

Today, numerous policies and programs are stuck just because not all the states agree to them. Even if the programs and policies are good, they get stuck because they seems to be pushed from outside (center) and because of partisan politics.  We can change that. The states should be able to decide what they want implemented and what they want to block. FDI in retail, insurance, policy on natural resources, reforms in banking, in agriculture, list goes on, all of these should get decided at state level. A mechanism must be created where even if only one state wants to implement a policy it should be allowed/enabled to do so, without waiting for the rest of the union to agree to it. It should be possible to create companies / business entities /legal entities that operate in a state, as if they are operating in an independent country.

This will make state governments answerable to their electorate. Today, bucks gets passed around, state governments blames center and center blames states, development and hence the people suffer. No one knows if the poor development in the state is because of faulty union policies or faulty state policies.

State elections should become more important than the union government elections. The political parties should focus more on putting their best candidates at state levels, they should focus on governing the states better, making them competitive, and improving the lot of people in the states that they govern. This will only happen if the states become more powerful and manage more of their affairs themselves.

I know the present state of the state governments and their governance record is pathetic. In fact, that is precisely the reason why I am suggesting, that we change the structure such that we take away their ailbi of always blaming the center for all the ills. The first principal of good governance and good management is to hold someone unambiguously responsible and accountable for it

It is clear and has been clear for a long time that our current system - both political and administrative - is broken,  what is required is overhauling of the engine and not just change of oil.

Before Status Quo takes over

Manmohan Singh,
Finance Minister,
Government of India

Subject: 6 things to do before status quo takes over

Sir,

Congratulations on taking over the additional charge of Finance Ministry! (Thank God, Pranab Mukerjee is out and so, hopefully, the 1980's economic thinking).

People expect change. They have high hopes from you. Don't let this opportunity slip by. If you wait, status quo will take over. Here are some of the items that you may want to start with.

Get rid of the changes in tax laws with retrospective effect. Make a statement, or come up with a policy stating that changes with effect from back date won't happen going forward.  

Get rid of GAAR, it is arbitrary, ambiguous and open to interpretation. If you must tax transactions that happen abroad but involve assets in India, then make it mandatory for the asset to change hands in India as well, to a newly registered entity. Let that asset gets valued independently and then tax it as per exiting norms. What I am proposing may not be best possible solution, as I am not an expert, however the idea is to take out ambiguity, arbitrariness from proposed GAAR.

Untangle the wires in telecom sector. One of the showcase sectors of our economy, a sector that is an enabler for larger economy, is now bogged down in procedural and legal hassles. The guilty must be punished, but please don't look at maximizing the money thru' auction  and cripple the growth of this industry. Don't kill golden egg laying goose.

Announce a plan to completely get rid of diesel subsidy. Put a timetable in place, clearly showing, when the entire energy sector is going to get decontrolled and deregularized. The money thus saved, should help reduce fiscal deficit and some should get pumped into research for renewable energy.

Implement GST, all the work has already been done. Give it a final push and get it implemented. Roll out multibrand FDI initiative, at least let those states that want to implement it get started. But ensure that those states don't go back and force the businesses to shut down, when the government changes. That will be a kiss of death for the Indian economy.

Put better administrators in charge of government departments. Put some kind of status reporting mechanism in place for all government employees. Hold them accountable. Inefficiency is rampant. Meetings get pushed. Leaves are taken in good measure. Holidays are plenty. Now and then there is a strike.

You know more than anyone else, it is a lot about sentiments and feel good factor. Restore it.


Your Truly,