Tuesday, October 3, 2017

Creating new growth drivers for the economy post the IT Services boom

As the clamour for macro-economic intervention reaches a feverish pitch, Prime Minister Narendra Modi continues with many micro-economic initiatives that he hopes will aggregate to a big enough positive impact overall on the economy.
On the list are a number of initiatives in the railways, power, connectivity, roads, irrigation, digitisation, urban mass transportation etc. Several big and small measures like direct benefit transfer (DBT), demonetisation, goods and services tax (GST) etc have been either put in place or are underway to plug the leaks and wastage in the system and to mobilise resources for creating assets for common use and improving underlying efficiencies.
Incremental growth from these initiatives should begin to add up soon and together they may deliver a bigger impact than each, individually.
But, against the backdrop of a sharp fall in economic growth, in the first quarter of the year, measures like demonetisation and GST have come under severe criticism with calls for a stimulus for the economy to overcome what some see as a cyclical downturn.
A general stimulus may not be the best use of resources as observed by Sajjid Z Chinoy in his recent article. Besides exacerbating the underlying economic problems such as current account deficit (CAD) etc, it may end up achieving little by way of longer term gains.
While growth has reduced sharply in the last quarter, with demonetisation and GST as possible contributory factors, the problems of growth run deeper.
Lacking A Growth Driver
The economy today lacks a primary engine that can drive growth. For much of the last 20 plus years, IT services export acted as one of the primary drivers for growth. Generating lucrative primary and secondary jobs and driving up the demand for offices, housing, white goods, consumer goods, transportation, automobiles, travel, education, electronics, software and so on. Creating a huge multiplier effect and driving the overall growth of the economy.
There seems to be no such growth driver in play at the moment with IT services growth slowing down considerably as it enters a huge restructuring phase. Replicating the success of IT services into other service areas had limited success.
Two opportunities were lost during these years, the effect of which we are feeling now - one in building world-class infrastructure (productive assets for the economy) and two in creating global brands for products from India.
Though the demand for manufacturing goods picked up and jobs in the manufacturing sector were generated, mostly the market was taken up by foreign companies, effectively exporting many jobs to other countries. India’s famed consumption story failed to produce global brands and businesses that could create new engines for growth.
Much of the buoyancy in government revenues was wasted on growing government expenses (doling out social benefits through extremely leaky mechanisms) resulting in poor investments in infrastructure development required to break the constraints holding back the economy.
Secondary growth in the services industry was not easily transportable to the rest of the world (although it equipped people with skills that enabled them to relocate resulting in lost talent).
Merchandise exports stood at $274 billion against a targeted $900 billion by 2017registering a slow average growth rate of around 4.7 per cent. The target of $350 billion by 2020 for the IT sector is now looking rather difficult to achieve, with its growth slowing down to around 5.3 per cent.
There are a number of microeconomic factors that keep our export uncompetitive like the cost of logistics, speed, low supply of skilled labour, shortage of irrigation etc.
Fixing the infrastructure deficiencies would remove some of the constraints to growth, improve general efficiencies and will soon start providing the incremental gains which could well add up to substantial gains in the short and medium term. Longer trend growth will, however, depend on building new competencies and capacities.
In depth Work Is Necessary To build Our Competitiveness In The World’s Markets
The Prime Minister and his team are therefore right in attempting to seed future growth through missions like, StandupIndia, StartupIndia, MakeInIndia, SkillIndia, Atal Innovation Labs, cleaning up and expanding capacities in education etc. Already much time has been lost and it will be a while before these seeds start having an impact on the economy. Remember, years of positive policies, pro-active support and numerous initiatives of governments at the centre, state and in cities created the IT boom. Including tax exemptions and preferred access to resources. Such a stimulus is required for establishing the foundations of a long-term growth trend.
New opportunities have appeared in the form of the world moving to greener options for transportation and energy, digitisation of the economy, robotics, greener lifestyles etc, and we cannot afford to miss them.
The government is also right in providing the context for this work by way of initiatives such as smart cities, bullet train, rural electrification, renewable energy missions, digital India, mass urban transportation projects, defence production and modernisation, expansion of the space programme and so on.
But, mechanisms need to be worked out on how to engage the private enterprise on a large scale in these missions, especially for the small and medium sized enterprises (SMEs) and start-ups. This is no easy work but critical to creating the flow of opportunities and resources towards building new capacities and capabilities in the economy, which can act as the source of future long-term growth. It requires an overhaul of the government procurement process with a bias towards sourcing from local SMEs and start-ups and one that emphasises quality and innovation over price and risk aversion. Maybe the model being pursued by the ISRO, which is currently working with more than 400 firms (including big private enterprises and a large number of small local firms) for components, material supplies and fabrication, can provide the template for the playbook for such a mechanism.
If the government can create a vibrant market for the private enterprise to participate in these initiatives, it will be providing one of the most critical elements for seeding the creation of huge future market opportunities for the Indian enterprise.
The added benefit could result in a faster movement towards a New India.
This article first appeared on Swarajya

Saturday, September 23, 2017

The fate of bolder initiatives may lie in the hands of the timid

Some friends were over for dinner and the talk took a turn towards, GST, Demonetisation, Oil prices etc. Some known Congress supporters (beneficiaries of the erstwhile corruption driven systems) and Modi haters (yes some like these are still friends with me), laughed at the idea of building infrastructure - 'where is it' - they said? 
‘The more you build flyovers the more traffic snarls you will have around them. ‘
‘So what about the metros’? I asked.
 ‘Well it is a good idea but being badly done they said. Everybody is making money hand over fist.’ - they retorted. 
‘And the oil prices, why are they so high? I’m a common man, it is affecting me’ - angry not just with demonetisation & GST but also the high price of petrol.
Now, these are people who so eloquently describe the problems India has, as they’ve been doing so for years now. Ask them for a solution and they have none. 
All that the government is doing (has done so far) is going to have a positive effect after a lag.
Meanwhile, the cynics and skeptics will look good.
My hope lies with the poorer, less educated, less vocal voters. In their hands may lie our fate to move ahead with bolder initiatives for the future or we may succumb to the short-term fixes that perpetuate the interlocking mess that we find ourselves in, now seven decades after we got the chance to determine our own destiny.

Tuesday, August 15, 2017

Building India’s Generative Capacities

The main stream talk on India’s economics is dominated by macro economic thinking - interest rates, liquidity, savings rate, FDI and things like that. The debate seems to have has hardly shifted from macro economic thinking to look at the underlying micro economic reality that shapes the growth trajectory and potential for the economy.
The emphasis of this government has been on better delivery of social benefits to the people and improving systemic efficiencies. This includes digitisation of the benefit delivery and transactions, to plugging leaks and wastes, cutting out the inefficiencies in running of the core services like power, railways etc., and creation of new Infrastructure like roads, rural electrification, housing etc. Things that have a positive impact on peoples lives.
These are certainly commendable objectives and the performance so far has been pretty good.
But the government needs money, a lot of it, to carry these objectives forward. So far the response to this has been around eliminating bottlenecks in FDI, plugin revenue leaks. etc. These are good short term measure, with many derived benefits to the economy over the longer run. But they are unlikely to give large enough gains for the future needs. This can only be bridged by much higher growth. It is here that the government needs to focus on microeconomic factors impacting the growth of small and mid sized businesses.

Growth and productivity problems

In Germany for example, virtually all businesses are small to medium sized - more than 99 percent. Numbering more than 3.6 million companies and providing more than 60 percent of all jobs in Germany, the “German Mittelstand” (mid sized companies) contributes almost 52% of total economic output. (The result of a very supportive government policy & support framework.)
In comparison in India, the micro enterprises (less than 10 employees) dominate with 94.9% of the SME sector. Small enterprises (10-100 employees) account for 4.9%, and only 0.2% are medium (>100 employees). SMEs in India employ 40% of the country’s workforce, almost 80 million persons. Numbering 44.8 million enterprises and contributing 17% to India’s GDP.  
All of this underlines how critical SMEs are to the goals of achieving higher investment, growth, and jobs. But clearly, there is a problem of growth and productivity here.

Low growth and productivity, not under reporting is the core problem

Take another set of statics - MSMEs with turnover of up to Rs 50 crore (Approx 8 million dollars ) accounts for only 20 per cent of the total tax collection through corporate tax though they account for 96 per cent of the total registered companies. 
The GDP contribution numbers and the tax contributions from this sector are a strong indictors that this segment is not as vibrant as it should be.
It’d be wrong to construe this as an indicator that this sector is full of unscrupulous elements and therefore must be dragged into the tax net by plugging the under reporting of their incomes. 
The truth is most businesses struggle to grow in the hostile Indian business environment and then stagnate as restrictive forces impinge on their growth. Most Indian businesses work on extremely thin margins, with one years margins/profits or just cashflows, becoming the input into the next years growth. Squeezing out taxes from them when they still have small revenues and especially cash from them in the form of advance taxes constraints their ability to reinvest in growth.
But even if we do assume for a moment that these businesses are under reporting and most of them are crooks and therefore paying very little by way of direct taxes, the fact of the the matter is that they are still generating a lot of economic activities and therefore corresponding indirect taxes. The new GST system helps plug the leakages and under reporting making this even better. 

Not doing well when it comes to making things

Take two other numbers that should concern the government. One, more than 50% of the MSMEs are into retail and trading, with less that 25% of them involved in making things (manufacturing). Second we now have a trade deficit of nearly 52bn dollars with China.
The numbers are a strong indicator that we’re not doing well when it comes to making things. Small businesses, especially manufacturing are struggling to grow for many reasons and need help. A large part of the blame has to fall on the broken eco-system, the result of a history of short sighted government policies & inadequate support for this sector. A vibrant StartUp-MSME sector is not just important to economic growth, it is strategic to our future as a nation.

Good beginning but much more is needed

Announcing the Union Budget for 2017, Finance Minister Arun Jaitley said MSMEs having revenues less than Rs 50 crore (approx 8 million USD) have been given a cut in corporate tax rate to 25%, from 30% earlier. Also, for the businesses that have turnover up to Rs 2 crore income would be presumed to be 6% of the total turnover of the assesses, instead of 8% for tax purposes (if gross receipts are received through digital means).
This make sense because it can have a larger impact without denting the government coffer much. The reason being, this sector accounts for only 20 per cent of the total tax collection through corporate tax, though they account for 96 per cent of the total registered companies. The annual revenue lost estimated due to this measure is estimated at Rs 7,200 crore (approx 1.2 bn USD).
Spelling out the rationale behind the move to reduce the tax rate on MSMEs, the finance minister said : "Medium and Small Enterprises occupy bulk of economic activities and are also instrumental in providing maximum employment to people. However, since they do not get many exemptions, they end up paying more taxes as compared to large companies. As per data of financial year 2015-16, 285,000 companies making profit of less than Rs 1 crore (about 200,000 dollars) paid effective tax rate of 30.26 per cent while 298 companies making profit above Rs 500 crores (about 85 million dollars) paid effective tax rate of 25.90 per cent."
This is good but clearly not enough.

Making more cash available for growth

Budget documents shows that in 2014-15, companies with turnover of Rs 50 crore and more accounted for 76 per cent of the total tax collected by the government. Out of this, companies with turnover of more than Rs 500 crore (approx 80 million USD) accounted for 56 per cent of the total corporate tax collected, 15 per cent by companies with turnover of Rs 100-500 crore and only 5 per cent by companies with turnover of Rs 50-100 crore (approx 8-16 million USD).
One measure the government could take to boost growth in this sector, is exempt payment of Income tax upto say a turnover of Rs 500 crores (40 million USD). That’d make a lot of money available to these businesses to reinvest in growth and innovation. 
And this won’t be without precedence. The IT services sector for years enjoyed tax free status and many local concessions to fuel its growth. Later, receiving the benefit of incrementally increasing taxes to the full extent over a 10 year period. The Indian IT industry is today estimated to reach 350bn USD by 2020. 
So why not for the SMEs? They’re just as important to create future growth and world class companies from India. If a case can be made for lower individual taxes to boost consumption surely there is a case for tax exemptions to boost investments. 
A back of the envelope calculation suggests the government foregoing 90,593 crores (about 14bn dollars a year) which would work out to around 6% of the total tax collection. Not much if it results in faster tax revenue growth in subsequent years and a more secure long term future.
And even when the business pays no income tax, it is paying by way of indirect taxes and contributing to the economy in many other ways. What this could do is give a big push to growth in this sector, adding both to government revenues and job growth.
Something the government should be happy with going into the next elections.
I will explore some more initiatives in follow up blogs that could reverse the situation and create a vibrant Start-up and MSME eco-system.

Thursday, December 1, 2016

Primary health care and nutrition an area of concern gets a helping hand


It is a beautiful winter morning. The mood is festive as little children accompanied by their mothers and at time fathers, stream in to the free medical camp organised for the children from the neighbouring slums (Vidhate Vasti) by the Aundh Shakha of the RSS (Rashtriya SwayamSevak Sangh) in Pune.

Children from the age 2.5 to 15 years are invited to the camp, about 198 turn up at the the camp that goes on well into the afternoon. A team of four doctors listen to their complaints and do a basic clinical examination. Free medicine is provided for ordinary ailments like cough and cold, with nutritional supplements provided wherever necessary. More involved cases are referred for further medical investigation and treatment to other doctors and hospitals.

The free medicines come courtesy the PMC (Pune Municipal Corporation), the doctors offer voluntary service for the day. Volunteers from the RSS contribute their time to spread the message in the community and help around at the medical camp.  The cost of such a camp is about Rs 2000-3000, spent in renting the desks and chairs, snacks for the volunteers and sweets for the children. 

This camp is the fourth this year organised by the Aundh Shakha of the RSS. The earlier ones organised at Indira Vasti, Kasturba Vasti and Chondhe Vasti brought in about 125-150 children each. A permanent clinic is also set-up at Kasturba Vasti for follow-up check-ups at a minimal registration fee of Rs 10/-

RSS runs hundreds of such camps across Maharashtra and India every year, trying to contribute its bit to alleviating the deficiencies in an important area of Public health - Primary Healthcare and Nutrition for children. 

A Study of Prevalence and Household Socio-Economic Determinants of Malnutrition among School Children in Mumbai Metropolitan Region conducted by Sanjay Rode and published in the Global Journal of Human Social Science states that the incidence of malnutrition among school children is higher in slums.
Severe malnutrition among males is higher in Ghatkopar, and among females, it is higher in Kalwa. Highest severe incidence of malnutrition is found among males and females of 6-8 age groups. The children of illiterate mothers have higher incidence of severe malnutrition. But the incidence of severe malnutrition among children is higher, even with the father’s secondary education.
The health status of schoolchildren is related to future physical growth, intellectual capacity and income. But malnutrition at an early stage among children can impact physical growth and intellectual capacity.
 -The Indian Express 

The problem is widespread with IndiaSpend reporting - Up to 86% of the rural population (717 million people) and 82% of the urban population (309 million people)  without health expenditure support.

It is therefore laudable that organisations such as the RSS are providing relief through such voluntary efforts.

What is particularly admirable is the breadth of geography and length of time over which such programs have been running e.g. Jankalyan Samiti a self-help organisation affiliated to the RSS has been running free clinics and blood banks for over 25 years now. Or consider that the National Medicos Organisation, also an affiliate of the RSS, is an organisation of qualified doctors and students of allopathic system of medicine, covering all the medical colleges and states in India. Organising and motivating allopathic doctors for serving under-privileged sections of the society, settled in the tribal villages and slum areas across the country. NMO has been active for over 37 years now, running various health check-up programs in schools, free medical camps and carrying out relief work in disaster hit areas.


“We’d like to do more but it is hard to make time. We need more people to give a little of their time to such work.” - It’s not a complaint, the Swayam Sevaks look quite happy going about their work at the camp, clearly motivated by their desire to serve and be of use to their people.

Thursday, November 24, 2016

A Case for a Universal Collaboration System for the Government

The corner stone of the Digital India program is to make Government services more easily accessible to the ordinary citizens. 

The objective is to deliver timely service to the citizens with least cost and hassles. The resulting benefits are greater accountability and transparency in the citizen-government interface. 

The use of social media to gather ideas and grievances and report progress adds to the improvements of the this interface (others being digital portals, smart phone apps and public email ids of ministries and government functionaries) and is likely to bring about a much better impact than say the RTI in improving services to the citizens. 

It turns on it’s head the ‘mai-baap’ raj that continued much after the British left. Where people were treated as subjects of an empire rather than the masters of a republic, in which the government functions as a servant to its citizens.

But while this is a great initiative, it address only the deficiencies of the external exchange (between the government and the citizens). The inner working of the government is still riddled with inefficiencies and lack of transparency. A lot of that inefficiency and lack of transparency comes from the use of paper based systems within the government that make it hard to track, search and analyse data and information e.g. while citizens can file income tax returns on the digital portal and receive acknowledgements on their email ids and mobiles phones through SMS, the inner working of the income tax office like issuing notices, internal noting etc. all happen over paper. 

“Where some projects have been initiated to create electronic document filing and tracking mechanism, the outcomes have been uneven and limited. Sometimes, a combination of public and private communication networks are used to get work done without concern for security or privacy. Disparate systems are creating information and data silos, making it difficult to secure and track information.” 

Problems with today’s systems

  • Inefficiencies because of incompatibilities between systems (multiple platforms in use to communicate and collaborate)
  • Large amounts of data / knowledge gathered / captured during the process is fragmented and therefore hard to leverage for further analysis, insights and action.
  • Trail of conversations and action taken, broken and therefore hard to trace.
  • Networks don’t get formed (incomplete/broken network graphs), leading to under-utilisation of the expertise within the government
  • Sensitive information could reside in public networks 
  • Possibility of loss of Information - because it resides in people’s personal accounts and devices
  • A universal collaboration platform (like AADHAR)

Just as AADHAR has been useful in creating a universal, unique and digital identity for the citizens, making it easier to track and exchange information between different public and private agencies for replacing the inefficient erstwhile system of multiple ids, a high quality universal collaboration platform in government establishments can make for much improvements in efficiency, effectiveness and transparency in the inner working of the government. 

The benefits of such a common collaboration platform would be as follows

  • It would bring about uniformity and compatibility, ensuring easy movement of information between various government departments, agencies and working groups.
  • It would create an overarching system to handle exceptions, coordinate and manage the working various government agencies and departments
  • It would ensure a greater data security and privacy (with discontinuance of use of public communication networks)
  • Enable the creation of a central repository of information gathered in the normal course of work which could be mined for references and intelligence, to further improve government response
  • It would creates a government social network that can comprise of people from across departments, retried government officials and consultants who can collaborate over ideas, problems and issues
  • It’d create a platform to build more advanced and specialised collaboration solutions for different needs of the government.

Possible Approach


The platform can be built using open source software and open standards data for message exchanges using easily available building blocks. Here is a suggested five step program the government can follow to adapt collaboration technologies for their internal functioning.

  • To start with all correspondences made over the electronic mail (regardless of the system in use) should be archived at a central location for reference, analysis and scrutiny in the future. This will also ensure recovery from any data loss due to breakdown or accidents.
  • Make it mandatory to use electronic mail for internal and external exchange of correspondence in addition to / or instead of paper based correspondences.
  • Encourage the use of more collaboration mediums like video chat, chat etc. as a way to speed up the inner working of the government departments. PM Modi has used such a system (as part of the PRAGATI program) to great effect.
  • Develop dashboards and workflow applications specific to different government departments on top of the basic messaging and communication systems to further improve efficiency and deepen collaboration.
  • Open up the platform for other people to develop applications / tools that can leverage the platform** to provide enhanced functionality
(**like Aadhar or the IRCTCs Railway booking system) 

Benefits

“A study done by Gary Hamel & Michele Zanini estimates a 3 trillion dollar loss annual loss to the US GDP due to unnecessary bureaucracy in US companies. It could well be that India is losing massively due to the slow movement of the government bureaucratic machinery.”

There is tremendous benefit to be had in making the inner working for the government more effective, efficient and transparent. Collaboration systems can help break artificial barriers impeding progress, helping in turn to arrive faster at decisions, leveraging the experience and information present in the government network and accumulating intelligence to make more effective decisions. 

Often due to a system of transfers and lateral movement of the government staff, a lot of effort in expended in learning and re-learning the subject and matter at hand, slowing the response of the government. Collaboration systems can enable quicker sharing of knowledge, capture of that knowledge in searchable form for future reference and create knowledge networks amongst the government staff, for faster transmission of the learning.


PM Narendra Modi himself uses a video conferencing system to review and speed up projects. Meanwhile hundreds of cases in the courts and tribunals move at snails pace due to lack of knowledge, information sharing and oversight.

Saturday, June 11, 2016

The Economics and Politics of Water



I am with a delegation of businessmen invited by the RSS to witness the drought relief work done by them. We're heading out to see the drought relief work done by them in Patharadi Tehsil of Ahmednanagr district. 

It must be about 46-47 degrees Celsius in the sun. Not a blade of green grass for miles and miles. Not a drop of water to be seen anywhere. The rivers here used to be perennial till a few years ago, now dry. The wells all around are dry as well. Water tankers bring drinking water once in a day to these villages. Life here is tough. 

Nimba Daitya Nandur (Pathardi), our first stop is a village were work is going on on 4 “Patticha Bandhare”  (check dams) to help increase water level in the region. This village, with approximately a population of 2800, was no 1 in district in past for onion production but due to water crisis since last 4-5 years production has fallen drastically. 

The heat is unbearable as we step out from our AC cars to to have a closer look at the work being done.


A Longer-term Perspective to Drought Relief Work


RSS's Jankalyan Samiti is working on 5 drought relief work in Patharadi Tehsil of Ahmednanagr district, to help increase Water level/resources in the region. 

Everywhere we go, the villagers are excited to tell us their story. They’ve been waiting for us for hours despite the heat.  Work has been going on through the day and night to remove the silt clogging the natural drainage system, the river is being deepened and widened to collect more rain water. The longer term plan is to make these rivers perennial again with a series of check dams. For the moment, the plan is to collect enough rain water and let it seep into the ground to recharge the wells nearby. The expected seepage into the ground would be about 10 times the water collected overground, recharging the nearby well for a year round supply of water.

In Village-Mohajdewale (Population of 3100) e.g. the check dam being build will collect around 15 crore liters of water with about 10 times that amount seeping into the ground, recharging all the nearby wells for a year round supply of water.

The work goes beyond providing immediate relief with the objective to ensure long term water security, which in turn would make these villages self-reliant once again.


Economic Impact of Water

The water resource development work done by the Jankalyan Samiti has been transformational for these villages in Ahmadnagar district. A study conducted by the Praj foundation (which provides support for this work) for similar projects elsewhere, showed an 8 fold growth in farmers income within a year from a sharp growth in agricultural produce and life stock population. 

The study also showed a doubling of the area under irrigation, multiplying the number of farmers benefiting from it by as much as 3 times in some villages.

The sarpanch of the village we’re visiting tells me that if they have water, there is little else that the farmers need.  

The program is run with a contribution of at least 25% of the cost from the farmers themselves. Wider participation is expected as stories of the benefits spread. The idea is to teach them responsibility & self-reliance and move them away from dependency on political masters. It’s a new kind of cooperative movement with only a situational coming together for collective long term benefit. No rigid and permanent structures. 
Each project covers approximately 250 acres or more, deep into the hinter land, rejuvenating the natural drainage systems and traditional water resources.  It’d be difficult for any canal system to reach here. The initiative ensures water security without the need for big projects that cause ecological damage & people displacement.

Similar work is going on all around, on hundreds of such projects lead by Art of Living foundation, Maharashtra Government’s Jalyukta Shivar, & through the Central Government’s MNREGA program. The rains will not just bring immediate relief but also start their journey towards more self-sufficient and prosperous villages.

Impact on Politics

Agriculture now accounts for less than 14% of India’s GDP,  but still is a source of livelihood for about 50% of our people, with water as the core need. 

Most of India’s land and rivers are rain fed. Especially so in peninsular India. Rains are uneven & erratic across time and geographies (as most natural systems are). Water management is an absolute necessity. But age old traditions of water conservation have been forgotten with detrimental consequences.

In the light of this, the water resource development work being done by voluntary groups and under government programs is commendable and much needed.

Investment in water resources and farm sector has already given great benefit to Madhya Pradesh with an agricultural growth averaging over 20% over multiple years 

Water resource development, taken together with other initiatives by the government, like Water efficient irrigation systems, Soil Health Card, Organic Farming, Farm Insurance, Rural Roads, Rural Electrification, DTS, etc., can bring about a great transformation in our village economy. It would spur the growth of the agricultural economy, kicking-up the overall economic growth. It would revive the local economies, making the overall economy more complex and therefore more resilient. The second order of growth would come from food derived products, creating millions of new jobs.

Multiplication of the farm and village income should bring about a qualitative shift in village life. It should hold back people wanting to escape the miseries of village life. 
It should free people from the dependence on dole. And with that will come a deep impact on the direction and quality of politics. 

How then will the politics of reservations, doles, favours and inter-state river water disputes, village versus city - play out then?

Monday, May 16, 2016

Modi@2 and what could be his Agenda till 2019



Modi government will complete 2 years this May. Has the government done enough to lay the foundation of a transformation that India so badly needs? Has it done enough to return to power in 2019? And what should be its agenda for the three years it still has in office?


Transformation

As a keeper, guardian and manager of the natural and economic resources, the government has the primary responsibility of managing them in a way so as to creates an environment where people can go freely in pursuit of their happiness and their enterprise. 
India has critical challenges to address here in managing it’s natural and economic resources. Improper management of these resources impoverish people and creates impediments in their pursuits.

Natural Resources - We have a serious limitation here. Bad management of these resources so far has resulted in poor air quality, water shortage, soil degradation, food and water contamination etc., seriously threatening the wellbeing of individuals and communities and imposing huge costs on the economy. Is enough being done to conserve, rejuvenate and make best use this wealth?
Human Resources - Over 400 million young Indians need jobs, a way to express themselves and explore their potential. It is critical to engage their energies not just to mitigate social discontent but to make for a nation of happier, richer and more confident people.
Financial & Economic Environment - This is the foundation of all economic activities. Here again poor management worsens the distress originating from limited resources. The more effective we are at managing and building these resources, the more we multiply our potential for growth and economic strength, the greater our economic strength, the greater the degree of our freedom.

These are at once big challenges and great opportunities for India at the moment. Poor management so far has resulted in painfully slow progress for our people as measured against almost all counts of Human Development Index.

So how has the Modi government fared when measured against the above framework to effect a transformation? 

The government does seem to be working well in reversing this trend. 

A combination of programs for Clean Energy, expansion of Energy Efficient Public Transportation, creation of a new Digital Infrastructure, Rejuvenation of Rivers & Farms and Pro-Environment Policies by the government are likely to make a significant positive impact on the environment & management of natural resources. 

Platforms such as the JAM, Rural Electrification, eNAM, Stand Up India, Start Up India, Rural Roads, Skill Development etc. are opening up immense opportunities for the young with the potential for transformational impacts on their lives. 

Innovative economic measures such as a new mobile payment mechanism, cleaning up the banking system, an under control budget deficit and inflation, attracting historically high FDI, and creating new opportunities in the manufacturing sector all bode well for the immediate growth prospects of the economy. The government has also done well in opening up new business opportunities for large and small enterprises through initiatives such as private defense production, smart city projects, solar power, infrastructure projects etc. 


Accelerating the Transformation Agenda

Despite the many good initiatives addressing the three pillars of transformation, a long list can still be made of things yet to be done. And it is important to recognise that the government cannot attempt to do all of this by itself. The government must focus its agenda on creating a platform that enables private enterprise to participate in these initiatives. The task is enormous and participation of the private enterprise is the best way to expand the resources available for such transformational projects. The government can never match the execution focus of the private sector, although it can provide the execution capacity via capital expenditure.

Finding innovative ways to engaging the private enterprise is badly needed. Take an example of the much hyped Namami Gange project. It is not very difficult to involve private enterprises for water treatment and putting in place pollution control equipments and systems. Such an involvement makes for a good public relations case for the private enterprises. Currently, we see several dedicated individuals running sharamdaan programs. While extremely well-intentioned, these volunteer efforts can never match the organisational & execution capabilities of enterprises. Why not extend Modi’s clarion call of volunteer work from individuals to enterprises? As the Ministry of Power has shown, such participation need not even be subsidized. The private enterprises only need to be shown a profitable opportunity to participate in a government program at a large scale and they will be happy to contribute to a social cause which makes them money in these tough global economic times.

Another area that could benefit from large scale private investment is expansion of quality education. The several opportunities which India has today will remain unexploited if the underlying delivery depth does not catch up. Opening up the education sector to private enterprise with a focus on enabling regulations to ensure quality is perhaps the biggest reform this government can take up in the next three years.



Winning 2019

First the bad news - without a growth in its core vote share, BJP risks losing many state governments to a combined opposition. With it comes the constant threat for obstruction and slow adoption of transformational initiatives, driven by vested interests. More importantly it can eat into Modi’s authority within the party giving room for disgruntled elements to manufacture trouble and create unnecessary distractions.

But here’s the good news - Congress doesn’t look like it has learnt one bit from its 2014 defeat. It has done nothing in the last two years to recreate the capacity to mount a serious challenge to the Modi government in 2019. And because it is the only likely centre of gravity for a possible alternate government, Modi isn’t yet at risk of a 2004 style debacle.

But to win 2019 comprehensively (which he would need to deliver on his longer term economic & social transformation vision)  Narendra Modi needs to engage people at three levels - create clearly identified personal economic benefits, drive emotional engagement and nurture a positive sense of community.


The Agenda for 2019

Modi government seems to be doing a lot for benefiting individuals at a personal economic level like - affordable life Insurance, access to cooking gas, skilling programs, farm insurance and so on. But is this enough to win in 2019? Maybe not. What the Modi government seems to be falling short on is in emotionally engaging the people and building a strong sense of community. 

Modi’s popularity across India came from him reminding the people of the best of our history. He filled the voters with hope and belief that those glory days of the past could be resurrected. It is time to retell those stories in greater depth, with a wider perspective and to spread them further. Maybe changing school books might not be possible without kicking up a storm. But it should be possible to create dedicated history channels on TV and social media, to tell the stories of the best of our past. Linking our heritage to the direction of the current economic program via available media like Doordarshan and AIR and exploiting the reach of social media is critical. The experiment of the DD Bharati channel should be replicated to cover our history, tradition, geography and modern day achievements of our people. 

Temples and festivals have always been at the centre of economy, culture and community for centuries in India. It is time we rejuvenate them and strengthen those linkages. The minimum the state and local BJP governments can do is to undertake measures ensuring cleanliness and improving facilities to make these places popular again, including to the young who should be persuaded to view this from a socio-cultural lens rather than a religious one. 

Rarely do we see a celebration such as when India won the world cup in 2011. People poured out on the streets and celebrated till late into the night. It was a spontaneous outpouring of joy and emotion. Sports can bring us together as a people cutting across the boundaries of casteism and regionalism. Bringing the junior world cup football to India in 2017 is a great start. More investment needs to be made to propel us upwards into the league of top sporting nations and instil greater belief and pride in ourselves. Besides it would be a very useful channeling of energies of our young. 

The lack of pride, confidence and emotional connect with our traditions, community and land, makes our people easy prey for the mongers of hopelessness, fear and defeat, in other words people who play the politics of entitlement, poverty, caste, regionalism and division.

The economic benefits can be promoted and pushed alongside three hitherto unexploited channels for emotional engagement - history, temples, and sports. 

In summary, the Modi government needs to find innovative ways to co-opt the private enterprise for a quicker and larger transformational impact. And to win in 2019 Narendra Modi must work on emotionally engaging the people into common cause and strengthening their bonds with the community and the nation. 


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The author wishes to thank Aashish Chandokar (@c_aashish on twitter) for his very useful inputs in making this article more readable
The article originally appeared in an abridged form in SwarajayaMag on 9th May 2016