Return and reforms

Will Manmohan Singh’s return to the finance ministry result in some reforms?

Pranab Mukherjee, an over-rated, over-respected and over-portfolioed cabinet minister presided over the finance ministry at a time when the results of UPA government’s gross mismanagement of the Indian economy began to show. His remedies worsened the malaise—not only has the economy slowed down, domestic and foreign investors have been given reason to believe that India’s economic managers are not only unserious, but also nearly banana. Retrospective taxation—Mr Mukherjee’s gift to economic policymaking—is an abomination and exemplifies how awfully perverted the UPA government’s thinking has been.

So, with Mr Mukherjee out of the cabinet (and undeservingly heading for Rashtrapati Bhavan) and Manmohan Singh taking over the finance portfolio, what are the prospects for reforms? None at all, argues the astute Swaminathan Anklesaria-Aiyar. Quite a lot, contends Sanjaya Baru. The truth may be in the middle, but despite Mr Baru’s valiant cheerleading, the odds are stacked up in favour of Mr Aiyar’s prognosis.

Samanth Subramanian sought my views for his report in The National. Here is my full response to his questions:

Q. Do you think the PM has the political capital he needs to make bold changes? Do you think, for that matter, that the government will risk making possibly unpopulist changes with the elections less than two years away?

Whether or not there will be any reforms depends on how much Manmohan Singh is willing to face down the Congress party establishment in order to secure his own place in history. It’s not so much about political capital but as he said in his 1991 speech “Sarfaroshi ki tamanna ab hamare dil mein hai/Dekhna hai zor kitna baazu-e-qatil mein hai.” Does he have Sarfaroshi ki tamanna?

Q. How much can any possible economic reforms redeem Manmohan Singh’s otherwise awful leadership of this UPA government?

What Manmohan Singh can do at this stage is revive the narrative of reforms, by setting out a long-term road map and by implementing the ones he can. The signal this will send will help set the economy back on track and hopefully redeem his own record.

Q. If you had to make a short, three-item wish list of reforms you hope he could enact, what would that list be?

Liberalise education, liberalise labour laws and start fixing land acquisition. Toying with fuel subsidies, reversing GAAR etc is mere signaling…the fundamental strengths of the economy can be reinforced only by liberalising education, labour and land acquisition. Playing around with financial markets and FIIs is mere tinkering. He must do what is necessary to revive direct investment, both domestic and foreign.

Cheap tablet, unaffordable mistake

The macabre antics of the India’s human resources development ministry over Aakash are the equivalent of Marie Antoinette’s “let them have cake” attitude

The matter is so serious that mincing words is the irresponsible thing to do. There is a demographic bulge on the horizon and two crucial areas will determine whether that bulge will result in a demographic dividend or severe demographic discount. The first is whether the 30 million children born every year will be educated and skilled enough to be productive members of modern society. The second is whether the Indian economy will generate enough jobs to provide them with adequate livelihoods. The median age in India is around 26 today, which means half the population is under that age. The general shortage of skilled manpower in everything from the armed forces to IT companies to cafe chains indicates that a substantial fraction of this population is not employable—because of the failure of India’s education system.

Unless something is done ten years ago, the demographic dividend will be diluted. Unless something is done now, the demographic dividend will be wiped away, leaving India with a demographic discount. As before, people will call it the “problem of overpopulation” instead of calling it by its real name—the problem of under- and misgovernance. Government exists to ensure the well-being of all its people. It is perverse to contend that population must be controlled because the government is incapable of serving it. It is the government that must boost its competence to ensure that it can perform its functions satisfactorily regardless of how big or small the population is.

In India’s case, the traditional and massively failed approach is to treat both education and jobs as if they were contagious diseases: insulated behind high walls, preventing ordinary people from having easy access to them. The government has failed to deliver education and jobs. So after over sixty years of failure, it’s time to try a different approach. Liberalise education (and labour) and let the solution begin to scale at the same pace as the problem. (See Ajay Shah’s article in this month’s Pragati)

The UPA government’s right to education act is not the answer, although some may claim it’s an improvement over the past. Instead of liberalising education so that the private sector can deliver education at prices and qualities that the people want, the UPA government has placed the entire education sector under the thrall of the Delhi Straitjacket. Disguising a bad policy—which is bound to increase corruption in society—in the language of “rights” may be increase the feel-good factor among sections of the public, but we are still moving in the wrong direction.

Why is all this relevant to a discussion on a cheap tablet computer? To show how deeply wrong Kapil Sibal’s priorities are. First, instead of working on a war-footing to work out how to strengthen the delivery of primary and secondary education, Mr Sibal is focused on the higher education sector. The clever excuse might be that primary education is a state subject. That still doesn’t mean that he should be tilting at the windmills of higher education at the expense of the taxpayer. The education cess imposed on transactions is grotesque—what does the government do with its ordinary tax revenues that it has to collect more money, ostensibly to improve education, but then subsidise fast depreciating assets solving a non-existent problem?

Second, as Atanu Dey has extensively written in the context of the One Laptop Per Child project, what Indian education needs is good teachers and good schools—not gadgets. Once you have good teachers and good schools you might want to supplement it with gadgets. But go look at any central or state government university, college or polytechnic—look the quality of the teachers, their pay scales, their morale, their working conditions and their work culture. No gadget, however cheap or indigenous, can help when campuses are decrepit shells of what they ought to be. How can anyone with a conscience accept that providing college students with a cheap, indigenous computer will even begin to provide them with education and skills they need to be productive members of society?

Third, let’s say—for the sake of argument—that some college students do need computers. Let’s further assume that they cannot afford the Rs 10,000 that can purchase a decent netbook. Should this mean that the Government of India must immediately procure these from a vendor (while lying to the public that the product is “indigenous”)? That’s what Mr Sibal announced initially when trying to create international headlines with the news of a $35 ‘indigenous’ tablet.

Clearly something—most likely reality—didn’t work out. So Mr Sibal has another announcement. “There have been some problems with DataWind (the company the government had contracted with) I must confess,” he admitted. “Therefore, I have got into the act. The IT ministry has got C-DAC and (state-run) ITI Ltd into the act, and I am going to ensure that this product is fully indigenous and truly an Indian product.” Mint, quoting unnamed government sources reports that the “..government is now planning to launch an upgraded version of the tablet as a completely indigenous product under the supervision of a high-powered committee comprising members from the Centre for Development of Advanced Computing (C-DAC), department of information technology, the IITs at Kanpur, Mumbai, Chennai and Jodhpur, and some public sector units.” (Aside: The message to investors is beware of contracts you sign with the Indian government.)

So a bureaucracy will design a gadget and a public-sector unit will produce it, before a subsidised product is ‘sold’ at Rs 2,276. What is the justification for the implicit and explicit subsidies that are being thrown at a gadget, especially in the computer market where the brutal forces of Moore’s Law relentlessly lower prices faster than the speed at which two Indian government departments can organise meetings?

Here’s a simpler, cheaper solution: why not get the government give vouchers (of say, Rs 10,000) to every student it intends to reach. Let the student use it to buy the computer of his or her choice from the open market, paying the difference in case the choice is more expensive. This is still an unnecessary expense but may be a far more efficient way to go about putting computers in the hands of college students. There is no need for Datawinds, C-DACs, IITs, ITIs or any public sector units at all.

Finally, it should shame every thinking Indian that a cabinet minister—ironically, one in charge of education—can get away with lies that every educated person knows are lies. Can anyone, anywhere in the computer industry claim a product is indigenous without being laughed at? After claiming that Datawind’s gadget was indigenous, Mr Sibal now says the new government-produced gadget will be really indigenous. These are lies. Should the national motto be so cheaply sacrificed at the altar of an inferiority complex? When it comes to educating our kids, maintaining our health or defending our country, the right approach is to procure the best that the money can buy, whether foreign or indigenous. Indigenousness is not a virtue, even when it is practical.

In the economic history of India, the UPA government will be held singularly responsible for squandering an excellent decade—of high growth, healthy revenues and a strong fiscal position that it had inherited from its predecessor. It has wasted eight years pushing dogmatic approaches to education and resisting labour reforms. Mr Sibal’s antics—there’s no more civilised way to describe his championing of the cheap tablet—show just how frivolous the UPA government is on a matter intimately concerning our future. “No schools, eh? Let them have a cheap tablet then.”