Do it yourself

After the conclusion of the recent Haryana Assembly elections, a lot of people, including some of the senior most political analysts & observers, wondered why the Congress party lost the election, contrary to the popular perception. The ruling party was witnessing serious anti-incumbency issues. The Congress party, being the principal opposition party, had raised all the pertinent issues concerning the common people. Congress leader Rahul Gandhi carried an effective campaign. Almost every poll projected a clear lead for the Congress Party.

At a gathering last evening someone asked me “how do you explain the repeated poor performance of the Congress Party, despite the rising popularity of its main leader?” My answer was simple, “Congress leaders are telling people what problems (inflation, unemployment, nepotism etc.) they are facing, as if people are not aware of their problems. Congress leaders, however, do not offer a solution for any of the peoples’ problems. That is why they lose elections.”

Yesterday, I ended my note highlighting a potential problem for investors (see here). Some readers suggested, “it would have been better if I offered some solutions also, lest it is a meaningless exercise”.

So, here are my two cents for augmenting the government fiscal balance. Of course, as usual, some of the readers may find these utopian. Notwithstanding, in my view these are practicable, effective, and worth sharing for generating a wider discussion.

Go back to villages

Since independence the government has focused on development of industrial and urban infrastructure in the country. It has actively participated in the endeavor through a large number of public sector enterprises; besides offering a myriad of tax and other concessions to the private entrepreneurs. Now, the country has a reasonably strong industrial base. Many of our industries are globally competitive. We have a strong set of entrepreneurs and risk takers. It is therefore high time when the government should reset its priorities and turn its primary focus on agriculture. To meet this end, the government may consider:

Exiting all industrial and banking activities and actively undertaking agricultural activities. It should develop barren lands; develop water bodies and irrigation facilities; develop and use technology for enhancing productivity; give employment to landless farmers; take risk with new technologies & crops; partner with marginal farmers in consolidating their land and do farming on that land - just the way it undertook industrial activities immediately after independence.

Undertake, on mission basis, the task to re-skill the underemployed farmers and farm labor. The farmers and their family members may be trained as dairy workers, domestic help, nurses, tourist guides, artisans, etc. Expecting the construction sector to absorb all surplus farm labor is a bad idea.

Develop at least 5 very large special agri export zones in rocky and desert areas of central and western India and undertake export of farm produce as a commercial activity. These zones may be developed in public, private or joint sectors. Besides, it may acquire farm assets, especially rice farms, overseas to reduce water intensity of Indian agriculture.

Encourage various states to make bilateral or multilateral agreements for procurement, processing and trading of farm produce and movement of labor within states.

Nationalize all rivers. Develop a national water grid. Set up a national water regulator, who shall work out a water sharing formula for all states and union territories every three year and maintain adequate provisions for managing droughts. The idea should be to ensure that not a drop of river water flows into sea from India. Develop a water distribution grid on the models of roads and power grids on a mission basis.

The aim should be to grow agriculture and allied sectors to become at least 40% of the economy. This only can assure sustainable employment for Indian youth, and orderly urbanization of India to promote services, (especially tourism) and rapid industrialization.

It has taken more than seven decades for Indian industries to reach a stage where the government may consider fully exiting the industrial activities. It may take 2-3 decades for Indian agriculture to reach a stage where the government will be able to exit farming activities completely. I am definitely not suggesting nationalization of the agriculture sector. I am just saying that the government should undertake the activity on a commercial basis to provide the sector with much needed escape velocity in terms of capital, technology, and risk-taking capability.

Pragmatic business regulation

The government must substantially liberalize rules and regulations governing businesses in India. It should make the regulatory pragmatic, allowing a great deal of freedom to businesses.

For example, an autonomous sustainability commission may be set up. The commission may comprise representatives of the scientific community, civil society, and judiciary. Instead of prescribing a rigid dogmatic environment clearance regime, each business must be permitted to submit a customized sustainability plan to the commission. The plan must specify how the enterprise proposes to address the sustainability concerns arising from its business. The commission may accordingly award environment clearance.

A pragmatic, business-oriented regulatory framework would stimulate growth, encourage larger CSR activities, generate more employment and hence ease pressure on fiscal.

 Exploring India – Part 2

In the past three weeks our team travelled through eight out of ten administrative divisions of Madhya Pradesh (MP), covering thirty six out of fifty two districts in the state. I may share some key points from the socio-economic and political assessment made by the team.

Socio-economic assessment

From socio-economic perspective, MP comprises of easily distinguishable three states –

1.    Tribal areas that are extremely poor; lack basic amenities (especially health and education); not properly connected; agrarian; highly contended; and mostly integrated with nature. Though the non-tribal elements and cultures have started to make inroads in these areas from the fringes, the impact so far is limited. Mobile phones, packaged snacks, pan masala (chewing tobacco sachets), motorcycles (scooty), small solar panels, shirt-pants, denim, plastic crockery, are main signs of what is commonly known as “modern civilization” in the tribal areas of the state.

In a state that is least divided on religious lines, one key area of struggle in the tribal areas appears to be between missionaries attached to various religious organizations and social workers who do not subscribe to any particular religion. While all try to help the tribal population, there is a persistent strife.

2.    Modern cities like Indore and Gwalior that have emerged as prominent centers of higher education and IT services. These cities are as modern, developed, diverse and cosmopolitan as any other major city in the country. The rate of growth in this part is high

3.    Rural areas and smaller cities & towns that sustain on agriculture & horticulture, trading of farm produce, food processing, public sector undertakings, mining and government services. In the past one decade this part of the state has gathered some steam and is witnessing higher but still below potential growth. The crops have diversified to more cash crops, horticulture and forest produce; tourism has improved due to better road and civil aviation development; mining, electricity and numerous defence units have also seen faster development.

The inequalities in these three parts of the state are stark and inexplicable. City of Indore is counted amongst the top centers for higher education in the country and is ranked as the cleanest city in the country. Merely 100 miles away from Indore is Khandwa district, home to Korku Tribal who live in abject poverty and ignorance. The tribal population in the adjoining Burhanpur, Betul, Chhindwara districts areas is also not placed any better. In fact there seems to be little connect between the three parts of the state.

The state has tremendous potential for religious, historical, ecological, adventure and leisure tourism. Unfortunately, it has not been able to attract rich tourists beyond Khajuraho and Tiger Safaris. A large proportion of the tourists visiting the state are local budget tourists or poor pilgrims. The development trajectory of the state appears lacking a clear vision. A small business community owns most of the industry and mining business and follows a typical colonial business model. The native tribal population, who is the legitimate owner of the abundant natural wealth of the state, is mostly deprived of the benefits.

Thankfully, unlike the neighboring UP and Rajasthan, the educated youth of the state is still not eager to migrate to Mumbai, Bengaluru or foreign shores. A large proportion of these youth is content with whatever is available in their home towns; though the restlessness may be increasing with each passing year.

Political assessment

The state is scheduled to have assembly elections in the next seven to eight months. However, the political activities are still subdued and limited to some inaugurations and facilitation rallies by the incumbent Chief Minister Mr. Shivraj Singh Chouhan (BJP) and Mr. Kamal Nath (Indian National Congress), who claims to be the primary challenger to the incumbent chief minister.

Not much political activities are visible in hinterlands and at block & village levels; except that the aspiring candidates have started putting up random posters to increase their visibility to the decision makers in Bhopal and Delhi.

The religious fervor that is visible in neighboring UP is not present in the state except in Bhopal, Indore and Ujjain. The politics therefore is mostly focused on caste, class and local personalities.

The incumbent government appears to be facing significant anti-incumbency; but the primary challenger is not very popular outside Jabalpur and Narmadapuram divisions. Though the internal conflict within the Congress party has reduced significantly after departure of Jyotiraditya Scindia; the acceptability of Kamal Nath may not be significant in northern (Chambal, Gwalior, Sagar divisions) and eastern (Rewa and Shadol divisions), areas of the state.

The other parties like BSP, SP, AAP etc. have insignificant localized presence and may not be a relevant factor in the election. Surprisingly, despite abject poverty, exploitation and inequalities there is no presence of the communist movement in the state.

Though it may be early days to make a clear assessment, as of now the state seems to be heading towards a close contest, like 2018, with BJP having a small lead. The situation could change if either of two major parties announces a change in local leadership. The central leaderships of both the major parties have a limited role in the local politics of the state; as their appeal may be limited to a few large cities only.

Also see Exploring India – Part 1

 योगस्थ: कुरु कर्माणि सङ्गं त्यक्त्वा धनञ्जय |

सिद्ध्यसिद्ध्यो: समो भूत्वा समत्वं योग उच्यते ||2:48||

Be steadfast in the performance of your duty, O Arjun, abandoning attachment to success and failure. Such equanimity is called Yog. (Srimad Bhagavad Gita, Chapter 2 Verse 48)

One who prudently practices the science of work without attachment can get rid of both good and bad reactions in this life itself. Therefore, strive for Yog, which is the art of working skillfully (in proper consciousness). (Srimad Bhagavad Gita, Chapter 2 Verse 50)

In the present times, ‘politics’ is a struggle to find balance between economics and popularity.

Good economics (fiscal prudence; balanced monetary policy; equitable taxation; etc.) usually does not get popular votes. Whereas poor economics (subsidies; helicopter money; unsustainable incentives like tax concessions, lower rates, subprime credit; etc.) may get popular votes in the near term, but it creates enough problems (inflation, unemployment, lower growth etc.) for the people as well as politician in power over mid to long term.

Unfortunately, most modern day politicians show a natural bias towards popularity over economics as it helps them in gaining and retaining power. Recent visits to three states going to elections in the next couple of months has shown that Indian politicians are no exception to this general rule.

Politicians from all parties are promising a variety of freebies to lure the voters. Free electricity and direct cash in the bank accounts of adult women are two most popular promises. Aam Aadmi Party (AAP), which is governing Delhi presently, is showcasing the Delhi model of governance (free electricity and improvement in public education) in these states and gaining support. In fact it is emerging as the main contender in Punjab and a strong challenger in Uttarakhand. The principal opposition in UP (Samajwadi Party) and Uttarakhand (Congress) have certainly taken a few leaves out of theAAP book. In UP and Uttarakhand, the ruling BJP is apparently seeking votes on the issues of good governance and development. However, on the ground, emphasis on subsidies, freebies and revival of Hindu nationalism is conspicuous.

My interactions with people in these states indicate that no party in Uttarakhand and Punjab may get a decisive mandate; though Congress seems to have a marginal edge in Punjab. In UP BJP may retain power with a clear majority, though its tally may be much lower than 2017 elections. If I may summarize the input received from various media reports, opinion polls and other sources, the other two states, i.e., Goa and Manipur, may also see an indecisive mandate.

In all the states, religion and caste remain key considerations for most political parties. In UP and Uttarakhand, predominantly Hindu states, all parties are vying with each other to prove themselves more Hindu than the others. The constitutional mandate of “secularism”, that used to be a key theme of non BJP parties in previous elections, is conspicuous by its absence from the main narrative.

Unsurprisingly, however, none of the parties seems to be concerning itself with the teachings of Hindu scriptures. For example, the above cited two verses of Srimad Bhagavad Gita, propound some quintessential qualities for the leaders (or politicians in modern context), viz., steadfastness in pursuit of righteous duty, equanimity, equipoise, and detachment.

The Lord says perform your righteous duties without bothering about success or failure; without attaching yourself with the results. Listening to what Lord says, the politicians today must be pursuing Good economics – adopt policies which would bring the prices down, create productive employment, make taxation equitable, and make growth inclusive and sustainable, even if pursuit of these policies does not fetch enough votes.

It is not that various governments have always ignored this guidance and pursued only poor economics. But they have definitely always shown a bias towards poor economics. Usually, the governments resorted to good economics only when it was inevitable, i.e., when the economy faced a serious crisis, e.g., Congress in early 1990s and NDA in late 1990s and early 2000s.

Obviously, the economic policy has been mostly driven by the political ambitions of the party in power, rather than the steadfastness and righteousness.

Of course, many would argue that this is not true about the incumbent government at center. I would certainly like to hear the arguments to find if there is any material difference.