Monday, October 5, 2009

Have more government inspectors to remove corruption

When Rabindranath Tagore was about 12 years old, his father Debendranath took him on a tour of North India. On their way, they stayed in a cottage near Bolpur in Birbhum district where eventually Tagore would establish The Vishva-bharati University. Debendranath would tell his son few stories and anecdotes. In his autobiography, Jiban Smriti, Tagore alludes a few. One of them told by Debendranath is as relevant today as it was then.

In a Zaminder's house, the milkman would sell milk diluted with water. In order to stop the corruption, a person was appointed to look after the milkman. Unfortunately, it was found that the quantity of water in milk went up. Then the Zaminder appointed another person to inspect the first inspector. But milk became more watery. As more and more inspectors were appointed, the milk soon took the color of blue sky.

Does it sound similar to what we have in Indian government today? The industrialist L.M.Thapar (if my memory serves right) said few years ago that the government somehow assumes that all businessmen are thugs and all the government inspectors are as honest as saints. I think that a little more trust toward businessmen could go a long way in removing corruption.

My sense is that it may have to do with our ancient caste system where businessmen and traders , the Vaishyas, came third in the hierarchy of caste after the Brahmins and Kshatriyas. Probably they were looked down upon and not trusted then and the process has continued.

As I said in my previous blog, it will be a much better system where businessmen and others interacting with the government are provided the rules and regulations but they are trusted to follow the rules. One can make sure that he is following the rules by having his facility inspected by a private inspector for a small fee. The government can perform random checks on a few facilities to ensure that rules are being followed. This will reduce the need for most government inspectors and hence reduce graft.

This will reduce employee count in the government and will save the taxpayers plenty of money. However, it will upset those whose only dream is of landing in a government job and those who believe that the government must create useless posts at taxpayers' expense in order to create job.

Thursday, October 1, 2009

Corruption in India and its solution

Ask the average middle class educated Indian what the biggest ailment of India is today. Nine out of ten will immediately say corruption. Indeed, in the list of nations ordered by prevalence of corruption, India is in the top quarter.

What is corruption? Are their categories of corruption with varying degree? Do they all retard India’s growth? Why is there much less corruption in the USA, Canada and Western Europe? We need to look at these questions.

There are a variety of corruptions in India. While a person wants to remove one type, he may be actively encouraging another type. Let us list some of them.

1. Bribery: This is the most common form of corruption against which almost all Indians want to fight. It is an instance of corruption in government offices.
2. Black marketing: Usually it means legally selling some product or service and then not paying right sales, income or corporate taxes
3. Cheating customer or shoddy product: A seller can sell poor quality product to customer.
4. Smuggling: Getting some legal (such as gold) or illegal ( such as cocaine) material into the country from a foreign source
5. Nepotism: In many government offices, they officials do not take much bribe. But they will only favor those they know or someone having connection with a senior ruling party member or a minister.
6. Denial of benefit: In many cases, this happens because the uneducated persons are not aware of the subsidies they can receive from the government.
7. Software piracy: Here software is a broad class which includes both computer software as well as entertainment software such as songs, videos and movies.
8. Dowry: It is an ancient form of crime.

While all Indians decry corruption, each individual has one or more from the above list in mind. The item 1, bribery is mostly cited as corruption by Indians as well as other nations. However, the same person who hates bribery often indulges in illegal copying of software such as Operating System, word processor and anti-virus programs. Many people also illegally copy songs, movies and videos without paying any royalty to the creator.

If we look closely, we will find that each type of corruption is a symptom only. It is not true that Indians are by nature, more corrupt than other nationals. In most cases, the root cause is a wrong government policy.

Items 2, 3 and 4 were prevalent in 1970’s and 80’s but are almost gone today. This has happened primarily due to changes in government regulations. Earlier, importing gold was impossible in a country where gold jewelry is in great demand. The government was trying to change the behavior of people into not spending on gold. It did not work and gold smuggling flourished. Then in early 1990’s the government changed the laws and allowed a person to import up to 5 Kg of gold with little customs duty. Overnight, the gold smugglers became jobless. Similar effect happened in smuggling of electronic gadgets when laws were relaxed so that the gadgets could be manufactured locally.

The license and quota raj made sure that no company could reach economy of scale. As a result, companies were producing shoddy products. The massive restrictions on import and export made an artificial craze for “foreign goods” among Indians. A person wearing a Levi’s jeans brought by his relative was considered lucky. When restrictions were lifted, plenty of interactions happened between Indian and foreign companies. Faced with domestic and foreign competition, Indian companies improved the quality of products to international levels. Shoddy products became history. At the same time, due to improved quality at home, the local companies could export their products on a large scale. Today, Levi’s jeans are available everywhere but many people find it cost effective to buy locally made jeans. The craze is gone.

The government reduced income tax, excise and customs duties. This helped a lot in increasing tax compliance. People do not mind paying taxes as long as it is reasonable.

The last item, dowry is a social evil. As more people become educated this will diminish. Also, dowry is a byproduct of arranged marriage. When a man and a woman fall in love and decide to marry, the chances of dowry exchange is much less. Compared to two decades ago, many more educated youth are avoiding arranged marriage. If the trend continues, dowry cases will reduce. Dowry taking is a crime in India. But in addition, the government should create a publicity drive of advertisements and short films where dowry-taking will be portrayed as a shameful act by the friends and relatives of the dowry-taker.

Now we come to the crux of existing corruptions which are items 1, 5 and 6. All these come from government officials. Either bribe or influence gets things done in the government. Poor people with neither money nor influence are often denied their legitimate rights. I will site some concrete examples.
1. You attempt to start a small business. You have to get government clearance from 30 departments from pollution control to municipality to department of small business. Often a government inspector will come to your premises to certify and ultimately provide a clearance. You might have to bribe the inspector or clerks at the concerned department or both.
2. You are a poor villager eligible for Below Poverty Level (BPL) card that will make you eligible for various subsidies from the government. But you have been marked as a voter of opposition party and hence the government officials in collusion with members of ruling party, will deny you BPL card. You do not have the money or resources to fight against them.
3. You are a middle class salaried person who has little interaction with the government. But you pay property tax, electric bill, phone bill etc some of which may be provided by the government. In each case, you face big lines and if something goes wrong, it is hard to get it fixed. If your phone provider is a government company and you get a huge bill, you have to first pay the bill and then apply to the company to investigate their error. In every case, the government official behaves not as a modest public servant but as a high handed representative of the King.

Why do such things happen in India and how can they be fixed? If you look at the common root cause, in each case the perpetrator is a government employee. He has been endowed huge power to harass you if he chooses. He can deny you the pollution certificate if you do not bribe him. Since you do not want to delay production in your new company, you end up bribing him for the certificate although your pollution record is impeccable.

The root cause is that monopolistic power has been given to ordinary government employees. This type of corruption can be easily eliminated if the monopolistic power is removed. The way to do that is to create multiple providers of the service that only government employees provide today.

For example, when it comes to various inspections, there will be authorized private inspectors along with government inspector. The inspector will charge a nominal fee and provide the certificate. Since you have the option to go to any private inspector or the government one, the power of the government inspector will vanish. How do you ensure that a private inspector is honestly doing his inspection? There can be random checks to see if the inspector is complying with the rules. In general, in order to remain competitive, each inspector will operate honestly.

The government should get out of providing services such as water, electricity, telephone and completely privatize them. The municipal tax could be paid at private banks where customer service is far more superior. For every government service, there should be multiple competing service providers with which the government provider has to compete. Only competition will improve customer service and eliminate corruption.

Therefore privatization and competition are essential. If a single private company provides the service, it will be as tyrannical as the government service. Therefore the solution is a radical policy change where, for each service multiple private players will be introduced.

Finally, the government may simplify the processes a great deal. It can abolish most of the clearances needed to start or run a company. Instead of forcing the company get pollution clearance, it can just tell him the allowable limits of pollution level. Then the onus will be on the company to make sure that it remains within limits. The government essentially says that we trust that you will be within pollution limits. We may do random check in future. If you are found to be non-compliant, we will take drastic action such as huge fine or closure of the unit.

Privatization and reduction of clearances will not only reduce corruption but also reduce red tape drastically and improve the efficiency of government departments. It will also eliminate many unnecessary government jobs and thus reduce tax payer’s burden.

Thursday, September 17, 2009

Too Little Space?

You are in luck because this blog will be short and I will not bore you with a multi-page blog. India is an overpopulated country. We have no doubts about that. But let’s look at it from a different angle. May be, it is not as populated as we think.
Japan is densely populated. Its population density is 338 per Sq Km. India’s density is 364 per Sq Km. But when you look more closely, about 75% of Japan’s land is either mountainous or dense forests with uneven slope thus making this area uninhabitable. This means that the actual population density in habitable area is 4 to 5 times higher than the official one. In contrast, barring the Himalayan region and Rajasthan’s desert, all of India is quite habitable.
China has a population that is little more than India’s. But China’s size is three times that of India. The official population density is 140 per Sq Km. But 70% of China’s land area is covered with mountains and hills thus making these places uninhabitable. So the effective density is perhaps little more than India’s.
India has a population of nearly 1.2 Billion. I have talked about need for urbanization before. But we do not want the extremely high population density of major Indian cities that makes living uncomfortable. The three major cities, New Delhi, Calcutta and Bombay all have a population density of roughly 25000/Sq Km. If we design urban areas that have a density of a fifths of these cities, i.e. 5000/Sq Km, people will have comfortable living.

How much space will be needed if we theoretically create one urban megalopolis which will house all 1.2 Billion Indians?
It is 1200 Million/ 5000 = 240000 Sq Km
How much space is that? Well, the state of Madhya Pradesh has an area of 308252 Sq Km. In other words, theoretically all 1.2 Billion Indians can be accommodated in Madhya Pradesh alone and yet the population density of the state will be only 1/5 of the three major cities. You can use the rest of India for farming, Industry and everything else.


In urban areas, an Indian consumes only 135 liters of water per day compared to 700 to 750 Liters used in the developed nations. We need to increase water supply so that the average Indian can use sufficient water. I have proposed before to create cities and towns with average population of 600000. We can provide sufficient water to the urban dwellers, if for the city 600000 strong we excavate an artificial lake of 25 Sq Km (5 Km X 5Km square or 12 Km X 2 Km rectangular) few Kilometers away from the city. Besides water, the lake can also supply sweet water fish and recreational activities like boating. The lake will get replenished by rain water.

Monday, September 7, 2009

Process of urbanization

I have proposed that out of 300 million people, mostly with little education, who work in farming and related occupations about 280 million must be displaced to urban land. These 280 million will be surplus labor as corporate farming takes over. On the other hand, we have seen that it is impossible to provide city-like infrastructure in 600000 villages. Unless city-like infrastructure is provided, which means access to good schools, colleges, university, good hospital, shopping mall, Movie Theater, cultural centers, paved roads, underground sewage, supermarkets etc, you or I will not move to such a place unless forced. If you and I cannot stay there willingly, why should we expect others to stay there?

Therefore as I have proposed earlier, we need to build towns and cities across India that will accommodate 80% of the population. My estimate is that with 4 to 6 cities in every district, we need around 2000 cities with an average population of 400000 to 600000. Keep in mind that during this process of urbanization which may take a decade and half, the population will be around 1.3 billion. If the process works properly, then perhaps after 15 years, India will have only 50000 villages.

Resources can be much more optimally utilized in cities where people live in close proximity. As I have said in an earlier blog, providing water connection, electricity connection, cable TV, internet etc is much more cost effective in cities compared to villages because of the concentration of population.

With a little planning we can make the two processes complementary. The two processes are urbanization and movement of surplus farm workers to urban area. Urbanization will mean expanding the existing towns in each district massively. A town which currently has a population of 60000 will be expanded to accommodate 500000 people. In order to do that over a decade, we need the following tasks which will be shared by public and private effort:

1. Acquire land
• Bring the villages on the fringe of the town inside the municipality
• Make the farmland suitable for urban construction

2. Plan township infrastructure
• Involve private builders, chain store owners, investors in the planning process
• May make electricity, water supply private
• Plan underground facilities for sewage, water pipeline, electric cable, fiber optic cable for TV, phone and internet

3. Water supply
• Create massive artificial lake near the city
• The lake will hold rain water and will meet the water requirement of the city
• The lakes should be guarded to prevent pollution
• Build pipeline from the lake to processing plant in the city
• There can be two or more competing private providers

4. Electricity
• Select private or public electricity supplier
• Determine source of power and who supplies
• Enable competition as far as possible
• Only licensed builders or electricians should wire a house

5. Sewage
• Build underground sewage system under every new road being constructed
• All sewage should go to a processing plant
• Recycling will be attempted as much as possible
• About 5 Km away from the township , there will be a garbage dump where solid waste should be disposed after reprocessing

6. Mobile phone network
• The mobile service providers will take care of erecting tower etc

7. Cable TV, Satellite TV and internet
• These pipelines, most probably using underground fiber optic cable should be laid when a new road is being built
• Eventually the city should provide free Wi-Fi financed by a city tax

8. Education
• The city will need several schools, colleges and universities
• Both public and private investment should be sought
• Medical and engineering colleges should be built
• Free public school with mid-day meal must be provide to all who want
• States should be able to impose income tax to provide free schooling for all

9. Health care
• Both private and public hospitals should be planned and built
• Routine healthcare should be free
• For catastrophic or long term illnesses, people should be encouraged to buy health insurance

10. Shops, bazaars
• Major grocery store , department store and mall builders should be invited
• As people populate neighborhoods, stores will come up to fulfill demand
• Shopping areas must be planned during initial city planning
• Movie theaters, auditoriums, libraries and cultural centers will be built
• Each shopping area must have ample parking space

11. Housing
• Preferably, housing should be provided by medium and big builders
• They will build apartment complexes having 500 to 1000 flats
• This will provide economy of scale
• Depending on the importance of the city or land value, the flats may be in 4-storied houses or in 10 to 50-storied skyscrapers
• In most small towns, 4-storied houses with 16 flats will be ideal
• Builders will determine flat size and amenities. There can be many types of flats and complexes based on flat owner’s income
• No cross-subsidy should be provided
• Banks and other lending institutions should provide 20 to 30 year mortgage
• Each housing complex must provide ample parking space

12. Dwelling for low-skilled employed workers
• The low-skilled workers that migrate from villages to work as construction laborer, maid, security guard, driver, worker in stores, janitor, cleaner etc. will need housing also. But they cannot afford middle class amenities
• For low income workers, no-frills flats will be constructed. These also will have 24 X 7 water and electric supply like everyone else. But the flats will be between 300 and 500 sq ft each with cement floor, cheap windows and doors which can be mass produced in factories, basic bathroom and kitchen and will have 2 or 3 rooms.
• The workers can either buy a flat using long term loan or rent
• The rent can be subsidized by government if necessary

13. Dwelling for newcomers from villages
• For those who migrate from villages with no job, they will be housed in dormitories. Each family will have a room. Single people will share a room. There will be one bathroom with multiple shower stalls and toilets in each floor. Each floor may have 10 to 20 rooms.
• There will be several shared kitchens with gas stoves in each floor. The gas will be provided by government. The building super will allocate time and kitchen for each family during which the family will have to complete cooking. They will use their own utensils, spices and other implements.
• These dormitory dwellings are free for newcomers for up to one year. Within one year, they will have to learn skills, get a job and move to dwelling described in item 12.
• A person, who gets a job, will be allowed to stay in dormitory for 6 months at most. After that, he/she will have to migrate to dwelling for employed workers.
• If a person loses job and cannot pay rent, he can move back to the dorms with his family.
• A social worker, who will act as a mentor, will work with several families. She will train the family in basic urban skills such as how to open a bank account and use it, how to operate the gas stove etc.
• In many cases, potential employers such as building contractors or owners of maid services or janitorial services can go to villages and collect employees.

14. Office complexes

• Multistoried office buildings can be built to house many offices
• Big corporations will be allotted land to build their office
• There will be ample parking space in every office building
• Factories that create noise or air pollution will have to located few miles outside city limits, providing room for future expansion of the city
• Company or chartered buses can transport workers to and from workplace

15. Transportation

• Public or private buses can be provided for public commuting
• Auto rickshaws and Taxi will be allowed
• Cycle rickshaw can be permitted within a neighborhood
• Many people will have their own mode of transportation such as car or motorbike

It can be clearly seen that from digging lake to building underground sewage and water pipes, laying underground cables for electricity and telecommunication, building houses, schools, hospitals, stores, malls, movie theaters and markets there will be a need for many skilled, semi-skilled and unskilled laborers. The people from nearby villages can be enticed into these jobs because they would pay higher wages and would provide year round work. The government as well as private companies can train them as required. While white collar employees like architects, engineers, accountants as well as highly skilled workers like masons, electricians, plumbers, machine operators have to be recruited from all over India, there are many low skilled and unskilled jobs where local villagers who would otherwise work in farms, can be employed with little training. Some of these jobs are mason’s help, brick carrier, road sweeper, janitor, gardener, garbage collector, security guard, maid and cook.


The role of mentors will be vital. Mentors can be hired by the government as individual employee or as a member of a group provided by an NGO or social work organization. They should be uniformly trained across the country in how to provide training and teach basic skills to people migrating from villages and those in search of jobs.

Each mentor will be able to handle, probably 100 families. She will most likely be a college graduate and a local person with knowledge of the town/city. Some newcomers from villages would not know how to live a city life. She will be their support person. She will teach them

• How to use bathroom cleanly
• What kind of opportunities are open to the adults based on their skills
• Where they can learn a skill or two so that they will get job
• Where are job openings
• How to spend within means
• How to open a bank account and use it
• How to receive money from the government during initial unemployment
• How to operate the gas stove safely
• Where to send children for school
• How to get additional help for children’s studies
• How to use public transportation

The central theme of this plan is to urbanize India without coercion. The premise is that most villagers live in abysmal condition in villages because they are not aware of better opportunity elsewhere. If they are provided opportunity, most of them will leave their ancestral land to city. The migration will happen anyway. This has happened in western nations in 19th and 20th century and is happening in China now. But all such migrations have been unplanned, chaotic and cost dearly to the people. With planned migration, the suffering can be reduced greatly.

Tuesday, June 23, 2009

Goals for the next decade

I do not know if the state or central governments in India start out with a short and long term vision. Unless you set your goals very high, you will not achieve even moderate development. It seemed to me that government functions mostly on an ad-hoc basis. As I have discussed in earlier blogs, majority of poor Indians live in rural India where infrastructure is non-existent, jobs are low paying and living condition is abysmal. I believe that the thrust should be toward urbanization on a massive scale. I think that the following goals should not be unreasonable for India at this stage of development:

A. Citizen ID: Every citizen should be given a citizen ID card at birth and the record should be maintained by government. The fingerprint of the person should be electronically stored in government database.

B. Urbanization: Today, about 35% of Indians are urban. In 10 years, this has to be raised to 80%.
1. Starting in 2009, a mission should be set up to urbanize most rural people by 2019. A few towns should be identified in every district and they should be expanded massively so that they can house most rural people of that district. In each district, at least 80% of the population should live in cities and towns by 2019.
2. The cities and towns will need huge expansion. There will be towns with population between 200000 and 600000 each. Each town should be able to issue municipal bonds to raise money to build infrastructure. Big builders should be encouraged to build massive, low cost housing with ample road and shopping complexes.
3. No one will be allowed to build unsafe houses made of clay, asbestos, hay or incomplete house. 90% of houses will be built by large builders.
4. The real estate market must be free. Any flat owner should be able to sell the flat in open market. Banking sector will need expansion in order to meet huge demand for housing loan
5. Each town should have wide roads, underground sewage, proper waste disposal and waste processing plant. Rather than developing these in the congested old part of the town, these sections should be developed in the fringes of the town where population is sparse. If necessary, adjoining villages should be incorporated as part of the town. Wide highways should be built that connect cities in the state.
6. Single window clearance must be given to housing, road construction, township building and other related projects.
7. Home loan will be regulated. The annual mortgage should not exceed a certain percentage of the family’s annual take home pay. In order to avoid speculation, a home buyer will not be able to sell the home for first two years except for distress conditions.

C. Social Security: The way subsidy is delivered to the poor should be changed.
1. Reputed national and global audit companies will be assigned the task of determining household income of every household in the country. This should be measured every 4 years and based on this data the government would determine households that fall below poverty level (BPL).
2. Only BPL households will get subsidy in the form of cash which will be transferred directly from Ministry of Finance in New Delhi to the person’s bank account every month. This will be for a specific amount of time (say 6 months to a year). The states will not have control over this money.
3. Nothing should be provided to the poor or other disadvantaged classes at below market price. Ration shops should be dismantled. There will be no subsidized grain for the poor. As stated in item 2, the BPL households will get cash subsidy with which they will buy goods from open market.
4. Every BPL family and unemployed adult will be assigned a mentor who can be from an NGO or reputed social service organization. The mentors will be trained uniformly across the country. They, in turn will advise the families and individuals about avenues to come out of dependency on government. The goal should be to move the BPL family up the ladder so that they can escape poverty.

D. Electricity: Every household and industry/service must get uninterrupted electricity
1. The central government should study electricity generation, transmission and distribution in developed nations and how it is privatized and regulated
2. Based on the study, it should initiate privatizing of electricity generation, transmission and distribution.
3. A mechanism should be in place to subsidize electricity cost for BPL households. Probably, the best approach will be for the government to directly pay a certain amount of the electric bill directly to the electric company on behalf of the BPL household.

E. Water: Every household must get potable water at the house faucets for 24 hours
1. One or more large lakes or ponds should be excavated near every town/city.
2. They will collect rain water throughout the year and should be sufficient for the urban consumers
3. The water should be pumped from the lake into a processing plant and then distributed to overhead tanks.
4. The processing plant must ensure that the water at the house faucets is free from contamination and potable
5. Every urban household must get 24x7 water supply from the city water supply.

F. Road network: All rural and urban roads must be paved.
1. Every neighborhood must have all paved roads.
2. All sewage must be underground. There will be no open gutters.
3. Every town should be connected to a highway.
4. All new roads should be wide enough to meet international standards.
5. Major highways must be at least 4-lane. In congested urban areas, highways should be 6-lane.

G. Education: Basic education up to high school must be mandatory and free.
1. It will be a state responsibility and center should help poor states.
2. A state should be able to introduce state income tax to raise money for school education. The money thus raised cannot be used for any other state expenditure.
3. If a student cannot afford to go to school, she/he should be provided free boarding facility near the school.
4. In general, high quality food must be provided in mid-day meal.
5. College and university education should be free only to meritorious students coming from BPL and lower-middle class households.
6. The government should encourage creation of private colleges and universities. The government can rank them according to various qualities for the benefit of prospective students and parents.
7. The government must not interfere into management of private educational institutions in the areas of tuition, teacher salary, lab size, classroom size etc. In a free market, customers will choose a college based on its ranking, quality and cost.

H. Basic Healthcare: Free basic healthcare for everyone
1. Basic health care including immunization should be free for everyone.
2. Specialized care such as cancer, organ transplant, heart bypass surgery etc. will be free only to BPL households.
3. Routine checkup often reduces expensive treatment due to early detection of disease. Every person must undergo routine checkup in free, government facility once or twice a year depending on age.
4. Those who can produce records of regular routine checkup for last 3 years should be eligible for reduced health insurance premium irrespective of the result of such checkups.
5. People will be encouraged to purchase health insurance for catastrophic illness. If a family chooses not to buy insurance, government should not be responsible for their health problems.

I. Agriculture: The goal should be to increase farm productivity at par with the west.
1. Today, rice yield per hectare in India is half of that of China and is 35% of Australia. The wheat yield is almost one-third of UK. The overall yield for oilseeds is half of China and less than 30% of UK.
2. I believe that in the long run, yield can be increased only be corporate farming.
3. In the medium term, some gain can be achieved using contract farming.
4. The process of urbanization will, hopefully wean away millions of farm laborers to better paying urban jobs. The mechanized farm will produce more and need much fewer workers. Hence, they will be able to pay much better wage to farm workers.
5. The workers in a mechanized farm have to be educated and skilled. The government can start training institutes or encourage the private sector.

An example of a specific district

The goal should be to urbanize 80% of Indians in next 10 years. Let us take a concrete example of the Birbhum district of West Bengal. It is a mostly rural district which also boasts of Tagore’s Vishvabharati University in Santiniketan. In Birbhum, 75% of people depend on low paid agriculture. It is a backward district with a substantial tribal and scheduled caste population.

Birbhum’s population is about 3 million. According to 2001 census, about 90% of the population is rural. There are four major towns: Siuri, Rampurhat , Bolpur-Santiniketan and Sainthia. The populations of these towns vary from 40000 to 65000 as per 2001 census. These four towns can be expanded by creating planned townships at the edge of each town. These townships will have underground sewage, piped water and 24x7 electricity at every home, schools, shopping center, hospital as well as other facilities that we take for granted in major cities. For safe drinking water, artificial lakes can be created near the town from where water will be pumped into the city, processed and then stored in reservoirs. As I said before, the towns can raise money by selling municipal bonds while the rest can be funded by the central government. The goal should be to raise population of these 4 towns to about 600000 each. That will enable most rural folks in the district to become urban in 10 years time. This will be much more cost effective than attempting to provide urban facilities in all 2200 odd villages in Birbhum. These four towns will be connected by excellent highway system which in turn will be connected to the National Highway network.

The same mechanism can be replicated in all 591 districts in India, keeping in mind variations in geography, culture, population density etc.

Tuesday, May 19, 2009

Change in Bengal's political landscape

The month long general election has just concluded in India. The Congress-led United Progressive Alliance (UPA) has won a decisive victory, defying all exit polls and opinion polls. The UPA will not have to depend on every whim of external partners. The last UPA government depended on external support of the left front.
Today, I will discuss specifically the election results in the state of West Bengal.
West Bengal earned the dubious distinction of hosting the longest serving elected Communist rule in the world. The Left Front comprising of the Communist Party of India (CPI), Communist Party of India (Marxist) (CPIM), Revolutionary Socialist Party (RSP) and Forward Block (FB) came to power in West Bengal in 1977 election. Since then the front has won every state election. It also won majority seats in the state in every parliamentary election since 1977. The CPI (M) is the predominant party in this alliance.
As a result, Indians outside Bengal as well as people outside India assume that Bengalis must be having a communist gene. In reality, in spite of their success, about half the Bengalis are opposed to communist rule. But until the election in April-May 2009, they could not dent the communist bastion. In the last Vidhan Sabha (state assembly) election in 2006, the opposition got only 35 out of a total of 294 seats. The primary reason was that opposition vote got divided. The two major opposition parties in Bengal are the Congress and the Trinamool Congress, a splinter group of Congress. Trinamool is a Bengali/Sanskrit word that means grassroots. Trinamool Congress founded and headed by Ms Mamata Banerjee is the dominant opposition. Until now, the two opposition parties usually ran for election separately. In a multi-way contest, the anti-left vote got divided and the left candidate usually won with less than 50% vote.
When they came together and fought the 2001 election jointly, there were plenty of ego clashes and the lower level workers of the two parties did not see eye to eye. As a result, the left front kept winning. Trinamool tried to form alliance with another national party, the Bharatiya Janata Party (BJP) which means Indian People’s Party. But that did not help because BJP has few supporters in Bengal.
Finally, prior to 2009 elections, Trinamool and Congress overcame their massive egos and realized that the only way to defeat the left is to form unified alliance against them. In the meanwhile, the left front’s popularity also went down a little because of its attempts to forcibly acquire farmland for industry, following the tradition of communist China.
Although the opposition was trounced in 2006 assembly election, they lost most seats due to division of anti-left vote between Trinamool and Congress. If you added up their votes, they could win in many seats. Each parliamentary seat is composed of 7 adjacent assembly seats. When I analyzed the results in 294 assembly seats and computed the total opposition vote in the corresponding parliamentary seats, I found to my amazement that the opposition wins in 13 out of 42 Lok Sabha seats outright. In another 6 seats, they come very close to winning.
The 2009 election results followed the same path. The Congress, Trinamool alliance won all those 19 seats with a handsome margin. Since this time around the alliance was formed quite early, all senior leaders of the two parties promised full cooperation and the rank and file got time to adjust, it was a successful alliance. The alliance also energized a small percentage of anti-left voters who never went to polling booths before because they knew that their candidate would have no chance of winning. This time they voted.
The opinion polls and exit polls gave the alliance between 14 and 19 seats out of 42. But the alliance did spectacularly. They not only got the 19 where they were ahead or very close in 2006 but grabbed another 7 seats where the combined anti-left vote was much less than left vote in 2006. These 7 seats were won due to the prevailing anti-left sentiment that started as a mild storm but soon became a tsunami.
Hindsight is always 20/20. But let us look at few reasons of the destruction of the left in Bengal. The state government attempted to bring the Tata Nano project to Bengal. The establishment of this small car factory was a noble cause but the farm landowners were not willing to give up their fertile land for the auto project. The government could have asked Tata to sweeten the deal by raising land price. But instead, its cadres started terrorizing the villagers. This had a tremendous effect against the left front all over rural Bengal. Tata had to withdraw the project and moved it to Gujarat.
Some claim that the loss of Nano project caused resentment among urban, middle class Bengalis because they had seen the potential for many skilled jobs in that plant and in ancillary industries. In addition, a project like this usually attracts other unrelated companies to start operation in that location. Singur, where Tata Nano plant was proposed, could have been a prosperous metropolis 20 years from now.
The left front thought that the Tata Nano might have produced some support for them in the urban middle class who are otherwise opposed to left. It may have been true to some extent. But it was short lived.
The left front provided support from outside to the Congress government at the central (federal) level in New Delhi. But when the Congress almost completed negotiations with the USA for a nuclear deal that would essentially make India a nuclear power that does not have to sign the NPT, the left front led by its general secretary Prakash Karat opposed the deal tooth and nail. Although the West Bengal state government was only mildly opposed to the nuclear treaty, they could not raise their voice against Karat. As a result, the left front withdrew support from the Congress-led government in New Delhi, hoping that it will fall and new elections will be called. However, it did not happen as another small party, the Samajbadi Party(SP) provided support to the ruling coalition. The no confidence vote against the government was defeated in the Lok Sabha and the government completed its full term before calling the election in 2009 as scheduled.
But this back stabbing by the left front at the center in order to destabilize the central government, made it extremely unpopular among urban middle class Bengalis who might have supported the left on the Tata Nano issue.
The left front government tried to establish a chemical industrial complex in Nandigram in southern Bengal. But it faced huge opposition and protest from the residents of Nandigram . Determined to stop the protest, police fired and killed 14 protesters. This caused a massive backlash not only in Nandigram but across Bengal.
The Lok Sabha election was held on three days in Bengal. In the last phase on May 13, 11 Lok Sabha seats in and around Kolkata, a section of each of which was part of metropolitan Kolkata, were contested. The anti-left alliance won all 11 of them.
Final result
Left Front : 15 seats ( CPI(M):9, CPI:2, RSP:2, FB:2)
Anti Left alliance : 25 seats (Trinamool Congress: 19, Congress:6)
SUCI (supported by Trinamool) : 1
BJP : 1
The Congress and Trinamool realize that they have to stay together to win in Bengal. Since Trinamool Congress was a splinter group of Congress, they share the same ideology. They are now preparing to defeat the Left Front in the next assembly election in 2011. Unless there is infighting between Trinamool and Congress on petty issues, there is no chance for the left in 2011.

Thursday, April 30, 2009

India vs Bharat

In the last blog we have seen that rural India is deprived in two ways. The infrastructure in villages is pathetic. The archaic method of farming generates little income for rural people. The low income in agriculture is reflected in statistics. Only 17% of India’s GDP comes from agriculture while 29% comes from Industry and a whopping 54% from service. But 60% of workers work in agriculture while 12% work in industry and 28% in service sector.
From this data we can say that for every Rs 100 that the average agricultural worker earns, the industrial worker earns Rs 853 and the service worker earns Rs 680. While it is true that the very high average income of industrial and service workers is skewed partly because of existence of some millionaires in these sectors, the effect is small.
Another way to look at the plight of farm workers is to note that almost 100% of farmers and farm workers are in unorganized sector while in industry and service sectors significant number of workers work in the organized sector. In general, it has been noticed that workers in organized sector get better wage and benefits from the employer. The only two non-farm sectors where large number of people works in unorganized sector are construction and hotel/restaurants.
As we have seen before, 60% of all workers work in agriculture and with mechanization the farm workforce can be reduced to 6%. This means that farm workers are massively underemployed. Every government and politician knows this fact. But none of them is brave enough to proactively tackle this issue or even admit it. From left to right, all parties expect farm workers to have a little better life as GDP grows. The low productivity and underemployment keeps half the population of India in perennial poverty. While in absolute terms, their standard of living goes up, relative to urban people they still live a miserable life. No political party even dreams of enabling the farm laborer the same standard of living as, say an elementary school teacher of a government school.
The only way to reduce rural poverty and lack of infrastructure is to wean rural population away from farming and into urban jobs. Therefore we need a two-pronged approach:
1) Allow mechanization of farming so that farm productivity goes up, requires fewer laborers and the income of farm laborers increase massively
2) Start urbanization on a massive scale so that the surplus farm workers can migrate to urban areas and get better job

In West Bengal there was significant land reform by Congress and Left Front governments where large number of farm workers became owner of small farmland. What we need across India now is another form of land reform where large investors and corporations are allowed to buy up as much land as they need for farming. The corporations will pay prevailing market rate or higher to the small farm owners. With thousands or millions of acres of contiguous farmland in corporate hand, they can introduce state of the art mechanized farming. Unless the value added per worker can be increased, the worker’s income cannot rise. Today, the value added per farm worker in India is only $385 per year whereas in USA it is $39000 per year. With large land at its disposal, corporations would be able to introduce state of the art farming procedures and mechanization.

Why are governments so reluctant in introducing this type of change? First, they are afraid of massive unemployment in villages and resultant migration to urban areas. There is a knee-jerk response to such changes that says that corporate farming will bring back feudal Zamindari system. Second, they are scared of losing control that they wield today over rural population.

Let me expand on the second point. Most rural folks are poor. The poorer you are, the more you are dependent on the government. If you are poor, you will look for BPL (below poverty level) quota and subsidies and handouts from the government that the average middle class, urban citizen does not look for. It is in the ruling party’s interest to keep people poor in order to maintain a permanently dependent vote bank. If corporate farming is introduced, then the workers will be loyal to the corporation and not the state government. Even small farmers are dependent on the government since they get subsidized or free inputs such as electricity and water. These subsidies also destroy the market mechanism which would have ensured most efficient utilization of resources. If you get water for free why would you care about limiting water usage in your farm? Why would you even think about drip irrigation?

It is often said that India is divided in two segments: India and Bharat. While India may be shining, Bharat is languishing. There is some truth to this. But those who claim this including those who are left-minded usually belong to India --- the middle class citizens who usually work in government or other organized sector. I will focus specifically on government and public sector units since these are run fully or partially from taxpayers’ money. The government and public sector companies are extremely generous when it comes to employee’s salary or benefits. Today, in impoverished West Bengal, a public high school teacher with M.A and B.Ed degrees starts at a gross pay of Rs 18000 per month. The prevailing market rate is lower. But the government pays this salary based on the rationale that it is the minimum required for a Bhadrolok (gentry) family to survive. In other words, open market is not permitted to determine the remuneration. It would be fine with me if the leftist government of West Bengal defied market and made sure that every household gets the income needed to survive irrespective of the value of its labor in open market. Of course this idea is utopian. Therefore, the West Bengal as well as other state and central governments distribute largesse only to the tiny middle class while ignoring the huge impoverished class. The school teacher gets salary based on need but when he shops vegetable in the market or hires a maid, the maid and the sabjiwalla are completely subjected to conditions of open market. The school teacher does not pay the maid a salary based on her need but whatever the prevailing market rate is. In the leftist terminology of class struggle, it is the unorganized poor class that is getting exploited by a connivance of a section of the middle class and government. I will not blame the middle class workers in private sector because they are paid market rate.