Exit of Raghuram Rajan as RBI Governor : Predictable Surprise  

The exit communication to staff by Mr. Raghuram Rajan, RBI Governor, comes as surprise, despite being so predictable. Tone reflects certain kind of arrogance (more on this later) which is unusual for stature of personality like him.

The timing of address seems suspect. It was just a week ago when press asked for his views on his possible second term or exit, the response was diplomatic and more nuanced.

" If you know such cases, the decision is reached after discussion with the government and the incumbent. I am sure you will know when there is news. I will direct you all to the statements of the prime minister and the finance minister. That is all I have to say,"

After a cursory look at language of communique, it seems that decision was reached after discussion and government was not willing to extent the term despite willingness of governor to continue at helm for more time.

" While I was open to seeing these developments through, on due reflection, and after consultation with the government...I will be returning to academia."

Added caveat in address further reflect his desire to work in Indian Policy circle.

“I will, of course, always be available to serve my country when needed.”

So he played proactively to his advantage (as one someone put it “Rajan exited in hour of his triumph”) or may be government asked him to break the ice so that they are free to choose his successor without taking any blame from defenders of Rajan.

The public reaction, especially of Press, political opposition and supporters and some enthusiastic supporters of Mr. Rajan (including young students, professionals) was predictable. This was best dissected and anticipated by Journalist R.Jaganathan in Swarajya Magazine article appropriately titled “Why Raghuram Rajan Could Do Without His Defenders”

“While it is fair to say Rajan has been an excellent governor, it is absolutely wrong to presume that or him we would be in deep trouble. If the future of Indian markets depends on whether one man stays and goes,  it is better that he goes."
"What we need is investor belief in what India can credibly offer, and not what one man can offer by way of assurance."

The one unusual thing was kind of arrogance reflected in his departure address.  No one dispute the fact that he was good governor, academician and statesman and above all a person who speaks his mind freely on every issues, be it social justice, intolerance or opportunities provided by education beside mundane economic topics. I regret to say that he has let down people by such tone in final communique.

The language like In my opening statement as Governor, I laid out an agenda for action” and presenting too gloomy picture at start and too bright a picture of present and taking credit for same seems a exaggeration and chest-thumping. It seemed to put him above institution and taking all credit for himself (albeit in language of “We” to represent RBI) shows the arrogance, for otherwise a ground to earth and simple person.

A more nuanced and calibrated performance appraisal is need of hour rather than toeing popular line that government has let down India by not extending term of RBI Governor.

Though a detailed performance appraisal may require a full post, I would take two-three points which Mr. Rajan has highlighted as his major accomplishments:

  1. New Inflation framework and Low Inflation: Efficacy of monetary policy in tackling food and fuel inflation is still debated. Whether it was tight monetary policy or global commodity slump along with efficient food management (lower MSP increase, release of buffer stock, price stabilization fund etc) needs to be deciphered. Also we need to analyze the opportunity cost of tight monetary policy in terms of higher cost to credit and its resultant impact on growth rate (reflected in lowest rate of bank credit expansion in a decade).
  2. Rupee stabilization and Forex Reserve: RBI played as per books and precedents (mobilizing NRI deposits with assurance of government guarantee). Also certain credit should also go to change of government at center with its promise of reform and growth.
  3. Positive Interest Rate on Deposits: It’s a laudable initiative and he should be congratulated for continuing his predecessor, D.Shubarav’s, initiative to provide a better deal to silent majority of savers. But why the saving and Credit growth hit the lowest ever in last few years? Why Indians are not taking advantage of positive real interest rate ?

These are issues which needs wider and dispassionate probing and sober analysis rather than jumping the gun on either side – in favour of Mr. Rajan or his critics. We need to make our considered opinion based on facts, substance and logic rather than on emotions.

Finally, Government has every freedom to choose the next governor and there are many capable people. The possible candidates include SBI Chairman Mrs. Arundhati Bhattacharya (who could possibly be first women governor) and Executive Director at IMF Mr. Subir Gokaran.

We hope that a prudent decision will be taken keeping Public and National interest in mind. Hopefully new RBI Governor would also be keeping in mind the ultimate objective of creating more jobs and prosperity in country rather than promoting crony capitalism. He would hopefully carry forward the good initiatives taken by Mr. Rajan while applying his mind along with taking help of institutional expertise of RBI to provide a helping hand to government in achieving macroeconomic stability and economic growth.



Agriculture is most profitable and lucrative profession

For the first time in many years, the Indian agriculture received its share of space in mainstream mass media. It’s not that there have been some sea change or transformation but it has suddenly become lucrative and attractive profession (to highlight agricultural distress, farmer’s suicide and off-course Padyatras of Young Emerging Political Scion).

Suddenly all the punditry become expert in agriculture and started to offer their opinions and expert advices on how to improve agriculture and how (illiterate & ignorant) farmers should do the farming.

But if we take critical view and take benefit of hindsight, we can see that agriculture has always been most lucrative profession, after all we are known an ‘Krishi Pradhan Desh’ and it become a instant social media hit when someone put his/her photo in lush green mustard farm. It’s also miracle that most of photos have mustard in background while it’s grown in very small areas and oil-seed are one of agricultural product which India imports.

After a bit of sarcasm, now let’s takes hard look at harsh, brutal and dark realities of agriculture in India:

  1. India’s planner never wanted to promote agriculture. They have same disdain for agriculture as Urban Indian has for people coming from rural areas (normally addressed as ‘Dehati’). This is sole reason that we have always set targets for agricultural growth much lower than manufacturing, services and overall economy. Take example of 12th Five Year plan – The growth target for agriculture is set at 4% while target for overall economic growth is set at 8%. It’s another matter that even these lower targets are rarely met.
  2. This deliberate, planned and sustained efforts to (de)promote agriculture has resulted in reducing share of agriculture in economy from ~50% at time of independence to less than 15% in 2015. Since it has happened by deliberate neglect, we didn’t care to create employment opportunity for populations depended on agriculture which continues to remain almost same (more than half of total population) as at time of independence.
  3. But in democracy, its majority which rules. Why such a large population lost its clout and repeatedly ignored? The reason lies in fragmentation and division among them by identity of region, language, religion and caste.
  4. While we routinely blame the skewed subsidies in form of power, fertilizer and MSP to farmers but don’t see the invisible subsidy provided to urban dwellers in form of assured electricity, piped water supply and transportation facilities. We don’t see and question lakhs of Crore subsidy to Metro rail as subsidy (here urban commuters need not pay full fare. Its infrastructure creation not subsidy!) But power provided to farmers needs to charged at market rate. We blame farmers lobby for all the ills of state distribution boards, power sector and economic woes while ready to elect a government in National capital (having largest per capita income in country) which promise them free water and subsidized power.
  5. Well, these are not double standard! It’s their legitimate right, because urban dweller pay taxes so they must have claim over the resources. Why the hell on earth, we should care for Nange Fakirs living in hinterland. What do they provide for us? Oh yes, we can express solidarity with them when one of them commits suicide. Suicide would make interesting story , especially if it happens in full public view, and we can always find motley crowd of activist who care for global food security & campaign for rights of poor and marginal farmers without even having any iota of understanding about how it feel to remain a hungry even for a day.
  6. Now take a look at some aspects of agricultural economics. We complain about food inflation. Governments have been toppled on this very serious issue. Why the dumb, non-responsive government is doing when onion is sold at Rs 30/kg in urban area? The political class & bureaucratic, mainly coming from this crowd itself, take steps to reduce price. But we ever see the government moving into action when potato are sold at Rs 2/kg by farmers. Where the government did goes? Oh I forgot, the Price stabilization funds are meant only to subsidize urban consumer, not to compensate farmers for their distressed sell.  Stupid they are, as they have produced bumper crop.
  7. Oh, now come to main point of farming being a very lucrative profession. One simple way to measure profitability of any profession is ratio of output/input prices. In farm sector, this is measured by Terms of trade. Here are some sample statistics to see for yourself :  harsish
  8. Very newspaper editorial and economic expert have blamed high MSP for runway food inflation in past year. But have you ever care to read how MSP are calculated? I would just provide some of novel assumptions followed in calculation of MSP
    1. Only the number of hours that bullocks work on farm is used for calculation, as if the animals don’t need to fed on other days of year.
    2. Interest on working capital is calculated for half the cropping season, presuming that farmers would repay the loan when the crop is half grown.
    3. Post harvest expenses are not accounted for
    4. .All members of a family engaged in farming are valued just as non-skilled laborer. No concept of managerial remuneration leaves apart the profit, oh after all what they contribute?  Industry requires manager, not farming.
    5. Cost of factors of production is one essential component. But it is presumed that farmers own hereditary land, so they are not entitled to seek market rent for their land.
  1. Ok well, this is story behind the much celebrated MSP number. Now come to much broader issues of farmer’s subsidy. You must have heard that more than 1 lakh subsidy per year is provided to farmers. Its pure misnomer and deception. When world cotton prices are at Rs 8000/ per tonne, the farmers are paid Rs 4000/tonne. Shetkari Sanghathan has done some background calculation to show that government is extracting lakhs of rupees from farmers and distributing it among affluent urban consumer directly (by suppressing prices of cereals, pulses, vegetables) and indirectly (by ensuring cheaper industrial raw material e.g. cotton for textile industry). By governments own admission (as per submission to WTO), the farm subsidies to wheat are in negative.
  2. It’s not a new story. Farmers are always there to sacrifice for the national development. They should readily provide land for affordable housing and social infrastructure without their consent. They should produce pulses and oilseed, even if they are not remunerative, to meet national demand. Their property rights do not matter. If we adopt non-discriminatory attitude, we should build affordable housing in Lutyens Delhi rather than by acquiring land in NCR periphery.
  3. Come to Economic reform. We demand reform, choice and liberalization in all sector but farming. Farmers are not capable of making independent and informed choice. They needs hand holding. This is reason that they can’t sell outside designated area (due to APMC restrictions) , they can’t sell directly to customers & then can’t share global price rise due to export restriction but need to share losses due to fall in global prices.
  4. Need more proofs on why farming is most profitable and lucrative profession and business? You need to ask this question to our political farmers who have fortunes out of farm land. They can earn crores; yes you heard it right, in between their election cycle from their farming land.
  5. But previous government has not much to alleviate the status of farmers. Oh yes, MNREGA did wonder for farmers as per studies of social scientist and activists. It is responsible for rising farm wages. Oh, then its good na! that a labourer is benefiting from higher wages. But their impact wiped out for laborer by high inflation.
    1. If 100 days of labour has been reserved for 250 days of lean season, it would have doubled the employment generated, without more investment.
  6. Oh if not MNREGA, then Farm Loan waiver was definitely good for farmer. The sad reality is that it helped only those farmers who have defaulted on institutional credit (not the regular payer or nor the non-institutional debtor).
  7. Unfortunately the sad and hard truth is that no one cares for so called Ann Data (grain producer). There is no organized body to represent their interest, they are given short-shrift by political class and bureaucrats are simple unable to comprehend the complex problems due to their elitist background. The same failed policies which haven’t changed anything are advocated by media punditry and social activist.

All these problems ultimately comes to the Niyat’ or Intention of policy makers and other stakeholders. If there is sincere intention, nothing is impossible as being shown by excellent performance of Agriculture in Madhaya Pradesh, Chattisgarh and Gujrat who have delivered more than 7% agricultural growth for more than decade from 2001-02 to 2011-12.

India’s farmers would be better served if they are left to themselves. Yes, there is scope for extending irrigation, providing high yielding seeds. removing restriction on trade of agricultural commodities and creating a national market for them,  extending credit facilities in simple & convenient ways and creating a viable income insurance and weather insurance to reduce unpredictability. But above all , what is require are honest and genuine intention. Political dramabazzi or scoring political points to secure their vote are most fatal for farmers.

Restructuring the Framework for Public-Private Partnerships

PPP has been much in news, most of time for negative than for its positive aspect. India has outlined ambitious target for funding the infrastructure deficit through the PPP Model, most recent being 12th Five years plans which outlined that approx 50% of funding for infrastructure would come from private sector (mostly through PPP model).

But real picture is not that rosy. It has faced many hurdles, most of which has to do with design of contract and model itself. The lack of regulatory capacity hampering implementation of PPP project was attempted to overcome through setting up of ‘3P India’ Institute in last budget with Budget allocation of Rs 500 Crore, but it also become a victim of bureaucratic red-tap (or vested interested).

The present Economic Survey while being superficial in most of the topics provides in-depth diagnosis of PPP projects covering – flaws in existing design, required changes and restructuring of existing contracts.

I have tried to analyse/scrutinize how correct the diagnosis is , is the remedy recommended workable and is there any improvement needed in the approach to revitalize the PPP model once again or do we need to abandon the model altogether.

We would adopt a Q&A Format to analyse the various issues:

What is situation of PPP Projects? What are concerns stemming from PPP Projects?  

What does Economic Survey Says: Many infrastructure projects are today financially stressed, accounting for almost a third of stressed assets in banks. New projects cannot attract sponsors, as in recent NHAI bids, and banks are unwilling to lend. This current state of the public private partnership (PPP) model is due to poorly designed frameworks, which need restructuring

So Basically ES highlight following aspects

  • Financial stress in infrastructure sector
  • NPA or stressed assets in banking sector consequence of this
  • Poor Design of Contract framework is blamed for this

My take: These are broader concerns related to PPP projects. But we also need to discuss and debate the merits, philosophies and efficacy of PPP model. Does PPP delivers what it promised (efficiency, better services, private financing etc)? Do we need to adopt PPP model in infrastructure starved country like India where most of population has low –paying capacity? In what sector PPP can be adopted? Are problems highlighted above are specific to India or they are global in nature? Is there deficiency in Design or implementation/Execution? What are lessons we have learnt from some of successful PPP Projects? By what matrix do we measure the success of PPP Project? Who should be competent authority to decide on whether to adopt the PPP model or not – should it be decided at national, state or local level?  These are some of issues which need a wider public consultation before proceeding further on the path to Public Private Partnership or People-Public-Private-partnership.

What are Flaws in Existing Design of PPP Models?

Take of Economic Survey:  

  1. Existing contracts focus more on fiscal benefits than on efficient service provision. In port and airport concessions, the bidder offering the highest share of gross revenue collected to the government is selected.
  2. They neglect principles allocating risk to the entity best able to manage it. Instead, unmanageable risks, e.g., traffic risk in highways, even though largely unaffected by their actions, are transferred to concessionaires. This is also true for railways and in part, for ports (though inter-terminal competition is possible) and airports.
  3. The default revenue stream is directly collected user charges Where this is deemed insufficient, bidders can ask for a viability grant, typically disbursed during construction. This structure leaves the government with no leverage in the case of non-performance, with few contractual remedies short of termination.
  4. There are no ex-ante structures for renegotiation. If a bureaucrat restructures a project, there are no rewards; instead it may lead to investigation for graft. Failed projects lead neither to penalties nor investigation. With such asymmetric incentives, bureaucrats naturally avoid renegotiation.
  5. Finally, contracts are over-dependent on market wisdom,g., bidders in ultra-mega power projects (UMPP) could index tariff bids to both fuel prices and exchange rates, but almost all chose very limited indexation. When fuel prices rose and the rupee fell, these bids became unviable. To enforce market discipline and penalise reckless bidding, these projects should have been allowed to fail.

My Take: The Economic Survey has done an excellent job of identifying the lacuna or shortcomings in present structure. Excessive focus on fiscal benefits rather than services provision, inappropriate risk allocation among the stakeholders, excessive focus on user charges (with no scientific approach to calculate user charges considering the paying capacity), absence of institutional structure for re-negotiations/adjustment to take into account various contingencies and changing market conditions and over-reliance on market mechanism are indeed the principle reason for sorry state of PPP projects in India. But Economic survey has left out the many crucial factors like –

  • Absence of Independent regulatory institution/Oversight Mechanism to protect the Public Interest in such projects. The Regulatory capture has reduced the bodies like AERB (Airport Economic Regulatory Authority) in aviation sector as mere rubber stamp failing to withstand the ground to protect publics or consumers interest. In road Sector, no such body exist which can decide the fairness of user charges or tolls. In electricity, though CERC and SERC have done some work, but they have failed to emerge as mature institution often falling prey to regulatory capture.
  • Political corruption via PPP route and crony capitalism – PPP have become the easiest way to make money for politicians. Whether it’s Mumbai-Pune Expressway or Delhi-Agra Expressway, the companies have grabbed the surrounding land at cheap-dirt price in connivance with politicians. They have built real-estate empire proceeding of which goes not in listed-companies executing projects but to the personal accounts of promoters and cronies of politicians. Viability gap funding is another mechanism to favour the one’s near and dear.
  • Opaqueness of procedure, Lack of transparency and accountability – lack of stakeholder consultation
  • Lack of Capacity among the Government/Public Sector authorities to handle the complex contract and ensure monitoring & evaluation. The capacity building requires persistent efforts, time and committeemen of leadership. The ‘3P India’ Institute announced in last budget is yet to take shape.
  • High User Charges and non-maintenance of service standard by Concessionaire
  • Lack of genuine competition as select number of private players complete in large projects. Public purpose could be better served by bundling them in smaller packages to ensure competition, innovation and better consumer services.

What modifications are needed? What Remedy is required to rectify the flaws and make PPP Successful?

Economic Surveys Take:

  1. Continue combining construction and maintenance responsibilities to incentivise building quality. If a single entity is responsible for both construction and maintenance, it takes lifecycle costs into account.
  2. Risk should only be transferred to those who can manage it. In a highway or a railway project, it is not sensible to transfer usage risk since it is outside the control of the operator. But, it can be done in telecom projects and for individual port terminals that compete with each other, where demand can respond to tariff and quality.
  3. Financing structures should be able to attract pension and insurance funds, which are a natural funding source for long-term infrastructure projects.

Then coming to Concrete/specific solution Economic Survey says that

  • Rather than prescribe model concession agreements, states should be allowed to experiment. For example, in ports, terminals can be bid on the basis of an annual fee, with full tariff flexibility, subject to competition oversight. For electricity generation, bids can be two-part, with a variable charge based on normative efficiency, or alternatively, determined by regulators and a capacity charge.
  • It also recommend to adopt Least Present Value of Revenue (LPVR)a contract, where the bid is the lowest present value (discounted at a pre-announced rate) of total gross revenue received by the concessionaire. The concession duration is variable and continues until the bid present value amount is received. A key advantage of this contract is that it converts usage risk to risk of contract duration, which is more manageable for financial institutions. Since the bid is on gross revenue, it also selects bidders who can execute at low cost and demand relatively lower margins and by limiting the scope for renegotiation to the remaining uncollected value of the LPVR bid, it discourages opportunistic bidding. Further, since the present value is protected, this structure is suitable for pension and insurance funds.

My Take:

  • Moving away from model concession agreement may be good move, but it needs caution. On one hand it may promote innovation, creativity in framework to suit the particular condition and local context but it may also be used for self-serving purpose or put bluntly to siphon off the public exchequer via sophisticated corrupt deals.
  • As Safeguard, an oversight mechanism involving competent professionals to monitor, approve, and regulate all the concession agreement may be set-up. This oversight mechanism needs only to look at broader principles or macro aspects rather than micro-managing the all details.
  • The second option though theoretically looks innovative and attractive but in practical terms this may promotes propensities to corruption. We here many court cases where concessionaire continue to collect tolls even after expiry of their period and under-reporting of toll is universal phenomenon in India. Can e-tolls solve this problem? Can moving towards Shadow-tolling (in which only the traffic count is recorded and no actual toll collection from user takes place at toll location) using digital technology solves this problem? There need to implemented on pilot-basis to check their efficacy and efficiency before wide-spread roll out.

Can existing contracts be Restructured?

Economic Survey’s take:

  • Revival of private interest and bank lending needs existing contracts to be restructured, with burden sharing among different stakeholders. Lenders may have extended credit without necessary due diligence, assuming that projects were implicitly guaranteed. Without burden sharing, this behaviour will be reinforced. Similarly, many bidders may have assumed that they could renegotiate in the event of negative shocks. Thus, there was potentially adverse selection of firms who felt they had the capacity to renegotiate; rather than firms better at executing and operating the project. In particular, this may have limited participation by foreign firms. In the absence of burden sharing, such adverse selection would be supported. Thus, the guiding principle should be to restructure contracts based on the project’s revenues, differentiating between temporary illiquidity and insolvency. Equity can be the residual claimant.

 My Take: To avoid Problems of adverse selection and moral hazard (if you renegotiate the present contracts, it would set wrong precedents and parties would assume that government would come to their rescue at time of distress), it would be prudent to experiment with new models from prospective effect. The existing contract should not be re-negotiated (as there was no provision for same in original contract) neither they should be compensated for their business risk (Supreme court in Adami Power and Tata Power case has set as bad precedent). If we allow the failure, it would avoid the contagion effect and also bring a sense of discipline among the future bidders. Even if there is any renegotiation it should be applicable to all with transparent procedure and burden be shared by all stakeholder with equity being residual claimant as proclaimed in Economic Survey.

We need to have wider consultation and public debate on what kind of model we as a society want to adopt for building the Infrastructure which is backbone of Economy. In what way we want to finance the same? Though long term investment sources like Pension and insurance source be encouraged (hopefully increase in FDI in both would bring more of same) but they alone would be insufficient to fund the huge infrastructure requirement of nation. We need to utilise the multitude of sources of finance, execution mechanism and technology to bring prosperity to all Indian.

Delhi Election Analysis

The overwhelming verdict in favor of Aam Aadmi Party in Delhi has given a new dimension to the politics in country. What it means for national politics? What it mean for Regional Parties?  Will it change the political landscape? Is the Modi wave over? Is this verdict on the Central Government? These are some of questions which are occupying the Public discourse at the moment.

As saying goes, success has many fathers while defeat is an orphan. Punditry and media has already started pouring their sagacious advices to BJP. The so called intellectuals class and foreign media (even diplomats) have offered their suggestions. The two telling are of Saba Naqvi who expressed his emotions by twit highlight Communal Agenda of BJP”BJP got less seats than the number of children they want women to have! They’ll really have to reproduce fast now….”

It is well established convention that foreign ambassadors don’t comment on local political events. But German Diplomat Michael Steiner has commented  “Confirms my conviction tht Indian voter can’t be taken for granted: Michael Steiner, German Ambassador on Delhi polls results”. This raises important questions. What role does foreign diplomat has in domestic politics? What agenda, do they have?  Are they expressing their sympathies to the Christian brethren in India? These questions need careful analysis but government of India need to immediately summon the German Ambassador for interfering in domestic politics. You could ignore such things at your peril. Recently Israel called back Diplomatic Staff who retwitted the content critical of their incumbent Prime Minister. Procedure should be followed by MEA to send a message that India would not tolerate any interference in its domestic politics.

International media terms BJP’s Delhi defeat as ‘political earthquake’. What is motive behind this? We need to be cautious on this. When was last time foreign media reported a state election with such enthusiasm, focusing covertly and overtly on contentious issues remotely associated with campaign.

While such issue raises the questions about the intent and motives of various supports of the winners in capital, it goes without saying that there are many genuine reasons for this verdict. Some of Reasons are:

  1. AAP Run Better Campaign than BJP:
    1. BJP fought election like a government. It was Government (slow, repetitive, predictable) vs Pary (Innovation, fighting spirit, dynamic, Coherent) The campaign of BJP looked like it was incumbent in Delhi wherein the fact was it was out of power for last 16 years (yes, 16 years). Being projected as incumbent without being in power is double blow.
    2. BJP gave too much importance to the opponent and focused only highlighting negative of opponents rather than projecting its own agenda. After sometime, people started sympathizing with them. BJP didn’t take any lesson from what congress did to Modi.
    3. It was pre-scripted campaign rather than dynamic campaign they run in Lok-Sabha Election taking into cognizance the changing situation.
    4. Constant media blitzkrieg has diminishing return. Giving ads for month doesn’t give any return. Slowly people got fed up with propaganda and look for innovation.
  2. People wanted to give AAP chance to fulfill the promises. They want to experiment with new establishment. This was one big reason for big increase in vote share (this especially prompted the neutral votes towards the AAP).
  3. Massive Shift of Congress + Others towards the AAP. Many of committed Congress supporter have no option but to choose the AAP over the BJP. Lower Middle Class (Delhi hardly have BPL Population) & Minorities voted en mass to AAP.
  4. Inducting Outsiders While inducting Bedi wasn’t bad decision, the timing wasn’t correct. Secondly, she was not prepared to face the media and public with her decision. She wasn’t convincing and persuasive enough. It proved to the blow to any chance of winning the capital. Here, BJP wasn’t able to manage perception to its advantage in last phase and lead to landslide victory of AAP. Similarly fielding outside candidates does demoralize the committed cadres and they are no longer interested in working for win of party.
  5. Real Engagement with voters by BJP was missing. Innovation way to hear and convince the people about their agenda was missing. There was no real engagement. At time of LS Election there was real engagement with all section through different methodology.’ Chai pe Charcha’ in which Leaders engaged with small crowd, provided them real feedback with dilution and helped them to remain grounded. AAP taking cue from success of same replicated same in ‘Delhi Dialogue’ to put forward its agenda.
  6. Media and Perception Management: In politics Perception matter as much content. BJP failed in this while AAP captured it to its advantage. One telling instance was induction of Mrs Bedi in Party and Subsequent fiasco. Every aspirant to joining politics should know what to speak and above all how to speak. In politics and public it is sine-quo-none. A wrong word or sentence may spoil your political chance. PR guys may help you to certain extent but common sense is what matters ultimately. The New professional who want to enter the politics need to take the lesson from this case study. The media wasn’t fair to Bedi nor was Bedi prepared to take the new role. Delhi is a City state. Here influence of media was much greater than elsewhere in India.
  7. Strategist did a disastrous job as always. Ignoring people connected with ground and giving too much importance to Delhi Coterie did cost the BJP. (Link to Lok Sabha vedict Blog)
  8. It’s true that arrogance crept too early in many Ministers and winners. They started ignoring the Karyakartas and become too indulgent.
  9. One news article picked up by foreign News-site and then highlighted by Indian Media – Modi wearing Pin Strap Suit – in one way was turning point. It made task of AAP much easier to convince the lower middle class that BJP would loot the state.
  10. Social Media Campaign can’t be run entirely by select team of people. Rather it draws its strength from real supporters on ground. It is reflection of ground reality. You need to institutionalize this by having constant and regular interaction. If you ignore them after winning and don’t respect their opinion, you are inviting trouble for you. You need to engage them, respect their ideas and put them in governance so that they feel empowered. It can’t be ones in 5 year or election time exercise nor it be supplanted by once in month story planted in media how someone’s work got done by intervention of PMO. People in Modern interactive world demand real time governance. People want their voices heard. They want to instant grievance redressal.
  11. Public Grievance Redressal issues weren’t addressed effectively. It is one of main issue which can build up or diminished the support. Inability of NDA to address this issue is one of reason for people’s frustration with current government. An effective Public Grievance System can fulfill the promises of ‘Acche Din’.
  12. Manifesto or vision documents are not a something which can be drawn in drawing room and put forward. It needs to be an interactive process. AAP did fine job, tough more ceremonial, through Delhi Dialogue while BJP ignored and paid price in terms of visionless agenda.

What wrong lessons most punditry will draw from this election. Here are some probables:

  • Its blow to Modi. While in actuality it’s not. Modi still is a national leaders and he would remain so in times to come.
  • Media would think that they are arbitrator of public opinion and want their voice to treat as ultimate public opinion.
  • People voted for free utilities and services. Many would lecture that entitlement (UPA Pet theme) is what the people want. Free Water, Free Electricity, Free Wifi, Educational loans to every student irrespective of income status etc.
  • Congress Supporters or Anti BJP would project it as win of congress style secularism or pseudo-secularism and rejection of politics of communalism by BJP.
  • Many pundits would predicts that Kejriwal is going to be future Prime Minister but building organization is a long term process and it take its own time.
  • Modi needs to comment on each and every instance of anything remotely associated with BJP.

Some Real Lessons from Election –

  • There is no substitute for real engagement. Uniform template doesn’t work i.e. one fit size mostly fails.
  • Elections have become personality centric. Its Main contenders (Prime Ministerial Candidate at Centre and Chief Minister at State) who matters rather than individual candidate.
  • Indian is very political and they can never be taken for granted. The Humble in politics is best asset. Ye Junta kisi ki nahi hoti.
  • Media play a big role in shaping the perceptions. It is especially true in urban areas.
  • People wanted that there should be some oppositions and BJP winning in so many states may not be good for long term politics of nation as it would give it unbridled power.
  • As one of friend on Facebook has rightely summed up – ‘If BJP thinks its verdict for Delhi then its wrong, if AAP think its beyond Delhi then they are also wrong’.

On Future – How will Delhi Elections impact the Centre-State Relation?

Many pundits have raised questions that Centre would deprive Delhi of funds and may not allow the Arvind Kejriwal to govern. This is baseless and unfounded. History shows that BJP rarely engage in confrontational or revenge politics. It may be sometime bad for their political career but as a party they believe in putting nation above the party politics, at least that can be safely said about previous PM Atal Bihari Vajpayee and Current Prime Minister Narendra Modi. This can be one of reason for lack of action against Sonia Gandhi and Robert Vadera. Since Sonia didn’t hold any official post, it would be hard to prove cases against him in any court of law.

In actuality, Centre would extend full support (as was available before) to Delhi to solve its problem, develop it as world class city. In fact , Prime Minister would get best companion in form of Arvind Kejriwal to implement the vision of Smart City. Offcourse this comes with a rider – AAP need to avoid unnecessary confrontation and need to focus on implementing their vision related to development rather than just lecturing on ideology or doing dharna.

It’s time for AAP and BJP both to focus on development, good governance and to work coordinately to improve the lives of peoples of Delhi. National prosperity should be our common objective irrespective of political ideology.

NITI Aayog –The new Avatar of Planning Commission

Planning Commission, the legacy of Nehruvian era, was dismantled and replaced with new Body called National Institution for Transforming India aka NITI Aayog on 1st January, 2015.

On reading headlines -‘ planning commission has been replaced by NITI Aayog’, Readers thought that it’s “Policy Commission” but, devil lies in details, it’s not Policy Commission rather ‘National Institution for Transforming India’.

I have tried to analyse the various aspect related to this development in question and answer format. Hopefully some of queries would be resolved after going through this.

What was mandate of planning commission?

The Planning Commission was set up on the 15th of March, 1950 through a Cabinet Resolution. Its mandate was to conduct a major resource management exercise (assessing national resources) in order to ensure equitable development through a series of five-year plans.

What is mandate of NITI Aayog?

The monitoring and evaluation roles have been retained. New body has not been given the powers to allocate funds. The mandate to look into the interest of national security is new.

Aims and Objectives of NITI Aayog:  (as outlined in official Cabinet Resolution)

  • To provide a critical directional and strategic input into the development process.
  • It seeks to establish a genuine and continuing partnership of states in policy making.
  • Emerge as a “think-tank” that will provide Governments at the central and state levels with relevant strategic and technical advice across the spectrum.
  • Evolve a shared vision of national development priorities, and foster cooperative federalism
  • It promises better Inter-Ministry coordination and better Centre-State coordination.
  • Develop mechanisms to formulate credible plans to the village level and aggregate these progressively at higher levels of government.
  • It will ensure special attention to the sections of society that may be at risk of not benefitting adequately from economic progress.
  • Create a knowledge, innovation and entrepreneurial support system through a collaborative community of national and international experts, practitioners and partners.
  • Monitor and evaluate the implementation of programmes, and focus on technology upgradation and capacity building.
  • Focus on leveraging Demographic Dividend, Poverty Elimination (Pet theme of erstwhile planning Commission), reducing inequality, villages, small businesses & environment and ecology has been retained.
  • Dissemination of best practices from within the country as well as from other nations, the infusion of new policy ideas and specific issue-based support.

What is composition of NITI Aaayog and who are its Members?

Composition of NITI Aayog is as follows:

Chairman: Prime Minister of India

Vice-Chairperson: Mr. Arvind Pangaria

Governing Council: Chief Ministers of all the States and Lt. Governors of UT.

Regional Councils: to address specific issues and contingencies impacting more than one state or a region for a specified tenure.

How is Composition of NITI Aayog Different from Planning Commission?

As saying goes – more things change, more they remain same. Structure and Composition is more or less same as Planning Commission. Tough Governing Council’s Role would decide how far it can achieve the aim of Cooperative Federalism and Team India.

How are aim and Objective of NITI Aayog Different from Planning Commission?

How surface it seems there is little change in its aims and objectives. Apart from stripping it of formulating 5 year plans, meddling in ministries work and instructing state government, there seems to be little innovation. In actual working, we may see some innovation.

As per Minister In-charge, NITI Aayog will actively monitor and evaluate implementation of government programmes and initiatives with its focus on Concurrent, comprehensive, credible and reliable evaluation.

One Important addition to the task of Body in terms of Public Policy is – “Creating Jan Chetna” or Public Perception Management or Awareness Generation. It was quite visible in recent government initiatives be it Prime Minister Jan Dhan Yojna , Swachha Bharat Abhiyan or Make In India or Beti Bachao Beti padao. It addresses one of missing point in India’s welfare and governmental programme. But it only addresses part of Problem. Other Crucial issue is Implementation and capture by vested interest.. It needs to be tacked effectively to accomplish real achievement.

What are Reasons for disbanding planning Commission and Constituting NITI Aayog?

Following Reasons have been cites in Official Resolution for Removal of Planning Commission and establishment of New Institution aka NITI Aayog

  1. Greater demand of state for their role in public policy
  2. The one-size-fits-all approach of central planning is not compatible with changed realities at national and intentional level.
  3. Planned economy (especially command and control economy) model is no longer working as anticipated and planned changes far outweigh the consequences of Technology revolution, market forces and Globalisation.
  4. New India needs an administration paradigm in which the government is an “enabler” rather than a “provider of first and last resort”.
  5. Government has to focus on enabling legislation, policy making and regulation.
  6. India needs to be an active player in the debates and deliberations on the global commons, especially in relatively uncharted areas.(How New Body would achieve this goal is not clear !)
  1. India’s pool of entrepreneurial, scientific and intellectual human capital is a source of strength -it needs to be leveraged through appropriate policy initiatives. (That was pretty much within scope and mandate of planning commission).

Does NITI Aayog address the deficiencies of Planning Commission?

  • To some extent it does. But not entirely. It’s too premature to judge at this stage , how it would address the above deficiencies of planning commission.
  • Tough it promise to adopt decentralised approach to planning but planning infrastructure and capacity is non-existent at local despite efforts of planning commission (though without sincerity and lack of political will are most crucial factor for this weak link).
  • Diagnosis of ills of Existing models of planning seems correct when it say “Development model has to become more consensual and co-operative. It must embrace the specific demands of states, regions and localities.” But how far the newly constituted body would achieve the aim is still a open question.

What NITI Aayog plans to do to achieve aims of Cooperative Federalism, Consensus based National Agenda and establishing TEAM INDIA?

  • In order to Promote Cooperative Federalism it promised to “Replacing a centre-to-state one-way flow of policy by a genuine and continuing partnership with the states.”
  • To maintain a state-of-the-art Resource Centre, be a repository of research on good governance and best practices in sustainable and equitable development as well as help their dissemination to stake-holders.
  • To actively monitor and evaluate the implementation of programmes and initiatives, including the identification of the needed resources so as to strengthen the probability of success and scope of delivery.
  • To focus on technology upgradation and capacity building for implementation of programmes and initiatives.

What Does Cabinet Resolution on NITI Aayog Says on Important Issues?

  • On Agriculture: move from pure food security to a focus on a mix of agricultural production as well as the actual returns that farmers get from their produce.
  • Villages (Gram) continue to be the bedrock of our ethos, culture and sustenance.
  • India has more than 50 million small businesses, which are a major source of employment creation.
  • But it’s silent on Human Capital, education, health and social security. Nor does it elaborate on specific sectors of economy. That is something which NITI Aayog need to outline its vision in coming days, months and years.

What are Focus Areas Outlined in Resolution?

Focus Areas outlined for New Bodies includes – Poverty elimination, Urbanisation, Agriculture, Skill Development to leverage the demographic dividend, involvement of NRI , India’s Interaction with Global institutions, Transparency in governance , Technology and Knowledge Economy.

Who has been appointment at NITI Aayog?

Former Member of Planning Commission, Arun Maira, has remarked that finding people with adequate expertise and skills to man this body would be challenge. It seems to be real issue.

Government has appointed  Shri Arvind Panagariya as vice Chairman along with full time Members Shri Bibek Debroy & Dr. V.K. Saraswat, Former Secretary Defence R&D (which shows focus on newly added area of focus of National Security).

But overall these appointments don’t inspire confidence. Body need to have much wider representation, not only restricted to the economist and retired bureaucrats, from different cross section of society. The government need to widen it’s net for selection of remaining panel and give representation to people with grassroots experience (e.g. Bankim Roy, Prof. Anil Gupta come to mind) to leveraging the diverse talent pool and not resort to importing talent from foreign universities.

What will happen to the 12th Five Year Plan? Will it be scrapped?

Speculations on the fate of 12th Five Year Plan are live as its fate would be decided by NITI Aayog in coming days.  Half of plan period is already gone but nothing substantial have happened. Even the earlier government has not paid proper attention to it with plan being approved by Parliament after almost 2 year of start. New government doesn’t seem to in mood to carry out the plan in letter and spirit though to avoid criticism it may not out rightly scrap or abandon it. Most probably it would die a slow death without anyone to take ownership or it would remain 12th player in 11 member team!  

Performance of NITI Aayog So far

Recently Prime Minister has asked the body to evolve a coordinated strategy for tribal development. The success of body to evolve a comprehensive developmental strategy for most underdeveloped areas, one of most backward groups and insurgency affected region would be crucial parameter to judge the efficacy and efficiency of new body.

Prime Minister has correctly advised NITI Aayog “to involve relevant research institutions, and eminent experts in all aspects of planning for tribal areas.”  If this advice is followed in true letter and spirit then it can set a new paradigm in India’s approach to Public Policy making. Also we need to involve the local community, civil society and common people in consultation before finalizing the policy for particular social group. It would ensure they own the policy and ensure effective implementation in their own interested.

Can NITI Aayog bring a conversance between different departments(Tribal Development, Forest, Rural Development, Health , Education etc.) & various governmental levels (Central, state , PRI and Autonomous Councils) to evolve a comprehensive strategy for tribal development ?  Can nudge from Prime Minister ensure that required impetus and focus are put into action to ensure that last mile issues are addressed to provide real benefits of growth to the most marginalised section of society?

And Final Verdict

On Broader level, Can NITI Aayog ensures that ‘Cooperative federalism’ is put into practice? Will it be able to address the issues of ‘Policy Paralysis’ & ‘Implementation deficit’ in Public Policy? Will it be able to handle the issues of monitoring, evaluation and Coordination to plug the ‘developmental deficit’? Can it serve as repository of best practice in governance and help to replicated best models of services delivery across the country? Can it serve as effective medium for knowledge sharing, exchange and capacity building across the state ruled by different political parties?  Will it be able to build the consensus on issues of Development, Welfare, National Security and International Trade?

These are some of mute questions whose answer would unfold as time progress and then people will start pouring judgement on the appropriateness or usefulness/adequacy of new architecture. Till then, NITI Aayog can enjoy its Honey Moon Period!

Reference –NITI Aayog Summary of Government released on 9th February

भारतीयता या विदेशियता

विदेशी चीजों से भारतीयों को बहुत प्यार है | हम उसे बड़ी आसानी से अपना लेते है | चाहे हो भाषा हो, तकनीकी हो , बाला हो या आलोचना| इसके प्रभाव अच्छे और बुरे दोनों हो सकते है | अगर हम दूसरों की अच्छी चीजें अपनाये और बुरी चीजों को छोड़ दे तो इस से अच्छा तो कुछ हो ही नहीं सकता , परन्तु अगर विश्लेषण करेंगे तो हम पायेंगे की हम बुरी चीजों को ज्यादा मात्रा में अपनाते है और अच्छी चीजों की तरफ कम ही ध्यान देते है | ये हमारी व्यक्तिगत जिंदगी में भी उतना ही लागू होती है जितना एक देश के लिए |

हम ये सोचने में तनिक सा भी समय नहीं देते की उस का गुण क्या है ? क्या वो हमारे लिए उपयोगी है ? क्या वो हमारे लिए फायदेमंद है ? क्या वो हमारे राष्ट्र-हित में है ?

तभी तो आपने देखा होगा हमारे अखबार भी तो विदेशों से कितने खबरे उठाते है जबकि भारत के बहुत से हिस्से की कब खबरे हम कभी सुनते ही नहीं | यही करना है की हमें उत्तर-पूर्व के राज्यों से ज्यादा पाकिस्तान की ,बंगलादेश की , अमेरिका और चीन की खबरे देखेने को मिलती है | टीवी चैनलो के लिए तो शायद दिल्ली से बाहर भारत का कोई अस्तित्व ही न हो| ये देखने में भले ही आम या साधारण बातें लगे परन्तु ये एक बड़ी मानसिकता का संकेत है जो देश के भविष्य निर्धारण में बहुत बड़ा योगदान देती है | शायद भारत उन सब देशो में अकेला ऐशा देश होगा जो एक महाशक्ति बननें का ख्वाब देखता है परन्तु अपनी संस्कृति,इतिहास, भाषा, धर्म, संस्कार,शिक्षा, प्राचीन ज्ञान सब को एक तिरस्कार की नज़र से देखते है | यह भी एक हकीकत है की कोई भी देख अपने पुरातन को भूल के विकास नहीं कर पाया है , वो एक महाशक्ति नहीं बन पाया है |

अगर अमेरिका का कोई अखबार भारत सरकार की आलोचना करेगा तो न केवल सब अखबार उसे प्रमुखता से प्रकाशित करेंगे बल्कि हमारे देखे के बुद्दिजीवीलोग उसे बड़े चाव के साथ फेसबुक और ट्विट्टर पर साझा करेंगे | साथ की टिप्पणी में वो इसका स्पस्टीकरण भी देगे| वो इस अवसर को भुनाने की कोशिश करेंगे| वो कहेंगे हमने कहा था ना , ये सरकार सही नहीं काम कर रही है |

इसी का एक नमूना अभी देखने को मिला जब अमेरिका के राष्ट्रपति बराक ओबामा ने पहले अपने दिल्ली के भाषण में ‘धार्मिक-स्वतंत्रा’ का जिक्र किया और बाद में ये कहा की “भारत में धार्मिक असहिष्णुता को देखकर गांधीजी भी अचम्भित हो जाते “| शायद ओबामा जी ये भूल गए की ‘भारत एक सम्प्रभुव और स्वतंत्र राष्ट्र है’ और ‘किसी भी देश के प्रमुख को ये लब्ज प्रयोग करने से पहले बहुत सोच विचार करने की जरुरत है’ | यही ओबामा जी सउदी अरेबिया में धार्मिक स्वतंत्रा पे कुछ नहीं बोलते, वहा उन्हें धार्मिक असहिष्णुता याद नही आती |

वैसे देखे तो ये सीधा-२ देश के आंतरिक मामलो में हस्तक्षेप है | इस की कड़े शब्दों में सभी भारतीयों द्वारा निंदा करनी चाहिए परन्तु वास्तव में कुछ राजनेतिक दलों, बुधिजीवो , पत्रकारों ने इस कथन का प्रयोग मोजूदा सरकार पर हमला करने के लिये किया | ये बहुत ही दुर्भाग्य-पूरण है|

इसका मतलब कतई ये नहीं है की हमारे बिच वैचारिक मतभेद नहीं हो सकते परन्तु जब भी कोई विदेशी ताकत हमारे मतभेद का फायदा उठाने की कोशिश करे तब हम सब भारतीयों को इसकी पुरजोर निंदा करनी चाहिए , ना की उनकी चल का हिस्सा बन न चाहिए |

इसी कमी का अंग्रेजो ने फायदा उठाया था | इसी का फायदा विदेशी ताकते अभी उठाने में लगी है |

जब तक हम इस मानसिकता से बाहर नहीं आयेंगे तब तक विश्व शक्ति तो क्या , एक स्वतंत्र राष्ट्र बने रहना भी एक चुनौती है | वैश्वीकरण के इश युग में भी हमें सब क्षेत्रों में आत्म-निर्भर बनने की कोशिश करनी चाहिए | तभी तो गाँधी जी कहा था की अहिंसा एक मज़बूत का औज़ार है न की कायर और कमज़ोर का | सही मायने में ‘भारत में निर्मित’ अभियान तभी सफल होगा जब हम खुद की अलग सोच विकसित करने में कामयाब होंगे |

Million Marketer’s Army at Ground

Million Marketer’s Army at Ground – Case of Direct Selling Business

It was rare sight to see long line of hundreds of youngster walking along the road in a particular direction. One could have easily mistaken them to be students coming from any competitive exam, as auto driver & passenger in auto have done yesterday. But, in Reality, they were part of ‘a Million Marketing Army’ of a Direct Selling Company.  These youngsters were coming from monthly review meeting with their City Head. Beaming with energy, enthusiasm and motivation, they were proceeding towards their shelter.

Everyone was curious about this scene, why there is such rush of youngster going in particular direction. Most of them thought they are coming from some exam. However, on some discrete inquiry, it emerged that these are not students (some of them were actually students) but Young Marketers’ of Direct Selling Company called ‘Glaze Trading’. They were coming after attending Monthly review Meeting of Company with their Boss, someone named Mr. Pawan.

In age of E-commerce Buzz, it was a surprise to see the army of more than 200 young enthusiastic people on ground in small town ‘Bikaner’ doing infield (offline) marketing for a little known company which selling daily use items(Soap, Washing Dish, Shampoo, Toiletries etc.). Interestingly some of them were Girls, but most of them were young boys in their late teens or early twenties.

One of Respondent revealed that most of them are from outside (even outside state, mostly from being Haryana). They are on a mission to earn a living by selling the product of company. They are new aspiring breed of youth who want to earn money, whether out of desperation or choice, to live a new lifestyle. They are ready to take risk in life. They are new entrepreneurs in making. They are learning the art of selling which is crucial for any entrepreneur.

Upon detailed discussion, one of Respondent provided his brief bio, their role, their earning and how they operate.

Mr. Anikesh was from Bhilwada. He was in his early twenties and seemed motivated to perform his task. He has taken plunge in this business for past 6 month. As per his claim, in last month he has earned Rs 11000/ by selling the products of Company. Company has charge him Rs. 13,000/ as initial joining fees and in lieu it provided him lifetime accommodation (don’t expect luxury here, rather a room where 5-6 people live in outskirt of city), two months food bill and initial products to sell. In coming months, members are provided with Rs1000/- as food allowance along with shelter.

As per information provide by him, they do most of their sale through networking. I presume it mean they use their network to sell the products of company. The accommodation provided is in outskirt of city area. He seemed happy with his earning. He also revealed that he is doing Private B.Com 1st year along with this Job/Business.

The official Website of company claims to have a ‘more than a million Glaze Independent Distributors’ in its network. It also promises efficient and widespread network ensuring reach to the most remote and farthest corners of the country. According to him, Company operated as Direct Selling Model. I am not sure whether it’s another Multi-level Marketing Company or doing genuine business with some ingenious methods.

It was kind of new experience and exposure. Even the most of people in that particular locality of city were not aware of such an enterprise.

India’s diverse market provides opportunity for both the millions foot soldiers working on ground in such direct selling company and million delivery boys working for E-Commerce Companies to co-exist.

Rural Market is considered a hard nut to crack and solving the last mile connection is one of most difficult challenge for marketing and supply chain professionals’. While Management Professional like C.K.Prahlad have made ‘Bottom of Pyramid’ a known buzz word but in reality many MNC giants are still experimenting (& Struggling) to evolve a perfect model models to capture the huge untapped rural and town market in emerging economies. While potential is huge, the market dynamics are also divergent and complex. It’s very difficult to match the local taste and demand. Cost consciousness/value for money often takes precedence over the brand recall. These unique and peculiar situations make it interesting & fertile ground for emergence of new innovative methods, strategies and approaches like ‘Glaze Trading’.

While traditional supply chain models (Coca-Cola, Pepsi), local innovation (E-Chaupal of ITC), Franchise (HUL for some products in specific regions) are adopted with mixed success, there is still scope for better delivery model to solve the last mile connectivity especially with emergence of better transportation and information infrastructure. The local variant like one seen, which relies on deployment of huge manpower at relatively low cost, may ultimately prove to be more superior to technologically reliant but lean in structure.