Luis Miranda
Luis Miranda
Photo: Reuters

Photo: Reuters

A couple of weeks ago, I was in Chembur, at one of the first slum rehabilitation buildings, sitting with some members of CORO, an NGO which works on developing grassroots leaders across Maharashtra. We were discussing with the CEO of McGraw-Hill Education the work that the young team was doing on the Right to Pee (RTP) campaign. The senior management of the company was in India on a quest organised by Leaders’ Quest.

The challenges that women face when it comes to urinating are plenty, and the more I talk to people, more shocking things emerge. At many places, women go in groups to pee because they feel unsafe going alone. At other locations, especially in rural areas, worms and insects like leeches enter their urinary tract which can be extremely painful. Some women deliberately do not drink enough water so that they don’t have to pee often, resulting in urinary tract and other infections. At public toilets, while men can pee without paying a penny, women have to pay.

We asked the team why it does not agitate more, why does it not block the streets and resort to other forms of agitation to ensure their voices are heard. A young lady said something that still resonates in my mind because of its profoundness. “We need to change attitudes. If we force them to build toilets, the municipality will build toilets that are non-functional, which will be poorly maintained and unhygienic to use.  So unless people have the intent to build proper toilets, we will have to continue with our campaign for the Right to Pee,” she said.

Supriya Sonar, RTP activist from CORO, who has been working on this campaign for over three years, taught me an important lesson that rainy morning in Chembur. Quite often, we frame laws and rules to achieve a certain social objective. But in reality, nothing changes. That’s because there is no intent. All that the people are concerned about is ‘ticking the box’. So audit committee meetings and board meetings get over in 30 minutes.  The box is ticked and there is no real intent to hold a proper meeting. Similarly, we believe that just by attending school, our children become educated. And we see that in infrastructure too. A Land Acquisition Bill is made into a law, but it doesn’t help land acquisition. Committees were set up by the previous government to fast-track projects, but people in the department say not much happened because there was no real intent by the Congress to expedite the projects.

Dowry was abolished when dowry payment was made illegal in 1961, but dowry harassment and demands still continue. The caste system was abolished over 60 years ago (discrimination against lower castes is illegal under Article 15 of our Constitution), but the system still continues in cities (just check the matrimonial columns), and even more in villages. Similarly, decades of affirmative action hasn’t dramatically changed the lives of many people. On the fringes there have been success stories, but not for all communities.

Yes, it is important to enact laws to force social change and enforce ‘proper’ business conduct. But that is only the first step in the long battle to effect change. The Right to Education and the Right to Food legislations will remain empty promises unless there is serious intent to help the uneducated and the starving. This is why voters voted for (Narendra) Modi – they believe that he has serious intent to bring about change.

Supriya taught me something valuable… unless we change people’s attitudes, we will not be able to see change. And changing attitudes is a lot tougher that enacting laws.

Image: Shutterstock

Last weekend the University of Chicago opened its Center in Delhi. This is the first major US university to set up such a facility in India. When I visited the center while it was being built, I was amazed at its location. It is in a building called Capitol Point at Connaught Place. Imagine an office in the centre of Delhi with lots of affordable car parking and just 15 minutes from the airport!

Capitol Point is an interesting joint venture between DLF and the New Delhi Municipal Corporation (NDMC) and houses multi-level car parking. This is the most sophisticated car parking facility of scale that I have seen in India. It has 11 levels with 8 levels of car parking, 2 levels of commercial space and the basement is a parking bay to drop off and collect your car. The commercial space is where the University of Chicago and other offices are located.

The parking experience is amazing. You drive into the basement, after the mandatory security check, and get your parking ticket from a machine that also takes a picture of the car before an automated boom barrier lets you into the basement. You then drive your car onto a pallet in the basement and get out of your car. Your car is automatically taken up to one of the parking levels and automatically parked till you return. The car park uses pallet-based technology on conveyor belts. The car engine is shut off when you drop off your car in the basement – so there is no pollution on the 8 levels where the cars are parked.  To retrieve your car you take your ticket to the air-conditioned lobby in the basement where a machine lets you know your total bill which you pay at a counter (the payment part has not yet been automated). While you wait for your car to come down you can sit in air-conditioned comfort, where you will be notified on a screen when your car is ready for you in the basement. The average collection time is less than 5 minutes. You then get into your car and drive out. If you have a driver, your driver can wait the entire time in the same lobby and can watch television, instead of sitting in the hot sun on the road. What an experience! All for just Rs.10 an hour.

Now here comes the sad part. The car park is hardly used by people in Delhi! Owners and drivers prefer to park on the road, possibly paying a higher rate or parking for free and blocking traffic, while their cars get heated up under the sun. What a shame. When I went there once I asked my driver to park in the car park and he was amazed at the cost and the experience. I asked him why he had not gone there before and he said that he wasn’t aware of the car park. So I hope that DLF and NDMC start advertising more about this excellent infrastructure that is priced so reasonably. The cost to park here is a fraction of what it costs in other major cities across the world.

There is more to come… In less than a minute one can walk from the University of Chicago Center in Delhi to the Shivaji Station of another state-of-the-art infrastructure project – The Delhi  Airport Metro Express. I have used this Orange Line many times and it is the most efficient way to get to the airport from the centre of the city. Once it took me just 45 minutes from Old Delhi to the airport during evening rush hour by using two of the metro lines. Last Monday I had a huge suitcase which was not difficult to roll from Capitol Point to Shivaji Station, take it on the escalators (which work), get it scanned and get onto the metro. In less than 15 minutes I was at T3 of the Delhi airport at a cost of only Rs. 120. The ride is extremely comfortable and the quality of the compartment and the infrastructure (including fully-automated ticketing machines) are just like the Hong Kong airport express and the Paddington Express in London. Yes, there were delays in getting this started and it had to be shut down for a while after it started for technical and commercial reasons. But this is by far the best way to get into Delhi from T3.

And here comes the sad part, again. Not many people use it. Maybe ‘sophisticated’ Delhiites can’t be seen talking public transport. Smart commuters from Mumbai tell their drivers to wait for them at one of the stations and thereby escape the crazy Delhi airport traffic. All for a fraction of what it costs in Hong Kong and London.

This finally brings me to a Reuters report that I found on the website of Tata Power some time back – “Counting the Cost of India’s Blackouts.”  This is an excellent note that reflects the sad state of infrastructure in India. To quote from it, “Is it better to pay more money for more electricity, or keep prices low and look forward to blackouts that will conk out offices, factories and homes in India? … Indian politicians must therefore strike a balance between allowing the private sector to make money, while at the same time protecting the interests of customers (and voters) in a country where hundreds of millions live below the poverty line … Is it better to have state-run pot-holed roads, or have swish six-lane highways that charge a toll that becomes unaffordable to some?”

I hope people in Delhi and the next government are listening.


Many months ago, I attended a discussion at the Observer Research Foundation on the future of the Mumbai racecourse at Mahalaxmi. It was an interesting discussion. There were many proposals presented on how one can develop that open land into a lovely green space which all Mumbaikars can enjoy. Today, people can walk or run around the racecourse track during certain times of the day and enjoy total peace away from the noise and pollution of Mumbai. A few years ago, when our daughter was sitting for her examinations at her school in Tardeo, I would go for long walks at the racecourse around 9 am while she wrote her papers. It was so peaceful.

The 99-year lease to the Royal Western India Turf Club (RWITC) expired last summer. In May 2013, the BMC decided against renewing it. A part of the 226 acres is owned by the BMC and a larger part is owned by the state government. I do not know where the lease renewal decision is stuck at the moment, but it clearly has been forgotten by the media. I thought that the proposal to build a garden of international standards at that site was an excellent idea and some very interesting proposals were presented.

However, the underlying tension in that room related to the sincerity of the government in actually retaining that open space for the citizens of Mumbai. People were sceptical that the government would actually build a garden, let alone build one to international standards. There was a fear that real estate developers would grab parts of the land and the area that would be finally available to develop a garden would be much smaller.  I left the room with the belief that we should renew the RWITC lease—this way all of us would at least be able to enjoy a part of this open space for most parts of the day—but it finally boiled down to a lack of trust in the government on whether it would keep its commitment.

It is this trust deficit that is hurting public policy today. Citizens do not believe that the politicians and bureaucrats work in the interest of the citizens. Lobbies, like the real estate lobby in this case, can adversely impact our interests. And the recent corruption scandals have seriously widened this trust deficit. This is the deficit that the Aam Aadmi Party very successfully exploited in Delhi. But does that mean that all politicians are crooked? Does that mean that all bureaucrats are crooked? Does it mean that all policemen are crooked? This is what the public seem to believe. I do not think so. Yes, there are many people in public service who have forgotten the importance of the words ‘public’ and ‘service’. So even if the government wants to take a step in the right direction, people doubt it.

And this trust deficit has made decision-making difficult in the government itself. Government officials cannot offer a contract to someone who possibly has the best product but not the cheapest price. Contracts have to be bid out and must be awarded to the lowest bidder. This is because there is a trust deficit within the system—people assume that a contract has been awarded bilaterally because someone has been bribed. Of course, open, transparent bids have a lot of advantages. However, in many cases, the contract will be awarded to the lowest-priced contractor, who will do a shoddy job or come back with repeated cost escalations.

Take a look at the existing domestic terminal in Mumbai. It was the last major contract done by the Airports Authority of India before the airport was passed on to GVK to manage. It looked lovely, but, within a few months, we all noticed the poor quality of material used. The new Mangalore airport has a similar challenge—lovely design, but poor quality material—all because the L1 process has to be followed to avoid persecution by the dreaded 3 Cs—CVC, CBI and CAG.

This trust deficit does not only exist between the government and employees and citizens. It is found everywhere. Cricket, or example. The betting mafia has given a bad name to the game. If someone drops an easy catch fans say “paisa khaaya” (the fielder has been bribed). Just like when a batsman gets out for a low score.

And this trust deficit gets into our own homes. So, many times, we come across husbands and wives quarrelling on silly matters. Or mothers-in-law over-supervising their daughters-in-law. Or kids not being allowed some freedom.

How does one overcome this trust deficit in our lives? In the public sphere there are institutions that are supposed to protect us, like the judiciary and the media. Unfortunately, even some of these have lost the trust of the citizens. And how do we overcome this trust deficit in our own personal lives?

I have three suggestions. The first is open transparency (as opposed to ‘fake’ transparency). For example, if there is public transparency on how tariffs are being set by toll operators, it is possible that the public will stop supporting the absurd destruction of toll booths by the MNS. It will also bring back trust in PPPs. But there have to be boundaries for openness—otherwise the trust deficit leads to fears of persecution by vested interests or the 3Cs.

The second is open communication.  If people are open with each other and communicate properly, the trust levels will improve.

And the third is that we stop being so suspicious and stop seeing conspiracies in every situation.

Until then, the trust deficit will continue to eat away at our faith in public and private institutions.


Prof Arvind Panagariya

A few weeks back I attended a talk by Prof Arvind Panagariya of Columbia University, hosted by Gaja Capital. And I loved it. After a really long time I heard someone in India talk about the role of markets in reducing poverty. Our colleges are filled with socialist teachings on the subject and we seem to trap our students in a time warp. So it was so refreshing to hear Prof Panagariya. He talked about the need to grow the pie in order to redistribute wealth … if we only have poverty then there is not much wealth to redistribute. He added that the reduction of poverty is more important than the reduction of inequality.

A few days before that I had met a consultant who had recently majored in Economics from one of the leading colleges in India. When she was still in college she had attended a course taught by a think-tank that I am associated with, Centre for Civil Society (CCS). CCS, was set up by Parth Shah 16 years back to open the minds of young Indians … to teach them about public policy … to give them an opportunity to connect classroom theory with practical work … to highlight the importance of making decisions based on data. And this young lady said that she enjoyed the iPolicy sessions of CCS because they discussed a very different type of economics from what she was taught in college and the theory was validated by experiential testing. I recalled my college days in Mumbai.  I was taught that the father of economics was Adam Smith and that John Maynard Keynes was God. That was it – no mention at all about economic theory after Paul Samuelson.  I then went to the University of Chicago and was exposed to a branch of economics that I had never heard about in Mumbai. I was introduced to names like Milton Friedman and was taught by Nobel Prize winners like George Stigler and Gene Fama. Thirty years later the situation is the same in our colleges, with a small tweaking … maybe one part of one paper over 4 years would talk about ‘fresh water’ economics. The developments in Economics over the past 30 years seem to be irrelevant in India.

I recently participated in a discussion on philanthropy with Rohini Nilekani and she talked about how we should use markets as a force of good in philanthropy, especially since a lot of recent wealth was created by entrepreneurs like Azim Premji and the team at Infosys, thanks to the role of markets.

Unfortunately after 60 years of independence we are still brainwashing our students that socialist policies will get our country out of poverty. So I asked Prof Panagariya how can we get more Indians aware about the role of markets in economic development and the reduction of poverty. He said that the problem lay with the faculty in our colleges. Those who are market-inclined either don’t get teaching positions because their ideology clashes with that of the rest of the faculty or they decide to take up corporate jobs. As a result, we have the same antiquated knowledge being taught over generations in our classrooms by so-called development economists who fail to realise that the world has changed around us. I have still to see the curriculum of a top college in India devote sufficient attention to new concepts like the Chicago School of Economics, the Public Choice School of Thought and Behavioural Economics. And this gets compounded when the faculty invariably comes from former students of the same college. This inbreeding has to stop so that students get exposed to new concepts.

I am not arguing that one theory is better than the other – all I am saying is that students need to be exposed to different schools of thought. And students should be encouraged to debate these theories and get hands-on training in economic policy. At Chicago Booth the faculty consists of people like Gene Fama and Richard Thaler who are on opposite sides of the efficient markets hypothesis. We need to see such intellectual tolerance in our campuses in India. About a year back I spoke about the role of markets to a bunch of post-graduate students at Manipal University. I felt like a slave in Roman times being fed to the lions. We argued a lot and most of the students felt that I was a total idiot to talk about crazy concepts like the importance of incentives and competition. I ended by saying that I wasn’t there to brainwash them that markets represented the Holy Grail, but to expose them to other ideas and let them debate these ideas amongst themselves. Their professor, Sundar Sarukkai, subsequently told me that there was fierce debate on my talk after I left. Mission accomplished.

I remember attending a 2-day seminar in Delhi a couple of years back where faculty of Delhi University, JNU and the University of Chicago got together to discuss the future of the study of humanities. One particular session stood out – a presentation by a professor from Delhi on research being currently done in Indian universities. Nothing in her presentation was backed by data and we instead discussed frivolous issues. It was a fascinating couple of days which highlighted the lack of academic rigour amongst some of the leading faculty in Delhi and the total disdain to look at what the data says. Which is why Bhagwati and Panagariya’s recent book, ‘India’s Tryst With Destiny’, is great – they use data to debunk common myths about India’s journey over the past two decades. For example, after markets took over from the state in 1991 poverty has declined even for scheduled castes and tribes, growth has gone up, jobs have been created and health and education has improved … this is, of course, only if you want to look at the data. Panagariya is also a supporter of education vouchers and cash transfers.

I asked my former Chairman, Dr. Vijay Kelkar, why data is largely ignored in public decision making and he paraphrased the sorry state of affairs with this lovely quote of leaders in public policy – “Don’t confuse me with the facts.” Dr Kelkar also reminded me of the famous quote of Prof Raj Krishna, of the Delhi School of Economics – “India’s policy makers are knowledge proof.” So is the media.

So those of you who were brought up on a heavy diet of Keynesian economics (like I was) and want to take a walk on the wild side, sign up for “Are Markets Moral?” (Jan 4-5 in Delhi; or the Asia Liberty Forum (Jan 7-9 in Delhi;

Have you recently been asked a question that you struggled to answer? I was in that situation a few weeks back. I was attending the 2013 Leaders’ Quest Pow-Wow in Jaipur. People from all over the world got together at the fabulous Samode Bagh and Palace to  push ourselves as we discussed issues as diverse as  leadership, ‘what really matters’, moral courage and the lost art of dialogue and also meet some great NGOs, like Bachpan Bachao Andolan, operating in and around Jaipur.

So here I am sitting with a smaller group of people from England, Brazil, Palestine, China and Israel on a Sunday evening when bang comes the question, “What is your dream?” Rene, who asked me that question, grew up in Ghana and now lives in London where he has had a fantastic career. “What is your dream?”

I did not know what to answer. And it bothered me because I have always been a dreamer and have always had dreams of doing great things. Often I have preferred living in my dreams than in reality because my dreams were more interesting.

“What is your dream?” I struggled to give a half-baked response and told my group that this question had stumped me and I was not happy that I couldn’t have a proper response. Maybe it was the excessive drinking the previous night at a friend’s party in Bandra that had made me incapable to dream at that moment.

The next four days were a mix of interesting introspection, deep discussions, random walks through villages, some great meals in exquisite locations and a trip to spend a day with kids who were rescued from bonded labour. I met some fascinating people, including Basu Rai, who at the age of 5 found himself orphaned on the streets of Kathmandu. I was introduced to an NGO called CORO that works at grassroot community change in Maharashtra. I had long conversations with a lady who faced death threats after publishing a book on Islam and is now weary. We discussed the serious challenges facing humanity. I learnt about life in Palestine. I learnt about the challenges kids in Brazil faced. I met an American who was going to spend 6 months looking after the dying in Kerala. I was reminded once again that India may be poor economically, but we are rich spiritually and emotionally. We talked about ‘active hope’. But I couldn’t find my blasted dream. Does one need a dream at all? I questioned the need for a dream.

“What is your dream?” I tried concocting dreams. But they did not excite me.  Three years back I quit my full-time job in private equity, climbed Kilimanjaro with our son and struggled to complete the Athens Marathon. I got a tattoo. I spent the past three years in the company of some incredible people who are doing amazing work in a variety of social enterprises,  NGOs and for-profit ventures. I hung out with college students discussing the roles of the State and the Markets. I travelled with my wife and kids to enchanted places like Bhutan and Leh, where we spent three weeks volunteering with an NGO (17000 ft Foundation) setting up libraries in remote government schools close to the Chinese border and the Pakistan Line of Control. I controlled the pace at which I worked. I would go for long breakfasts with our daughter. I was on the board of an IPL team. But I had stopped having a dream.

After four days of trying to find my dream, I came back home and told my wife about my frustrating search for my elusive dream. She gave me that loving look that only wives can give their husbands when we have done something really stupid and simply said, “You don’t have a dream, because you are living your dream, you idiot!” Sometimes what we are looking for is staring back at us – we only need to know how to look. Now why didn’t I discuss this with her four days earlier?


Image: Shutterstock

Some years ago I wrote in an article that Right to Education (RTE) could cause budget schools to shut down. And that is happening today. As feared, RTE has made it more difficult for children to go to school whereas it should have created more opportunities for them.

Let’s understand the issue. The Right of Children to Free and Compulsory Education Act, 2009, (popularly known as ‘RTE’) gives every child the right to full-time elementary education of satisfactory and equitable quality in a formal school (which satisfies certain essential norms and standards).

These input norms include prescribed Pupil-Teacher Ratios, standards for buildings and infrastructure, defined school-working days, defined teacher-working hours and the appointment of appropriately trained teachers. There is no mention at all about outputs and no requirements about improving the quality of education. [For more information on the RTE you can check]

In the recent past, budget schools have proliferated in India. These schools charge fees of around Rs 200-600 per month and serve as an alternative to the free government school system. Given the low fees, these schools cannot afford large infrastructure or offer the same salaries that government schools offer their teachers. But many parents prefer to spend money sending their children to these budget schools instead of sending them for free to a government school.

Makes one wonder why someone would refuse a free service? The government’s response (and Amartya Sen’s response too) is that the poor cannot make rational decisions about their children’s education — a throwback to the days of a controlled economy. Professor Karthik Muralidharan (UC San Diego, NCAER, NDER and J-PAL) recently presented the results of his research on schools in Andhra Pradesh. He concluded that private schools deliver slightly better test score gains at less than a third of per-child government spending.

Data is sketchy on the number of schools that are being closed down because of the RTE. State education portals do not carry these figures. The Centre for Civil Society, a leading think tank in Delhi, has tried to get data on this. According to their analysis, 933 schools have been closed in Punjab and another 219 schools face closure. In Haryana, the court has stayed the closure of 1,292 schools.

Assuming an average school size of 200 children, this works out to 500,000 children who either have no school to go to or cannot go to their school of choice. In some cases these children will be forced to go to a government school — a perverse situation where the government is forcing poorer children to go to government schools. However, where there are no government schools these children will have no school to go to.

I visited one such village in Ukhrul district of Manipur, where 40 students found that they had no school to go to when their private school was shut down; we finally bought them a bus so they could travel 5 kms to another private school in a neighbouring village.

Accurate data is not available for other states, though press reports suggest that 529 schools have been closed in Andhra Pradesh and 30 in Tamil Nadu. In addition 6,116 schools face closure in Tamil Nadu, Delhi, Uttar Pradesh, Andhra Pradesh, Jharkhand and Maharashtra. This adds up to 1.8 million children who may be forced to quit their chosen schools. And this dangerous stat pertains to eight states only.

It is not that those private schools that are being shut down have necessarily been doing a good job in educating children. Some of them could have been bad, like the one I visited in Manipur in February. But some of the government schools that I visited in Leh and in Mumbai earlier this year were not better by any measure. So, by forcing a child to move from a private school to a government school doesn’t necessarily assure the child a better education, as inferred by Professor Karthik Muralidharan’s research.

Many budget schools are working hard on improving the outcome of education. The National Independent Schools Alliance (NISA) was formed in 2010 to create a unified voice in India for budget schools and to also improve the quality of education in these schools.

It is interesting how democracies work and how public choices are made. Instead of creating more opportunities for children to get a proper education, the RTE is pushing children out of the education system or forcing them to get inferior quality education. I am hoping the Parliament expected something else when they passed the RTE.


 Image: Shutterstock

I recently attended a round table discussion on skill training in India at the British High Commission in Delhi. S Ramadorai, Chairman of the National Skill Development Agency (NSDA) and the National Skill Development Corporation (NSDC), hosted the discussion along with the UK India Business Council (UKIBC).  I left the British High Commission that evening very content—I am not sure if it was because we had a good discussion or because the beer was nice and cold.

Either way, after a long time I was finally seeing light at the end of the tunnel for skilling of India. Over the past few years, that blasted tunnel kept getting longer and the only people who seemed to have made significant money from skill training in India were consultants and conference organisers. And after many years, I see three critical components falling into place—corporate focus, training vouchers and certifications. Let’s take a look at these factors.

Corporate focus: Most companies in India play lip service to training. Everyone grumbles about the poor quality of skilled labour, but only a handful, like L&T, have invested significantly in skill training. Most companies do not want to bear the cost of training because of high staff turnover and because customers don’t run away due to poor service. Many also complained about the poor quality of third party training institutions.

The bottom line is that most companies were not willing to spend on improving the quality of workers. The new Companies Act recommends a 2 percent (of profit) spend on CSR and one of the approved activities is “employment enhancing vocational skills”. So skill training companies are salivating and hopefully corporate India will now start spending on skilling India.

Samhita Social Ventures, a CSR advisory firm, advocates that companies should spend their CSR budgets on efforts that help their business. And improving the quality of workers is a no-brainer.

Training vouchers: One of the challenges skill training companies face is the low ability or interest of students to pay for it. The tag line of the Centre for Civil Society (CCS) is “fund students, not schools” and CCS pioneered the concept of education vouchers in the country. Through a voucher programme, public funds are used to give citizens the choice to pick their service provider. After a long struggle, CCS recently started India’s first skill voucher pilot programme  together with Babasaheb Ambedkar Research & Training Institute (a part of the Department of Social Justice, Government of Maharashtra), Michael & Susan Dell Foundation and NSDC. This will cover 3,000 scheduled caste students.

The Government of India recently went one step further and announced the STAR (Standard Training Assessment and Reward) scheme with a funding of Rs 1,000 crore. At one time, the government told CCS that it cannot fund vouchers … and then they went on to fund the mother of all skill training voucher schemes, without referring to it as vouchers. I am not complaining since, as “a rose by any other name would smell as sweet”. It is interesting that India is home to two of the largest education voucher programmes in the world—the 25 percent reservation under the RTE, and the STAR programme. Milton Friedman must be celebrating in his grave.

Certification: Until industry or the government makes certification a prerequisite for specific vocations, skill training as an industry will not take off in India. For example, in England, you cannot use an unregistered electrician for any work in your home. As a result nearly all electricians in England are certified and registered. Now, we seem to be moving in that direction with NSDC championing certifications through Sector Skill Councils.

As I stated at that roundtable, the hard work over the years of organisations like NSDC and the PMO’s Skills Mission have finally resulted in the frameworks falling in place.  The time has now come to stop talking and focus on execution. Young India is still waiting.

(Disclosure: I am Chairman of the Board of Advisors of the Centre for Civil Society, Chairman of Manipal City & Guilds and Director of Samhita Social Ventures)

I want to join the hordes of ‘experts’ who are commenting on the value of the rupee, what the RBI should do, etc. What right do I have to write about this? Many… The main one being that my daughter is off to the US to study next year and her college bill is going up very fast! Maybe because I spent 11 years of my life in the dealing rooms of Citibank, HSBC and HDFC Bank advising clients on how to hedge against a falling rupee. And I was wrong quite often. So I guess I am eminently qualified to also write about the rupee.

First of all, I haven’t met anyone who knew what the correct price of the rupee should be against the US dollar or any other currency. Anyone who can claim to know that is God. And yes, I believe in God. But I haven’t met God in any dealing rooms or economist’s adda or in a press room or TV studio. So if someone says that the rupee should be at 70 to a dollar she or he is talking nonsense. Of course if everyone says that the rupee should be at 70, then the rupee will indeed head towards 70. But that doesn’t mean that the correct exchange rate should be 70… or 50.

The simple fact is that people buy dollars and sell rupees if they either (a) need dollars to make a payment, (b) expect the rupee to fall further and want to lock into a rate for a future payment, (c) want to anyway lock into a rate for a future payment to remove any exchange rate uncertainty or (d) want to punt on the value of the rupee through a trading position.

Speculators punt on the value of the rupee. And everyone loves to trash speculators. They are treated the way people treat rats. I detest rats. I find them creepy, and many years ago I nearly jumped off my terrace when a tiny rat showed up. A few years before that one of my Sunday School students gifted me a white mouse knowing that I dread these creatures. So most people want to get rid of rats. But rats have an important role to play in the food chain. If we got rid of all the rats we will have other problems… other pests will proliferate, garbage will increase, etc. So while we shouldn’t eliminate all rats we should control them. We have seen how difficult it is to control the rat population and the areas in which they scavenge.

The same with speculators–they play a very important role in the FX markets by supplying the ‘noise’ element and lubricating the system. If we remove speculators we will have violent swings in the value of the rupee because some ‘wise’ person would be deciding what the value of the rupee should be in an illiquid market; and as I have said earlier, that person cannot play God.

But I have got lost in my ramblings… how does one save the rupee? As long as people have little confidence in the stability of our economy they will have little faith in the rupee. The RBI can do little to reverse that sentiment and it is foolish to expect the RBI to have a magic potion. So the solutions are simple: Bring back confidence in the economy by reversing the reversals in the reforms process (a great article by Ajay Shah recently), monetise the gold held by the Tirupati Trust (that was Jamal Mecklai’s suggestion), stop the barrage of negative articles and talk shows in the media by ignorant people (a recommendation of my dad), focus on the good stuff happening around us (eg the growth in the rural economy), complete stalled infrastructure projects to show that the government is committed to action (as opposed to announcing new projects which will find poor response), cut down on socialist schemes which increase the fiscal deficit, get a Pied Piper to lead all politicians off a cliff (that was my idea, related to my aversion to rats)… Okay, maybe all of these measures are not possible and I am painting too rosy and simplistic a scenario. But the current government got us into this corner with great ease and they can get us out as easily.

We are a nation of emotional people who swing widely from euphoria to despair very easily. I recently attended a talk on the Indian economy in Singapore where our sentiment towards the Indian economy was compared to our sentiment towards the Indian cricket team. In May 2011 Dhoni’s house was stoned. In May 2013 he was condemned for being too close to Srinivasan. And now he is worshipped as India’s greatest cricket captain. This morning a friend reminded me… oil was at $28 in 2003. If someone told us that it would be around $100 ten years later, we would have fled India and moved to an oil exporting country.

Well, many of us stayed on and India is still going strong. So let the rupee fall to where the market wants it to be. All I know is that this is a great time for foreign capital to be investing in India. It is a lot like 2003… Over the five-year period from 2003, oil prices went up 3 times, the stock market in India went up 6 times and the rupee appreciated against the dollar by 14 percent.

I recently read an interview where the person interviewed said we don’t need more banks. He argued that we instead need more efficient banks which are better capitalised, we need consolidation amongst banks and five more banks won’t help inclusion.

While I can’t disagree with these objections, I strongly believe that we need more banks … mainly for one big reason – INCREASED COMPETITION. My University of Chicago brainwashing still remains!

Twenty years back Indian banking was dominated by the public sector banks. The foreign banks were highly efficient and profitable, but they remained on the fringes. The first wave of banking brought in a host of banks. Some ended up as disasters or don’t exist today – Global Trust Bank ended up within Oriental Bank of Commerce and HDFC Bank over the years gobbled up Times Bank, Centurion Bank and Bank of Punjab. But the remaining banks have grown and done very well. HDFC Bank, ICICI Bank and Axis Bank have all become neighbourhood banks and have forced public sector banks to become more efficient.

Twenty years back none of us thought that these new banks would be so powerful. So while all the banks were not great successes, the ones that survived did brilliantly and permanently changed the banking landscape of the country.

This year I have travelled to remote parts of our country. In January I was in Nagaland and Manipur visiting remote private-sector schools. And I was very happy to see branches of HDFC Bank all over the place (and proudly sent back pictures of these branches). Recently my wife, kids and I spent four weeks in Ladakh where we mainly set up libraries (with an NGO called 17000 Ft Foundation) in remote government schools. We were all excited to see HDFC Bank branches and ATMs at many places on our trip. And I was asked to talk to HDFC Bank to set up branches in many more places. This highlights the role that these ‘new’ private banks have played in promoting financial sector inclusion. What the past 20-odd years have also taught me is that we can’t make change overnight in all sectors. Some of these processes take years and investors, entrepreneurs and managers need to keep this in mind and have patience. Most of the banks that were in a hurry in the 90s do not exist today.

Let’s look at the current euphoria on banking licences. First, it is useful to note that the banks of the early 90s which survived are those that were mainly sponsored by financial institutions – ICICI, HDFC, UTI and IDBI. This is an important point to note. Second, these banks had professional managers running them. Many of them were run by bankers and financiers who had only domestic financial sector experience – so foreign bank experience is not necessary. And finally it is important to remember that the ride wasn’t always smooth. In our early days at HDFC Bank the market critically compared our slower growth story with the scorching pace being set by banks like Global Trust Bank and IndusInd Bank.

Yes, we need more consolidation in the public sector banks. But that is a political mine field involving state politics and trade unions and is more difficult to achieve by a weak coalition government. Instead, by having more banks being set up (which are mandated to focus on inclusion) we will have more competition and that will force better pricing and services to customers. Dr Rangarajan said at one of my earlier investor conferences that more competition helps consumers.

Finally, the appointment of Raghuram Rajan, a professor at the Booth School of Business at the University of Chicago, as the next RBI Governor is a great step forward. A lot of people were worried that in this election year the government would appoint a rubber-stamp central bank chief who would be flexible in monetary policy and doling out bank licences. Raghu is not that type of person – which is why after a long, long time I am feeling a bit optimistic that this government has the balls to take a tough, market-friendly decision.

(Disclosure -   I was a part of the start-up team at HDFC Bank and set up IDFC Private Equity, the PE arm of IDFC, which has now applied for a banking licence)

When we talked to infrastructure developers 10 years back on what their biggest challenges were, it invariably included “getting people”. That was one of the drivers for setting up a skill training company within Manipal Global Education together with City & Guilds of the UK, the world’s leading skill certification organisation (full disclosure: I still remain associated with this company). The government also focussed a lot on skill training and set up NSDC, which in turn helped spawn a host of other skilling companies, and NSDA. But most of these companies haven’t grown the way they were expected to and the government must be way behind its skilling targets.

Various explanations have been given for this. In this blog I want to outline one reason – the fact that we are a welfare state has made kids less hungry to work hard for a job. Let me explain, before you start slamming me.

I am involved with India’s first dedicated student loan provider for vocational training courses, Springboard Finance, which is helping pilot a programme on student loans for vocational training. Mihir Sheth, the promoter, told me that some kids quit their jobs within a few weeks because of reasons like “my boss shouted at me”, “I had to be out in the sun too long”, “I wanted to be closer to home”, “ the food is not good”, “I don’t like the clothes they make me wear”, etc. And these young adults would prefer to be unemployed than to struggle at the job they have.

So on one side we have employers looking for employees and on the other hand we have youth who chose to be unemployed or underemployed. Why would these youth prefer to be unemployed and not take up whatever job they can get? Admittedly this is not the reaction of most students, but it is representative of a proportion that is still statistically significant.

I can think of two reasons for this – (1) these kids have the safety net of staying at home with their parents or relatives and so their basic needs are taken care of. In some parts of the world they are unlikely to have this privilege and would therefore take up whatever jobs they can get. (2) Because of this safety net, they are happy surviving on whatever little they get from their family or from schemes like NREGA’s Mahatma Gandhi National Rural Employment Scheme, a corruption-riddled employment scheme that the Congress hopes will help them win the next election. It is a well-intentioned programme where, like in all well-intentioned programmes, the challenges lie in its implementation. When I was in Manipur and Nagaland earlier this year the biggest employer seemed to be NREGA-created programmes. These schemes often dull the drive of the youth and also severely impact job migration (which has it positives and its negatives).

A friend of mine, Praveen Chakravarty, who has worked a lot on skilling issues, explained to me that these unemployment insurance schemes have also effectively raised the minimum wage level in the country, which is a positive step. But the higher compensation was meant to be balanced by higher accountability and performance levels. Unfortunately the latter part has been forgotten and as with most government programmes, outputs are ignored. This is why minimum wages have risen without any increase in performance level.

So unless we find ways of tweaking these safety nets we will continue to see a shortage of labour which will impact projects and businesses across the country.

An alternative to tweaking these safety nets is to make the youth understand the importance of hard work by changing their attitude. A few organisations look at this aspect when doing skill training. I was recently discussing this issue with Simon Winter and Punit Gupta of TechnoServe, an organisation I am involved with that empowers people in developing economies build businesses that break the cycle of poverty. They have a large programme with The MasterCard Foundation to train rural youth in East Africa to be entrepreneurs. A part of the STRYDE Program is mentorship and counselling to change behaviour patterns among the youth to work hard at a career. This has to become an essential part of skill training in India.

Luis Miranda
Luis Miranda started investing in India's infrastructure before it became fashionable. He started IDFC Private Equity and was earlier a part of the start-up team of HDFC Bank.
Luis has invested in and has been on the boards of companies like GMR Infrastructure, Delhi International Airport, Gujarat Pipavav Port, Gujarat State Petronet, L&T Infrastructure and Manipal Global Education.
Today he is involved with various non-profits like Centre for Civil Society, SNEHA, Human Rights Watch, Gateway House and Samhita Social Ventures. Luis graduated with an MBA from Chicago Booth.
Luis Miranda'S POPULAR POST(S)
Most Popular
Luis Miranda's Activity Feed
August 31, 2014 20:35 pm by Sandra Martyres
Commented on What Is Your Dream?
Luis, I chanced upon this inspiring blog today - it is not often that one comes across someone able to live his dream.. You have selected the path less tread upon and are doing an amazing job..
August 08, 2014 14:57 pm by Uday
Both the examples are taken from Delhi which is not representative of India. In cities like Mumbai or Bangalore, people are willing to pay but not much is being offered. It is incorrect to say people of India are unwilling to pay for good infrastructure, just that a few wish to have free lunch all t...
July 30, 2014 03:55 am by Luis
Linus, agree ... change has to start with each of us ... Gandhi had said, "Be the change you want to see in the world."
July 29, 2014 23:53 pm by Linus Farias
My belief is that a cosmopolitan city like Mumbai can affect fundamental change such as this ONLY when each person takes a least one step to change the life of themselves and one neighbour (mother, sister, daughter, father, brother, son or stranger) in a small way. It can start with the following q...
July 26, 2014 22:04 pm by Luis
Yes, I also read that article shortly after my blog went live. The statistic on the child mortality rates between Hindus and Muslims is interesting.