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Luis Miranda
Luis Miranda
Reuters

Reuters

I have been experiencing something very interesting over the past couple of months: I have been involved in various discussions about the virtues of economic freedom and capitalism! And I find that strange because capitalism got thoroughly bashed up after the 2008 global financial crisis. Focus moved from economic freedom to the pathetic state of the poor. The fact that there was a strong positive correlation between increased economic freedom and poverty reduction was forgotten in the excesses of recent capitalism. And when the late Gary Becker said that free markets generally do a good job, while governments generally do not do a good job, only a few people cared to listen. The Chicago School stood discredited. Forbes magazine, which celebrates capitalism, must have also gone through a tough time!

First of all, I spoke at a few sessions of the Freedom Caravan, an interactive dialogue with young people organised by the CCS Academy to explore pressing questions that affect our economy. We discuss what the foundations should be for a free, prosperous and just society. This year the discussion was on ‘Why is India Poor?’ During these 3-hour sessions at various colleges across the country we encourage participants to think critically and freely ask questions so that we all become better agents for change.

We start off by discussing the various traditional reasons given for India’s poverty: Population, education, resources, culture, colonial legacy, corruption, democracy, size, climate, globalisation, etc, and go on, by using data, to analyse why each of these are, at best, only half-truths. We then discuss the role of institutions and policies in determining economic success and, by looking at data again, we talk about the role economic freedom plays in creating policies and institutions that reduce poverty and create economic wealth.

In the past 60 years we have been able to see some real natural experiments on how economic freedom has created prosperity and how the absence of economic freedom has resulted in misery—just look at the two parts of Germany and Korea after they were split up. We conclude by looking at data from across the world compiled by the Fraser Institute and the World Bank.   For example, countries with more economic freedom tend to grow more rapidly; the share of income earned by the poorest 10 percent of the population is unrelated to economic freedom; and the amount of income earned by the poorest 10 percent of the population is much higher in countries with higher economic freedom.  You can download a copy of the book for free from http://ccs.in/liberty-society-series-1-why-india-poor.

Then, about a month ago, I connected with a group of professionals who are keen on ending the socialist mindset and bureaucratic controls that prevail in our country. They believe that only economic freedom can make India an economically strong country where poverty is considerably reduced. Most of the brainwashing in favour of socialism starts in the classroom, and students do not get a chance to freely debate the merits and faults of various economic frameworks. Most debates on this issue do not use data and it is very easy for the socialism argument to be adopted by politicians and voters. This group of professionals seeks to use facts and figures to back its arguments. How do we teach voters that accepting freebies does not help them? In Tamil Nadu, for example, the government gave away free TVs. India Spend, India’s first data-based journalism initiative, reported a few years ago how thousands of TV sets were given away to villages that did not even have electricity. Shouldn’t the state government have focused on creating more capacity for generating and distribution of electricity instead?

Finally, and this resulted in me writing this blog, I attended a session recently with Bill Gates, who outlined three areas of focus for India: Health and sanitation, education and capitalism! He described how capitalism creates the capital that is helping improve the quality of health and education in India. Most NGOs raise money from foundations and philanthropists who made their money because of capitalism and economic freedom.

The time has come to move the argument from wealth inequality to reducing poverty. Instead of focussing on how the rich are getting richer (the Indian crab mentality) shouldn’t we focus on getting the poor out of poverty? How do we create a larger pie where everyone benefits, as opposed to either creating a larger pie where only a tiny section of society benefits or repeatedly slicing the same pie so much that there is no incentive to work hard? When will people learn that it is better to teach a person to farm than to dole out food every day (I thought that the fish and fishermen analogy wouldn’t fly with the vegetarians!)?

I will end with one of my favourite poems, ‘Where the Mind is Without Fear’ by Rabindranath Tagore. Tagore did not specifically mention economic freedom in that poem. But the freedoms that he talked about—knowledge, speech, hard work, debate—are all components of economic freedom… “Into that heaven of freedom, My Father, let my country awake.”

(Disclosure – I Chair the Board of Advisors of the Centre for Civil Society).

dialog

Image: Shutterstock

I was in New York recently and met the United Nations’ special representative for the naming dispute between Greece and Macedonia. This row began in 1991 when Yugoslavia was split and since then, negotiations have been going on for over 20 years. To me, a 20-year dialogue indicates that the talks are a total failure. However, the representative looks at it very differently.  “Have you read about this dispute on the front page of a newspaper? Have you read about it on the back page of a newspaper? Have people died because of it? The answer is ‘no’ to all these questions. Hence, it is a successful negotiation!” It is very likely that neither side wants to give in because it may be political suicide, but as long as dialogue continues, there is continued peace and trade.

This got me thinking about the importance of continued dialogue. I recently came across a private equity deal where lawyers are battling it out and neither side is talking to each other directly. As a result, the trust deficit (which I have written about earlier) has widened even further. If both sides do not talk to each other directly with or without a trusted intermediary/negotiator, how can a dispute be resolved without ending up in court where a judge will make a decision and lawyers will get richer?

People need to talk. Sometimes verbal diarrhoea may actually help! About a decade ago, I attended one of my most interesting courses ever-Negotiations-at the Indian School of Business, taught by a couple of professors from overseas. We discussed the importance of preparing for a negotiation (one has to know one’s facts) and the realisation that we may actually not know what the other side is thinking (we only can predict or guess about it). And only by continued dialogue can you and the other side work towards a settlement. Of course, for strategic reasons, one side can walk out of the dialogue, but a permanent stalling cannot help.

Earlier this week, I participated in a Google Hangout at Gateway House on Chinese President Xi Jinping’s upcoming visit to India. It was very interesting to hear KJM Varma, China correspondent for PTI, say that the Chinese media is talking a lot about this visit; this is possibly because about 80 percent of China’s recent investments in India have gone into Gujarat when (Narendra) Modi was chief minister there. After the hangout, I was discussing the Macedonia-Greece issue with two of the Fellows at Gateway House–Akshay Mathur and Sameer Patil. Akshay spoke about how the 16 rounds of border talks between China and India had resulted in relative peace for about 20 years until last year’s incursions in Ladakh. Sameer remarked that dialogue ensures that other stuff continues. Sometimes dialogue for the sake of engagement ensures that there is less violence, though it may not actually end the dispute. And over a period of time, as a new generation takes charge, the bitterness wears off. Last year, I spent a couple of weeks in Nagaland and Manipur and met a few Nagas, who are in their 70s and 80s, and their children. The older generation still does not want to settle, but the new generation is tired of all the fighting and wants peace. And if the politicians do not screw it up, we could have peace there soon.

Of course, in private equity, we cannot wait for 20 years to settle a dispute through dialogue! We need to accelerate settlements. But that acceleration cannot be done through our court systems alone. It needs continuous dialogue as well. At IDFC Private Equity, we never went to court for a dispute with any of our promoters. This was mainly because we strongly believed in maintaining dialogue; especially when things got tough. Remember what Sameer told me, “Dialogue ensures that other stuff continues.”

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.

multi_level_parking
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.

race

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.

arvind_panagariya

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; www.ccs.in/msu2014/index.php) or the Asia Liberty Forum (Jan 7-9 in Delhi; www.acenetwork.asia/alf2014).

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?

education

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 http://www.righttoeducation.in/]

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.

skill_training

 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.

 
 
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.
 
 
 
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October 01, 2014 13:54 pm by sathish.k
Commented on Why is India Poor?
The moral which you conculed is right .. But on my side we only keep on blaming on other's that they did and he did'ent do...what he has done while rulling the government..his rulling is wrong ..we just keep on aruging this is what happend uptill now...so on my suggestion what we have done to our co...
October 01, 2014 11:34 am by Himanshu
Commented on Why is India Poor?
What is interesting is that despite all the five year plans, socialistic models of growth and reservation to uplift the poor and marginalised, situation has changed slowly, only in certain regions or pockets. In one of your earlier posts, you did mention about the lack in ambition or hunger as anoth...
September 29, 2014 19:37 pm by Purvish Diwanji
Commented on Why is India Poor?
Great analysis but to make this concrete and get it through the people it is about changing the Indian crab mentality. This can be done only with education and when a change in generation happens. The right values need to be inculcated into the coming generations and only then will we see this big t...
September 29, 2014 18:59 pm by balasubramanian
Commented on Why is India Poor?
Dear Luis, 2008 crisis in my view did not throw out capitalism. It exposed how in the name of economic freedom capitalistic institutions which enjoyed the franchise to raise money from the public ( read banks) or to 'rate" safety ( read rating agencies) and investment bankers which sold issues were...
September 19, 2014 07:46 am by Luis
Thanks, Nalini. And based on what I see with our own kids, you are doing a great job!