Tag Archives: India

Where have all the women gone?….

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The 15th Finance Commission in India has just been set up and the announcement includes five members. For the fifteenth time, and to no one’s surprise, the Commission is composed entirely of men. The most-recent membership of the Niti Aayog also does not include a single woman in its ranks. And so we have to ask – in this great country of one+ billion, how can the government remain unable to find any woman it deems worthy and capable of serving in these policy and planning capacities? Where have all the women gone?

It seems that our current Government, which has co-opted many good initiatives of past Congress governments and leadership (e.g., concept of Mission, Aadhaar, GST, etc), has left out the most important one: real action in the spaces of female empowerment and gender equality.   Rajiv Gandhi’s Office had Mrs. Grewal at its helm for many years with a large number of senior women in his team.  But today’s PMO has only one woman on staff in a leadership capacity, and that too at the Joint Secretary-level (though there are several more at Director-level and below).

Our current Prime Minister is very fond of ancient history and so this fact may help the cause of my tribe. The recent archeological evidence shows that until 9,500 BCE or until the onset of domestication of agriculture and animals, there was complete equality between men and women. Experts believe that this was because men and women carried out the same tasks of hunting and gathering food. And it is only when specialization led to differentiation in work — i.e., women tended to agriculture or managing house while men continued to hunt — that inequality between the sexes seeped in over time. So perhaps for the modern-day gender crusaders: maybe we should start with equal representation at work to recreate history.

Back in modern day India, it is not just the Finance Commission where we’re seeing gross under-representation of women in senior leadership positions. In 2017, India ranks 139th in World Economic Forum’s gender inequality sub-index for Economic Participation and Opportunities for Women out of a total of 144 countries, ahead only of Iran, Yemen, Saudi Arabia, Pakistan, and Syria. And omitting women altogether for opportunities like this, where they are elevated to the national stage and have the chance to make a lasting impact on policy, isn’t just confirming fears we all already knew. It’s also an opportunity lost.

Perhaps we’re living in an era of empty words: Because although the government seems to be working overtime to flood the national media with news about India’s improved rankings for World Bank’s Doing Business 2018 index, little publicized fact remains that India’s gender gap specifically for economic participation and opportunities under this government has worsened.

Most of us are too busy to notice the chasm that exists between the “alternative reality” – the world of words spun by the government, a “good” development narrative, or token empowerment for all achievement amplified to the national stage – and our own, everyday experiences. Fifteen successive Finance Commissions with just one single female member (that too in 2009) isn’t just an unfortunate coincidence; it’s a pattern. It’s our reality.

And Let the People Rule…….

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The Comptroller and Accountant General of India’s (C&AG’s) address “Social Obligations of Public Auditors” to the Kennedy School has created a mini storm yet again: C&AG chose to take debate about his mandate to what he calls “America’s most elite university”. The question raised is: should public auditors be mere accountants and do arithmetic over government expenditure or should they go beyond their (constitutional) mandate and seek to sensitize public opinions on audit observations? With this new mandate, C&AG hopes to  become an active participant in public governance rather than a mere report pusher.

 

In this new audit model, C&AG advocates broadening his stakeholders beyond the executive, legislature, judiciary and to include civil society, social organizations, media, and the public.  The new normal for C&AG includes three initiatives: first, “the fault-finding auditor”, “wiser at hindsight”, will be replaced with positive and balanced reporter. Second, “Noddy” type booklets and pamphlets on audit observations will awaken citizenry to demand better governance from various departments. And finally, participation of social groups in social audit will give better outreach and inclusion of wider groups.

 

Let me start with  some interesting takes on his approach. C&AG declared in the speech that “Today’s youth is discerning, demanding, and believes in respecting institutions. He is not willing to see politicians subvert these institutions. He seeks a new moral and ethical framework for sustainable governance.“ Seriously? Evidence in India seems to suggest otherwise: numbers at anti-corruption rallies are dwindling forcing Anna Hazare to take a short pause. Unless a critical mass of empowered youth leaders is allowed to emerge and they invest in their own future, their engagement on such issues will remain episodic.  They are more likely to be disillusioned and disengaged against continuous negative flows of global and local news, thus creating a wedge between their intention and action.

 

Second, respecting institutions also means that changes are brought in legitimately, following a due process, and not at the whims or the fancies of its leaders, however good these might be. One should never forget that the role of the rebranded US Government Accountability Office was changed over a very long period. And this was done at the behest of the US Congress, through an act in 2004.  As early as 1967, US Congress asked the then General Audit Office (GAO) to review federal government’s anti-poverty program. In 1974, GAO’s role was expanded to cover evaluation functions. With these changes, GAO no longer was staffed with accountants alone, but included scientists, economists, and other policy experts.  We do not have to follow these steps, but three lessons are worth noting: first, there was an explicit demand for professional and independent support from US Congress to see how government money was spent for the welfare of American people. Second, the change process took over 30 years from the first step in 1967 to the ultimate full recognition and rebranding of General Audit Office to Government Accountability Office.  Third, the organization itself changed to meet the rising challenge and now has become a multi-disciplinary expert agency, well respected by the media and the Congress. Some of these steps are inevitable if the role of India’s C&AG is to change to cover broader mandate.

 

Third, no doubt informed electorate is a key to effective democracy, but informed legislature will necessarily be the important first step towards this end. Even though technology has improved communications a great deal, it is really the Parliament that will have to be the supreme institution of accountability in our democratic society.  In fact Justice R M Lodha, in his famous judgment  “C&AG is not a munim” reminded all of us that C&AG is a constitutional authority and it is for the Parliament to correct the mandate.  Unless C&AG is seen to bring value to the Parliament as a whole, (as was the case for the US Congress), it can snatch a headline or two, but will not deliver the broader mandate of improving governance.

 

Fourth, creating trust requires credibility:  there have been many articles in the Press and in the academic world about the C&AG’s numbers, be that for 2G Scam, or for coal. There are also reports where C&AG seemed to have agreed to suggestions that some of the estimates can be debatable, but having the right number is what I expect from my accountant, more than anything else.  Don’t you?

 

Finally, media and technology enables information dissemination, may even raise social awareness, or assist in crowd sourcing, but certainly, it cannot replace the slow and painful task of institution building. Democratizing accountability sounds great, but will it address our fundamental challenge of development?

 

Sources of Temptations

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For the first time, I find myself agreeing wholeheartedly with Arundhati Roy when she writes about her unease at the developments currently unfolding in New Delhi. Anna Hazare is leading a campaign for strong Lokpal Bill to make India corruption free. Delhi’s Ramlila Maidan is a scene of this protest and Anna is on fast for the last eight days. Generation Y is particularly mobilized and if the media is to be believed, this campaign’s online presence is orchestrated by a Canadian Indian who has worked in conflict zones such as Sierra Leone to Afghanistan, using technology to introduce people-powered politics.

My first concern is that assembling such an enormous crowd on an emotive issue like corruption (which is deceptively easy to reduce to moral absolutes but in reality immensely complicated) without clear leadership is always cause for alarm. To do so in India, which struggles to straddle any number of cleavages, is downright dangerous. Igniting unrest and tension along any one of these societal fault lines is a risk that India cannot afford. The media, in particular, has a responsibility to maintain a balance where all views are heard and debated. The difficult questions must be asked – and answered: Where are the voices of reason? Where is the much-needed political leadership?

Secondly, I agree with Roy’s assessment that Hazare’s fast will not help solve the crisis. Corruption is a major problem, in India and elsewhere, but the scope and means of the current debate are very narrowly focused. Lokpal Bills are not, unfortunately, magical solutions. Weak institutions and even weaker wills ensure that corruption cannot be legislated away; Instead, movements like Hazare’s will only raise false hopes.

Lastly, 2010 and 2011 have borne witness to the undoubtable power of social media to galvanize ideas and mobilize people, especially the youth. But let us be clear: The current situation in India is not and should not be swept into the rhetoric of the Arab spring, or any efforts towards oppressive regime change. India is a vibrant democracy: We allow for debate and dialogue. We do not need support or sympathy from the rest of the world to protest against our own government. In the past sixty years, we have used democratic processes to retire administrations that do not work for our people and to reelect those that do.

Instead, let’s mobilize against the sources of temptations. In the next five years, India is planning to spend a trillion dollars on infrastructure – and how we invest those funds will be crucial not only for our economic development, but also for good governance. Will the government adopt and enforce strong anti-corruption mechanisms? Will the government seek the help of civil society to stop potential leakages? And what will the government do to bring back money already stolen from India?

Ultimately, even if Hazare’s demands are met, corruption will not disappear overnight. Democratizing accountability through crowd sourcing can only be a means to raise awareness, nothing more. We have a long way to go and work has to begin on curbing major sources of corruption.

India’s trillion dollar challenge

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Preparations for the Twelfth Five Year Plan have begun in India. Infrastructure will need trillion dollar investment if India is to nudge up its growth rate to 9-9.5% per year in the next plan. One of the usual questions puzzling the planners is whether we will find resources to create world class infrastructure. Similar concerns were also raised for the current, Eleventh Plan − will India be able to double infrastructure investments? Or will infrastructure become a binding constraint for accelerating economic growth?

As per the Mid Term Appraisal of the Eleventh Plan, there is nothing to worry. India has already invested $340 billion and with expected $117 billion of investments this year, actual will be $457 billion, missing the target by only $3-4 billion. And the role of the private sector has been an important one in meeting the current plan targets. Private sector will account for a significant share, 36% or $167 billion of total infrastructure investments during Eleventh Plan. No wonder, at yesterday’s Planning Commission meeting, the Prime Minister once again called on the private sector to supplement public resources. It will not be possible to meet India’s trillion dollar infrastructure challenge without active support from private sector.

Good News? Well, it depends on your perspective. I am very worried looking at a recent news item.

The economic regulator has agreed to the demand of Delhi International Airport Pvt. Limited for $225 million in additional passenger levies. The news report quotes regulator’s response from their website. “It is also noted that the project has already been implemented. Therefore, any corrections or remedial measures do not appear feasible at this completed stage of the project.” The regulator adds, “Further, the auditors have expressed their inability to assess the monetary impact of the issues raised by them…..”

In the past concerns were raised about rising costs of this project. The overall cost of the Delhi airport has gone up from Rs 3500 crores at the initial bid stage to, Rs 6000 crores in 2007 to Rs, 9000 crores in 2008. The current costs are estimated at Rs.12,700 crores. The government has already given a number of financial concessions in favor of the private sponsor. It is not clear whether such deals make economic sense at all for all the stakeholders.

Even 101 economics will tell us that in theory, PPI instruments offer value for money, provided the procurement process is efficient, and there is true competition to drive the overall costs down. Once the project is selected, government hands over a monopoly to the selected bidder for a long period of time. Competition for market does not ensure economic efficiency within the market, unless the underlying instrument, in this case, a contract is designed to ensure such efficiency. Such long duration contracts are bound to be renegotiated and hence the possibilities for moral hazard are very large indeed. It pays the bidder to get the contract at low price and then renegotiate. This seems to be a very common practice in PPIs and India is no exception.

It is important that planners worry on how to meet the trillion dollar challenge, but this time round, let us not focus on the quantity alone, we need to examine the price tag of this trillion dollar. The government or apex institutions in India are just not ready to deal with the complexity of PPI risks. Model concessions and bidding documents bring standardization, not necessarily economic efficiency.

Democratized Corruption?

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When Jawaharlal Nehru christened the Bhakra Nangal dam the “temple of modern India,” he foresaw today’s reality: Modernity is dependent on infrastructure. But sixty years on, India seems no closer to the dream he envisioned. And the question is inescapable: Why not? Where has the money that could have been used to build our dams, power plants, schools, roads, and research institutes gone?

$1.5 trillion in unaccounted funds parked in Swiss bank accounts reportedly belongs to Indian nationals. This is more than the total deposits of nationals from all other countries. And with tens of other tax heavens dotted around the world, the amount of national wealth that could have been recycled as investments but is instead tucked greedily away in private accounts is unknown. What we do know is that this can happen only in an environment where corruption is rampant. And as multiple scandals break in our newspapers and on our television sets, it is unsurprising that so many of them are infrastructure-related.

But for ordinary citizens like you and I, a figure of $1.5 trillion, while shocking, is ultimately abstract. It means little. So instead I thought of writing about the everyday cases of corruption that we witness personally.

Until just a few years ago, Delhi used to have power outages so often that waiting impatiently in the dark became part of our daily routine. Several legitimate factors were behind these shortages: Inadequate capacity, lack of investments in infrastructure, low power prices, inefficiency across power systems, and an ever increasing demand for power from a growing city. In recent years, energy provision has improved significantly because of sector reforms, new capacity, and the entry of private power distributors. But isolated black-outs continue. What is interesting is that these power problems persist in a number of wealthy residential areas, often affecting single homes – and, in the most unlikely of coincidences, when residents host parties. When a driveway full of visitors’ cars becomes the cause of a black-out, it is clear that technical or structural shortcomings are no longer at fault.

Christmas usually comes early to Manila: From early October carols are played on repeat in shopping malls, lights twinkle along every building edge, and Styrofoam snow sprinkles from rooftops. But along with the usual yuletide spirit comes the inevitable serge of traffic as the city slowly grinds to gridlock. But what’s the connection? Bus-loads of out-of-town shoppers surely add to regular traffic volume. Numerous mega-sale events tempt even the most conservative shoppers out of their homes. Limited public transport and the relatively low cost of driving certainly don’t help. Then there is the basic reality that existing roads are inadequate to deal even with everyday traffic and Christmas simply tips the scale. But these factors provide only part of the explanation. There is one more answer. Invariably, traffic lights are switched off at peak times and even with dozens of policemen on the ground to direct vehicles, traffic comes to a complete halt. But not everyone loses in these tough times: Street vendors make brisk business selling snacks, drinks, and trinkets to the exasperated drivers.

In both these cases, market and government agents have specific information from which to extract economic rent. In Manila, the story is that some traffic enforcers receive pay offs from street vendors benefiting from bored buyers trapped in traffic; In Delhi, some home-owners have to bribe local power company agents to ensure uninterrupted power supply during parties to prevent them from losing face in front of guests.

Clearly, it is not only large-scale corruption in infrastructure investments that raises the transaction costs of business, loss of employment opportunities, or cripples economic growth. And it is the commonplace instances of corruption, those that rarely make headlines, that are far more difficult to fix. In today’s democracies, no one individual or group has a monopoly on corruption.

India’s growing pains

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Today’s global media is full of stories on India and most of it is certainly not what the Indian government had hoped for five years ago when it signed up for the mess that is called the Commonwealth Games (CWG). The first Asian Games, held in New Delhi too were delayed and had to be postponed from the original schedule of 1950 to March 1951 due to delays in preparations. India was a young nation and the World was perhaps kinder then. Learning from this experience, Delhi was fully ready for the Asiad, the 1982 Asian Games. The planned infrastructure, a new Asiad village with good road network, was all in place, on time. The country also launched color television at that time so that larger numbers of Indians can see the games. No doubt, there were several tense moments, but in the end, India was able deliver. So what is wrong this time? Is it just the scale of corruption?

And though CWG is getting all the attention these days, I want to remind ourselves that most public and semi-public infrastructure projects have suffered similar fate all along for the last sixty years. How would you otherwise explain another grim headline yesterday from New York? UN just released the Energy Poverty report where India tops the global list. Over 400 million people do not have access to electricity in India, the largest single country group. China has managed to give electricity to its billions except just about 8 million. Moreover, 855 million Indians use traditional biomass for cooking, twice the number for China. This is in spite of the fact that India has been planning to provide modern energy sources to all for last several decades. In the transport sector too, we have yet to achieve the pre-independence promise laid out in the 1943 Nagpur Plan connecting all of India to an all weather road-network. Overall achievements on all large infrastructure projects remain illusive, time and time again.

The usual comment one often hears is “a good plan implemented badly”. Prof. Mrinal Datta-Chaudhury in 1990 argued that this dichotomy between the formulation and implementation of a plan is usually false. “If a plan is supposed to be a feasible action program, then it must cover the expected behavior of all economic agents.” Some twenty years later, nothing is changed. India’s planning remains divorced from implementation. India is not, as yet, able to fill the yawning gap between plan and execution because the existing institutions and processes continue to provide perverse incentives: as is evident in the CWG episode, delays usually lead to a lax scrutiny with larger potential pay –offs for those who want to benefit from public money. In fact rent-seeking behavior thrives under delays and mismanagement of large projects. It is difficult to see India getting its seat at the World’s big table without addressing this fundamental flaw in her institutional structures.

Assurances are given to all of us by our political leaders that appropriate accountability will be established in the CWG episode and the guilty punished, hopefully severely. If the results of such a scrutiny helps to instill a better accountability through fundamental institutional changes across Indian political economy surrounding all large infrastructure projects, not all is lost. History will judge this episode, as an expensive treatment of India’s growing pains.

India’s new normal: from public finance to project finance

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Today’s media is full of stories about the ‘new normal’. The high profile failed bombing attempt at Times Square this month was splashed across headlines as the new normal of home-grown terrorism. Two million Boston residents had to adjust to the new normal of life without safe drinking water after municipal mains ruptured. The Huffington Post’s Caroline Dowd-Higgins penned five tips for navigating the new normal in today’s job market. Time reports on the growing prevalence of memory-loss diseases like Alzheimer’s or other forms of dementia: clearly, forgetting is the new normal. For military families, the new normal is repeated redeployments of their loved ones to ever-increasingly dangerous zones. Much closer to home, Suman Bery highlighted the issue of exchange rate as part of the new normal monetary policy framework. Strangely enough, the Indian infrastructure story has not been phrased in the new normal rhetoric. At least not as yet.

India has moved rapidly from public finance to project finance in infrastructure. In the first quarter of 2010, India topped the Asia Pacific region with eight out of the ten largest project deals, amounting to $15.2 billion or 46% of market share. Seven out of these are infrastructure projects. Globally too, India accounts for five out of the top ten projects. 2009 was a turning point: When the world responded to the financial meltdown with a 44% decline in project deals, India came out as the most active country for project finance with 72 deals totaling $30 billion, leaving the runners-up Australia ($12.6 billion) and Spain ($11 billion) far behind.  Moreover, the 2009 PFI award for Bank of the Year for Asia was taken by the State Bank of India. So what drives this new normal of Indian infrastructure?

A push from the highest quarter of the Indian government is surely a factor. The high profile Infrastructure Committee is chaired by the Prime Minister and is guided by the Deputy Chairman of the Planning Commission. There is also a bottom-up cry for more infrastructure services. Power availability in April was 14.6% short of demand at the all-India level, and seven states faced a peak deficit of more than 20%. High macroeconomic growth at home, global financial troubles, and PPP mania are some of the other impulses driving this new normal.

Most of these deals are highly leveraged: A typical PPP project has less than 10% equity from the promoter. But this is precisely what has changed globally after the collapse of Lehman Brothers. In March 2009, Ian Davis, the Worldwide Managing Director of McKinsey, characterized the new normal world as having two distinct features: It involves a fundamental restructuring of the economic order with, firstly, significantly less financial leverage and, secondly, a much greater role for government. So is there a quiet disconnect from the global new normal? Easy availability of project finance has made it possible to add infrastructure capacity without dealing with the much-needed sector reforms. Take the example of the Indian power sector: Overall subsidy which was $6.2 billion last year is expected to rise to $26 billion by 2014-2015, despite some moderate improvements anticipated in the next few years. The Indian states carry huge contingent liabilities because of power, and other, demands. Overall efficiency of the SEBs remains low and increasing the share of private providers in the sector will not change this. In fact it may even exaggerate fiscal problems, at least in the medium term. For example, SEBs which have not planned for capacity addition or taken steps for load management will end up relying on short term power exchange at a much higher rate than the cost of new capacity. The open access policy will allow the paying private sector users to contract with the new PPPs directly, leaving SEBs with loads that imply large subsidies under the current regimes.

One should always remember that PPPs carry much larger foreign exchange and fiscal risks compared to government financed projects. The new infrastructure model can work, provided the government undertakes important sector reforms, particularly tariff reforms, now. Let us not forget that the last two centuries have seen many waves of private infrastructure followed by state solutions that levied huge fiscal costs for tax payers. And most of the time, it is these highly leveraged infrastructure projects that were responsible for such swings. India’s new normal looks great at the moment, but how long will it last?