Indian PM visits Japan

I just recorded an interview with NITI Central on the PM’s visit to Japan. As soon as it is uploaded, shall update this post with the link. I think it is a mutually beneficial relationship. India needs order, quality, technology, infrastructure. Japan needs to find some source of growth. Regardless of whether the relationship is targeted at or against any one – it need not be – India and Japan have much to gain from each other. Whether we like it or not, the mere fact of them drawing closer will bring about stability in the region and moderate the behaviour of others. The Western media has a penchant to paint this as an adversarial combination against China. See this for an example. It does not have to be. The mere combination will suffice.

Amy Kazmin’s piece in FT is not a bad one. Pankaj Mishra’ piece in Bloomberg is an example of the kind of output that we get from people who neither know their economics nor studied history well and properly. In the interests of propriety, decency, decorum and dignity, we need to stop our comments on Mr. Mishra’s columns with those remarks.

Jairam Ramesh and the Indian PM

Late Sunday night, I had the (mis) fortune of coming across this piece by Mr. Jairam Ramesh, former Union Minister in the UPA government. The following questions came to my head, after I finished reading that piece.

What is the point of this piece? What does one expect a former Cabinet Minister from a decimated political party to say? What new information is being conveyed here to the readers?

Did the PM really play the ‘good cop, bad cop’ routine in Gujarat? He did not. He was consistent. He did not give room for fissiparous tendencies. Period. He shows no special favours. He does not pander to special interests nor does he engage in shameless, vote-grabbing minority populism.

Second, the PM has not choked access to the corporate sector. The personal access that leads to cronyism has been stopped. It is indeed supreme irony to see a former Minister whose Ministry was almost single-handedly responsible for stopping India’s Gross Fixed Capital Formation on its tracks shedding tears for the Indian corporate sector.

Further, on international matters, for a political party that governed without spine, it must be galling to see the PM being willing to be the last man standing on matters of principle.

The first 100 days of the government have been disturbing, indeed. But, not for the nation. But, for the Opposition who hoped that he would commit major faux pas. He has not. Hence, it is disturbing them.

Finally, it is the crowning irony of the piece that a Minister who, within days or weeks of assuming office in the previous UPA government, undermined the authority of the Prime Minister (and continued to do so throughout his tenure), should make a case for a Prime Minister with authority! (Read Sanjaya Baru’s ‘Accidental PM’ to know about Mr. Ramesh’ role in leaking a memo written by Ms. Sonia Gandhi to the PM, to the outside world).

Well, on second thoughts, I must admit I am wrong about the non-purpose of columns such as these. They do serve a purpose. They remind the rest of us as to what wretched governance that we had to endure for the last decade that set India back at least by three decades. For that, we should be grateful to the writer of this piece since human beings are prone to forgetting easily, even capable of forgetting the old adage that those who forget history are condemned to repeat it.

If Indian voters can so easily forget the sordid decade that ended in May 2014, they will have none but themselves to blame for it. One can then kiss India’s future and the very idea of India goodbye then.

China data

The burden of this article is that China under-reports consumption and understates growth in the Services sector. The conclusion is that China is growing and that it is more balanced than is given credit for. May be, what the author says is true and may be, it isn’t. The problem is that we simply do not know how wrong he is and in which direction. The same can be said of China’s statistics (or, for that matter, that of India’s). If consumption is under-reported, what is the guarantee that investment, high as it is, is still being reported accurately?

Plus, reporting GDP numbers within two weeks of the end of the quarter, with no breakdown and details and with the number bang in line with consensus estimates cannot inspire any confidence at all as to the reliability of the numbers.

To know more about the true state of the Chinese economy now, read Yu Yongding in ‘Project Syndicate’. He may be understating his conclusions. But, his facts tell their own story.

Future is history

The more one grows, the more one appreciates the importance of history. Somewhat unsurprising, I guess! But, I am not referring to nostalgia here but the importance of learning from history, especially for those who believe that life (and lives) is cyclical and not linear.

Rajamohan unconsciously/sub-consciously invokes that in his column on Indo-Japan talks:

For Modi and Abe, widely hailed and rebuked for their unabashed nationalism, the past is not really past. They are actively mobilising the past in pursuit of their current goals. [Link]

Larry Summers is thoughtful and hence insightful here in his remarks on the relevance of the past:

I’m a strong believer in the farther forward you want to look the farther back you need to look. [Link]

Price setter for copper no longer

This news-story in the South China Morning Post suggests that China might be no longer a price-setter for copper. That should actually be good news for China too, if only in the long run.

A good story in Washington post on the Burger King changing its corporate citizenship. How, on earth, does the US expect to revive its manufacturing glory with such tax rates and in a world where national loyalties take a distinct backseat to the bottomline as it feeds directly into valuation of executive stock options and overall compensation?

Once again, the US Treasury market has proven many pundits wrong. But, they would not mind because they have been wrong and not been hurt. Stocks have rallied too. But, what they fail to realise is the day the Treasury stops rallying and yields start rising steadily and sustainably, the days of stock rallies too will end. Of course, stock rallies can end even when Treasury yields start reaching for Japanese levels.

Must sound very familiar to most Indian city-dwellers:

Some vintners said the newer homes—many on multi-acre lots—were constructed with little planning for water availability, and that they, too, have had to drill more wells. “Everybody was pumping to their heart’s content, until they realized the basin isn’t that big,” said Jerry Reaugh, 68, a local grape grower. [Good story on Californian drought and ground wells running dry]

Who changed and why?

A good friend had forwarded this article by Shekhar Gupta, formerly of ‘Indian Express’ and now with ‘India Today’. The article is well written and is worth a read, regardless of what you are going to read below. You can find it here. I had the following thoughts, however:

The article is fine and dandy. IF the PM had been like this since 2007, I am not sure I saw them reflected in Shekhar Gupta’s Op.-eds in IE. We shall let that pass. Quite a few of us knew this trait of the PM – he will not go out of his way to pamper or pander and that he treats all his people equally. He had made that clear several times not just in the campaign, but well before that – in many Q&A in media organised conferences, etc.

The commentators just refused to see that image because it did not fit into their prism. Now, this is a tacit acknowledgement that the man had not changed but that their view of him has changed (because he is in power? – we shall let that one pass too) because they were wrong. They should be gracious in admitting it even if some of us would wonder if his being in office has anything to do with it.

Hindutva

A good friend had sent me the letter written by one Dr. Harish Dave in FT – a no-nonsense response to an all-too-familiar and predictable article from a FT journalist.  The journalist was one Victor Mallet and the article can be found here. I do not know if it is behind a subscription firewall.

In addition to what Dr. Dave had written, I added the following comments on the website:

It is an unfortunate article for one important reason, among others: the objectivity of the views and credibility of the only two commentators cited here are taken for granted. They and their views are presented to the readers as the only two authentic voices on what Indian students should learn about their history. Their own roles in the past and the rigour (or, the lack thereof) of their scholarship needed to be presented, so that readers could place their comments in perspective. Second, many other views complete the continuum of views on this matter. They offer a more nuanced treatment of the subject. The FT journalist has made no attempt to include them, for obvious reasons.

Reading links

From the Jackson Hole sidelines: Amazing that all the three economists polled on the timing of the rate rise talk only of inflation risk if rates remain too low for too long and then dismiss it. No mention of the financial cycle and the risks of an asset price boom-bust, financial system instability and economic instability consequently. What education will open people’s minds and brains? Is there such an education at all? [Link]

Rising and falling stars of Global Manufacturing – US and UK are mentioned. Evidence is missing, however, in my view. Investment in non-residential equipment and employment gains in manufacturing are conspicuously missing. [Link]. This supports my scepticism.

Former Chief Economist of the Reserve Bank of Australia (RBA) feels that rates (monetary policy) are being asked to do too much work. I agree. Central banks in the West seem only too willing to oblige, instead of pushing back. He also warns of ‘groupthink’ in RBA. [Link]

This op.ed. in Financial Times agrees with the former Chief Economist of RBA. Whether or not it does, I agree with it!

“In just two years – 2011 and 2012 – China produced more cement than the US did in the entire 20th century” – from the FT report on the China property bubble. More here and here.

My proposal

This is the full text of my proposal that appeared in NITI Central. This is in response to the invitation by the Prime Minister to propose suggestions for the new body to replace the Planning Commission.

The Preamble/Background

This note assumes that the strong mandate received by the Prime Minister in the elections held in May 2014 is a vote for a complete overhaul of the goals and methods of governance that have been in place for the last six decades and more. The country has progressed but has not been able to keep pace with, let alone get ahead of, aspirations and the mounting challenges of public health, sanitation, education, environment, urbanisation, safety and security of its citizens. Hence, dramatically new thinking is needed. The mould has to be broken.

Name and Structure

The new institution – to replace the Planning Commission of India – shall be named theDevolution, Decentralisation and Development Commission of India (DDDCI).

The rationale for the name

India is huge and diverse. Development challenges may be the same across States but the solutions have to be varied, depending on the policy path adopted thus far, social norms and culture, the political context, the level of skills, maturity and resilience of public policy institutions in each State. Therefore, it is better to make States both the owner and thekarta of economic and social development of the State.

Over time, the Centre shall become solely responsible (only) for foreign policy, national security, management, sharing of national resources, fiscal redistribution, related economic matters and international economic relations. In other areas, it shall convert itself actively into being a facilitator, laying down recommended guidelines and framework for policy, where necessary. It shall be an advisor and a sounding board – at the request of the States – for States in many areas of social and economic development.

Through its work, the new Commission – DDDCI – will be responsible for giving concrete shape to the new role that is envisaged for the Central government. For example, given that there is huge variation in the capabilities and the willingness of various States to pursue development goals, the Commission will be responsible for drafting the minimum standards, the processes and the protocol for the devolution and de-centralisation of development agenda to the States.

Structure

With the Prime Minister as the Ex-Officio Chairman of DDDCI, it shall have a Deputy Chairman who shall act as its CEO.  The goals and responsibilities for the CEO shall be finalised in a discussion with the Prime Minister and made public (this is not necessary but can be considered actively).

Given that Article 263 of the Constitution permits the creation of an Inter-State Council through executive order (with Presidential assent), the Inter-State Council or its variant, the National Development Council with State Chief Ministers can be the Governing Body for the DDDCI.

The CEO, in turn, will assign goals to the Five ‘Advisors’ who will report to him. Each advisor shall be responsible for two policy areas. There will be an annual performance review with one or more interim reviews. Each Advisor will have an adequate staff of researchers, field officers and interns and administrative support.

Responsibilities and tasks of DDDCI (indicative and not exhaustive)

(1)    The Commission will choose ten priority areas from the Concurrent List – in consultation with the Prime Minister – to commence work. In these areas, it will work to devolve (financial and other resources) and decentralise authority and administration for their implementation by States. It will identify legal and regulatory hurdles, if any, that would impede the transfer of authority, responsibility and resources for the States to take ownership of these priority areas.

(2)    It will work with the States to initiate multiple pilot schemes – taking into successes and failures from the past, among other things- in each of the priority policy area. Review and consultation with States and course correction are expected to be part of this. The Commission will guide the Centre in the funding of these pilot schemes/policy experiments.

The assumption here is that no one size fits all problems and all States. Even within States, multiplicity of approaches and solutions may well be needed. This is also based equally, if not more, importantly on the extensive research and its documentation oninherent human limitations in decision-making*. We need to adapt our decision-making processes recognising the findings of such research.

Of course, acceptance of this approach and its practical implementation will not be easy. This is where the Commission will have its role cut out. The main challenge before the Commission is to help all the stakeholders deal with the complexity of managing de-centralised and a diverse approach to economic and social development.

(3)    It will conduct workshops, for groups of bureaucrats and Ministers or individually. What is envisaged here is on the lines of ‘Coaches’ who currently mentor many corporate executives and leaders.

(4)    Among the ten policy priorities that the DDDCI will take up, one will be management of India’s mega cities. The top 10 Indian cities will have to have a completely different administrative structure, competence, authority and financial resources. They are bigger than many countries in the world. Chennai and Bangalore are twice the size of Singapore and Delhi and Mumbai are four times the size of Singapore. They urgently need attention and management lest they become irredeemable disease and death holes.

(5)    DDDCI will act as a ‘Sounding board’ (Devil’s Advocate) for the Prime Minister. In fact, the vigour and rigour of their challenges to Prime Minister’s ideas and proposals should form part of their goals and annual evaluation.

(6)    Through its work, the Commission will create policy case studies for discussion in India’s premier public policy and management education institutions to enrich their content and to enrich its own work, in the process.

(7)    The Commission may consider exchanging experiences and information with similar bodies in other countries for cross-fertilisation of ideas, methods and goals.

* For a somewhat light-hearted treatment of the endemic mental blind spots that we humans have when it comes to decision-making, this video is recommended. For a slightly more serious treatment of the matter, Dan Ariely’s ‘Predictably irrational’ and Jason Zweig’s ‘Your money and your brain’ are recommended. For a scholarly treatment, read Daniel Kahneman’s ‘Thinking Fast and Slow’.