Bhagwati V/s Sen : The Real Deal

Jagdish Bhagwati's attacks on Amartya Sen, Sen's own involvement in political discourse, and their supposed political affinities, have become topics of discussion recently. On one hand, of course, I feel glad that a discussion in this country is happening lead by two of the best intellectuals this country is supposed to have produced. At the same time, the sweeping brushstrokes painting this debate as Sen's Socialism versus Bhagwati's Capitalism, or Sen's Kerala versus Bhagwati's Gujarat, have been rather unfortunate. I have read a bit of what Bhagwati has to say about development themes, and am beginning to understand Sen's views. With that caveat, I would like to try to show that this debate is nowhere as sharp as it is being made to be.

Firstly, does either of the economists disagree that growth must benefit the marginal sections of society? No. Sen's views on this aspect are fairly well known. On the other 'side', Bhagwati repeatedly mentions that growth is a means to achieving human development. Moreover, his passionate defense of India's performance on development indicators betrays the centrality of human development in his world view. That Sen would have a lot of intervention in human development is fairly well known. But Bhagwati has discussed at length various methodologies that can be used to improve the standard of living of the people. Bhagwati at no point defends laissez faire or even the now-ridiculed trickle down theory. Hence, there is a commonality of human development as the 'end' in both their arguments.

So what is different? Given my limited reading of both, I have been able to identify two sources of 'discord'. The first is regarding the prioritisation, and the second regarding the implementation. Let me talk about the former first. Laymen have often rejoiced at the growth versus equity debate - and Sen and Bhagwati are seen to be at opposite sides of the spectrum here. But on closer look, the differences do not seem to be all that significant. Sen has merely said that growth (of the kind that India has experienced since 1991) is a great thing, but the lack of an improvement in human development at the same time is shameful. He seems to argue that growth for the sake of growth is immaterial, which I do not believe any sensible person would debate. At no point have I seen Sen argue that India should have grown at a lower pace, and instead redistributed its national income. On the Bhagwati side, he clearly demarcates 'Track I' and 'Track II' reforms. All of his Track II reforms are directly targeted at human development, and even his 'Track I' reforms around economic liberalisation, are supposed to eventually lead to human development. The minor divergence here is the prioritization. Sen would say that equity and human development will eventually lead to growth, whereas Bhagwati would say that growth will generate the necessary resources for equity and development. Neither of them would disagree, I assume, with the fact that growth and development essentially go hand-in-hand. I do not believe there would be any country which focused on any one while ignoring the other.

The second, and apparently more substantial difference, is their view on Government provision of basic services. Here, Bhagwati is distinctively right-wing. He praises the virtues of the private sector in provisioning (with the Government acting as a facilitator), and also suggests replacing the NREGA with cash transfers. I have not read Sen's views on different Government services yet, but on the food subsidy, for example, he openly confesses his lack of knowledge. His support for the food security bill, if at all, is a grudging realisation of no better alternatives. Sen says we need to intervene more effectively in the poor's lives, and if state intervention is the best way to do it, then so be it. For example, Sen extols the virtues of the Bolsa Familia in Brazil, a cash transfer that would be something even Bhagwati would praise. 

In conclusion, the differences between these two great economists is not as great as it seems to be. Bhagwati is by no means a capitalist, and Sen is even farther from being a socialist. A welfare state within the structure of capitalism is neither unique nor surprising.  We, as readers, can rationalise the debate between two great minds to hone our own understanding of the country we live in.

World's cheapest Tablet - The Aakash

As far as memory serves, the tagline mentioned above was (and is) used when ‘The Aakash Tablet was first talked about. Not being a gadget-goer at all, this post coming from me is rather surprising. But what really compelled me to write about this issue was a recent article I read some place – ‘what really went wrong with the Aakash?’

For those who would like a mention of its features - The Aakash is a low-cost computer with a 7-inch touch screen and 256 MB RAM running under the Android 2.2 operating system. It was in 2011, that India's IT minister Sh. Kapil Sibal announced the launch of the Aakash tablet for Rs 2,500 with much fanfare. It is part of the ‘One Laptop per Child’ idea. That moment, I recall my brother telling me with much excitement, ‘And I shall book this digital leveler ASAP’. (Well, he is a computer engineer after all!). And so, he became one of those 1.4 million users who registered for the gadget. (:O)

But I guess, that was the ONLY happy part. A series of blunders followed. First, there was an IIT-Rajasthan versus DataWind quarrel over specification issues, making headlines. According to a statement by Datawind's CEO, Suneet Singh Tuli, the company supplied 10,000 tablets to IIT-Rajasthan which were part of an initial order of 1,00,000 tablets that Datawind was supposed to supply to the government at a price of $49.98 per unit. But after only a few hundred tablets reached the students, IIT-Rajasthan started rejecting the Aakash tablet, allegedly after reports that the device was failing during pilot testing and did not meet the quality criteria set by the institute. IIT-Rajasthan was then removed from the Aakash project, and IIT-Bombay was then chosen.

The process became murkier when DataWind entered into a war-of-words with its ex-assembly vendor, Quad Electronics. While the ‘registered’ customers awaited the delivery of Aakash, the Hyderabad-based assembler of the tablet, Quad Electronics, sued DataWind alleging that the British Indian firm failed to procure its contracted inventory or pay for the tablets. DataWind retorted saying it won't procure any more tablets from Quad and would settle the issue legally.

And to top it all, the prototype turned out to be a disaster. Some phones in the market worked faster than this contraption. The battery wouldn’t last two hours if a user tried to play video files on it. The touch screen, apparently, wasn’t ‘touchy’ enough. Similar computing devices with superior capabilities have been brought out of Chinese factories but India seems to have lost the plot; what could have been an incredibly compelling story is now nothing but a stillborn.

What I’m trying to put across through this post is that almost three years ago, when we first heard of an ultra low-cost tablet to be launched by the Indian government, then known as ‘the $35 tablet’, India made it to the headlines across the world. ‘Steve Jobs innovates for the rich; this is for us’, one of my friends had remarked. So what went wrong – Is it all the quarrels? Is it the MHRD, which claimed to come up with an effective program in too short a period? Or is it the failure of the initial prototype? Well, it is ALL of these.

And now the news shows the launch of an upgraded version of the tablet. The Aakash II is reported to have improved hardware with Google’s Android 4.0 OS, 256MB of RAM and 2GB flash storage. And it shall hit the market around December this year. So, lets just wait-n-watch on this one before commenting any further.

 

Much ado about autos !

When was the last time that a University student was able to find an auto conveniently (and I am not even talking about the fare yet)? Every time that I step out of my college to go to some place not easily accessible by metro, I spend double the time it would ordinarily take me to reach my destination - because half the time is spent finding an auto.

What is the issue with autos? In 1997, the Supreme Court fixed the number of autos registered in Delhi at 55,000. The reasoning behind this judgement I have not been able to locate, but what I can definitely say is that no judgement has been more ill-conceived than this one.

Let us make a simple guesstime. Assuming that an average family consists of 5 members, the number of families in NCT Delhi is approximately 3 million. Assuming that every day at least one member of a family, on an average, needs to take an auto ride, we get the number of auto rides required per day in Delhi at 3 million. Given that there are, at a maximum, 55000 autos on Delhi roads at any point of time, that is over 50 rider per auto per day. Ask any auto wallah, this does not happen. Evidently, there is a demand-supply imbalance in Delhi.

There are some inherent problems with any kind of licensing system. For one, how does one decide how the licenses are to be given out? This is junction 1 for corruption. Secondly, how does one ensure that licenses are not hoarded by those who are able to get it? This is junction 2 for corruption. Thirdly, how does one ensure that a black market does not develop? This is junction 3. And lastly, how does one ensure that roughly perfect-competition prices are maintained in the market? This is junction 4.

In Delhi, it is not a secret anymore that an auto mafia does exist - for example, an auto usually costing just over a lakh costs over 6 lakhs by the time it reaches the road. This is because obtaining a license is a difficult process, and the mafia hoards most of the lincenses anyway. If one was to include these costs in the cost of production, the prices that the auto wallah charges for the ride will correspondingly increase.

Will removing licenses totally solve the problem? For one, it will lead to a proliferation of autos, and drive down auto charges to bare minimum levels. However, this is likely to lead to more traffic congestion. This is thus something that I am not very sure which way to call. Either way, a fixed number does not do the job. At worst, the Government should fix the number of auto licenses according to the population of the city. This way, new licenses will be issues every year - and probably some licenses that have exceeded a certain number of challans can be removed too.

If rash driving is considered a problem, then let anybody who passes a driving test take an auto? Presently, auto licenses are more scarce than driving licenses, and hence the thrust is on obtaining an auto license, rather than properly monitoring driving standards.

Let's just hope the Government stops looking at the metro as the ultimate solution to traffic woes.

References:

(1) http://www.inewsone.com/2011/04/25/delhi-needs-more-autos-says-police-official/45823

(2) http://www.indianexpress.com/news/sheila-wants-autos-off-delhi-roads/592194/0

(3) http://delhiscoop.com/section/transportation/27

Microfinance in Assam - June, 2011

Microfinance is a very popular tool to uplift poverty by bringing in economic inclusiveness of the lower class, which is very essential for the holistic development of a nation. The concept as we know, had been started as the ‘Grameen Bank – The community development bank’ in Bangladesh by Professor Muhammad Yunus in 1976. It is centrally themed at the idea that the poorer sections of the population have the ability to be economically and financially included in the mainstream and can harness their abilities in contributing to the development of the nation and increasing the GDP.

When I studied about the Microfinance scenario in Assam, I learnt of how prevalent and useful this concept was in here. I had worked with a small, emerging Microfinance Group, called the Nightingale Microfinance Institute. Started in 1997 in Assam and 2005 in Guwahati, they had made marginal progress and have helped a commendable section of people in the rural backdrop. They had an industrious army of Credit Officers who braved plains, terrains and hills to reach out in the backwaters of the city and the state, where people need it the most.

We went to many hilly rural localities in the countryside of the city. One such incident was my experience in Birikuchi, Bonda. It is an area which is about 10 kilometres from the main city hub. Firstly as the rule goes, we had to investigate the houses of the appointed families. We had to check their financial status, and their living and housing facilities to approve them of the loan. There are certain criteria one has to fulfil in order to be eligible for the microfinance loan. There are two means of Micro financing schemes followed in Assam. One is the SHG-Self Help Group and JLG- Joint Liability Group. The JLG is popular and prevalent in this part of the state as the time constraint and the bank liabilities aren’t that big an issue. The crux of JLG is the Soliditary Lending System, where a group of five women borrow the money each, and when the time comes to pay the interest, they encourage each other to do so, and give it holistically as a group. There is an inbuilt peer pressure which helps built the liability and the responsibility in every borrower to give the interest regularly and on time. The houses of all the five members have to be in close vicinity in order to facilitate communication, networking and circulation and dissemination of information. Once that is done, we have the CGT- Compulsory Group Training, where the members are taught the ethics of being a part of Microfinance League. This help is predominantly given to married women of the age of 18-50, with a stipulated monthly income and a pre-planned and income generating Investment and business scheme. There is the GRT – Group Recognition Test, after this, where the Branch Manager tests the members, interviews them and then sanctions the loan. There is the Loan Disbursement Process where the cheques are handed out and the interest slips are given, where it is clearly mentioned the time an dates of the weekly interest payment proceeds.

Some important things which I observed in my surveys was most of the people invested the money in Weaving, Fishing, and Cattle Farming. The MFI also monitor and examines the success rates of such ventures so that any chance of loan default and collapse is eliminated. There were a lot of women who were pressurized by their husbands to borrow money for alcohol and tobacco. In this way, a lot of loans got piled up from different institutes and banks, and one loan was actually used to pay for another one. In this way, the whole purpose of the scheme was eroded. It is actually aimed at economic inclusiveness and woman empowerment. Giving the power to the woman of the family makes them more included and legally involved in planning out the economic avenues of the family, which in a way secures the safe interest of the family in terms of education of children and family business and promotes savings within the family.

Micro financing also is a way to promote and encourage savings. Though that is a bit hard to implement n all parts, but the very banks which lend money to the MFI’s encourage people to open fixed deposits in their branches, which plays a double role. It helps banks branch out and earn more, and it also keeps some safe money in the vault for these poor people to cope with emergencies and much required start up capital for new business ventures.

Now, it is for time for some bit of stats and facts...

The micro finance service providers include apex institutions like National Bank for Agriculture and Rural Development (NABARD), Small Industries Development Bank of India (SIDBI), and, Rashtriya Mahila Kosh (RMK). At the retail level, Commercial Banks, Regional Rural Banks, and, Cooperative banks provide micro finance services. Today, there are about 60,000 retail credit outlets of the formal banking sector in the rural areas comprising 12,000 branches of district level cooperative banks, over 14,000 branches of the Regional Rural Banks (RRBs) and over 30,000 rural and semi-urban branches of commercial banks besides almost 90,000 cooperatives credit societies at the village level. On an average, there is at least one retail credit outlet for about 5,000 rural people.

Though for now, because of the time constraint, I have to go back to college but I resolve to resume back for this project in my later course of holidays. At the cost of sounding absolutely cliché, it has brought me a bit more close to humanity, if at all. I walked and braved the scorching sun for the surveys and this made me see how hard people are working just to survive. It’s important to realise that upliftment of this section of people which makes about more than 40% of India’s population is the only way to actually bring about holistic progress of the country.

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To be continued.

Is the Government subsidising the Delhi Metro?

The title of this post is slightly misleading. Firstly, the Government already subsidises the Delhi Metro. For example, electricity used by the DMRC is subsidised by the Government. Secondly, this is not some serious article. It is just an observation that I want to share with the world.

The Delhi Metro has always intended to raise a significant part of its revenue by means of property development and advertisements. My contention is with the second. While travelling in the Delhi Metro, the advertisements that I most often come across are ones by the Delhi Government (especially the ladli scheme), public sector banks, MTNL and a few private universities. I also observe that a lot of metro coaches don't have advertisements, even though space is left for them. The third observation is that even though advertising space has been outsourced to private companies such as BigStreet, most such space has still not been booked.

Can it thus be concluded that advertising on the Delhi Metro is not as attractive as it is made out to be? If, for example, most advertisers on the Delhi Metro are Government - owned, is it fair to assume that they are free from Government control of their advertising? If the Delhi metro has not been such a success as far as commercial advertising space is concerned, then is the Government playing a greater role than what meets the eye in making the enterprise profitable? This all leads to the question - is the cost of the metro to India greater than what meets the eye?

On the flipside, one can argue that even PSUs have only a fixed advertising budget, and what they are forced to do (if at all) is to divert funds from one form of advertising to another. However, optimal allocation would require equi-marginal utility in all forms of advertising. However, given that marginal utility from advertising (especially online forms) are extremely hard to monitor, a proper economic argument against such a diversion is nearly impossible to make. What could be done in this regard is to consider the ratio of public to private advertising on the metro to that outside the metro, and see whether it is significantly different.

Till then, chew on this thought!

- Subhashish Bhadra