India at the edge of dramatic change in political governance

 

The election results are out and what a victory! After about 2 decades of coalition politics, we have government with the leading party, BJP, having a majority by itself. The Congress party, the next largest party, has been decimated to less than 10% of the seats. Regional satraps have been side-lined if not cut to less than their original sizes. Hence this leads to the question whether “India is at the edge of dramatic change in political governance?”

Let’s look at some major trends from the 2014 elections:

a)     End of dynasty rule - The Congress party has been decimated to less than 50 seats and officially it cannot lay claim to the status of the opposition party. The vote against the Congress has essentially been a vote against the Gandhi family. Sonia and Rahul held the real power of the UPA government and had a hand in all the decisions and probably the scams too. The Gandhi – Nehru family right from Indira, Rajiv to Sonia / Rahul have ruled the country as their fiefdom. By adopting a neo- socialist approach to appeal to the mass vote banks they have won elections but hampered the growth of the country. Populist and unproductive themes like “Garibi Hatao” MNREGA. Food Security Bill, etc. have drained the exchequer with very little benefits. The basic objective was to keep the voters occupied with populist ideas but with no development. With the present election results, I am sure that most of the Indians, including many Congress members, also have seen the futility and limited utility of the “Nehru - Gandhi” name. Governance norms basically aim to avoid excessive power in a particular individual. The heavy defeat in the elections will hopefully ensure limited role for the Nehru - Gandhi family in the future.

b)    Winning platform of development and governance - Narendra Modi and the BJP fought the elections mainly on the plank of development and governance. It’s probably for the first time in the history of independent India that the winner has won on a plank mainly focussing on development and not on petty issues like caste, religion, etc. The people of the country, fed up with the dithering UPA government, the narrow petty minded parties like Communists, SP, BSP, etc. have given a resounding verdict for development. This verdict will hopefully ensure that development and governance will be the core features of all future political movements.

c)      Rise of new parties with a fresh perspective - Even though the AAP has won only 4 seats in the general elections, it has made its presence felt in many constituencies. In Delhi, AAP was placed second in all the seats and had a 32% vote share. In Varanasi, Arvind Kejriwal was placed second giving a good fight to Modi while Ashutosh was placed second in Chandni Chowk ahead of a heavyweight like Kapil Sibal. Even though AAP made a fool of itself in the Delhi Government, their plank of anti-corruption has caught the people`s eye. The people are prepared to look at a fresh approach breaking away from the dogmas of the past.

d)     Use of NOTA - The introduction of NOTA (none of the above candidates) garnered 1% of the votes i.e. about 6 lac votes. Infact in Nilgiris constituency where the corruption tainted former telecom minister A Raja stood, the 3^rd largest vote share, about 5% of the votes, was for NOTA. The message for the political parties is very clear – perform and nominate suitable candidates else, the people will not be constrained by the lack of choices in voting.

e)     Change in outlook of regional parties - Only 2 independent regional parties performed well viz. AIADMK in Tamil Nadu and TMC in Bengal. The AIADMK was benefited by scams, misrule and the infighting in the DMK while the TMC benefited by the declining fortunes of the Communists. Everybody is aware of the fact that the TMC hasn`t done anything in Bengal since it assumed power but yet got the votes shifting from the Communists. If TMC doesn`t shape up then the day isn`t far when the BJP or any other party with a development agenda will take over and similar is the case for the AIADMK. Without development the people will judge them very harshly. The other strong regional parties like SP, BSP, YSRCongress, have their political vote bases in some clusters. However they have been exposed to shifts in their political bases in cases of non – governance. A good example is the shift of some Muslim votes away from SP after Muzzafarnagar riots. Hence the message for regional parties is join the bandwagon for development lest be run over by others.

f)      Development over ideology – The 2014 election have shown that parties with ideology and no development agenda are relics of the past. The Communists are in the danger of getting extinct due to their dogmatic approach. To a large extent, Rahul Gandhi also didn`t have any concrete development agenda and his talk on ideological principles, as he mentioned in his famous interview on Times Now, actually hastened his defeat.

The 2014 election is a major milestone in the history of India. Hopefully, the verdict will move the country to a platform of development and governance uncluttered by narrow and petty considerations like caste, religion, etc.

Narendra Modi, the man who has a track record of development and governance in Gujarat, carries the hopes of all Indians as a leader who can lead India to a new world. The people, old and young, have given him a landslide victory to lead India. Let’s see whether “Acche Din Aane wale hain (Good days are about to come)!”

 

The new look India cricket team – are we being too harsh?

Quite a lot has been made of the new look Indian team, their performances of late and of course the leadership of MS Dhoni. India has been losing matches sometimes badly and importantly very close matches as we saw in the Asia cup recently. The most irritating aspect has been that India hasn`t managed to win Test matches from winning positions as we saw in South Africa and New Zealand. Many pundits, like ex- captain Sourav Ganguly, have put a significant part of the blame on Dhoni`s captaincy and his defensive tactics. Dhoni is a product of the one day school of cricket and hence it is futile to expect him to be an attacking captain like Sourav. However, it was under the leadership of Dhoni and Kirsten that India was winning matches across the world. Can the blame be put on Duncan Fletcher or the Indian team? Fletcher I don`t know but let us look at the Indian team. Can the new look Indian team be blamed for the losses? Unfair I would say.

I am inclined to look at the team of early 2000`s, under Sourav`s leadership, which proved we can win abroad in alien conditions. Like the present Indian team, the seeds of 2000`s team was laid in second half of 1990`s which saw the advent of people like Dravid, Ganguly and Laxman. These people joined the likes of Tendulkar and Kumble and joined later by people like Sehwag. In late 1990`s the Indian team was seen as a team with potential but failed to win many matches. Be it the South African tour in 1997, world cup of 1999, Oz tour of 2000, the team was not very successful. However the seeds for a successful team were laid during this period. We saw some outstanding performances by the stars who formed the nucleus of the 2000`s team like Dravid`s century in 1997 South African team, Sourav`s performances as an opener in one dayers, Kumble`s 10 wicket haul. Probably Sachin Tendulkar was the only consistent star performer during this period. Infact, Laxman established himself only after the stupendous Kolkotta effort in the Oz series of 2001 despite making his debut in 1997.

If history were to repeat itself, I would recommend giving the new look Indian team some more time. Kohli has started becoming consistent now along with Pujara. Dhawan and Rohit have just made their debuts about a year back along with Rahane. In addition, these players have got more international exposure as compared to the 2000`s team due to IPL. A couple of good overseas tours will certainly help them play better in hostile overseas conditions. The new look bowling attack of Shami and Bhuvaneshwar Kumar are taking strides for becoming good bowlers and hopefully will do so under the tutelage of Zaheer Khan.

The major problematic area seems to be Fletcher`s coaching abilities. There has been a drastic change in fortunes since he took over. Yes, the team was going a transition phase after he took over, however his role in the value chain of the Indian team needs to be thoroughly looked into. His combination with Dhoni vis a vis Dhoni`s combination with Kirsten needs to be looked into to resolve the loopholes well before the world cup in 2015. However unlike the performances of players, the decisions on the captain and coach are taken by the bigwigs of BCCI whose working is anything but logical and transparent. Let’s hope for the best !

In a gist I`am looking forward the developments of the new Indian team.

The new International Cricket Council (ICC) – is it a boon or a curse for cricket?

The changes in the International Cricket Council (ICC) have been announced and the 3 main members now namely India, England and Australia have taken lots of efforts to explain that the changes are in the benefit for one and all. If the definition of “benefit” is more revenues to the 3 members then they are absolutely right. However, the main question to be asked is whether these changes for the benefit of the game?

Let’s look at some of the key changes:

1.  The revenues of the ICC are to be split-up in the ratio of the individual nations revenues generated.

2.  The proposed Test championship has been scrapped. Hence the original form of cricket i.e. Test cricket is being overlooked.

3.  One day Champions Trophy is being revived again. Thanks to India winning the last edition and hence one day championships are better.

4.  The Future Tours Program, which tried to ensure a fair and equitable number of matches for all Test playing nations, has been given a silent burial and in the new system the individual nations have to negotiate with each other.

What will this lead to? The ICC has become a big boys club with the top 3 members as bullies. Firstly, the 3 main members will have a bigger share of the matches to be played. Secondly, the financially weaker nations like West Indies and Bangladesh will get a lesser share of the matches. Thirdly, revenues seem to be main driver for ICC with no efforts being made to promote Test Cricket. Fourthly, no effort is being made to widen the nations playing cricket or to upgrade the standards of the game in the associate members.

In the last 30 years, the only nation which has graduated from a pushover to a world beater is Sri Lanka. Zimbabwe was predicted to make the grade but they have not. Bangladesh, despite Test status, still looks like a club cricket side. For very long we have seen countries like Ireland, Holland, Nepal, Kenya, etc showing flashes of brilliance but couldn`t sustain the momentum.

The changes in the ICC will lead to the following results which is not surprising. The top 3 members, especially BCCI, will get richer. Test Cricket will continue to languish at the present levels, if not worse. The cricket playing countries will remain an exclusive and Commonwealth club. Thankfully as long as it does so, India will be in the top 2 or 3 and we claim to be world class in at least one sport!

Aam Aadmi Party`s governance agenda- will it succeed?

The “Aam Aadmi Party (AAP)” revolution led by Arvind Kejriwal has caught the attention of the entire country so much so that the onetime poster boy of the media – Narendra Modi- has been swept off the media pedestal. As per the AAP spokesperson Yogendra Yadav, people have voted for AAP for 3 reasons viz. clean politics, good governance and anti- corruption. Very true! Narendra Modi`s agenda has included these 2 themes along with economic development as a part of his election campaign. Arvind Kejriwal is being touted as the 3<sup>rd</sup> alternative for the Prime Minister`s post so much that a national newspaper has reported today that Modi has pressed the panic button fearing the AAP wave.

What does the country need now? Given the precarious economic scenario that we find ourselves in, economic development is very important for our country. Our GDP growth rate has fallen to sub – 5% levels from the 9% levels we were in a few years back. However, the country has been severely shaken by the numerous corruption scandals in the last few years and historically corruption has been rampant in this country ever since our independence. Hence governance and anti –corruption plank have also become equally extremely important and has caught the imagination of the people especially the middle and upper class that are fed up with the 2 big national parties.

A research paper “Is good governance good for development[1]?” argues that good governance is not a necessary precondition for development. The research paper lists some obstacles mainly the different political characters of various nations. The western nations saw a surge in their economic development in the 18^th and 19^th centuries when the term governance was unheard of. In the last few decades we have seen the rise of China and some other East Asian countries that would rank not very high on the governance matrices.

So what is important now- 

• Governance or economic development? 
• Is governance required for economic development? 

My answer would be yes. Good governance is a good supporting factor for sustainable economic development and possibly to convert economic miracles to sustainable development. The presence of proper institutions like judiciary, legislature and executive machinery is important to deliver the benefit to the people and avoid issues like corruption, inefficient allocation of resources, etc. A well-developed banking and financial system can lead to financial inclusion. Speeding up of judicial activities can ensure protection of ordinary citizens and protection of industrial interests.

For a sustainable and balanced growth of the country it is therefore necessary that economic development goes hand in hand with good governance. Given the size and political status of India, it is imperative that we have do not have a governance less development like the Middle East and some African nations and neither should governance impede development as still a sizeable population is below the poverty level. Singapore can be quoted as a good example of a “proper” balance of governance and development. While many critics can describe Singapore as prison state, the government under the tutelage of the previous premier Lew Kuan Yuew has developed Singapore to be a model of economic prosperity and a toast of the world. People are willing to let go some freedom for economic prosperity.

The Delhi AAP government of Arvind Kejriwal has taken 2 sets of decisions since taking power in late December`13 viz. governance decisions like anti-corruption telephone line and audit of power discoms and on the other hand populist measures like power subsidy and free water. The populist measures smack of “Leftist” thinking which has long been rejected by people. In fact the communist parties are being threatened with the advent of AAP!

Hence Arvind Kejriwal and his AAP team members should probably work on the following paths:

1.The focus on governance is what the country needs and people would love to see the same being institutionalized. Hence the AAP should implement measures and systems to make governance a way of life. Some of them would be institutionalizing the Lokpal bill, ensure proper law and order, regular availability of metered and billed power and water, improve efficiency of government services and last but not the least infrastructure. This in turn would help the economy as well. This will not happen overnight but a proper process can be put in place to do this. One way, which has been initiated, is to form teams with professionals (true aam aadmis!).

2. AAP should not be seen as anti- business and hence should avoid socialist  leanings like the Congress. An anti- business stance will hit the economic  development and can prove counterproductive.

3. Populist measures, especially subsidies need to be avoided as these are  truly anti proper governance.

To conclude, I would sincerely hope that the Aam Aadmi Party truly becomes a mainstream political party and cleans up the entire Indian system and in the process ensure an all-round development of India. All the best AAP !!

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[1] Kwame Sundurama, Jwame and Choudhry.  United Nations Series on Development. 

Human Capital Index: How do China and India fare?

After I wrote my blog on Gross Capital Formation- Trends for India and China (http://ramnarayanan1112.blogspot.com/2013/09/gross-capital-formation-trends-for_27.html), I received various interesting comments. A Harvard economist, who also taught me during my masters at London Business School, commented that” if the same analysis were done for human capital formation (HCF) what would it look like”?

Is HCF important? I guess so. After all human skills are very important to extract the maximum value from any advantage that a country may possess. The Japanese, with superior skills, have been world beaters despite lack of many natural resources while the oil rich Middle East nations thoroughly lack skill sets and hence have to depend on outside workers to run critical functions in their economies.

The WEF Global Competitiveness Report ranks countries on 12 parameters. Two of them are (a) Health and Primary education and (b) Higher education and training which are listed as a basic index and as an efficiency enhancer index respectively. These two parameters are directly linked to the well being of individuals and hence taken as indicators to look at HCF. To be more specific, the World Bank data lists health expenditure (as a % of GDP) and primary school enrolment % for basic indices and for higher education and training, tertiary education enrolment % has been taken as an indicator.

The World Bank Data shows that for the last decade (2000-11) the average world health expenditure is about 10% of the world GDP. The highly developed countries lead the pack as expected. As shown in table no.1 during the peak development period the developed countries had an average spending of more than 8% as shown in table no. 2

India and China lag behind the world in health expenditure with the 10 yr averages at 4.1% and 4.6% respectively. In fact the Indian figures have shown a declining trend since 2004 (since UPA-1!).

During the peak development years, the developed nations like USA and Germany have recorded health expenditures of above 10% consistently. In fact among the BRIC nations, Brazil is the closest the global average with health expenditure in 2000-11 of close to 8%. Thus the aspiring nations like India and China need to boost their health expenditure to sustain their growths. 

One of the main factor in having better health expenditure is the government`s share in the entire spend pie. Even though private expenditure is advantageous to the health systems, government intervention ensures affordable health care within reach to all the people. The World Health Organization (WHO) is driving the Universal Health Coverage (UHC) which seeks to increase health coverage to all people with the help of the governments. As chart no. 2 shows developed countries like Germany, Japan have a very share of government spending in the health expenditure. Even China which was lagging behind in early 2000`s has overtaken USA in terms of government spending. However with the “Obamacare” health insurance bill, the government spending would go up in the USA. Indian government lags far behind which explains the shoddy state of health care and the rise of private health care facilities in India. Will this help the poor get access to health care in India? Certainly not!

 In terms of education most of the countries do pretty well when it comes to primary education which gives basic sustenance and elementary skills like reading, writing and counting. The World Bank lists Primary Gross enrolment ratio (GER, primary)[1]  as an indicator. The major education parameter which increases the efficiency and effectiveness of humans and has a major role in the economic development is tertiary education. Tertiary education also referred to as third stage, third level, and post-secondary education, is the educational level following the completion of a school providing a secondary education. This is the stage where people learn higher skill sets like engineering, vocational skills, accountancy, etc. which enable them to do higher skilled jobs. The World Bank lists Gross Enrolment Ratio for tertiary education[2] as an indicator.

Most of the countries do well in terms of primary education and have enrolment ratios very close to 100% as shown in chart no.3. The average world Primary GER (P-GER) is 104% for the year 2000-11. Chart No. 4 shows the scatter plot of the T-GER and indicates a wide variation and a decreasing slope. The average global T-GER is 24.7% in 2000-11.

       

Naturally the enrolment ratios keep dropping as the progress is made from primary to secondary to tertiary education. Kids enrol for schools and steadily the dropout ratios increase as they progress from primary to secondary. Depending upon the status of the economy and social structures and the thrust given to higher education, the countries with higher degree of development have consistently had a higher proportion of enrolment in tertiary education.

As table no. 3 shows, there is not much of a difference between the nations in P-GER but there exists a huge difference in T-GER between developed and developing countries. India and China are abysmally low in T-GER.

How do the so called developing tigers (I am disinclined to call then developing economies anymore) fare comparatively? Table no. 4 shows that Brazil is a leader of the pack from a health expenditure perspective. Russia, which has inherited most the remnants of the erstwhile Soviet Union where lots of emphasis was laid on technology, research and vocational skills, is far ahead in the tertiary education sector. China and India lag behind in health as well as in tertiary education matrices.

 

However the silver lining for India and China is that T-GER has been consistently increasing over the last decade as shown in chart no. 5. Thanks to the growing economies there has been an increasing trend among people to upgrade their skills to enter the job market. However both these countries lag well behind the global enrolment numbers.

Is the public spending the most important driver in education sector? Well, there are mixed signals. The top 5 spenders as a % of GDP in 2007-11 are Lesotho, Cuba and Timor-Leste! The comparison of some indicator countries is a mixed bag as in table no. 5. USA is above the world average but countries like Japan, Russia and Germany are lower. This lends supports to a hypothesis that for an effective education sector, the private sector spending has to go hand in hand with government. A higher proportion of private spending in the tertiary sector helps in aligning the skill sets of the job seekers with the job needs.

In terms of HCF, if we look at some of the major countries in developed world and the developing tigers, it’s very clear why the USA is the world`s leading nation. As table no.6 shows, The USA leads in both the health expenditure as well in tertiary education. The health expenditure figures will further go up once the medical insurance scheme of President Obama, which is his pet scheme, goes into full swing. The US universities are symbols of excellence and attract the best of the brains from across the world. As we discussed earlier, primary education is for sustenance while tertiary education is for the future sustenance of an economy. It’s better if higher proportions of people who undergo primary education enroll themselves for secondary and tertiary education and hence lower the difference between primary and tertiary enrolment rates. As table no.7 shows, not surprisingly, the USA scores way above others in the difference parameters. India and China are just below the global average of close to 80%.

Thus the analysis of HCF throws up the following points:

a) Leading nations like USA, Europe, and
     Japan have spent a    higher figure on
     health as one of the basic drivers to
                                                  sustain growth.

                                               b)Tertiary education is very important to

                                                   drive growth  especially innovation driven

                                                   growth as in USA.

                         
                                               c)  China and India still lag far behind in HCF

                                               indices.

As is my usual habit I leave the following questions to be debated:

1. What should be role of private sector in education especially tertiary education?

2. Should the governments of developing countries like India and China focus only on primary and secondary education?

3. What should the governments, especially the Indian government, do to make health care more accessible and affordable?

 Data & Information Sources:

1) World Bank

2) World Health Organization

3) Wikipedia

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[1] GER, Primary is defined as enrolment in primary education, regardless of age, expressed as a percentage of the population of official primary education age. GER can exceed 100% due to the inclusion of over-aged and under-aged students because of early or late school entrance and grade repetition.

[2] GER for tertiary education defined as including universities as well as institutions that teach specific capacities of higher learning such as colleges, technical training institutes, community colleges, nursing schools, research laboratories, centres of excellence, and distance learning centres.[

Platts Commodity Week Interview

A clip of my intervview at Platts Commodity week at Mumbai in Sep`13.

http://www.youtube.com/watch?v=NPSMkI2vBKY

Limitations of Brain – how critical are human attitudes?

A July 2011 Scientific American article” The limits of intelligence” by Douglas Fox, claims that the human brain has reached its limits of intelligence from both a physical as well as structural point of view. The basic premise of the argument is based on the movements of the neurons which as claimed by the author has reached its practical limits.

If the brain gets bigger in size to accommodate more neurons and hence more processing power, the brain would need higher energy as the neurons would need to would need to travel more distance and hence brains can actually become slower. Secondly, if the connection wiring between the neurons is increased or if the neurons are made thicker to increase processing power, this will also lead to more energy consumption and hence would not add to the processing power of the brain. Coincidentally, a newspaper article (TOI dtd. 7^th Oct`13) reported, that a physician who studied the structure of Albert Einstein`s brain after his death found that the wiring between the various parts of his brain was exceedingly high and proposes this as the reason for the Einstein`s brilliance. Thirdly, if structurally more neurons are packed in the same brain area and hence decreasing the size of the neurons, the author claims in this scenario that the interactions between the neurons would be destructive and would not lead to a better output from the brain.

If the human brain can`t get any better then how do we better the human output in this age of “innovation” driven age. Douglas Fox says that one way is by better social interaction leading to a collective pooling of human brain and the second way is by use of technology (viz. internet). Thus social interaction i.e. culture and technology can actually reduce the need for greater individual smart brains!

To understand the ramifications of the article, I tried to look at the ecosystems for the culture and technology angles as raised in Fox`s research.

From a business perspective, the global business scenario too has been consistently changing over the past few decades. From the post-world war 2 physical infrastructure build-up in western nations, the rise of the competitive and efficient Asian economies in the 80`s, the IT and internet boom in the 90`s and to the rise of India and China, in the last 15 years, as the global back office and manufacturing base respectively, the scenarios have constantly evolved based on the business requirements. The next decade will be dominated by countries and organizations for which “innovation” is at the core of the business models. 

Better output from social interactions can happen in an ecosystem which encourages more interactions between the people. Apple and Microsoft are designing offices in which people bump into each other more and exchange ideas. Yahoo has banned employees from working from home so that employees work more effectively by more face to face interactions rather than the more efficient means like email, phones, etc. Jack Welch, as GE insiders say, would look at the body language and commitment exuded by the manager presenting new ideas rather than look only at the details of the plans.

The society culture also plays an important part in social interactions. Typically family driven social systems like Indian, Chinese and Japanese tend to have more social interactions. However this trend has changed thanks to the advent of electronic gadgets, internet (strangely yes!), increase in nuclear families and increased urbanization. In India we have seen lesser number of kids preferring to come out to play and be confined to home playing with gadgets. In public transport people are stuck to their phones, tablets, kindles, etc. rather than talk with their fellow travellers. Another aspect to consider is the work culture of the society. Team driven cultures like Japanese have achieved more thanks to their collaborative attitude while the Indian culture of individual brilliance but poor team works skills have impeded the output.

The American system and the European systems have able to drive innovation with the help of the educational and legal frameworks.  These systems driven culture have enabled collaboration between various people by encouraging out of the box thinking and risk taking. The education system too plays an important part in this process. The Western education system and some other education system like the Japanese system focuses on building up specific skills and concept learning which fosters a culture of innovation and higher productivity while some rote based systems like in India and some Asian countries only churn out educated coolies. The legal system too, is protective of original pieces of work e.g. protection of patents, trademarks, strict laws against plagiarism. Etc.

One of my senior business acquaintances who hails from Korea told me that 2 things are very important to succeed and drive changes and innovation in an organization – team work and passion. While passion comes from within, people who can work and contribute to a group effort are very important to organizations which in turn have to build up ecosystems to nurture group efforts. He also mentioned that humans who can use their left and right brains equally well are more productive than single brained humans. The left side of the brain is used in structured and analytical work while the right side of the brain is used for instinctive work like arts, sports, etc.

This information based on the research has very important ramifications for organizations, institutions, societies, etc. which are highly influenced by human behaviours.

1.      One man army teams, teams with rock stars and high calibre people who can`t gel in a team will have limitations beyond a particular point. As the saying goes – “the whole is better than sum of the parts”.

 

2.      Well rounded personalities would be preferred as compared to uni- dimensional personalities in managerial positions. In an organization a person with high IQ but average – low EQ would be a disaster. Highly left brained or right brained people would find it difficult to contribute to an overall case beyond a limit.

 

3.      To identify the correct people, organizations would need to have robust recruitment and training processes. People in managerial posts would need to have interests in varied activities like sports, arts, music, etc. to be effective managers.

 

4.      The education system would need to be modified to stress not only on academics but also in extracurricular activities and sports. Rote based systems need certainly to undergo rigorous changes to suit the new challenges in a global system.

 

5.      Women managers would be find more and more chances as generally they are better off in team work and more well-rounded and balanced personalities as compared to men.

As my Korean friend said “Team work” and “Passion” are the one of most important aspects in life. Very true!!