Of losses and quick wins

The Bihar assembly results are out and open to interpretation. There will be dissection, postmortem and blame fixing in the coming days. On the face of it, the resounding victory of the Grand Alliance, brings out some very interesting facts. First, the clean image of Nitish Kumar was a factor that helped, but his image was not clean enough and the Janata Dal (United) could only win 71 of the 101 seats it contested. Second, though the clean image of Nitish Kumar made him a popular Chief Minister, a corrupt and convicted Lalu Prasad’s Rashtriya Janata Dal bagged 80 of the 101 seats it contested. Third, Indian National Congress, which was reduced to a humiliating four seats in the outgoing assembly managed to win 27 seats this time. Fourth, the huge crowds that the Prime Minister pulled during his 30 rallies in the state, did not like his message and hence voted someone else.

There are many reasons, which worked in favour of the Grand Alliance and pushed it to a two-thirds majority in the assembly. Similarly there are reasons, which lead to the crushing defeat of National Democratic Alliance. Some of the reasons that immediately come to mind are similar to the ones that failed corporations face during their turnaround. At the end of the last parliament, India was similar to a failing organisation. Big ticket scams, slowing economy, non-existent foreign policy, cash guzzling and zero value social programmes (MNREGA) and fuel subsidies were pulling the country down. India was not allowed to live up to its potential.

Failing corporations employ experienced consultants to turnaround the company. The consultants in turn use tried and tested (sometimes radical) measures to re-engineer the processes and bring in efficiencies. The Modi government promised a similar re-engineering for India. But the similarities end there. A good consultant knows that challenging the status-quo will inevitably bring resistance. Change is the only constant, yet it is the most difficult thing to accept. Try bringing in a radical change in an organisation and it is doomed to fail. The consultants know this and they have found a way around. For the entire organisation to see the benefit of the turnaround exercise, they use quick wins. Quick wins are tasks that are easy to do, take little time to implement but show results that are visible and tangible.

Once the quick win succeeds the rest of the organisation can be easily taken on board and they will act as partners in the turnaround. The Modi government failed in identifying quick wins. Let alone implementing them. The government embarked upon dream projects like Make in India and Swachh Bharat. Both very well meaning projects and will yield results, but in the long run. The mammoth task of bringing millions in the banking network was achieved rather swiftly but again it falls short on expectations. Having a bank account is good but there has to be enough money in it for the account holder to benefit.

The PM is repeating the mistakes the Vajpayee government made. Stressing on big ticket reforms at the cost of quick wins cost them the 2004 elections and the UPA I reaped the benefits five years later.

One of the easiest quick wins for the government is job creation. Job creation in semi-skilled sector. That is where the rural population hunts for employment. The government should emphasis on sectors like highway and manufacturing. These are labour intensive sectors and have a high multiplier effect. Red tape and archaic concession agreements make it difficult for the private sector to bid aggressively and for the government to close the transaction efficiently.

A construction site or a factory not only provides employment to the actual workers, it also generates business opportunities for transport companies, taxi services, restaurants, hospitals, housing companies, and so on, creating further employment opportunities. It helps create an ecosystem, which brings in prosperity and jobs to a region.

So far the government has done things for India, it is now time to do things for Bharat. Gold monetisation might attract India but a country where two thirds of the population is poor, Bharat might find it elitist. The government has lost a year and a half, if it does not wake up to quick wins, it might see a repeat of 2004 and the next government will reap the benefits of the long term reforms that the Modi government is carrying out today. Bihar is a warning bell and we know for whom it tolls.

Neither food nor security

India is the second largest, fast growing, large economy in the world. It is also has the second largest population in the world. India is home to 1.2 billion (and counting) people. For the sake of comparison we can say that India hosts a bit more than the total population of Africa on little less than one tenth of its size. Catering to such a huge population is a daunting task, especially when it comes to feeding it. Fortunately India is blessed with large and fertile plains fed by perennial rivers and an annual cycle of monsoon.

The land of surplus

In the year 2011-12, India produced a total of 246.2 million tons of food grain (rice, wheat and coarse grains). The census of India carried out in 2011 is yet to throw up details regarding household numbers and the average household size. But according to the census carried out in 2001 India had a total of 191.96 million households and the average household size was 5.3. The 2011 census tells us that India got an additional 181.96 million people in the decade since last census. Assuming an average household size of five the additional households would number 36.4 million, bringing the current number of households to approximately 228.5 million. A simple math will tell us that 246.2 million tons of food grain and 228.5 million households will leave a little more than a ton of food grain per household per year. The national sample survey organization reports that per capita food grain consumption in 2009-10 was roughly 11 Kg per month. The average household will hence consume 660 Kg a year, significantly less than the available and hence leaving a surplus for storage/exports.

Who moved my grains?

The interesting fact however is that 42% of India’s children are malnourished and 58% are stunted. These are alarming numbers, especially when India is a food surplus country. One might ask where all the food is going. Well, much of it just rots in the extreme weather. India made huge progress in food production but failed to create enough storage facilities. A Reuters report from July 2012 quotes that as much as 6 – 19 million tons of food might perish due to lack of proper storage.

Did you work out the freebies?

But that’s just half of the story. India for many decades has a system of “Public Distribution System” (PDS). A system under which heavily subsidies food grains is sold through licensed shops. Eligible families get 35 Kg of food grains a month, rice at Rs. 5.6 (USD 0.093) per Kg and wheat at Rs. 4.1 (USD 0.068) per Kg. Unfortunately the PDS is one of the most corrupt institutions in India. In certain states less than a quarter of the eligible families get their fair share of food. The rest is siphoned off and sold in open market at a premium. An ugly nexus of bureaucrats and private shop owners play the game with impunity.

The ruling UPA government has recently introduced an ordinance (pending a vote when the parliament meets later in July 2103) providing food security to almost two thirds of India’s population. The food security bill will provide additional five kilograms of food grain at prices lower than the PDS price. The scheme will cost the exchequer INR 125,000 crore (USD 20 billion) a year. This is all good, especially since India is gearing up for the national elections early next year. But the irony is that the government plans to implement food security through the same corrupt and inefficient PDS network. There won’t be any surprises if the additional food grain ends up in open market to be sold at a higher price like the rest of the PDS grains.

One step forward three steps back

The government recently introduced a futuristic programme. Households will get the subsidy on cooking gas directly into their bank account once they pay the market price at the time of purchase. This was termed direct cash transfer. It was supposed to be extended to all kinds of subsidies. The next step for the government should have been to extend the subsidy to food grains and eliminate the corrupt nexus of PDS. Supply of more food grains in the open market would have reduced the prices and the poor could have afforded a better choice in the open market. But the government decided to load the PDS with more grains. It is anybody’s guess what will happen to the extra 62 million tons of grains which will be pumped into the PDS.

Successive governments at both centre and the states have created a society, which lives off the freebies. Free food, free electricity, free television sets, free laptops, etc. have won many elections for the politicians. None of the governments think of long term investments for the overall development of the society. Investments in public infrastructure, education and health care are hardly seen.

The poor will get the benefits of food security bill only if the PDS is eliminated and new infrastructure for proper storage of food grains is created. Pouring more into a corrupt system will not help address the needs of the poor, nor will it send a positive signal to the voters. 

Do you know what you are reading?

Two senior executives of Zee news have been arrested on charges of extortion. Navin Jindal (owner of a steel and mining conglomerate and a sitting member of parliament on a Congress ticket) has alleged that he was being blackmailed by the media house and asked to pay up Rs. 100 crore ($ 18.2 million) over a period of four years in advertising money to Zee news. A grainy video (edited version) allegedly shot by the Jindal employees has been posted on Youtube. The video suggests that a deal is being struck to prevent damaging coverage of coal mine allocation to the Jindals. Zee news has rubbished the allegation and the case is now sub judice. More will be revealed in the coming months, but this leaves us wondering whom to believe and what to ignore?

It is widely accepted that Indian media is free and uncensored, which to a large extent is true. All the media reporting on scams by the sitting UPA government would not have been possible without a free media. The kind of support lent by the media to Anna hazare’s movement, which was clearly anti establishment, once again proved the freedom enjoyed by Indian media. Despite this there are a lot of grey zones. As claimed in the Jindal video by the Zee executives that the likes of Amir Khan and Madhur Bhandarkar (well known Bollywood actor and director respectively) also have to pay for news coverage and that the front page stories in The Economic Times are paid, are enough to shake our faith in independent reporting. The ugly nexus of corporate world and media companies has come to the front.

The colour yellow looks good on mailboxes
not on newspapers

Indian society has always relied on media. The secretly published regional newspapers during colonial times were trusted over the official media. When Indira Gandhi declared state emergency on 26^th June 1975, newspapers protested by leaving blank front pages and announcing the demise of democracy in their obituary columns. Indians have grown up trusting their newspapers. After the advent of private electronic media more people now rely on them for independent news and views rather than on state media. The change in which started in mid 90s did little to assign accountability to the media. Media houses disclose little about their investment structure, their relationship with other media firms and businesses. Disclosure is completely lacking when it comes to reporting. As a reader one is entitled to know the background of a news piece.

Take the example of the Zee news Jindal scandal. There was wide spread reporting of the matter in various newspapers including DNA. DNA batted for Zee news and carried full press statements from the electronic channel. What it failed to inform the readers was that DNA is part owned by Essel Group which is also the owner of Zee news. Readers would have formed a better opinion if this information was disclosed in the news article. Non disclosure of full information is just one aspect of dishonest reporting.

The problem of misleading the readers is not limited to business reporting. Popular, award winning journalists like P. Sainath (writes mostly for The Hindu, a Chennai based newspaper on social cause related to farmers and poverty) too tend to distort or hide facts in their reports. In his article, “To fix BPL, nix CPL” published on 26^th March 2012 he talks about how the government is helping corporate world by writing off Rs. 5 lakh crore ($ 91.4 billion) in the annual budgets since 2005-06 as revenue foregone. He on purpose fails to tell his readers what exactly is included under the revenue foregone head. Reading the article one gets the impression that it is all about giving concessions to big multinationals at the cost of poor people. The truth however is that revenue foregone includes more than just tax breaks to businesses. It includes the amount waived off by the government under various sections of income tax (investments, donations, savings, provident fund and pension contributions, rent allowance, higher education loan, etc), area based exemption in excise for North Eastern states and hill states, etc. Revenue foregone is also the subsidy the government provides on cooking fuel, electricity to farmers, fertilizers, etc. If the readers know the real definition of revenues foregone they would probably form a different opinion.  

Indian media which carries out anti corruption campaigns should start doing some housekeeping. It is time that the readers are given honest information complete with background information where ever it is required and clearly disclosing their business and investment relationships. Reporters like P. Sainath who are known for their good work and recognized by international institutions of repute should not mislead their readers by promoting their agenda instead of reporting.

The Zee news scandal should also send a signal to the readers on how they form their opinions. They should learn to question the report and try to find out the truth behind it. Blindly believing or rubbishing a report will turn us into a herd of sheep.

Exchange rate used is of today, 29/11/12 USD @ 54.73