Tuesday, November 5, 2013

Political iconography: Significance of Sardar Patel in India Today

Narendra Modi is building the world's tallest statue, in memory of Sardar Patel, in the Narmada district, of Gujarat? Why does Narendra Modi, the chief minister of Gujarat, and the prime
ministerial candidate of the BJP in the forthcoming general election in 2014, need to lay a claim over political legacy of Sardar Vallabhbhai Patel, independent India's first home minister, who died in 1950. Is it an attempt to saffronise Patel, the nationalist icon who was opposed to religious and communal politics? Or is it a sign of desaffronisation of Modi, in his attempt to shed his own communal image? These are some of the questions which I explore in the following article. 

Every political ideology or movement needs a face or an icon, symbolising the essence of the campaign to the public. To be effective, such a political icon needs to be seen as bipartisan, something which the wider sections of the population, beyond the party faithful may be able to related to easily.

With the elevation of Narendra Modi as the BJP's prime ministerial candidate in the 2014 general election, Modi is now the obvious face of the campaign. But Modi is a highly polarising personality, who attracts acolytes and critics in equal measure. Therefore Modi's campaign needed a bipartisan figure as its icon.

By claiming Sardar Vallabhbhai Patel as the icon of BJP in the current political campaign, Modi is making a distinct effort to use the bipartisan appeal of Patel, to diffuse his own partisan image.

Will Modi succeed in desaffronise himself, riding on the image of Sardar Patel? Or Will he try to saffronise the Sardar, and succeed in claiming the first nationalist icon for the BJP?

Political icons

In the 2009 general election, the BJP had tried to project L. K. Advani as a decisive leader, "Louha Purush" or the 'Iron Man', in the mould of Sardar Patel. The campaign did not succeed. So now Modi as the head of BJP's campaign in 2014, is trying to claim for itself not just the lexicon, but the icon itself, Sardar Patel.

It is really interesting that, today the Congress party, which espouses inclusive governance, have over the decades increasingly excluded many of its own nationalist icons, focusing primarily on the Nehru-Gandhi family. And now that the party is feeling increasingly marginalised, it is trying to reclaim some of the political icons it had willfully discarded. But as the 2014 campaign unfolds, Congress seems unsure whether to reclaim some of the political legacy, or stay loyal to its first family.

Other political parties have their icons, too. BSP has adopted Ambedkar. The remnants of Indian socialists have Lohia. The communists have Marx and Lenin. The Naxalites have Mao. The DMK has Periyar and ADMK has in addition MGR in Tamil Nadu. TDP has NTR in Andhra Pradesh. Shiv Sena has Shivaji in Maharashtra. Akalis have the Gurus in Punjab. Mamata routinely idolises Tagore, Vivekananda, Subhas Bose and others from the Bengali pantheon, although she is her own best motif.

But the BJP-RSS combine with a national political ambition has no icon with pan-India appeal. Most Indians have not heard of Hegedewar the founder of RSS. Dr Shyama Prasad Mukherjee, the founder of Jan Sangh, the precursor of BJP, may be better known, but does not have much popular appeal. Deen Dayal Upadhayay, who laid the intellectual and organisational foundation of Jan Sangh, and conceptualised integral humanism, as an alternative political ideology, to western theories of capitalism and communism, is today largely unknown. And A.B. Vajpayee, the prime minister of the BJP led NDA government between 1998 and 2004,  is too recent to become an icon. Also, Vajpayee's differences with Modi on the 2002 riots in Gujarat is too fresh in public mind to allow Modi to claim him.

So it is interesting that Modi is trying to claim Sardar Patel, who was from Gujarat, although Patel had banned the RSS in the aftermath of Mahatma Gandhi's assassination. Patel was foremost among Indian nationalist, and had nothing to do with Hindu nationalism, the brand which Modi and his party tries to propagate. Patel said about the RSS: "The speeches of the Sangh leaders are poisonous. It is as a result of this venom that Mahatma Gandhi has been assassinated."

Sardar Patel and Politics

Modi is attempting to recreate the political image of Patel, according to his own electoral need. Patel had gradually faded from the contemporary Indian political lexicon, and yet has an element of mythology surrounding him for his effort to unite the 500 odd princely states that constituted British India, following Independence from colonial rule. Therefore Modi believes it may be relatively easy to resurrect Patel as a symbol of united India.

It is a small matter of history that in Patel's vision of India, he considered both Hindu and Muslim identity based communal nationalism posing a fundamental threat to Akhand Bharat, the united India.

In order to project Patel, Modi feels necessary to speculate on the direction India may have taken had Patel been the Prime Minister at Independence in 1947. But Patel was a life long member of the Congress, working closely with prime minister Nehru, who was many years younger to him.

Mobilising the faithfuls

Political icons are not mere statues cast in iron. They have a practical purpose. One is to project a message or idea that may appeal to a broad cross-section of the people. But in an election campaign, it is critical to be able to turn that appeal in to votes, as well. This requires political mobilisation.

Advani's rath-yatra in the late 1980s, as part of the campaign to build a Ram Temple, at the alleged site of Ram's birth in Ayodhya, was more than just an effort to build awareness of the idea of Ram or the temple. It was a very astute move to mobilise a large section of Indian society towards the idea of Hindu Nationalism. The campaign stood out in contrast to apologists for secularism, who were portrayed as playing vote bank politics and practicing a policy of minority appeasement.

Even while disagreeing with the goals and narratives of the Ram Temple campaign, one can hardly deny that this was one of the most successful political mobilisation at the grassroots in modern Indian history.  The bricks being mobilised from thousands of villages across the country to build the temple, demonstrated that it had stuck a chord among a large segment of the population. It had catapulted BJP from its nadir in the 1984 general election, to the doorsteps of political power in Delhi by the mid-1990s.

Political base

Advani and Modi may have their political differences, but their political strategies are strikingly similar. There seems to be a clear political strategy underlying the desire to build the world's tallest statue of unity, to Sardar Patel, in the Narmada district of Gujarat, near the Sardar Sarovar dam, at a cost of Rs 2500 crore.

Apart from claiming the political legacy of Patel, the building of the statue provides a practical tool for mobilising people, and try to translate the general political appeal, in to votes for the BJP. Like the bricks for Ram Temple, this time Modi is appealing to farmers to donate their redundant farm equipment, so that the metal could be recyled to build the statue. Rural India is critical in BJP electoral calculus.

The BJP's political rise in the 1990s came due to wholesome support from urban India, and its loss in 2004 and 2009, is also a reflection of the urban voters moving away from the BJP. This time, with a strong sense of anti-incumbency towards the Congress led UPA government, it is expected that a large section of urban voters may return to BJP and its allies.

At the national level, there is a general consensus among political analysts on the depth of disillusionment towards the Congress led UPA government across India. However, given the scale of expenditures and range of projects aimed at the rural population, undertaken by the UPA in the past decade, there are doubts regarding the scope of anti-incumbency sentiments across the country side.

But rural votes have been a challenge for the BJP for a long time. Even in Gujarat, in the 2012 assembly election, when Modi won his third assembly election, BJP swept the urban and semi urban seats, but Modi could only win half of the rural constituencies. Clearly, the BJP needed a political strategy to effectively mobilise people and opinion in rural India. The appeal to farmers to share their spare equipments for the purpose of building the statue of Patel, is aimed at doing that. Also, perhaps in not too a small measure, Modi may also be trying to assuage the feelings of the Patel community in Gujarat, many of may still have misgivings about his treatment of leaders from their community.

Despite mobilising on the issue of Ram Temple, and moving the bricks from villages, the construction of the temple in Ayodhya, is quite far from being realised, given the political and legal opposition. In contrast, the statue of Patel in that sense is a much more feasible venture. There is no major opposition expected from any significant section of society, and so it is a statue that can actually be built.

Politics of polarisation

While the BJP may be averse to Gandhi, the Mahatma, they have no hesitation in taking a lesson from the greatest political mobiliser the world has ever seen. The key to Gandhi's strategy for political mobilisation was to pick a simple idea which people can relate, and then provide a way by which people can actually participate in a concrete way, and thereby feel politically empowered.

Idea can touch the intellect, but the capacity to act can help mobilise the heart. This is how Gandhi transformed the Congress from an elite group of Indians, and built the mass support for India's political emancipation.

While mobilisation on the Ram temple was quite a success, it has continued to be extremely divisive even today. The Ram Temple campaign had peaked almost twenty years ago. While it did make the BJP in to a national political force, by that same token, it showed the political limitation of such a polarising political strategy. At its peak, the BJP had so far been able to secure only about 25% of the votes nationally, and therefore needed political allies in order to form national government.

Sardar Patel is not seen as divisive by most Indians today. Despite attempts to reinterpret Sardar Patel's political legacy, saffronisation of Patel may not succeed. For one reason, Patel is being resurrected by the BJP, in the hope benefiting from the Sardar's impeccable nationalist credentials and bi-partisan appeal. Saffronising Patel, would only polarise opinion, and defeat the very purpose of adopting him. Secondly, a polarising political strategy may be useful in mobilising the faithfuls, but in a country as diverse as India, this inevitably limits appeal of the sectarian idea beyond faithfuls, and limits the electoral dividend.

In 2009, the BJP's vote share had fallen to about 18%, nationally. If it is to have a realistic prospect of forming the next government in 2014, it needs to attract 28-30% of the votes, if successful, this may double its seats in Lok Sabha, to over 200.

The questions that remain

Sardar Patel's statue of unity is being billed as the tallest statue in the world, at 182 meters, nearly double the height of the Statue of Liberty, in the United States. That is a billing that is likely to be overcome somewhere in the world, sooner than later.  Today, the iron lady in New York is not known for her height or age, but stands as a symbol of freedom across the world. Unfortunately, in India, we are prone to creating idols and statues, while preferring to argue and even fight over the inanimate form, rather than debate the substance that gave them meaning. Over time complex rites and rituals become dominant, and seem to clog the capacity to even think about the possible meaning? Would the statue of Patel suffer the same ignominy?

Modi's claim on Sardar Patel raises a number of interesting political questions. Is Modi trying to send a secular message to the public, and trying to distance himself from the RSS, the very forces that paved his rise as the BJP's prime ministerial candidate? Or is Modi trying to create a new icon with saffron colour in a true Goebblesian style distorting history in order to ride on a larger than life image of Sardar Patel?

Or is it that, having highlighted the development plank, and soft-pedalling on the core Hindutva issues, Modi is now trying to use Sardar Patel, as a mere instrument, for political mobilisation, to which people, particularly in rural India may able to relate?  And is the RSS' silence of Modi's adoption of Patel, only tactical, for the possible electoral benefit? Or is it a deeper acknowledgment of Patel's views of RSS?

In 2009, the debate over Patel's political legacy had split the top leadership of the BJP itself. While Jaswant Singh, had held Nehru and Patel both responsible for the partition of India in his book, Advani had suggesting that Patel had banned the RSS in 1948, under pressure from Nehru.

The dichotomy

Whatever Modi does or says seem to have a way of dividing opinion. He recently spoke about the priority to build toilets, rather than temples. While the sentiment attracted a lot of sympathy from a section of aspiring Indians, who are looking at Modi for deliverance; it also attracted hostility from the hardline Hindutva activists at the core of his support base.

The proposal to build the statue of Sardar Patel have not been politically divisive, so far, except for political opponents accusing Modi of opportunism. But the proposal to build a tourism and recreational facility near the statue, replete with resorts and golf courses, on land acquired from poor villagers, is surely going to raise further questions about the political sincerity of Modi and his commitment to professed development agenda.

This dichotomy is not limited to the statue of Patel, though. For instance, in Uttar Pradesh, there has been a distinct attempt to polarise public opinion on religious lines, by the lieutenants of Modi, as well as his opponents, in search of electoral dividend. While Modi continues to ride his developmental horse on his own campaign trail.

The greater irony may be that the Statue of Sardar Patel may look over the yet to be completed Sardar Sarovar Dam on Narmada. The strong and decisive Sardar will be a permanent witness to the social, legal and political divisions created by his political inheritors leading to the indecisiveness on the future of the dam whose gates have not yet been installed, while money have flown like water over the dam.

If Sardar Patel, the symbol of united India, was alive, he surely would not have been happy to see the disunited political fabric of India today. And Modi himself typifies that political division. While Modi may need Patel, but there are doubts whether Sardar Patel will oblige Modi!

Saturday, August 11, 2012

The One-child Policy may stall China's rise

During a recent trip to China, I spoke at a couple of conferences on the evolution of the population policy, in India and China. That gave me an opportunity to discuss with quite a few Chinese, scholars and students, the various dimensions of China's one child policy. I was also surprised to learn that increasing number of Chinese scholars are questioning the utility of the population policy, and warning of the serious implications. With the help of research inputs from Prateek Kapil, I have tried to explore some the potential consequences of the one-child policy for China, and for the rest of the world. China has defied many conventional wisdom, whether it can defy the old adage “demography is destiny” will be seen over the next few decades. A version of this article has been published in the Geopolitical Information Service.

In the past three decades, China's rapid economic development has attracted attention of the world as well as led to some anxiety. However, in the next three decades, China's trajectory will be determined by its rapidly changing demography. The signs are that China's one child policy could stall its rise as dramatically. Today, China faces its biggest challenge, it may become old without becoming rich.
During his rule, Mao Zedong had suggested procreation was a patriotic duty to boost labour force. After Mao's death, and the ensuing power struggle, Deng Xiaoping took over the reins of power in Beijing and initiated his economic reforms.
In another clear break from the Mao era, on 25 September 1980, the Politburo of the Communist Party issued an "open letter" to all members of the party and the Communist youth league, urging them to take the lead in having only one child.China's leaders were reacting to an unprecedented population boom - from 540 million to 960 million people in just under 30 years. By 2010, population growth was slowed. Chinese authorities claim some 400 million births have been prevented over the last three decades.
In the 1970s, the fertility rate was about 5.5. By 2010, the United Nation's Population Fund estimated the fertility rate at around 1.6 in China. According to the UN’s population division, the nationwide fertility rate will continue to decline, reaching 1.51 in 2015-20. The Chinese Academy of Social Sciences (CASS), in a report in 2010, had warned that officials were seriously overestimating the fertility rate (the number of children an average woman can expect to have in her lifetime). CASS report urged the government to try to and boost the fertility rate at least to the replacement level of 2.1.
In contrast, America’s fertility rate is 2.08 and rising. And India's fertility rate stands at 2.63.

The Social Impact
The one-child policy, combined with a traditional preference for boys, has sharply distorted the sex ratio (the number of females for every 1000 males). According to the UN estimates, the child sex ratio at birth has declined from 935 females in the 1960s to 842 in 2010. Many Chinese men over the age of 40, may never find a bride. A survey done by the Xi'an Jiaotong University in 369 villages spread over 28 provinces found that on average there are 9 bachelors in every village, with an average age of over 41 years. This distortion is also leading to increase instances of violence and trafficking of women within, and also from outside China.
This policy has also led to phenomenon like black marketing in the adoption market, and “official” seizures of what the administration labels illegal babies. A slew of negative side effects have been noted, including a rise in sex-selective abortions and even infanticide as many families sought male offspring. There has been also been many reports of forced abortions, sterilizations and other brutalities.
The one-child policy came under renewed scrutiny in June 2012 after 22-year-old Feng Jianmei was forced to abort a seven-month fetus by local officials who claimed she had violated family-planning rules. It was also revealed that the officials had demanded a huge 40,000 RMB from this couple as fine and bribe to allow them to have the second child. The picture of the listless woman on a hospital bed soon after the abortion, led to a storm of protests in the Chinese social media. The officials have now been hauled up by their superiors.
This was hardly a rare incident. During visits to China, it is not uncommon to come across young Chinse in their twenties who acknowledge that they may not have been born if their parents had not been able to pay off the local officials.
The policy is also leading to new social issues in an old civilisation. In China, traditionally, children looked after their old parents. The 4-2-1 family structure means that often it falls upon an young couple to take care of two sets of parents and four sets of grandparents. With economic growth and millions of people moving away from their homes in search of better lives.
China's latest census puts the senior citizen population at 185 million, or 13%, over 60 years in age. And a tracking survey released in July 2012, found that almost half of them are living independently, and do not see their children too often.
A draft law proposed in June 2012, to protect the rights of elderly, includes a clause that would make it a legal duty of children to visit their parents regularly. While the intentions behind the law may be good, a “legal duty” may not really meet the emotional needs of parents. Equally importantly, for many migrant Chinese workers, it is not very feasible to take leave to travel home more than once a year, many may not also be able to afford the cost of travelling long distances.
The established old-age security system too has failed to meet the growing demand. There were about 38,000 old-age home in China in 2009, taking care of about 2.66 million elderly. But an additional 3 million beds are required to just meet the current needs.

The economic impact
The economic impact of an aging China is already being felt. The median age in China has risen from 22 in 1980, to 35 now, and if the trend continues, by 2050, it will be closer to 50 years. In contrast, the median age in the United States would be around 40 years by 2050, and for India it is expected to be about 35 years.
The number of young people in the age group of 18 to 22 years peaked at 125.4 million in 2008, and is expected to decline to 56.2% of that peak by 2020. Over the next ten years, the population in the age group of 20-40 years could decline by 100 million.
Chinese businesses are already feeling the pinch of this shifting demography. The increasing incidences of labour disputes is just a manifestation of the shortage of appropriately skilled labour, and the rising labour costs. It is projected that between 2013-15, the working age population in the age group of 15-64 years, will begin to shrink.
The much talked about labour dispute at Foxconn Technology Group which assembles Apple's iPad and iPhone, a couple of years ago, is typifies the challenge. In February 2012, the company announced a hike in starting monthly pay to 1,800 RMB (US$ 286), and this was the third hike since 2010, when the salary was 900 RMB. Foxconn is now planning to move a part of its manufacturing facility to Indonesia.

Addidas has announced the closure of its garment production facility by October 2012. IKEA is considering a move to Italy, to save cost, and improve quality. And Nike's facility in Vietnam recorded higher share of production than China's in 2010.

A study by the Boston Consultancy Group, released in earlier in 2012, found that more than a third of executives at US based companies with sales of over US$ 1 billion, are either planning to bring back some of their production to the US from China, or are considering it. BCG predicts that improved US productivity and competitiveness, coupled with rising costs in China, would make a range of industries move at least partially back to US. This could create 2 to 3 million manufacturing jobs in the US, with an investment of US $ 100 billion, over the next decade.

A growing number of economists are predicting a slow down in China in the coming decades, due to shrinking labour pool, and rising costs. And the aging demographic trend is likely to reduce China's capacity to power economic growth due to increased domestic consumption.

The Other Dimensions

Changing demography presents its own security and strategic challenges. The low birthrate has adversely affected the recruitment of young people to the military and security services.

The tragedy is that One-child policy was never supposed to be a permanent measure, but was meant to bring down population growth to a manageable level. Tian Xueyuan, a leading member of the team that oversaw the policy's introduction, told the Jinghua Times: "The purpose of the policy was to control birth rate for one generation." The subtext has gone far beyond these justifications today.
Yet, few expect significant changes to the one-child policy soon. Chinese officials continue to argue for continuity.
Noted political commentator Fareed Zakaria has succinctly summed up - “This is actually a fascinating real life example of the problems with centralized authoritarian regimes, even when they're as well run as China's. When they make good decisions - on economic policy, for example - they are rapidly implemented and well-executed. But the same is true when they make a bad decision, or a decision that no longer makes much sense. That seems to be the case with the one-child policy.”
The irony is that Mao celebrated procreation, so that there would be ample cannon fodder to showcase China's power. While Deng, unleashed the animal spirit of China in the economic sphere, yet, put the fretters in the bed room. China has paid a huge price for Mao's follies. And may yet have to pay again for Deng's mistaken policy on population. Only a new generation of leaders in China might be able to break China free from the legacy of its two supreme leaders, and avoid a demographic doom. But reversing the demographic trend is extremely difficult, as Japan, Singapore, and some other developed economies have discovere. If China fails to reverse the trend towards becoming old before becoming rich, then the rise of China would stall in the next few decades years.

Speculating on Deng Xiaoping motives underlying the one child policy
One may never know the real motive behind Deng's decision to push for the one-child policy. But one could speculate on a few factors that might have influenced his decision.
  1. In the 1970s, population growth was the biggest buzz in the world, and Deng may have wanted to signal to the world about his progressive concerns.
  2. Deng wanted to break from Mao's legacy, and just as he embarked on market reforms, he questioned Mao's views on human proliferation.
  3. While embarking on market oriented reforms, Deng would have faced many challenges from within the Communist Party. So the one-child policy sent a message to the party and the population, that while China would liberalise the economy, the party would still control one of the most personal decisions of the people. This may have reassured the party that it would retain absolute power over the people, even while the people may enjoy some freedom in the economic domain.

Friday, July 27, 2012

Politics of Power: Electricity reforms in India

Most Indians experience daily power cuts. Now, voters are realising that the price of being powerless without electricity, which may be free yet not available at all, can be quite high. And politicians too are becoming aware of the high political price for promising electric power and then failing to meet the growing demand. This is putting a premium on availability of reliable electricity. I explore the changing political dynamics over electric power, and look at the prospect of creating new opportunities for politicians and policy makers to explore new and innovative ways to reform the electricity sector. A slightly shorter version of the article has been published in the Asian Wall Street Journal, on July 26, 2012, under the title "Power to India's People".
The longer version is below. 

India is facing an electricity crisis. This year, five states have declared power holidays and another eight say they intend to ration power at peak times. Nationwide, there is a peak shortage of around 12%.

This isn’t exactly a new problem for India since it’s faced such shortages in the past few decades, but this time there is a difference. Voters earlier may have countenanced blackouts, but the increasing living standards of the past decade have now made them unwilling to do so. Some state governments are summoning the will for change, and one in particular has even developed solutions that open the door for more policy innovation and reform.

For decades, the political wisdom was to provide electricity at very low cost to consumers, and often at no cost to farmers. So while one set of users paid little or nothing, another set usually comprising primarily of the commercial and industrial users, often paid three to four times higher. These so-called cross subsidies couldn’t keep up with politicians’ promises though. The result was a big financial hole for the power generator or distributor—these days the latter—which eventually left it unable to supply power.

Voter agitation about these shortages, as well as recent state election victories for parties that talk about reforming public services, have gotten politicians to rethink their tack. The southern state of Tamil Nadu, in the face of rolling blackouts for 2-6 hours every day, agreed to hike tariffs for the first time in a decade this year. The enormity of the situation can perhaps be best appreciated from the fact that the two major parties in the state haven’t opposed the construction of the Kundakulam nuclear power plant, despite NGO protests over it since last year’s Fukushima meltdown in Japan.

Next, consider Gujarat, which has summoned the political will for a new creative idea. In the past decade, it has built a parallel distribution grid, particularly in rural areas, and offered consumers a unique choice. If farmers opt for the new grid, separating domestic and agricultural connections, they are assured electricity for 8 hours a day, but at higher tariffs (they can still access the old grid). Or they could remain on just the old supply network, without any assurance of supply of electricity, but at the lower price. To the surprise of many observers, farmers have opted for the former. At the same time there has been an aggressive steps to curb theft of electricity.
Tamil Nadu and Gujarat’s examples clearly show that people prefer stable supply of power over its price. The ideal next step is complete deregulation of distribution, but let’s be realistic: Few politicians will abandon control so quickly; nor will they be brave enough to immediately take this radical solution to voters. Meantime, though, state governments can take their innovations to the next level.

Gujarat’s case demonstrates that farmers could do with the irregular supply for some needs such as running household appliances, but for larger requirements like tending to their fields, they specifically want a premium supply. Yet, right now, this comes in the form of a second distribution network, which is expensive to build and maintain. Increasingly, however, rural households too are beginning to realise the benefit of assured electric supply, and many are opting for the new three phase supply, at a higher rates, which allows them to start small household businesses too. Despite all these changes, those who want to retain their old connections based on size of their electric motors, at fixed but low tariff, without assured supply, are allowed to do so too. This option has been a very important element in diffusing the political opposition to increase in tariff.

Vernon Smith, the Nobel laureate economist had suggested differential pricing as an economic strategy to overcome political opposition to increase in tariff using the same grid. One way forward is for consumers to pay a below-market price for ‘x’ units of electricity—or, for the poorest households, even make consumption of these ‘x’ units free. But above ‘x’, electricity should be priced competitively.
The 'x' could be calculated on the basis of average household consumption in the past three or five years. Or it could be politically agreed upon to make a certain minimum amount of electricity as a right available to all households at a nominal or no cost.

Today, per capita consumption of electricity in India is one-twentieth of that in the United States. As India’s economy grows, more people will begin to enjoy the benefits of many modern appliances, and consume more electricity, this big marginal increase in consumption would be paid at market prices. After some years, most of electricity consumption will be at competitive prices.

Such a transition will change the landscape of the power industry and make it more economically viable. It will reduce the incentive for political interference in pricing, since consumers would be willingly hiking their electricity consumption and enjoy assured supply, without expecting to be subsidized. Meanwhile, politicians can still claim to be pro-poor. Losses incurred by state-owned distribution companies, which currently runs to over 1 trillion rupees ($ 20 billion) all over India, would dramatically come down.

As a result, this system would stop skewing price signals. Today’s distribution network involves below-market prices nearly across the board, which means that few producers have incentives to set up power plants. Even in Gujarat, the incentive isn’t fully in place since one distribution grid still operates on subsidies.

This plan for a single-grid premium system still involves some distortions, but that distortion itself dwindles once most electricity consumption takes place above ‘x’. And this is, anyway, an intermediate solution to convince voters of the idea of paying competitive prices for quality supply from utilities they took for granted a decade ago. A grid that is financially viable will also allow large consumers and generators to directly negotiate the price of electricity, and this increased capacity to trade in electricity which will dramatically improve the financial health of the generators and assure quality supply to consumers.

Clearly, innovations like these will not occur overnight, and not across all states at the same time. But voters are realising that the price of being powerless without electricity, which may be free yet not available at all, can be quite high. And politicians too are becoming aware of the high political price for promising electric power and then failing to meet the growing demand. So the political trend in favor of competition is clear, and in a federal setup such as India, the onus will fall on the states to explore and experiment with such ideas. When political leaders feel confident that voters are behind them, these governments will surely begin to take the small steps leading to bigger reforms in the electricity sector.

Tuesday, March 13, 2012

Democratic Dividend: Lessons from UP election

When political parties face intense electoral competition, they are forced to focus on growth and governance. Or they may continue to pander to identity politics, and risk becoming politically irrelevant. This is the lesson from the recent assembly election in Uttar Pradesh. The contours of Indian politics are beginning to change, as the significance of identity politics in India begins to diminish. I suggest that this political shift is opening up the need to explore new policy options. This was published in the Asian Wall Street Journal on 13 March 2012, titled "India's democratic dividend".

The consensus view for most of the past decade in India held that good economic policy did not make for good politics. New Delhi's trade and investment openings since 1991 mostly benefited the middle class, while the poor in rural areas kept voting for corrupt politicians who promised more handouts.

Last week's election results in five Indian states turned the conventional wisdom on its head. Voters, especially in India's most populous state of Uttar Pradesh, resoundingly favored parties that promised development. The elites are still in a state of shock.

Actually a few states started voting in this direction five years ago, but the verdict in UP confirmed the trend. Fifteen years ago, the state typified the problem elites had with Indian democracy. In the late 1980s, after the Congress Party lost dominance, political parties started competing, but their first instinct was to fragment along caste and religious lines.

The Bharatiya Janata Party (BJP) initially won power by appealing to hardcore Hindu voters, especially in the wake of the demolition of a famous mosque and Hindu-Muslim riots in 1991-92. The Samajwadi Party's base used to be lower castes and Muslims. And the Bahujan Samaj Party (BSP), led by the fiery Ms. Mayawati, was India's first party of Dalits, a section of the population whom the higher caste Hindus considered to be Untouchables.

From the mid-1990s till 2007, every political party failed to expand its appeal. UP is India's democratic laboratory because, like the country, its population of 200 million has tremendous religious and ethnic diversity. Neither the hardline Hindu base nor the Dalit base by itself can be dominant enough to ensure electoral victory. Keeping in mind India's first-past-the-post electoral system, a winning party has to secure the support of diverse voting blocks.

The party that understands this reality will win. In 2007, the Samajwadi Party didn't get it. It had been ruling in UP since 2004 by the sheer caprice of its ministers. The party fielded mafia dons as legislators, destroying the administrative machinery of the state and making voters nervous about law and order. When state elections came in 2007, Samajwadi campaigned by pandering to Muslims and its lower-caste base. Presuming these voters were economically backward, it played up the politics of envy by clamoring against modern technology and English-language education.

Ms. Mayawati's BSP, on the other hand, decided that it would have to go beyond Dalits. This base constituted just over 20% of the vote in the state. It had become clear that even if the whole group stayed loyal to the party, it would still not add up to around 30% of the popular vote, which is necessary to have a realistic possibility of winning a majority of seats. So Ms. Mayawati consciously promised law and order as a way to expand her appeal. Defying the pundits, she won.

Ms. Mayawati may have succeeded in 2007 by promising much, but she failed to deliver. Yes, the general law and order improved in leaps and bounds, which helped the state grow 7% annually in her term. But two issues failed to convince voters she had true pan-UP appeal.
First, she emphasized her Dalit identity, building memorials to Dalit icons at huge cost to the taxpayer. This reminded voters of her second problem—a penchant for marquee public-sector schemes. Big projects like a Formula One racecourse tainted her with cronyism. By 2012, her party was most identified with the allegation of corruption in the National Rural Health Mission, where ministers and senior officials were accused of misappropriation of funds, and many functionaries connected to the scheme died under suspicious circumstances. Meanwhile, Ms. Mayawati failed to undertake governance reforms.

Samajwadi, desperate to come back to power, hammered these issues in the 2012 campaign and beat the BSP. Moreover, it learned from its pre-2007 mistakes. Its young leader Akhilesh Yadav, now set to become chief minister, played the aspiration card. Using both traditional rallies and new social media, he emphasized how Samajwadi would promote law and order (no more mafia dons as ministers) and push modern education (by offering free laptops and tablets), while not pandering exclusively to certain castes. Mr. Yadav apologized for the party's previous errors.

Mr. Yadav knows his party can only survive by pushing the singular message that appeals to everyone in UP: growth and governance. The next five years will tell if Mr. Yadav can live up to his promises—if he fails, another party will win by taking the growth-and-governance message to the next level.

It is also worth noting that while the regional parties realized the need to adopt a more inclusive strategy, the larger national parties, the BJP and Congress, both played the divisive caste and religion card. They failed, and they will have to change or risk becoming irrelevant.
This political churn is significant because it's clear now that competition forces parties to focus on good economics. My analysis of India-wide voting patterns and growth rates in the past decade shows that when parties get re-elected by too wide a margin, they don't focus on development. But when political competition increases, and the prospect of electoral defeat looms, the parties pay much more attention to growth.

Indians often wonder why their country didn't grow as fast as Western liberal democracies did in the 19th century. The answer is that though India became a pluralistic democracy in 1947, vigorous competition among parties only started in the late 1980s. Since then, as the economy has seen the best performance in its history, democracy finally started paying dividends.

Tuesday, March 6, 2012

Democratic Dividend: Economic benefit from political competition

In 2012, developmental issues have firmly emerged at the top of the agenda of most major political parties. Yet, barely a decade ago, many believed that India was paying a “democracy tax”, that political pluralism was at the cost of economic well being. Today, increasing political competition has opened new opportunities for the voters not only to demand performance but drive the economic changes as their aspirations rise. This is forcing politicians to explore new ideas that might meet these demands. Is it time for India to reap the economic dividend from political democracy? A longer version is "Democratic Dividend: Economic benefit from political competition". A shorter version was published in the Mint, on 6 March 2012.

Thursday, February 2, 2012

Can one buy an election?

Contrary to popular chatter, there seems to be little or no correlation between the amount of money a party or a candidate has and the likelihood of it winning an election. It is time we consider removing the limits on election expenditure, that has done little to restrain cost of elections. A law that can neither be obeyed nor enforced, is contributing to undermining the legitimacy of democracy, and of politics. Therefore an open election expense law, with no limit but complete disclosure, would be a better idea, I suggest in this article in the Financial Express, on 2 February 2012.

There can be no two opinions that Indian elections have become prohibitively expensive. Also, there is widespread apprehension that money is used to unduly influence voters.

Despite reams lamenting these threats to democracy, and a constant flow of anecdotal reports in the media, it is really surprising that there is little hard evidence to support such fears. Let us look at some of the evidence and arguments that are used to support the view that money is corrupting the election process.

Currently, the election expenditure on each candidate is limited by law to R25 lakh in a Lok Sabha constituency, and R10 lakh in a Vidhan Sabha constituency in large states. Candidates are to maintain daily accounts, and also to submit a final statement within 30 days of the election.

The Election Commission has made rigorous efforts to monitor election expenditures during the two weeks of campaigning. Expenditure observers are sent out, armed with a 165-page document on how to keep track of election expenses, including videography. There is another 10-page document on the ECI website that lists various provisions of laws relating to offenses and corrupt practices in connection with elections.

With such a proactive role, one would expect that the ECI has been successful in prosecuting and punishing the guilty. Over the years, there have been barely a handful of instances when ECI has been able to disqualify a winning candidate for violating the election rules. In all these years, not one candidate has filed an election account above the permissible limit, and no one has been prosecuted for exceeding the expenditure limit.

In one case, a person was disqualified because of his failure to submit the account within the time limit. Last year, an MLA from UP, who had won the assembly election in 2007, was disqualified because of complaints lodged by another candidate. The charge was of placing misleading advertisements in local newspapers, which could be mistaken as positive news coverage. The ECI found the person guilty of not reporting an amount of around R21,000 paid towards these advertisements, and barred her from contesting elections for the next three years. A more celebrated case, against the former Maharashtra chief minister Ashok Chavan, for using “paid news” in the 2009 state assembly election, has been pending before the EC.

These few instances would suggest that either the ECI has been spectacularly successful in enforcing the election expenditure limits, or that the ECI has miserably failed in this regard.
However, the ECI admits that there is a problem. They point to the R75 crore seized during assembly elections in 2011. In the current election season so far, the EC has seized about R45 crore of cash.

While these figures are large, they pale in comparison to what is commonly believed to circulate at election times. It is thought that to mount a serious election campaign in an assembly constituency today, at least R1 crore is needed. With about 700 constituencies going to polls in this round, spread over 5 states, that would total up to around R1,400 crore, if one conservatively assumes that only two serious contenders are present in each constituency.
Recently, officers of the Income Department had been quoted in the media saying that they expect about R2,400 crore of black money to be spent in the ongoing UP assembly election alone. Clearly, there is a huge gulf between the legally permissible expenditure, the ECI’s capacity to monitor and enforce the law, and the wider perception.

After a prolonged campaign by citizens’ groups, 10 years ago, the Supreme Court had ordered that all candidates had to file an affidavit before the election authorities, containing information about their assets and liabilities, their educational qualifications, and to make public their criminal records.

A summary analysis of the average assets of MLAs of major political parties from all the states suggest that there is no evidence to suggest that rich candidates can help their parties win the election in any significant way (see table).

Punjab is going to poll this time. In 2007, the average asset of Congress MLAs in Punjab was significantly higher than that of the Akali Dal and BJP. Yet, the former lost that election. This time, the average assets of Akali candidates has almost doubled from R4 crore to R7.5 crore, while that of the Congress candidates has increased from R5.3 crore to R8.2 crore. Yet, no party is sure of winning the election, although in the past 40 years, Punjab has never reelected the governing party.

In another crucial state, Uttar Pradesh, in 2007, the average assets of BSP’s MLAs was R70 lakh, while that of the Congress and the SP was R2.9 crore and R1.4 crore, respectively. Yet, BSP surprised most people by winning a majority of its own in the state for the first time.
Another state where money is believed to play a significant role in elections is Tamil Nadu. In 2006, the average assets of DMK and Congress MLAs was R95 lakh and R2.4 crore, respectively. The DMK alliance had defeated the ruling AIADMK alliance, whose MLAs could only average about R89 lakh. However, in 2011 election, the tables turned. While the DMK and Congress MLAs have average assets of R9.2 crore and R6.2 crore, respectively, a significant increase from five years ago, they lost the election to AIADMK whose MLAs had an average asset base of R3.4 crore.

In Gujarat, after the 2007 election, the average assets of Congress MLA were more than that of BJP, although the latter won the election handsomely for the third time in a row. On the other hand, in Rajasthan, the average assets of BJP MLAs after the 2008 election stood at R2.8 crore, but it lost the closely fought election to Congress whose MLAs’ averaged R1.8 crore in assets.

Money is important in an election, but even more important is the message that resonates among citizens. The historic Lok Sabha election of 1977 showed the importance of the message, and the capacity of the ordinary voter to choose. For the first time, the Congress lost power at the national level despite its total political dominance at the time, and unlimited access to money and power.

The debate over the role of money in elections has fatally damaged the credibility of the political leaders, all of whom support election expenditure limits. They have made a law, which can neither be obeyed nor enforced. This has made the politicians look highly hypocritical, and inevitably raised questions over their own legitimacy. This has also led to undermining the credibility of elections, the most critical element in a democracy.

Also, the focus on election funding has diverted attention from the more basic reasons for corruption in public life, such as discretionary powers that provide lucrative opportunities for rent seeking by public servants.

The limit on election expenditure could also be considered to be a limit of freedom of expression. How and why should a supporter of a particular candidate be stopped from doing do? This was an argument that was successfully presented before the US Supreme Court in the 1970s, which had ruled campaign finance limits to be unconstitutional.

The focus on money power actually is an insult to the capacity of the ordinary voters in the country, who regularly participate and repeatedly demonstrated the legitimacy of the electoral process. If the voters are willing to sell their votes for a few rupees, then the country may not be worth saving.

Rather than election expenditure limits, it is time to rethink the idea itself. An open election expense law, with complete disclosure, and a severe penalty for non-compliance would not only be politically desirable, but also legally enforceable. Such a change in our law would go a long way in cleaning up our election system. 

Saturday, January 28, 2012

Can bad politics make for good economics?

It is generally believed that good economic policies do not necessarily lead to electoral victory, in India. There is a general agreement that economic competition improves the lot of the paying consumer. So, what might be the impact of political competition? While economic growth is not sufficient to help win an election, could increased political competition among major political formations help in adopting economic policies that perform, and contribute to marginal improvements in the lot of the citizens? I look at the possible relationship between economic growth and election outcome in the states of Punjab and Uttar Pradesh, in "Can bad politics make for good economics?" in the Financial Express, on 28 January 2012.