Ideas for India's Future

[Harold Schiffman]

Excerpts from an exclusive interview; and excerpts from a book review

INTERVIEW

Nitin Pai

IN ADDITION to being co-chairman of the board of Infosys Technologies,
Nandan Nilekani is engaged in a number of public policy initiatives—he
is the president of the National Council of Applied Economic Research,
a member of the National Knowledge Commission, a member of the board
of governors of the Indian Institute of Technology, Bombay and is
involved in numerous other governmental and non-governmental
initiatives. The range of his interests and his passionate commitment
to India's future comes out in his book Imagining India - Ideas for a
new century (reviewed independently on page 25). As indeed, in his
voice when he spoke to Pragati.


How would you define India's national interest? When we posed this
question to Jaswant Singh, he said it was the preservation of the
resilient core of Indian society that is the heart of India's national
interest, because it is Indian society that keeps the wheels turning
whatever is the political structure of the state. According to K
Subrahmanyam, India's national interest is to ensure high rates of
growth, alleviate poverty and ensure good governance.

Anything that we can do to make the country stronger, more equitable,
more secure, more fair and which can truly leverage the extraordinary
opportunity—that would be the national interest. The definition of
Indian society is amorphous and is prone to multiple interpretations.
My view is that it is very rare that nations get an opportunity to
lift a billion people out of poverty. And due to a confluence of
events that I have described in my book, we have a truly extraordinary
opportunity that comes once in a millennium. It is in our national
interest to make the most out of that opportunity and achieve economic
independence and fulfilment for all our citizens—doing that would
automatically address the other challenges that we have.



Human capital

Your book is about ideas, and you have quoted a number of people and
their ideas. If you were to pick one to focus the governance agenda of
the coming central government, what would it be.

The most important idea and the central theme that I start off in my
opening chapter is the change in our view of the population. For a
long time, in part due to international pressure, we treated our
population as a burden and something that needed to be controlled. But
today, we've finally realised that people are our biggest strength,
our assets and not liabilities, that human capital is what makes you
tick. The moment you think of our people as human capital then
automatically the challenge becomes how do we make sure they are
healthy, educated, have roads to go to work and school, have lights to
study at night, have jobs and can become entrepreneurs. The
fundamental shift in the way we think about population is the central
theme of my book and everything I talk about is how do we leverage and
exploit that human capital, and what are the obstacles that you see in
doing that.



If I were to stretch that - what would be the policy measure that
would stem from this idea:

Part of it is execution—in areas like single markets, urbanisation,
primary education and infrastructure, for instance, I don't think it's
a policy issue so much, because there is a demand for that from the
people, and there is political will. It is about doing it right, on
time and with quality. Take primary education—there's a huge amount of
money coming down the pipe, and there's a huge demand from the poor
who have realised that lack of education impairs their economic
mobility. So you have demand and supply, but execution is a
problem—getting schools to work, getting teachers to come…

The policy issues—which I talk about in my third section—first, we
need to completely deregulate our higher education: it is unfair on
our part to deny our children a good education. That's exactly what we
are doing by all these artificial constraints we have put on the
sector, in the form of the whole "HRD Raj" that we have.

Second: labour reforms, and creating an environment where companies
and well-meaning entrepreneurs can create a large number of jobs with
the flexibility to be able to contract the work force when necessary.
Today, due to the inflexibility of our labour laws, entrepreneurs are
developing capital intensive industries when there are a large number
of people who need jobs. On the other hand, 93 percent of the
employment in the unorganised sector where people have no rights
whatsoever. This is clearly an untenable situation. We need to change
that and create a large number of jobs in the organised sector.

And third, if we are able to do these then we don't really need
reservations, because reservations is a way to parcel out quotas from
an small existing capacity. It is much better to expand capacity so
significantly that nobody really needs reservations; and we move
towards a system of affirmative action where we offer people
opportunities instead.



Right shift

It's hard to dispute your contention that the extremes must be
rejected in favour of a fine balance. But anyone born before 1991, and
perhaps after that too, has been raised on a diet of socialism. The
population may be young, but most of our politicians and
decision-makers still carry socialist baggage. In this climate, isn't
it necessary for those who believe in liberalism to take extreme
positions so that the balance moves towards the right? In other words,
shouldn't those who want to bring about centre-right outcomes take an
unabashed stance in favour of individual rights and economic freedom?

The experience of the world, including the current economic crisis has
demonstrated that unregulated markets are as bad as unrestricted
socialism. Markets are very powerful and useful instruments…they are
the engines of economic progress and the only known way of raising the
standard of living of billions of people. At the same time I think we
need to balance markets with very good public governance and public
accountability. The last section of my book, which is about
anticipating the future, looks at health, pensions, energy,
environment and technology. There is clearly a huge role for the state
to make the right choices so that it can create the right environment
in which markets can operate.

Markets should operate freely within a framework of rules, regulations
and incentives. I'm not in favour of a state that hunkers down and
decides who should produce what but more in terms of public policy.
For example, if you want to drive a post-carbon economy, you can't do
it in a big way without public policy. I'm a strong believer in
markets, but I also think that markets should be complemented with a
very strategic thinking state.

But is there enough in the public discourse in terms of selling market
ideas to the people?

Absolutely not. In fact, one of the arguments I make in the book is
that half-done reforms are worse than no reforms. Because when you
have half-done reforms, those of us who have access to education,
English language and jobs can really prosper in this economy, and
those who don't get shut out. Rather than positioning our reforms as
something which is to make rich people richer, the real part of
reforms is to broaden the access to opportunity—of education,
infrastructure, healthcare to the common man. Reforms have not been
positioned as something that lead to improved opportunities. That's
one of the political failures. All our reforms are done under stealth
by our technocrats as if its something they shouldn't be doing. If
sold properly, reforms are pro-people, and not pro-rich. This has not
been sold well-enough.





REVIEW

Harsh Gupta

But Imagining India is not all policy and is in fact peppered with
many perspicacious observations about our society, politics and
history. A section which beautifully combines all three is about the
English language which Mr Nilekani calls "The phoenix tongue". Tracing
the language's evolution in India from a colonial administrative
language to a neutral language in the post-independence linguistic
battles to finally the language of upward mobility in a knowledge
economy, he says that we have finally accepted the language and that
no chauvinistic politician today can deprive rural and poor children
of an English education without facing a "groundswell" of protest.

The structuring of the book into four parts—ideas that we have
accepted and implemented, ideas accepted but not implemented, ideas
presently under debate, and ideas for future debates— precludes an
episodic feel to the chapters. And while the first three parts, in
some form or shape, are standard fare for the recent crop of
non-fiction on India—it is in the last part that the book really
stands out by daring to be innovative as well as controversial.

Indeed Mr Nilekani accurately presages and pre-empts future leftist
attacks by advocating for a "social insurance plan, built around
defined contributions (and not defined benefits)…would touch a
demographic sweet spot…leveraging the growing value of India's capital
markets in the next few decades". He explains that this policy would
not only be economically inclusive, but would bolster government
revenues from the capital markets instead of depleting it with
pay-as-you-go Ponzi welfare schemes.

But the book—clearly being a tour d'horizon—can feel a little dry and
encyclopaedic at times because historical contextualisation and
copious quotations of experts is included in every section. At the
same time, the author's internal thought process and struggles—why he
rejected and accepted certain policy alternatives—is not well
documented throughout. So the author's debate with himself should not
have been edited in favour of a this-or-that position pitch, ignoring
a spectrum of policy options on some issues.

For example, in the section over what India's policy response to
global climate change should be, carbon taxes and emission caps for
India are directly endorsed. But the question remains: even given the
scientific consensus on anthropogenic global warming, what is the
opportunity cost of mitigating global warming? In other words, is the
current cost to combat global warming less than the net present value
of future costs if the problem is not addressed on a war footing?

Furthermore, is it in India's national interest from a strategic point
of view to commit to ceilings and green taxes now? These are tough
issues but the economic future of millions is at stake. Maybe sticking
to carbon credits while further encouraging technology transfer
globally and better environmental practices locally is our best
option.

On the whole though, Mr Nilekani's vision of overcoming India's
"vertical divides" of caste and religion through economic growth and
reforms is highly inspiring and relevant. Quoting Martin Luther King
Jr, he says that we must understand "the fierce urgency of now", lest
our demographic dividend goes waste by staying on this statist,
quasi-socialist path. This book needs to be read carefully by all
thinking and compassionate Indians. They might even convince
public-spirited entrepreneurs like the author that they are in fact
not "unelectable." Because even if positive change in India is
inevitable, competent citizens need to usher it in.

This is an excerpt. Download the issue to read the entire article

http://pragati.nationalinterest.in/2008/12/ideas-for-indias-future/


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