Tuesday, July 30, 2013

not quite a feminist still

Can a woman describe herself as a feminist if she has no knowledge of and control over her financial affairs? 

It began as what I thought was a charming quirk. My salary was a paltry sum before the Pay Commissions began displaying some generosity to government servants. I would spend all of it on buying gifts for my family, especially my brothers. I had a vague idea that there were some deductions called GPF and CGEIS and the salary slips were thin sheets of paper that somehow managed to lose themselves. Beyond those pieces of information, I had not much idea about the salary components, allowances etc.

Matters did not much improve when I got married because I was so focused on setting up home and then bringing up my children that the nitty gritty of how much I earned didn't much engage my attention. It was good enough that I budgeted revenue and expenditure ----and let me say, I did a better job than GOI, as do most home makers. My husband didn't earn much either so when we first decided to invest in a plot of land , where we'd build our post retirement dream house, the weeks of drawing up of lists of essential and non essential expenditures became a learning experience in itself.

Then the Pay Commissions happened, and my husband's promotions began to take place super quick ( because performance matters in the private sector, thank God, even if its frowned upon in GOI!) so the family income increased dramatically. I became more and more complacent, because as a family, we do not party or believe in conspicuous consumption so our expenditure is pretty much limited to (a) healthy food (b) vacations (c) fine dining on occasion. 

That complacence has brought me to a state of affairs where I do not know what my gross salary is,what its components are, which pay grade I am entitled to, what other allowances the government bestows upon its employees, etc etc. Since salary slips and salary credits are now online, I do not even have to take the trouble of filing the salary slips!! My income tax return is filed by my husband, I have scarcely any savings in my salary account, and in the belief that "Sir sir rijak sambāhe ṯẖākur kāhe man bẖa▫o kari▫ā. For each and every person, our Lord and Master provides sustenance. Why are you so afraid, O mind?" I scarcely ever worry about the future. 

What property I own ( either co ownership with my husband or otherwise) I do not know the present value of nor have access to the papers. What jewelry I own is in a locker and there is no co signatory! There is a life insurance policy somewhere ( my father in law has been paying the premium amounts) but I don't quite know what it is. Several years ago, an ICICI bank executive had persuaded me to invest in several SIPs. I did. All of the investments are now redeemable below par !! 

All major investment decisions and major purchases ( cars, for example) are made by my husband, with participation from my younger son vis a vis the latter. 

To summarise, I am a strong believer in women's rights and assert them ever so often except in my own financial matters. 

My resolve for August, therefore, is to do a 360 degree appraisal, sit with a financial consultant  and set my house in order. Or am I over reacting? Is it OK to trust your financial affairs in God and man { beloved husband :) } ??

Sunday, July 21, 2013

A bit of heart

Our days are happier when we give people a bit of our heart rather than a piece of our mind. I have always ascribed to this philosophy and tried, by example, to have my children too imbibe it. Only time will tell whether and how far I have succeeded.

This year, on my son's sixteenth birthday, I tried in yet another way to give him that message. One of his birthday presents was a Milaap gift card which he could redeem by making a loan on Milaap.

Milaap is an online platform that enables you to lend to India's working poor. Milaap partners with established organizations that have a strong presence at the grass roots to design customized loan programs. It then shares requirements, backgrounds and photos of all borrowers. The online listing of borrower profiles enables the lender to select the cause and the borrower of his choice and give a loan of minimum USD 50 or Rs 1000. Every month, Milaap sends the total loan collected to its various field partners who disburse the loans. Throughout the loan cycle, the field partners regularly monitor the progress of the borrowers and collect repayments from the borrowers. Milaap makes monthly deposits of the repaid loan instalments into the lender's Milaap account. At the end of the loan cycle, the lender can choose to withdraw the repaid loan amount or decide to relend it to another borrower on Milaap. Through re-lending, a small loan goes a long way and gathers impact.

 Dhruv chose to redeem the Gift Card by making a loan to  the Zaite group to help one of the members buy a deep freezer Ice Cream vending machine which will bring more income and profit as her store will be the first to have the machine in her locality.

Here's how Dhruv described the experience of making a loan to someone he doesn't know, living thousands of kilometres away, in a part of the country he has never visited, living a life he is completely unfamiliar with:

Whether its a gift or a loan, I'd like it to be a person who needs the money not just for buying things (even if its a toilet) but for investing it in an activity which brings him income. It could be money someone needs to get skills which are needed in a job. It could be money needed to buy tools or equipment which make him more efficient and productive. There has to be an output ------a production of goods or services.

What is it about the experience of online lending that you liked the most, I asked him. Its anonymous and impersonal, he said. Those who wish to get a loan do not have to feel embarrassed about asking for a small loan ( young men and women would, he said) and those who give loans do not feel awkward about it as he would have if he had had to personally hand over the amount.

Why did you choose the Zaite group, I asked? Its a simple business model I have seen succeeding in my own neighbourhood (he gave me the example of a local grocery store).

Will you lend again,once you begin earning? You bet, was the succinct reply. 

Do you think such micro loans can change the fate of millions of poor Indians? It cannot,he said. They need jobs, they need the government to stop treating them like beggars, they need the country to become a place where people can earn their living and live with  self respect.

Why did you make this loan then, he was asked. Lets not think this is the solution to India's problem of poor millions, he said, but it feels good to help someone, even if its just 1 person in a million. 

Thursday, July 18, 2013

who reads?

I haven't written a blogpost in a while.

It is so much easier to succinctly express one's view on Facebook. Not all subjects, of course, are amenable to being reduced to Facebook status updates but there are enough to keep one happily engaged while supervising a reluctant student ( that's my son!). 

The more important reason is that one writes a blogpost putting heart and soul into it (all right, that's an exaggeration, but it certainly requires more effort than an FB status update) but never gets to know who the readers are, why they read the blogpost, or what they think because readers hardly ever comment. Why, oh why, is it anathema for most people to comment on blogposts? 

I love to write. As a child, I only wrote long answers in school notebooks but as a teenager I began writing a journal, then even got a poem or two and a couple of articles published in the newspaper. 

My love for writing didn't get swamped by the responsibilities at work or my responsibilities as a mother.In office, I wrote long, long hand written file notes that made my bosses tear their hair in frustration or smile in appreciation, depending upon personal proclivity. At home, I drew up lists of every conceivable type and "wrote" a new story every day when it was story telling time for my children. 

A couple of years ago, I discovered blogging, and began writing with great gusto, straight from the heart, sometimes with bits of research ( into legal questions) thrown in, mostly expressing my thoughts ( for what they are worth!) on issues that are significant to me. 

Now, I have half a dozen drafts waiting to be finalised ----on AFSPA, the Saranda Action Plan, the denial of bail, the search for friends etc etc etc. I write a couple of sentences, save the draft, and forget about it for the next two weeks or so. 

The answer to the question "why don't readers comment?" remains elusive and so does the determination to complete the half finished blog posts. Perhaps there's a "gadget" somewhere that will allow me to ask readers this question, with a drop down menu that lists the options any one of which they can tick, including "the posts are too deadly boring to merit a comment".  Is there? I"ll probably not get an answer to this question either.

Saturday, July 13, 2013

The economic consequences of Professor Amartya Sen ---- rebuttal

This United Progressive Alliance (UPA) government is heading into the tenth and possibly last year of office, a tenure whose crowning achievement might well be the Food Security Bill. One may fault this government for incompetence, corruption, and delayed action but it cannot be faulted for lacking a vision. There has been an overarching idea that underlies many of its economic policies: namely, that the poor and underprivileged in society must be empowered by conferring them with new rights - to work, education, food, and presumably, all basic needs.

Call this the redistribution through rights and entitlements (RRE) approach, which is now associated with the articulate advocacy of Professor Amartya Sen, channelled effectively into policy through his co-author and long-time collaborator Professor Jean Dreze. Their latest book is a cogent exposition of the RRE approach. Nobody can question the moral urgency of helping the poor which is the key objective underlying this approach. But that should not exempt its methods and consequences from critical scrutiny. And this scrutiny reveals some serious failings.
Empowering the poor is not merely a moral imperative, it isn't something we are doing from the goodness of our hearts. It is an economic imperative. If 2/3rd of our population is starving and malnourished and sick, where will we source labour, how will we increase production and productivity, who will provide the market? We aren't doing any one a favour, we are acting in our selfish long term interest. Lets not reduce this to a "moral imperative" alone. 

1. RRE causes instability and vulnerability: Amongst emerging markets, India is the most macroeconomically vulnerable, with a deadly combination of high fiscal deficits, close to double-digit inflation, and high external deficits financed by short-term foreign capital inflows that may even now be starting to flow out of the country. How did we get here, though? Much of the blame must lie with the redistributional zeal of this government. The ultimate cause of macro-vulnerability is the high fiscal deficits in turn caused by the fact that government spending per capita (intrinsic to RRE) has increased by nearly 75 per cent by under this government (see Figure 1).
On the issue of fiscal deficits: 35% of non plan spending is on interest payments ! It'd be instructive to have a break up of these payments. 43% of plan expenditure is on account of energy and transport, and how much of it is translating into REAL outcomes needs study.
We are importing inflation ---- edible oils is a case in point.

This spending contributed to instability directly, because it pushed up rural wages and procurement prices, thereby stoking inflation; and indirectly, because it put aggregate demand on steroids, even as supply capacity was left to languish, weak and under-nourished.

Why was supply left to langush? I draw your attention to a series of excellent articles written by Jaitirth Rao, outlining how supply side could have been /can be revived. It doesn't require massive investments, only common sense, and a dismantling of crony capitalism.
Jerry Rao's articles

For some time, the macro-economic damage caused by RRE remained obscured. Headline fiscal deficit numbers actually declined during UPA-I, because its tenure witnessed a dream combination of high growth and low interest rates which should have resulted in headline deficit numbers substantially below actual ones. Similarly, headline fiscal debt numbers have declined throughout the UPA's tenure, but for bad reasons - India has reduced its debt through sustainedly high inflation. The government may have gained by this, but the aam aadmi has suffered, since his capacity to hedge against inflation is limited. And now, the underlying damage to the overall economy has been exposed now that international investors have become less willing to finance India, as reflected in the plight of the rupee.
There are several reasons why international investors are fleeing India -----the political uncertainty, the massive corruption, the all pervasive pessimism, the unrest in several parts of the country triggered by anti people policies etc etc Its simplistic to pin all the blame on "RRE". 

2. RRE legitimises atrocious policies: If one were asked to single out the worst economic policy in India, energy subsidies - for diesel, kerosene and above all power - must be a strong contender. Consider the bad outcomes that power subsidies cause or abet: bad crop mix, depleted water resources, unprofitable and mismanaged state electricity boards, under-investment in power, lower economic growth and higher carbon emissions.
Does the writer forget that the genesis of the power subsidies lies in the Green Revolution and the contemporaneous urgency to become self sufficient in food?
Mismanaged state electiricity boards are a symptom of the larger malaise of looting the public exchequer by the bureaucracy and the political class and at the very least, an outcome of a complete indifference to the principles that govern our micro level, household level economics. Lets not wrongly label them an  'RRE" outcome?
Given the choice,training and support, at least 1 crore farmers have shifted in AP to organic farming which is far, far less water intensive (and therefore far, far less power intensive). What stops the govt from replicating the model? Is it the fear that organic farming will deal a death blow to companies profiteering from fertilisers and pesticides ,including by diversion of  farm fertilisers to industrial use??

The diesel subsidy hugely benefits the middle class, and there's a brouhaha whenever the govt talks of dismantling it. Is that also a part of the RRE syndrome?  

Now, politicians promising subsidised power for electoral reasons is understandable. That is part of the hurly-burly of grubby politics. But intellectuals providing legitimacy to these policies is another matter. Intellectuals on the Left cannot expect to be exonerated on the grounds that they have not explicitly advocated subsidised power. After all, if there is a right to cheap food and education why isn't there one also to basic energy needs and hence to subsidised power for the poor? And this is not a slippery slope argument - because India has slipped already, finding itself at the slope's bottom which is the shambolic mess that is the power sector in India.

Why should there NOT be a right to basic energy needs? One in six villages is unelectrified even today. Cut the TnD losses, increase efficiency in slothful bijli boards, curb corruption, make green buildings mandatory at least in the public and commercial sector, re work office hours to reduce power consumption -----there are a million things that can be done but are NOT being done and the blame for fiscal deficits laid at the door of "RRE" !

3. RRE undervalues opportunity costs: Governments have limited political capital and must hence prioritise actions, choosing those that maximise bang for the buck. In this view, RRE is problematic because it leads to sub-optimal policy choices. So, instead of enacting a right to education act, why not focus on getting teachers to show up for work, that would have a far greater impact on educational outcomes? Similarly, instead of an employment guarantee scheme, why not create sustainable opportunities for employment creation by eliminating regulatory impediments?
The two are not mutually contradictory. Political capital is GAINED, not lost,if the govt decides that RTE is to be accompanied by such improvements in the govt funded aided schools as require STRICT monitoring and enforcement of existing provisions. Citizen participation is essential here ----the parents whose children suffer must BE EMPOWERED TO hold the teachers and administrators accountable. This requires deentralisation of power which the govt is loath to do. 

The government could defend its choices by invoking political constraints: absentee teachers in rural India cannot be fired because they are also party apparatchiks, and labour laws cannot be amended because of vested interests. But the problem with votaries of the RRE approach is they don't apply the same analysis to their preferred policies. Will RRE not run into the same political and bureaucratic constraints?
A facetious argument. Absentee teachers are not fired because no one sitting in the district hqrs cares. Give the people the power, and see the difference. 

4. RRE overburdens state capacity: Indeed, one of the supreme ironies of the Left in India is that it has been so disrespectful to its core belief in a strong state. Several commentators have noted the problems of creating rights without the ability of the state to honour those rights. The public distribution system is broken but instead of being fixed or replaced, it is being asked to do more. It is as if an emaciated, old man struggling to carry a load of stones is asked to carry another load because that will strengthen his muscles.
The PDS is broken because of poor or absent oversight, corruption, and a callous disregard of the poor. Remedying these does not require fresh investments. It requires (1) political will (2) citizen monitoring via more and more de centralisation, (3) creative solutions such as local level grain banks. It is easy to build a case for scrapping the system, but not so difficult to make it outcome oriented. Let the solutions come from the beneficiaries. Engage them. Empower them. The PDS is not an emaciated, old man, its an able man being continuously weakened by inimical forces. Remove them, and see him spring back with zeal and energy. 

What is worse is that the Left has been ambivalent about or even hostile to the one genuinely important and far-reaching attempt at building state capacity in India: the Aadhaar scheme (yes, it is really hard to think of any other state capacity-building initiative). Regardless of the merits of direct cash transfers (which is only one potential application of the biometric identification project), the important point is that Aadhaar seeks to harness technology to strengthen the ability of the state (and also the private sector) to deliver services in the long run. The Left in particular should be celebrating rather than griping about it.
AADHAAR still lacks statutory basis, it has not addressed privacy concerns, there is a lot of false hype connected with it (I can give at least 1 example), it is needlessly pushing election ID to the background which is THE most crucial document so far as democratic functioning is concerned, it cannot address leakages, adulteration etc. 

5. RRE undermines the state: Intellectually, the most damaging consequence of RRE in India, and least recognised, is that it does not just burden the state, it has the potential to fatally undermine it. How so? The evolution of the state provides one important lesson pointed out recently by Professor Indira Rajaraman of the National Institue of Public Finance and Policy. The history of Europe and the US suggests that typically, states provide essential services (physical security, health, education, infrastructure, etc.) first before they take on their redistribution role. That sequencing is not accidental. Unless the middle class in society perceives that it derives some benefits from the state, it will be unwilling to finance redistribution. In other words, the legitimacy to redistribute is earned through a demonstrated record of effectiveness in delivering essential services.
Delivery of essential services is adversely affected not so much by lack of funds but by lack of motivation, supervision, systems of rewards and punishments, transparency, accountability to citizens etc. To give a simple example, the street lights in Gurgaon don't function, and this frustrates the middle class citizen because he does not know who to complain to,and  if he does find out, no one acts upon the complaint because OUTCOMES that are citizen friendly are not the administration's goal, creating wealth for the elected and appointed executives is. Does THAT undermine the State or "RRE" ?

A corollary is that if the state's role is predominantly redistribution, the middle class will seek - in Professor Albert Hirschman's famous terminology - to exit from the state. They will avoid or minimise paying taxes; they will cocoon themselves in gated communities; they will use diesel to obtain power; and they will send their children overseas for higher education. All these pathologies are in evidence in India. By reducing the pressure on the state, middle class exit will shrivel it, eroding its legitimacy further, leading to more exit and so on. A state that prioritises or over-emphasises RRE, risks unleashing this vicious spiral.
As above

For this admirer of Professor Sen's exceptional academic work two ironies stand out. His Nobel-winning insight was about the importance of broad purchasing power rather than the narrow (physical) availability of food in avoiding famines and mass starvation. It is curious, even mystifying, therefore, to see him forcefully advocate, through morbidity-laden polemic, the physical provision of one type of food - cereals, which are rapidly declining in people's consumption basket - to help reduce malnutrition.
(1) what would the writer recommend, starvation as the preferred alternative because the subsidised food basket cannot contain a wholesome mix?? (2) by all means, generate purchasing power, enable rural resurgence, remove the skewed weightage to irrigated crops, promote dryland agriculture and organic culture, desist from handing out massive amounts to scam ridden SEZs and similar schemes, review and halt fraudulent irrigation schemes, -----there's so much to be done, do it, then scrap the FSB except for a very few, don't place the cart before the horse 

His second major insight was that development was about freedom, especially the freedom to exercise choice. Yet, the RRE approach has privileged paternalism - by determining that the poor need specific assistance - over expanded choice in the form of "untied" cash transfers or broader employment opportunities that enhance purchasing power.
Freedom? One cannot exercise freedom on an empty stomach. Give the poor the choice between doles and employment opportunities and they will choose the latter, but the growth in the past decade has been a job less growth ---- GDP has increased but not jobs, so continuing down the same path, which job opportunities are we talking about which we are denying the poor?

If there is a tension, even contradiction, between Sen, the academic and Sen, the advocate, this government might, in the twilight of its tenure, do well to ask itself: did we draw our inspiration from, and put faith in, the wrong Sen?