0. The Role of the Government

In a large country, a government that is trying to control too much is likely to get bogged down by the sheer volume, and end up being completely ineffective.

What does a society require a government to do? Provide electricity and other services in an inefficient manner, control markets by various subsidies and taxes, and end up making them inefficient, breed corruption?

Or,  how about this:

1. The government cannot be the primary or majority employer in the economy.

2. The task of the Government is to provide the right environment for the Industry and businesses to flourish. Once they do, (and government is out of doing them in an inefficient manner), the national exchequer shall have more revenues. (E.g. instead of running state electricity companies where theft and corruption flourish, and the companies cost the taxpayers Billions of Rupees every year, let private sector supply electricity, and earn tax money from its revenues)

3. In a competitive business environment, more people should get employment than today. However, there is no doubt that some people shall be left behind.

4. The task of the government is to provide adequate, but not overwhelming, or populist, welfare to such people, who are left behind. This welfare can be in a voucher based format. (i.e. Providing the welfare should itself not breed more corruption, like it does in the case of subsidized food and kerosene)

5. Once government ministries and bureaucracy is no longer involved in taking decisions about allotment of petrol pumps, maintaining transformers, food storage facilities, loss making textile mills, and so on, they shall have enough resources and time to focus on providing the basic needs of the citizens - justice, education, security, health, good environment, food security.

All of these can be delivered more effectively via a voucher based system, rather than a subsidy based approach.

6. One way to enforce Fiscal discipline would be to make it a part of the law. (E.g. In Germany, the government is not allowed to spend more than a proportion of the GDP, unless it is an emergency). Hopefully, this should prevent short term populism that is so rife - free color TV, laptops, parks.

13. Labour Laws

Along with France, India has some of the most cumbersome labour laws in the world.

For instance, several sectors (including soft toys) were originally reserved for the small scale sector.

Any manufacturing facility with more than a few hundred employees, has a huge difficulty in reducing its staff when business goes down.

The unions are typically controlled by some political parties and their "Gunda's" and do not really serve the average labour.

Many of these ideas have been taken from the communist countries, but if we look at even communist countries like China, these ideas are no longer applied there.

The result? Investment into manufacturing in China has been many times more than that in India. (they export more soft toys than our total exports!) China today employs more labour in a very large and truly gainful manufacturing sector, and the labour are now getting a better welfare than their counterparts in India.

If we want to really provide employment to a large number of young people of India, services and IT sector will never be able to absorb the vast population of India. India needs to have a thriving manufacturing sector, which needs to be freed from the Bureaucratic red tape and allowed to flourish.

To free this entrepreneurial energy and spirit, the labour laws need to be based on a simple principle - a company employing labour is doing a service to the society, and the nation. In good times, it does not make good business sense for a company to fire a competitive and trained employee. Let them do it when they need to.

Their can be alternate means to protect such labour, and provide them welfare. Especially, if the Industry thrives, and taxation is high, and the government is focussed on providing the welfare, there is no point dragging below a company from its competitive advantage globally.

12. Basic Welfare - Health

I recently visited some relatives at a "5 Star hospital" in India where they just had kids. There was a personal air conditioned room for the mother of the newborn, en-suite toilets, a spare bed for a visitor, the whole place was cleaned and disinfected every hour, and (I am told) the hospital even had a menu choice for the food you want for each meal. A far cry from the average maternity ward in an NHS hospital in the UK.

We have heard of similar "5 Star" hospitals all over India offering a great healthcare service, so much so that India has become a leading destination for "Medical Tourism". Elderly people waiting for years to get a hip or knee replacement, or a bypass operation are traveling to India to get the operations done at a fraction of the cost in the west, and get a much better service.

Perfect.

Perfect for people who can afford all this - err.. that would be a mere 10% of the population, (and the "tourists", of course)!

Now, take this - a World Health Organization (WHO) study of 2007-08 has revealed. that India ranks 171 out of the 175 countries in the world in public health spending. India spends 5.2% of the GDP on healthcare. While 4.3% is spent by the private sector, the government continues to spend only 0.9% on public health. This is less than some of the sub-Saharan African countries. Millions of poorer people die each year due to easily preventable diseases, for the lack of very basic health care.

It is easy for the elite and chattering classes to be cocooned in the comfort of the air conditioned 5 star treatment that their private insurance provides them, but does it save them?

An epidemic like Malaria, Dengue, Chikunguniya or, more recently, Swine Flu, does not infect people after checking their income. Even the rich in India, despite the hype of the 5 star hospitals, are actually much more exposed to simple communicable diseases because of the crumbling public health infrastructure.

A totally money oriented mindset has also resulted in wide ranging malpractices in India, such as prescribing excessive drugs to the patient, just to earn a commission from the pharmacies, performing needless procedures and tests to inflate the bill, and in some cases, scaring the ignorant patient to extract maximum money for the phony treatments later.

But what is the solution?

Keep living in the "Shining India" world, where we perform a heart bypass surgery for a wealthy American health tourist, while a poorer countryman dies for lack of medicines for cholera?

Spend more on public health services, only to see them getting destroyed by apathy and red tape? 80% of the doctors in India reside in urban areas, while the majority of the population lives in the villages.

Force the same (poor) service for all, regardless of income?

This is complex. Lets see what are the strengths and pitfalls in solutions the developed countries have adapted.

A totally private system like one in India can offer the best to people who can afford it, but become expensive over time, as americans have learnt. As a percentage of GDP, they spend much more than Europeans, but still have a large number of poorer households without any insurance. A doctor is looking at your pocket before treating you. Sometimes, the doctor has no choice - as your insurer dictates the service that you are provided. On the plus side, the covered patient, who can afford this, has a choice of providers, or the insurer.

A totally public system like the NHS in the UK, provides a totally egalitarian service. Theoretically, ("Post code lotteries" and restrictions on more expensive treatments aside), the doctor provides the same treatment to the poorest of souls as to the richer person still interested in NHS, without looking at the pocket of the patient. However, over time it can become too bureaucratic and inefficient. NHS is now one of the largest employers in the world, yet the number of doctors/nurses per 1000 people is lower than that of France. There is no incentive for a GP or a hospital in the UK to actually provide better service to the consumer, there is no choice for the patient, and with a single provider in the market, there is no chance of any competition amongst the providers.

Somewhere between the two, lies the System being practiced in France (also Japan). It covers everyone, and provides a high-quality care that WHO has consistently rated it as the best in the world. In all its entirety, it is too expensive for a country like India. Nevertheless, it is a direction we could aim for. Let us see how it works first.

Virtually all physicians in France participate in the nation's public health insurance, Sécurité Sociale. The main fund covers eighty percent of the population. There are two additional funds for the self-employed and agricultural workers. It has created a standardized and speedy system for physician billing and patient reimbursement using electronic funds. This significantly cuts the overheads and admin costs related to billing and management.

Patients can choose their own doctors, and -- unlike the U.S., where private health insurers can have a say, doctor's freedoms of diagnosis and therapy are protected - they can prescribe any therapy or drug without approval of the national health insurance.

So, back to India.

1. Health Insurance for all poor, (bit like some states like Haryana and Andhra Pradesh are doing with schemes like Aarogyashri)

2. Some degree of compulsory insurance for the employers, to provide the working class poor with a basic cover.

3. Voluntary insurance, as today for the middle class and the privilaged classes.

4. An independent regulatory body overseeing the medical education, and the ethical standards for the hospitals.

5. Government leases out its public hospitals to non-profit trusts, who become independent players in the market.

11 Physical Infrastructure

Lets look at some of the issues first. (I have already discussed electricity separately)

1. A typical Indian trucker is using lousy roads, is harassed by the police on every few hundred kilometers, and pays about Rs 80,000 (2000 USD) in bribes annually. Eventually, this adds to the cost of Indian goods in international markets, and also hampers the ability to deliver goods in a timely manner.

2. India’s largest container port, Jawaharlal Nehru Port Trust (JNPT), has a waiting period of up to 10 days. Port of Singapore, in comparison, took just about half a day. For the size of our coastline, we have very few ports of the size and capacity that are necessary to fuel growth.

3. Indian Railways run at a snails pace. A typical freight trains runs at 20-30 KMPH, and the average speed of the "Super Fast" Rajdhani and Shatabdi trains is only about 80KMPH.

Solutions:
1. Harmonize the taxes at the national level (VAT/GST type system), so that there is no need for a state level taxes, and hence the scope for harassment of truck drivers.

2. Invest in ports, privatize all major ports.

3. Invest in railways with a view to increase the speed.

10 Social Equality

India has become a land of Disparities. Our relatively developed bigger cities are full of slums. A State like Maharastra, home to industrial cities of Mumbai and Pune, also has a huge number of poor farmers in the Vidarbha region. Eastern UP is lagging behind western UP and so on. To top it all up, since VP Singh played the Mandal card, casteism has increased in society and is being blatantly abused.

We Indians are so prone to "premature triumphalism" that we start self-congratulating ourselves at the smallest of achievements. We have become so accustomed to seeing poverty all around us that we have become blind and insensitive to it. (It takes a Danny Boyle to create the Slumdog Millionaire!)

The recent anti-north Indian violence in Mumbai, and the growing frequency and audacity of Naxalite attacks in central/eastern India should alert us to the dangers of growing disparities. Unless poorer people find a way to channel their anger in a constructive manner, we could have a fertile ground for breeding regionalists, secessionists and other form of rebellion.

But, what is the solution to this? Why should a progressive industrial state bear a burden of hinterland and badly ruled states within India?

I think we need to look at the model of welfare states in Europe. Clearly, India, as a developing country cannot sustain the high level of personal taxation as prevalent in Europe. But, could we have a basic level of welfare to keep people out of total poverty, and be provided some basic services?

1. Poverty Alleviation: What does it cost to support the 30% of our brethren, living in absolute poverty ? Thats about 300 Million people, perhaps about 75 Million Households. If we just give each household 1 dollar a day, and let them do what they want with it, it would cost 27,375,000,000 dollars annually. (about 28 billion). Thats not too high, compared to the general level of government expenditure in any case, which has been done inefficiently in the past. (our recent budgets have been to the tune of around 200 B Dollars).

Once we have a unique ID system, we could also have a "smartcard" that is automatically and electronically credited every month, and could be used in shops etc. This is infinitely less wasteful then having layers of corrupt government officers distributing welfare money to the poor.

2. Social Reforms: Lets face it, our society has been full of ills like caste system, status of women and so on. Can we do something now so that these ills disappear from the face of earth in the next few generations?

Maybe, Encourage Interfaith, Inter-caste, and intra-regional marriages. Obviously, this is a private affair, and state has got no business to interfere in it. However, a person who marries outside his or her community is in fact doing a good deed in terms of promoting national integration. Such people usually face a social stigma, which can be offset by the state. Perhaps government can pay a "marriage gift" to such couples?

All caste based organizations need to be discouraged. (Just Ban them on grounds of being discriminatory?). If we take the other steps to fix the other root causes and provide general welfare to ALL poor, there should be no need of any affirmative action that is caste based.

9 Energy Security

Some 400 Million Indians still dont have access to regular electricity. Electricity demand outstrips supply by about 15-20% in India. On top of that, losses due to theft are unusually high at 30-45%, causing an annual loss of about Rs 20,000 Crores (1 Crore = 10 million) to the state Electricity companies.

To grow at a reasonable pace, India needs a high level of investments to increase the generating capacity. However, it is the transmission and distribution systems which need to be totally overhauled. State run companies have contributed to a large amount of corruption, and have overall, failed the consumer.

But, would allowing a free hand to the market not make it more expensive for the urban consumer?

Yes, it will. But, would an urban consumer prefer to pay less on unreliable power, and then invest significant amount on small generators/battery units, or prefer higher tariffs for a reliable power supply? Evidence suggests that its latter.

But, this is just one part of the story. We still need to cover the rural consumer. It is this segment where participation of private sector will not be easy to develop. Logistically, it would be difficult for any private company to keep a distribution network running for remote villages, and not charge them a surplus for it. Politically, this section of consumers may not be as willing as the urban consumers to actually pay more for better service.

Studies indicate that transmission cost to rural areas can be three times the generation cost. A recent exercise based on Gujarat Electricity Board data has put the true cost of delivery to rural areas at Rs 9 per kWh (kilowatt hour). When the infrastructure cost is computed along with hours of delivery, the total cost can actually be as high as Rs 19 per kWh.

The Govt. of India recently announced a Rs 40,000 Crore project for rural electrification of 115,000 villages through conventional grid.

One interesting way for developing it might lie with the usage of small and clean sources of power - like Solar/Wind powered generators. Policy support could be in the form of compelling the grid to buy any surplus generated out of such small scale power sources. India is home to one of the most abundant solar resources in the world, with 3 million square kilometers of tropical and subtropical land and an average of 250-300 clear sunny days a year.

Perhaps, every village panchayat (the local body) can be given some money (say 300,000) to buy/build a solar/wind/small hydro powered system generating about 1 kilowatt of power supply for local needs (e.g. community TV, some bulbs, one water pump, etc). This could generate a lot of demand for the suppliers of such products, whose prices might come down by achieving more scale. The maintainance and running costs of solar power are minimal.

This is just a hypothetical scenario to illustrate the point - not all villages may have a perennial shortage of electricity. Not all may have a potential for developing such renewable sources. However, if you take this to be the case for all 600,000 villages of India - The total investment required (Rs 18,000 Crores) is no more than the annual losses suffered by the state electricity boards! (Note: 1KW power is clearly insufficient to power an entire village, actual requirement might be 10 times that or more, I am merely using this as an example to illustrate the point.)

Such a solution is cleaner for the environment, requires lesser investment in transmission and distribution, and makes the villagers the stakeholders for their own power needs. They themselves protect and maintain their system in a fair way so as to gain from it.

8 Urban Planning

Indian cities today are a prime example of haphazard, unplanned growth. The local planning bodies and councils are hotbeds for corruption. Local governments are weak, and have little say or budgets to play with. We have millions of people living in "illegal" slums and other unauthorized housing developments. One reality of modernizing India is that our cities are amongst the ugliest in the world.

In many cases, large number of "planned" and approved dwellings have cropped up, without adequate provisions for the traffic and connecting roads, schools, parks and other such public spaces. In some cities, there is a strong nexus between the developers and politicians. IAS officers, who have no professional qualifications in Urban Planning, take major decisions in various local bodies. PWD has a very corrupt way of developing public buildings and roads.

1. We basically have one qualified urban planner per 100,000 urbanites, and these people are not in a decision making roles they deserve to be in. Further, the quality of our manpower in this field does not compare very well with the international levels.

2. We need to have a system where only professionally qualified people are given the decision making planning roles in the urban bodies. Further, number of such professionals needs to be increased at least ten-fold, i.e., one planner per 10,000 people.

3. With the RTI act, we need to make the tender process more transparent, and have more involvement from the civic society. Further, we need local residents to have more say in an appraisal process for the technocrats. (e.g. we could have a system so that if >50% of the residents show dissatisfaction with the quality of a recently constructed road, the engineer/contractor in charge of the project automatically get investigated). Similarly, contracts for other civic work could be allocated/renewed based on a direct appraisal by the people.

4. Cities should develop master plans for projected growths in next few decades, and develop zones in accordance with the international standards.

5. For instance, waste collection for cities can be done more enthusiastically, if the people doing it were really interested in getting more waste processed. If, for example, all the rag-pickers of Mumbai were to form a co-operative organization, which had a facility to process waste using some more advanced machinery, and then take all the things such as paper, plastic and metal which could be salvaged to earn money, and leave all the bio-degradable waste to be recycled to create biogas or fertilizer, it is likely to work more effectively than the waste collection services run by the BMC (Greater Mumbai's Municipal Council).

Housing for Urban Poor
Urban Poor constitute about 25% of total urban population, and the absolute numbers are expected to be around 80 million (Source UNDP) , or roughly 20 M households. Poorly planned urbanization has meant that they live in slums. If proper urban planning is done, and land acquired for housing for the poor, then it is the question of achieving the goal of providing a bare minimum level of a dwelling unit with water and electricity supply, and proper sewage to these households at the lowest possible cost. The preparatory investment required to do so, is of course huge, but we immediately see the dividends in terms of better sanitation (less disease), more revenue from regularized electricity supplies etc.

If the government can subsidize and encourage investments in cheaper housing technology, (recycling old shipping containers, bamboo or plastics based prefab materials, or whatever), and we can get cost of a house down to 100,000 rupees, we would need to spend about 2 Trillion Rupees (40 Billion Dollars).

Think about it, its do-able.

A one-off investment that erases the blots from our urban scenery, and some continued investment (with hopefully better urban planning in the future) , for creating such new houses as per the future needs.