Homeless: A Short Story

Mumbai: Campa Cola Compound residents face homeless future

(IBN Live)

Tanvi looked at the frenetic activity around her building with apprehension. It was not clear to her what was happening or why. Someone wanted to break their home down because it was on the tenth floor. Her friend Asha lived on the second floor and there was no problem with her home. Tanvi had heard that all homes above the fifth floor were illegal. That left her quite puzzled. But many people were trying to help them. They were all there: uncles, aunties and grandfathers and grandmothers. So was the lovely lady in a white sari who promised to protect their building. The lady even sat with her father and others to perform a pooja that would ward off evil. There was large crowd outside the gates to her building. The police were there as were officers with lists in their hands. And there were on-lookers and children from nearby slums. What a noise there was! The TV cameras were interviewing the grown-ups. They also interviewed Urvashi-didi who spoke so confidently. She said such lovely things about their building, how they had been born there and how they had grown up there. Some had even got married there. Yes, Tanvi vividly remembered Sanjay-bhaiya’s wedding. What fun it had been to play with friends all day long! But why was all this going to end? Why were they going to cut off their water and electricity? They say they are going to break down the building tomorrow! Oh no! Questions swirled around in her head: where shall we go? what about my friends? And my school?

It was morning, but still dark because of the clouds. There was a light drizzle. Jhanvi was staring blankly as the trucks with big arms tore down their homes. Her mother sat next to her, holding her tight. There were loud sounds of truck engines, of walls and metal and wood being smashed down. Everywhere that Jhanvi looked the steel arms of trucks were hammering down on their homes. She looked up but could not see the driver of the truck. But the arm was relentlessly raining down blows. Why were they breaking down their homes? Yesterday, the good uncle had said everything was okay. After Baba gave him money, he had promised they could continue to live there and they could continue to have their water and electricity connections. She was happy to live in her home, close to all her friends. Jhanvi loved her father. What would he not do for their happiness! But where was Baba now? Where was the uncle today? Why were there no TV cameras when their homes were being destroyed? She had seen the TV cameras yesterday – she was standing right next to the TV man as he interviewed a girl through the gate of the building. And the lovely lady in white, where was she? Why was she not helping them? It was just them and the monster trucks and no one else. There was despair and weeping all around. Her mother was crying loudly as were all the other aunties around her. Their sound of wailing could be heard intermittently through the deafening din of the trucks. Where was her father, she kept asking her mother. “Why does Baba not stop the trucks? Why does he not call the TV cameras? Has he gone to call the lady in white sari?”, she asked. Your baba has gone to find a new home, her mother said. Jhanvi did not understand. What was wrong with their present home? They were happy here, why did they need to move? Jhanvi’s eyes were now limpid pools, brimming with tears. Then she began to cry, her tears mixing with the drizzling rain. There was no one to help them. No TV cameras, no lady in white sari, they were completely alone. The tears flowed unabated down Jhanvi’s cheeks. Her baba suddenly appeared in an open tempo, a small truck. He loaded all their belongings on to the tempo. Other uncles did the same with their belongings. Jhanvi and her family and the others sat at the back of the open tempo which soon it began to move. As it approached the crowd, the tempo had to slow down. The air was filled with noise, there were TV cameras everywhere. Jhanvi also saw the lovely lady in the white sari talking to the police. Her heart felt an intense tug of deep disappointment. The lady was very busy doing important things, but surely she could have come to our home for few minutes, thought Jhanvi; she could have stopped the trucks from breaking our homes. And, Jhanvi wondered, why did the TV cameras not show her home being destroyed? As the tempo passed the crowd, it picked up speed and soon the crowd was no longer visible.

As Jhanvi’s tempo passed the building, Tanvi was waking up. The fan was still working. And there was water in the bathroom. Her uncles and aunties and didis and bhaiyas had stopped the bad people from cutting off their water and their electricity. Tanvi glanced at the TV. They were showing her building. Ramesh uncle was being interviewed. She quickly dressed and went down. All her friends and neighbours were already there. The lovely lady in white sari was there too. Tanvi looked at her adoringly; she wanted to be like her when she grew up. The TV cameras were busy filming everything. The usual crowd was there too, people from neighbouring buildings and passers-by. But the children from the nearby slums were nowhere to be seen.

Did the UPA Destroy the Economy? A Counterfactual Exercise

As the heat and dust of the Indian elections settles down, as the BJP settles into governing and as the Congress gets used to the idea of being out of power, it might be possible to discuss the question asked in the title of this post.  Before I start, I should state clearly what I am not doing: I am not at all going to suggest that the UPA should have been re-elected in the recent general elections. Given its lacklustre performance, especially during the last two years in office, and the various scams that took place, there is no denying that the UPA deserved to be voted out. But the question in the title of the post is important since it was one the major attacks against the previous government (see here). For a robust and general defence against that attack, I invite the reader to look at the careful analysis of the UPA rule by Ghatak, Ghosh and Kotwal. My purpose in this post is far more limited: I want to narrowly focus on the fiscal stimulus that was introduced by the UPA during 2008-09 and 2009-10 and show how this worked to protect India from the ravages of the Great Recession. I am going to discuss this in the context of a branch of economics known as Public Choice.

Public choice tells us that a government often manipulates economic policy for partisan objectives. One of its most important objectives is to remain in office by being re-elected. This is a far more cynical view of governments as compared to the textbook version which supposes that governments relentlessly promote social welfare. Given the loss of innocence over the last few decades, I am quite sure that the cynical view will find greater resonance among the electorate than the standard textbook view.

Governments have tremendous discretionary powers at their disposal, so that policies are often crafted and implemented in such as manner as to enhance re-election prospects of the party in power. Typically, a self-serving government will try and ensure that the economy is doing well around the time of the elections. This is expected to be done by introducing a public expenditure programme around election time so that economic growth is healthy and unemployment is low. Inflation inevitably follows in the wake of such a programme, but by that time elections have already taken place and the ruling party is once again entrenched in power. Policies to control inflation are now implemented and these lead to rising unemployment. But this situation is non-threatening since the next elections are far off. The middle of the electoral term is thus characterised by low growth and high unemployment. As the next elections approach, once more the economy is boosted to improve the chances of re-election. 

Did the performance of the UPA-II match the prediction of the public choice theory? Not at all. It delivered high rates of growth in the two years immediately after re-election: 8.2% and 8.9% in 2009-10 and 2010-11, respectively. Surprisingly, this was higher than the 6.5% rate recorded in 2008-09, the year leading up to the elections of 2009.  Even worse for UPA-II, it delivered its worst economic performance in the two years prior to the elections of 2014. In short, its performance was the exact opposite to that predicted by public choice theory.

The question I address here is the following: if the UPA government were to behave cynically, as proposed by public choice, how would it have behaved differently? I am going to put forward a counterfactual narrative to the events that unfolded from 2008-09 to 2011-12. Counterfactual history (interested readers may check here) is in the form of a “what if” question: what if the fiscal stimulus package were not implemented in 2009-10?

This counterfactual narrative will be compared to the factual narrative, which was that India’s fiscal stimulus packages were activated on 7^th December 2008, 2^nd January 2009 and 24^th February 2009. These actions, which were in keeping with standard prescriptions for tackling recessions, included excise duty cut, additional plan expenditure, increased government borrowings, interest subsidies for export finance among other measures. The increase in public expenditure due to this stimulus amounted to about 3 percent of GDP (see Supriyo De). It should also be remembered that the employment guarantee scheme (MNREGA) was already in place by then which also added to public expenditures.

The steps that I adopt to carry out the counterfactual exercise are given in the appendix. In its essence, my counterfactual experiment seeks to estimate what the GDP growth rate would have been if the fiscal stimulus of 2009-10 and 2010-11 had not taken place.  The chart below gives the actual growth rate of real GDP as compared to the counterfactual GDP growth rate derived from my exercises. 

The figure makes clear that, in the absence of fiscal stimulus, Indian growth rate would have faltered. From a public choice point of view, sacrificing growth during 2009-10 and 2010-11, (with the government behaving as in the counterfactual exercise) would have been the “rational” choice. Then, as the elections of 2014 approached, a policy to stimulate the economy could have been put in place. Of course, the point is moot whether it would have been possible to revive the economy once it had lost its momentum. A very likely possibility is that India would have slipped into a prolonged recession and extricating the economy out of this would have required an even greater fiscal and monetary stimulus with no guarantee of recovery. If that were to happen then, not only would growth have remained low during 2012-13 and 2013-14, but possibly India would have suffered sluggish growth right from 2009-10. This would have been no different from the pattern of growth experienced in a large number of countries which are still struggling to recover from the recession.

Considering the growth performance of many countries around the world during the time period 2008-09 onwards, it seems almost miraculous that India (and China) was able to postpone the slowdown by a few years. See chart below:

The chart shows that, barring China and India, every other country experienced negative growth rates in 2009 and positive but low rates thereafter.

In fact, as the recession spread around the world, a very large number of countries suffered very low rates of growth in 2009. See chart below which has been created using World Bank data.

Out of the 191 countries covered in the chart, 180 performed worse than India. Of these, 90 had negative growth rates. This chart brings out sharply the world-wide devastation wrought by the Great Recession. Of the 11 countries in the top two groups (on the extreme right of the chart), excluding India and China, the remaining 9 are very small countries with a combined population of only 151.1 million which is less than 13% of India’s population. This probably gives a proper perspective of the significance of India’s achievement during 2009-10 to 2011-12.

In conclusion, I would like to propose the following two points:

1. The ferocity of the recession was too great for any country, including India and China, to have escaped completely unscathed. That India was able to stave off its ill effects for three years is an achievement that is perhaps not adequately recognised and appreciated.
2. The UPA-II government acted quite unlike the predictions put forward by public choice theory regarding self-seeking governments. In fact, by formulating and implementing a fiscal stimulus policy at the correct time, it acted sagaciously and unambiguously in the national interest. Far from having “destroyed” the economy, the UPA-II, in fact, protected the economy from the cataclysm that had engulfed the world.

APPENDIX

The steps that I adopt to carry out the counterfactual exercise are the following:

1. I consider two data series: GDP at constant prices and real Total (Centre + State) government expenditures.
2. For the time period under consideration, I compute the expenditure multiplier defined as change in GDP divided by change in expenditure. I get values that are much higher than those reported in the literature (See Bose and Bhanumurthy). However, I continue to use my higher values. It may be noted that had I used the multipliers reported by Bose and Bhanumurthy, the counterfactual growth rate would have been even lower than the ones reported above.
3. For the years 2008-09 to 2011-12, I create a counterfactual path of government expenditures using the average annual growth rate of the three years prior to 2008-09.
4. The counterfactual path of government expenditures allows me to compute the changes in government expenditures which, when multiplied by the multiplier values of 2008-09 to 2011-12 (see step 2 above), gives me annual changes in real GDP.
5. Finally, these changes in real GDP are used to create the counterfactual path of real GDP from which the counterfactual growth rates are extracted.

Violence against Women

Right from the time when the ghastly crime against the young ‘Nirbhaya’ occurred in Delhi in December 2012, there seems to be no end to the violence against women. Various questions emerge: (1) Is violence against women on the rise? (2) Is the rate of growth of the crimes committed rising over the years? (3) Is the increasing media attention and heightened sensitivity of citizens leading to greater reporting and publicity of the crime? (4) Along with heightened sensitivity of citizens, is there simultaneously an increase in misogyny as well?

Some of the incidents of rape and other violence have been so horrific that the mind boggles at the thought a woman being subjected to such gruesome assaults. Equally, there is widespread callous and cynical attitude towards violence against women which is starkly visible in the attitude of the police, politicians and so-called god-men. The medieval attitude of the likes of Mulayam Singh (“Boys make mistakes”) and Babulal Gaur (“Sometimes it [rape] is right, sometimes it is wrong”) beggars belief. Even worse, it probably is representative of the views of a large number of males.

In the wake of the Badaun rape case where two young girls were raped and then killed, a conjecture has emerged that rapes are caused by lack of toilets at home which forces women to go into the fields at night to relieve themselves (http://www.bbc.com/news/world-asia-india-22460871 (See BBC report or Hindu Newspaper). The suggestion coming out of this is that if toilets were available inside homes, the number of rapes would reduce significantly. A similar argument is made about cities where there have been cases of rapes in or near public toilets (See here).

The chart below brings together the number of rapes in Indian states and the absence of toilets inside the household (abbreviations used for the states are listed in Appendix 1).

The significant point to note in the above chart is the many instances where the blue line (representing absence of toilets) rises and falls along with the red line (representing number of rapes). This suggests that as the percentage of households without toilets rises in a state, the number of rapes in that state rise as well. The reverse is also true. It appears that there is likely to be some connection between the number of rapes and absence of toilets at home.

Using data available from the National Crime Bureau and from the NSS 65^th Round Report 535 (Housing Condition and Amenities in India), I estimated a regression equation seeking to explain the total number of rapes that take place in a state with the causative factor of interest being lack of toilets inside the homes of households. Of course, one must also allow for other causative factors that might have effect on the number of rapes. For example:

•   Law and order situation in the state: the worse the law and order situation, the higher is likely to be the number of rapes.
• Average income in the state: it is possible that higher income would reduce the number of rapes in a state.
•   Level of policing in the state: higher number of police in the state could act as a deterrent to rapes.

What is being ignored in the above list – “the elephant in the room regression equation” – is a variable that measure the attitudes of men towards women. The reason is that data on attitudes are not (regularly) collected. But more on the attitudes of males later.

The estimated regression equation (reported in Appendix 2) revealed that, after controlling for the three factors just listed, absence of toilets at home continues to remain a significant determinant of the number of rapes. The results show that improving the availability of toilets at home will help: a 1 percentage point decrease in the number of homes without toilets will, on average, reduce the number of rapes by 15.

Having obtained the above results, I tried to discern whether similar factors are at work in rural and urban areas of the states of India. Interested readers are referred to Appendix 3 for a brief note on separating the data for rural and urban areas. The results for rural areas were similar to those at the level of the entire state discussed above. However, the results for urban areas were different.  For urban areas, it was not the absence of toilets at home that was important. What was important was the percentage of households that used public toilets: reduction of 1 percentage point in the number of households using public toilets (in favour of toilets at home or shared toilets) could decrease the number of rapes by 13.

Let me now revert to the discussion of the missing variable – attitude of males – introduced earlier in this post. The results reported above do suggest that making toilets available at home might safeguard women from rape to some extent. If such provision does make girls and women safe, by all means, we should do so but let us not lose sight of the primary cause behind rapes, namely, the terrible attitude towards women that pervades Indian society. This is why I am extremely uncomfortable with the link between lack of toilets and rapes that is being played up in the media. My reason is that this shifts the blame from the main culprit – the predatory male – to the victim who needed to go to the field at night. Since the “outside world” seems so dangerous, all kinds of restrictions have traditionally been placed on women: “do not go out alone” or “do not go out after dark”. This is, of course, the familiar Little Red Riding Hood story: “don’t go out of the house or else the big bad wolf will get you”. If going out for mundane things – and what can be more mundane than a toilet visit – might cost a woman her life, the problem cannot be explained away as inadequacy of toilets at home. The problems are far more deep-rooted, lying in the mental make-up of males and the extreme misogyny that wreaks wanton violence on women. It also lies with the so-called leaders, whether political or social or religious, who view rape as a minor problem and make excuses for those who rape.

APPENDIX 1

Abbreviation	State Name	Abbreviation	State Name
36GARH	Chhattisgarh	MAN	Manipur
AP	Andhra Pradesh	MEG	Meghalaya
ARP	Arunachal Pradesh	MIZ	Mizoram
ASS	Assam	MP	Madhya Pradesh
BIH	Bihar	NAG	Nagaland
GOA	Goa	ORI	Orissa
GUJ	Gujarat	PUN	Punjab
HAR	Haryana	RAJ	Rajasthan
HP	Himachal Pradesh	SIK	Sikkim
JHR	Jharkhand	TN	Tamil Nadu
JK	Jammu & Kashmir	TRI	Tripura
KAR	Karnataka	UP	Uttar Pradesh
KER	Kerala	UTK	Uttarakhand
MAH	Maharashtra	WB	West Bengal

APPENDIX 2

Estimated Equation (with p-values in brackets):

NOS-RAPES =	77.57 +	15.02*NOLATRINES +	3.65*RATEOFCOG -	0.01*PCSDP
	(0.87)	(0.01)	(0.03)	(0.12)

Adjusted R-squared = 0.40

F = 7.00 (0.00)

White’s test for homoscedasticity = 11.59 (0.23)

Abbreviations used:

NOS-RAPES = Number of rape cases

NOLATRINES = Percentage of households without toilets inside the home

RATEOFCOG = Number of cognisable crimes committed per 100,000 population

PCSDP = Per capita state domestic product (measure of average income levels)

APPENDIX 3

As stated above, data on rape cases are not separately available for rural and urban areas. What is available is the number of rape cases in 53 cities in India. I use this information to create data for rural and urban areas.

Undermining the Bureaucracy

Regulation, the primary function of the bureaucracy, is a response to market failures. If there were no market failures, there would be no need for any state intervention and, hence, no need for a bureaucratic regulation. Examples of market failures abound:

·      Presence of monopolies, especially private monopolies. This is not to imply that public monopolies (e.g. Indian railways or the telecom sector till the 1980s) do not matter but that the distinction between the regulator and the regulated gets blurred in such cases.

·         Presence of externalities (e.g. pollution)

·         Pricing of natural resources when the markets required to reveal prices are missing (e.g. coal blocks, spectrum)

To safeguard bureaucratic autonomy, it is important to ensure arms-length regulation so that the regulator is not influenced/cajoled/bribed by the regulated. The alternative to this – sometimes called “embedded bureaucracy” in East Asian economies such as Japan and South Korea – has been tried out but was found wanting. The Asian crisis of 1997 exposed the embedded bureaucracy approach to charges of crony capitalism.

Regulatory capture is a situation where arms-length regulation is compromised: it is a process through which special interests affect state intervention in any form ( See Ernest Dal Bo). Much regulatory capture is accompanied by corruption, some of it in the form of instant gratification (inducements/bribes) but a more subtle form of corruption offers the security of an income stream after the retirement of the bureaucrat. If the bureaucrat is free to take up a job with private business after retirement, arms-length regulation comes under severe threat. The quid pro quo between the regulator and the regulated in such a scenario takes the form of diluted regulation in exchange for a deferred reward (after the bureaucrat’s retirement). 

This is the reason why the All India Service Rules of the Indian bureaucracy require a “cooling-off” period before a retired bureaucrat takes up employment with the private sector. The cooing-off period used to be two years but now stands at one year after much pressure from the bureaucracy (See here). Of course, the Service Rules had the usual escape route where the cooling-off period could be waived with the prior sanction of the government.

It is not just in the private sector that retired bureaucrats have found jobs. Numerous chairmen of the Telecom Regulatory Authority of India (TRAI) have been retired bureaucrats. Among the various regulatory bodies created during the last two decades, many are headed by retired bureaucrats, for example, Comptroller and Auditor General, Central Vigilance Commission, Human Rights Commission, and the SC/ST Commission to name a few (See here).

Since retired bureaucrats have also been finding employment in various regulatory or other government bodies, is it sufficient to restrict the cooling-off period to only the private sector? What about the quid pro quo between the government and the bureaucracy? Isn’t the autonomy of the regulator/bureaucrat compromised by the inducement of a government job after retirement? This is not regulatory capture in the sense discussed above but it certainly impinges on bureaucratic functioning. The lure of a government appointment could possibly compromise the independence of the bureaucracy. It is precisely to prevent such a possibility that the TRAI Act of 1997 had the following provision:

“The Chairperson or any other member ceasing to hold office as such, shall —— (a) be ineligible for further employment under the Central Government or any State Government or (b) not accept any commercial employment, for a period of two years from the date he ceases to hold such office”

[Curiously, the version of the TRAI Act on the TRAI website uses the word “eligible” instead of “ineligible” (point (a) above), which has to be an error. Were it not an error, there would have been no need for the amendment recently passed by the BJP government (see below).]

The TRAI (Amendment) Ordinance of 28 May 2014 introduced by the BJP government has now amended this provision in the TRAI Act which now reads as follows (see here): 

“In the Telecom Regulatory Authority of India Act, 1997, in section 5,—

(i) for sub-section (8), the following sub-section shall be substituted, namely:—

‘‘(8) The Chairperson and the whole-time members shall not, for a period of two years from the date on which they cease to hold office as such, except with the previous approval of the Central Government, accept—(a) any employment either under the Central Government or under any State Government; or (b) any appointment in any company in the business of telecommunication service.’’;

While the original act completely prohibited employment for a period of two years, the amendment allows the government to waive this requirement. I think this change is a very retrograde step taken by the BJP government. Let me hasten to add what I don’t mean by this statement of mine.

1.      I am not objecting to the use of an ordinance when the parliamentary session is to be held shortly. I am more concerned with the principle involved in the amendment rather than the procedure adopted.

2.      I am not objecting to the Prime Minister’s perceived urgency in appointing a serving Chairman of the TRAI. If Mr. Narendra Modi felt that Nripendra Misra was the best person for the job of Principal Secretary to the Prime Minister, I am willing to respect his judgment

My objection is that an institutional mechanism has been diluted for a personal need of the Prime Minister however justifiable and urgent this need might be. I had been very pleased  when Mr. Modi stated the following in his interview with TimesNow TV: “...I still believe that every idea must be institutionalised and then that institutionalised activity will work” (see transcript of interview). But the recent amendment sets a very bad precedent since it dilutes an institutionalised provision at the altar of expediency. One of the problems that has been faced in India is the lack of independence of the bureaucracy in the face of ministerial diktat. In this context, the TRAI Act had made a contribution of profound importance in original provision quoted above. It had clearly recognised that the threat to bureaucratic autonomy can come, not only from private commercial interests, but also from the government of the day. Alas, this important contribution of the TRAI Act has now been compromised.

Finally, also note that the amendment has also made it possible for the private sector to employ any TRAI member (after obtaining government approval, of course). Does this open the way for regulatory capture? Is that an intended or unintended consequence of the amendment?

Of Hawks and Doves

There are things that a hawk can do which a dove cannot. I refer to hawks pursuing peace with an “enemy” and not receiving the flak that a dove would for the same act. History is replete with such examples. Cukierman and Tomassi  in “Why Does it Take a Nixon to go to China”? (UCLA Working Paper)  provide interesting analysis of such hawk-dove issues. To quote them: “The history of public policy contains several episodes in which structural reforms or important economic or foreign policy shifts were implemented by parties of policymakers whose traditional position was to oppose such policies”.

As examples of hawks mimicking doves, one recalls the US President Richard Nixon reaching out to China’s Chairman Mao and Prime Minister Menachem Begin of Israel signing a peace treaty with Egypt’s President Anwar Sadat. Closer to home, Prime Minister Vajpayee met Prime Minister Nawaz Shariff of Pakistan in 1999 and signed the Lahore Declaration  just months before the Kargil war and the subsequent overthrow of Sharif by General Pervez Musharraf. Vajpayee also met Pervez Musharraf (as President of Pakistan) for the Agra Summit in 2001 barely six months before the attack on the Indian parliament. And now comes the completely unexpected, but welcome, overture to Pakistan by Prime Minister Narendra Modi in the form of an invitation to Prime Minister Nawaz Shariff to attend the inauguration of the new BJP government. Just as Nixon had established a staunch anti-communist record and image before extending a hand of friendship to China, likewise the Bhartiya Janata Party (BJP) had established its hawkish credentials with talk of “hot pursuit” in 1998 (see here) as well as the scathing attack on Prime Minister Manmohan Singh for joint statement at Sharm-el-Sheikh (see here)  among much other strong criticism of the UPA government with respect to its Pakistan policy.

It is interesting to look at Prime Minister Modi’s invitation to Prime Minister Nawaz Shariff in this context. There is essentially no substantive difference between what Modi has done and what Manmohan Singh had enunciated in Parliament in July 2009 (see here): both positions state that talks/communications/contact will go on between India and Pakistan despite terror attacks and the festering Kashmir issue. But Manmohan Singh and the Congress in general were seen as doves and were thought to have compromised Indian interests. Modi and the BJP have now taken up a dovish position after having demonstrated their hawkishness. This kills two birds with one stone.  Being originally hawkish, no one accuses them of a sell out. On the other hand, the Congress having advocated a dovish position on Pakistan cannot now criticise the BJP for inviting Nawaz Shariff for Modi’s swearing-in ceremony.

The hawk-dove position that Modi has initiated, presumably, with the full backing of his party, is a welcome development especially for those who have always advocated keeping channels of communication open between India and Pakistan: it is pragmatic and it is beneficial. Belligerent posturing can get the BJP a lot of Facebook likes but that is not how governments are run: governing imposes responsibility on the person and the party. It can only be an immature person who would continue to behave in a hawkish manner after taking over the reins of government. This sense of responsibility is something that Modi might have to drill into some of colleagues/ministers. In this context, I present Exhibit A which captures rather perfectly the stark difference between the maturity levels displayed by Modi and by Nitin Gadkari (now a cabinet minister). The street-level fight that Gadkari indulges in should be cause for extreme concern for any right-thinking Indian. Such aggressive posturing by a high-ranking BJP leader makes a mockery of the magnanimous gesture of Modi. In the absence of a firm message from Modi (who comes to the high office with a strong reputation of governing with a firm hand), it is possible that such embarrassments may bedevil the BJP government periodically.

The elections are over. Now comes the hard part…

In my last post I had wondered whether more than 272 lotuses would bloom for the BJP. The people of India have now spoken: many, many more have, in fact, bloomed. It is a resounding result that we have not seen in decades.I was under the impression that the days of one-party dominance had ended in the 1980s. The sheer demolition of the Congress suggests that one-party domination may be here to stay for quite a while.

Was I a Modi/BJP supporter? No, I was not. But, then, neither was I supportive of the Congress. In any case, after 10 years of rule, every party/coalition becomes stale. Turnover of members of parliament is essentially a good thing. Outsiders have the chance to enter the parliament while incumbents face the prospect of being voted out and losing the trappings of power. Without this churning – or electoral turnover – tyranny in the form of individuals remaining in power indefinitely is a distinct possibility. Turnover is important for a variety of reasons: creating opportunities for aspiring leaders or disfranchised groups and for permitting policy changes. In the absence of the possibility of new blood coming in, the polity would be bereft of new ideas and lead to arrogance of power. In the USA, there is concern over the lack of turnover where incumbents have a much better chance of being re-elected (see here and here). In India, by and large, it is the reverse: incumbency is a disadvantage. Incidentally, take a look at my earlier post “Anti-incumbency in Indian Elections” where I have reported some results from on-going research. Specifically, that post had stated that the higher the turnout at elections, the greater the anti-incumbency effect. That prediction seems to have been borne out: the 2014 elections saw a very high turnout and the incumbents were routed right across India.

As far as the negative vote against the Congress/UPA was concerned, I was convinced: the ruling coalition did not deserve to be re-elected. But I was not convinced by the BJP’s and Modi’s claims about the successes of the Gujarat model. Maybe I will write about that in a later post. So, while there were strong reasons to vote against the Congress, I was hard-pressed to find convincing reasons for a positive vote in favour of the BJP. Be that as it may: the nation has spoken loud and clear. And we are to have five years of BJP rule and, considering the shambles the Congress finds itself in, it could even be ten years or more.

Getting such a massive support in elections is certainly daunting and onerous. Hopefully, the BJP is fully aware of this. Living up to the aspirations of the electorate might well make the election campaign look like a walk in the park for the BJP. Let us have a look at what is on the agenda for the new government. I have created the list below by culling out significant items from the election manifesto of the BJP (see here)

• Economic revival
• controlling Inflation
• spur the process of economic growth,
• strictly implement fiscal discipline
• policy framework for investments both foreign and domestic to make them more conducive
• Developing physical infrastructure
• Making India a global manufacturing hub
• Low cost housing for all
• High priority to water security
• Growth of agriculture
• High priority to job creation and opportunities for entrepreneurship
• Skills development
• Food security
• Access to health services
• Equality of opportunity to education
• Eliminating the scope for corruption
• Institutional reform - administrative, judicial, police and electoral

It is difficult to find fault with any of the items listed above. The question is: how long will it be before we see success in the form of positive outcomes? There is no denying the pressing urgency of the first item, namely, economic revival. But there is no magic wand and there will be contradictions between pushing growth and controlling inflation. In the process of controlling inflation, the RBI has had to raise interest rates but this has had the short-run impact of subduing growth. There is an argument that over the longer term, moderate inflation will be good for growth but there has been a price to pay in the short run. The knives (or, more specifically, a single knife belonging to Subramaniam Swamy) are already out for the RBI Governor, Raghuram Rajan (see here). Replacing Rajan would be most unfortunate. Perhaps for the first time after Manmohan Singh, we have a first-rate economist in charge of the RBI. I do hope Swamy does not command any clout within the BJP and that Modi knows who is to be let loose during elections but kept on a tight leash afterwards.

Reintroducing fiscal discipline will also be a challenge. In the fight to keep at bay the impact of global recession (one component of which was the employment guarantee scheme), fiscal deficits have risen quite high. These deficits have to be reduced, but it is equally important how these are reduced. For a very long time now, fiscal deficits have been managed by curtailing capital expenditures due to the (political) inability to lower revenue-account expenditures – these are expenditures on subsidies, administration and so on. Lowering capital expenditures of the government (which includes infrastructure spending) has very adverse consequences for the growth of the economy.

Items 2-6 in the list above will require substantial investments and the results will not be visible in the short-term. Items 7-11 are vital from a social welfare point of view but again much time will pass before benefits are visible. Job creation, especially in manufacturing has been a challenge in India for decades. There seems to be a consensus that India needs to create one million jobs per month. Which sector will create such jobs? Table below shows sector wise share in GDP and share in employment

SECTOR	SHARE IN GDP (%)	SHARE IN EMPLOYMENT (%)
Agriculture	14	53
Manufacturing	15	10.5
Services	67	24.4
Other	4	12.1

Agriculture which contributes just about 14% to GDP, employs 53% of the labour force. This seems a dead end as far as employment generation is concerned. The services sector accounts for 67% of GDP (far too high for an economy at India’s level of development), but has a share in employment of under 25%. Finally, manufacturing contributes 15% to GDP, but has a share of only 10.5% in employment. So, where are the jobs going to come from? Just to get a perspective of the situation in India, share of manufacturing in China’s GDP is 35% and employs 30% of the labour force. This has allowed China to generate employment and absorb surplus labour from agriculture. Why is job creation in Indian manufacturing so low when India has such an abundance of labour? Organised sector employment in India is rather privileged and an individual, once employed, loses the job only in extreme circumstances. So, when exit from jobs is so difficult, entry into jobs becomes highly restricted. Changing this situation has been impossible for many decades now even though the problem and its solution stare us in the face.

Finally, items 12 and 13 require institutional reforms. It is not merely a question of passing a law, which can be done easily enough. From an institutional perspective, laws are only as good as their implementation. Once again, any benefits of these changes will take a long time to emerge.

Clearly, the government will have to be given enough time for it to accomplish what it has set out to do. Possibly, one term will not be enough. But will the vociferous and passionate supporters of the BJP remain patient as the party gets down to the nitty-gritty of governing? My fear is that there will be pressure on the government to show results soon but, as stated above, these will take a long time to emerge. What is the government to do in the meantime? In such circumstances, most governments fall back on populist quick-fixes. The BJP (especially Modi), in its election campaign, has scrupulously avoided any reference to the religious agenda of the Sangh Parivar. But will it be able to stay clear of this once the pressure to deliver starts to build? My fear is that it might not be able to do so. One might well see the issue of the Ram temple coming to the fore in UP. There is also the possibility that the issue of “Bangladeshi” migrants might rear its head in West Bengal. Will Modi have the sagacity to keep the fringe elements of his party under control and suppress such volatile issues? Will he have the strength to focus in a steadfast manner on the development agenda? For India’s sake, I certainly hope so.