Tag: Good Governance

Far too ambitious?

NMP is indeed a bold reform initiative but its effectiveness will depend on how the structural impediments are removed and unemployment challenge is averted


The Union Budget for 2021-22 clearly brought out that the economic policy of the government is geared towards growth which would lead to the overall prosperity of the people. Privatization policy was also clearly mentioned in the budget. In addition, the budget spoke of the need to create a national monetization pipeline of brown field projects to finance fresh investment in physical as well as social infrastructure. NITI Aayog was tasked to prepare the policy framework for this announcement and, recently, the Government of India announced its policy along with a detailed guidebook covering all aspects of the same. The government declared that it has prepared a national monetization pipeline that would unleash a latent potential of six lakh crore or USD 81 billion by 2025. The target for the current year is Rs 88,000 crore. It is indeed a very ambitious programme and also a very bold reform initiative.

The policy says that there will be no sale of assets and only brownfield assets would be leased out for a certain period of time to private sector investors or an investment trust that will operate and maintain the assets as well as make investments and, at the end of the lease period, hand over the assets back to the government. The assets identified for this purpose are roads valuing 1,60,200 crores; railways 1,52,496 crores; power transmission 45,200 crores; power generation 39,832 crores; gas pipeline 24,462 crores and mining 28,747 crores. Additionally, there are some other sectors also like telecom, sports stadiums etc.

The strategic objective of the national monetization pipeline, according to NITI Aayog, is to unlock the value of investments in public sector assets by tapping private sector capital and efficiencies which can thereafter be leveraged for the augmentation of greenfield infrastructure creation. In essence, this means that a lot of public sector assets are lying underutilized and they are not being managed and operated efficiently because of the inherent structural impediments of the public sector, and which can be transformed by the private sector to generate resources that can be utilized for the development of new infrastructure. There is no denying the fact that to achieve a high rate of growth, India needs substantial investment in infrastructure which raises the question of the availability of resources. For quite some time, economists and administrators have been grappling with this problem of financing infrastructure. The national monetization pipeline is an innovative solution in this direction and, by all means, can be called a significant structural reform in creating value in infrastructure.

However, the crucial thing is the implementation of this policy. Historically, we have seen that the ambitious targets of disinvestment have not been met year after year due to various procedural bottlenecks. In light of this, it is difficult to see how such a massive scale monetization of public assets can be executed in the given time frame. Personally, I feel that it would be difficult to achieve the 88 thousand crores target for the current year and six lakh crores till 2025. The matter of Air India privatization and that of BPCL pending for years exemplify how such matters take a long time to materialize.

The experience of public-private partnership (PPP) would be vital in implementing the NMP. Various models like upfront lump-sum payment or annuity payment were devised to implement PPP and they are as many success stories as failures. I remember one of the first PPP projects in UP was the bridge on the Noida Delhi highway. The private concessionaire was expected to collect toll for a certain number of years but there was a massive agitation by the farmers and residents of the area after some years and, finally, the toll barrier had to be shut down. There were views on both sides. Some claimed that the PPP agreement had been drafted to give extra benefit to the concessionaire while some felt that the concessionaire was entitled as per the agreement to collect toll for the stipulated number of years. In any case, the whole episode showed the kind of problems that a PPP agreement can lead to. Even in NMP, this crucial issue of valuation of the assets, amount of lump-sum payment and other terms and conditions would determine the success of the policy. The private sector has often argued that the PPP documents are prepared in a manner that private developers do not get a reasonable rate of return on their investment, making it unviable for them. There is no doubt that the civil servants who draft the agreements along with consultants are inclined to err on the side of caution. They deliberately want to put such conditions which would shield them against any inquiry in the future. Naturally, this leads to putting conditions that impact the viability of the project. NMP is a new policy and the civil servants do not have prior experience and, despite the guidelines formulated by NITI Aayog, there is a likelihood that such terms and conditions may get framed that adversely impact the rate of return to the private investors, implying that they would not evince interest in bidding for the assets. Of course, in the case of PPP, things improved over time as the civil servants got more experienced and repeated guidelines were issued by the government. Similar learning experience is possible in the case of NMP but this will take time, making it difficult to achieve the NMP targets in the prescribed time frame.

The fear of subsequent allegations of corruption is not entirely unfounded. You can look around and see the number of cases of privatization or disinvestment where inquiries are going on and there have even been court directives to investigate and lodge criminal complaints. It is, thus, important that the Government of India evolves the system to protect the civil servants from any undue harm if they faithfully, and with bona fide intentions, carry out the NMP exercise.

Apart from above, the private sector would only come forward if it gets a higher rate of return than it would get through an alternative opportunity of investment. Not all assets listed in NMP are likely to give this kind of a return. This could lead to a situation of cherry-picking where the private sector bids for assets with the greatest potential of returns and avoids the others. The implication being that not all assets listed in the NMP will get a private bidder. The more lucrative assets will get bidders while the ones with less potential will remain with the public sector. I saw an example of this when in Uttar Pradesh we wanted to bring in the private sector in power distribution in the districts. We found that the private sector was keen to take up only the city areas where it was easy to collect power dues and did not want to go into the rural areas at all. This meant that the state power corporation would lose its best accounts and remain saddled with the most problematic. We had then decided to offer a package of rural plus city consumers. Not many bids were received as per this model. This is very much possible in the NMP also. We already saw when the Railways wanted the private sector to run some trains, only the public sector corporation IRCTC came forward. This again gives weight to my argument that the entire NMP list of six lakh crores is not likely to get private bidders.

Moreover, there would be issues relating to the employees. Will the private sector retain them? Will the terms and conditions remain the same? What will happen to the crucial issue of reservation in case the private sector does recruitment of its own? There are various social objectives that these assets are fulfilling and it would need to be seen whether the private sector would continue to do so. Moreover, if the public sector has not been performing then it is due to various structural impediments which would need to be analyzed, otherwise, they would constrain the working of the private sector also. Further, a private-sector monopoly is no better than a public sector one.

It is also important to see how the regulators would respond to this kind of initiative. There would also be the need for an open and transparent dispute resolution mechanism. Finally, a special independent authority would need to be created to monitor the entire process.

NMP is a bold reform initiative that could unlock funds for further development of social and physical infrastructure but there are a lot of implementation issues that need to be handled. Also, we should be aware that the targets set are far too ambitious.

Click to read original article.


Required underpinning

To ensure ample employment generation and smooth economic recovery, the ailments of the MSME sector has to be addressed

I recently read in newspapers that a Parliamentary committee on micro, medium and small industries (MSME) has found that the sector is not in good health and needs special measures to come out of the negative impact of the pandemic. The committee observed that enough is not being done to support the sector. It strongly recommended making finance available to the sector at a concessional rate of interest of three to four per cent and also a longer repayment period. I agree with this. Worldwide, the MSME sector is known for its potential for job creation. The sector contributes to 90 per cent of the businesses and provides 50 per cent of employment worldwide. A World Bank estimate has projected that by 2030, 600 million jobs would be required globally and the MSME sector will play a crucial role in this.

The MSME sector is second only to agriculture in terms of employment generation in India. There are close to 6.5 crore industries in the sector that provide employment to about 11 crore people and contribute 29 per cent of GDP and 31.89 per cent of gross value added (GVA). It is one of the major pillars of the economy and accounts for 48.9 per cent of Indian exports. The sector lays out the foundation for flagship government policies like Make in India, Atmanirbhar Bharat and startup/standup India. One district one product (ODOP) scheme of the UP government is also based on the MSME sector.

The Union Government recently changed the definition of MSME on the demands of various industry associations and with the idea of benefitting a large number of industries with various facilities offered by the government. According to the new definition, all industries having investment in plant, machinery and equipment of not more than Rs one crore and an annual turnover of up to Rs three crore are categorised as micro. Similarly, the corresponding norms for the small sector are Rs 10 crore and Rs 50 crore and, for the medium sector, Rs 50 crore and Rs 250 crore. This was hailed as a major achievement in the interest of the MSME sector. However, my interaction with members of the industry gives a different picture. The micro sector feels that this new definition works counter to their interests, as it is now the industries belonging to the medium and the small sector that have a greater capacity to access the benefits of government schemes allowing them to corner disproportionate gains. A little-known reality is that the micro sector is 99 per cent of the MSME sector. There are 6.30 crore micro units whereas; the corresponding figure for the small enterprises is 3.31 lakh and, for the medium, 0.05 lakh. Clearly, the major contribution to the national economy and employment comes from the micro sector which is largely unorganised. This sector plays a major role in bringing people above the poverty line and provides goods and services to the maximum number of people. This sector is often run by people who are not aware of government policies. They are reluctant to register themselves as they want to avoid the numerous regulatory norms. The sector also suffers from a deficiency in financial literacy, leading to a lack of financial inclusion.

The biggest need of this sector is finance. However, people in this sector resort to informal sources of finance — often at a higher rate of interest. Many don’t even go for loans and generate funds as equity from their friends and relatives. They work on thin margins and often have high input costs. It is thus imperative that credit at a low cost is made available at the right time to the micro firms without any collateral.

The micro sector has to be handled differently. The new definition of MSME may not be easy to change as there is a lobby that wants it that way. There should be a separate cell in both the Union and state governments to deal with the problems of the micro sectors. In every government scheme for the MSME sector, a fixed amount should be designated for the micro sector. The government has prescribed a 45-day limit for the payments to be made to the MSME sector and has also devised a mechanism where grievances relating to nonpayment can be addressed. Unfortunately, the reality is that the payments are still not forthcoming despite the assurances at the highest level. This payment clause needs to be enforced in the wake of the precarious financial position of the sector. There is also a definite requirement to set up a payment recovery tribunal to handle such issues in the MSME sector.

The MSME sector, especially the micro sector, is unable to market its products as the units do not have the knowledge and expertise to do so. The portal designed by National Skill Development Corporation could be a big help. It needs to be further activated. The state governments should also design similar portals. Further, the micro-units cannot afford to pay earnest money (EMD) against all tenders. At least in public sector undertakings, the government should waive the EMD requirements. There is also a case for mandating 25 per cent procurement by the government or public sector enterprises from the MSME sector. In the past, these kinds of orders have been issued, but not fully complied with because the issues of quality have been raised. This sector has to certainly introspect and become quality conscious. The sector requires better access to modern technology and the government must come up with innovative schemes to make this possible.

There are a plethora of schemes for the MSME sector. The real problem is that of awareness regarding these schemes. The government agencies must conduct regular awareness programmes to make sure that even the micro units can avail the benefits. The district industry centres should do the required handholding for this purpose. Many MSME units do not know how to avail the benefits of government schemes. A single window system is required, as often the entrepreneur is made to wait for months and run from pillar to post to get the benefits. There should be a prescribed nodal authority to monitor this process.

Covid has led to the closure of more than 33 per cent of MSME units, and a large number are somehow surviving. They require immediate relief which could be in the form of direct cash support or indirect exemptions from fixed charges for utilities like power. Relief in taxes would also help. The government should concentrate on developing this sector by using the cluster approach where they can provide common facilities. Also, a specific intervention for rehabilitation of the sick units is called for.

The MSME sector is vital to employment generation and bringing about economic recovery. Special focus is required for the micro sector. Post-Covid, the governments should focus on supporting the existing units rather than try and get new investment. The government has the right intentions but it needs to understand the ground realities and address them at the earliest.

Click to read original article.

Decentralized governance

Direct elections to the post of ZP chairperson and proper devolution of resources could ensure smooth delivery of public services and reduce corruption

The recent elections to the post of chairman of Zila Parishad in UP made me think about the reality and the possibilities of decentralisation of governance through the third tier of government. I was disturbed by the allegations of use of money power, muscle power and partisan attitude of the local government officers in the indirect election. Such a perception about the election process demeans the office of the chairman and also puts a question mark on the functioning of the third tier of government. An immediate solution to this kind of situation would be to carry out an amendment in the relevant Act and go in for direct elections to the post of chairman. This will give much more stability, credibility, legitimacy and accountability to the institution and also enable the third tier to function in a manner that the 73rd constitutional amendment has envisaged.

I recall that in 1980, I was posted as an administrator of a municipal corporation in Uttar Pradesh and, after one year of my tenure, the elections to the post of corporators and mayor were held. At that time the mayor was elected through an indirect election where the corporators were the voters. I personally witnessed the money power that was used to buy votes by the contestants, and the person who won was reputed to have spent a fortune. Almost immediately after taking the charge, the mayor began to look for avenues to recover his investment and this led to a clash between us. I am not commenting on any one individual but on the system. Indirect elections always tend to bring in these imperfections. A direct election is always a much better alternative. Later on, the Act was amended and we began to have direct elections to the post of mayor in UP. This brought about a big change in the entire system. The mayors today are true representatives of people and have much more acceptance in the society. In fact, more powers should be devolved on the mayor to make him/her the actual leader of a municipal corporation with full accountability to the people. In a similar manner, if direct elections are held for the post of the chairman of Zila Parishad, the elected person would become a genuine representative of the people and local governance will be empowered. I also feel that this system could lead to more people of talent and leadership quality contest for the elections. With this amendment, the institution of the chairman of Zila Parishad would become much more powerful and responsible towards people. I foresee that there could be opposition to this from the bureaucracy. The elected members of the legislature and parliament may also oppose it because the chairman of ZP would be directly elected by a larger vote base than them.

The 73rd amendment in 1992 provided for a three-tier Panchayat system at the village level, intermediate level and district level. This was specifically meant to give these institutions the required status and dignity of viable and responsive people’s bodies. Article 40 of the constitution had laid down, as part of the directive principles of state policy, that every state shall organise village Panchayats and endow them with such power and authority as may be necessary to enable them to function as units of self-government. However, due to the absence of regular elections, insufficient representation of weaker sections and women, inadequate devolution of powers and lack of financial resources, these institutions have not been able to fulfil their role.

As a consequence of 73rd amendment, the three tiers of local self-government have come into existence in most states but the level to which the functions, functionaries and finances that have been devolved to them vary from state to state. States like Karnataka and Maharashtra have set examples of a much higher devolution of power than Uttar Pradesh and Bihar. However, almost all states now have a state election commission which ensures that regular elections to these three tiers are held; the earlier practice of keeping these institutions in a state of suspension is no longer possible. This, by itself, is a major change. The election process gives due representation to women, scheduled castes and scheduled tribes and weaker sections to make them truly representative of the society. Most states have also constituted a state finance commission which decides upon the percentage of state resources that would be transferred to the urban and rural local bodies. In UP, 15 per cent of the state resources are transferred to these local bodies even though successive state finance commissions have recommended a higher percentage. There is indeed a pressing need for such a step.

True decentralisation of power would lead to definite improvement in the delivery of public services to the people. For example, Uttar Pradesh has close to two lakh elementary schools. It is humanly impossible for a state-level secretary or a director or a district-level education officer to monitor the functioning of the village schools. This can be best done by the local village Panchayat. The same is true for ICDS nutrition centers and health sub-centers and other local-level development schemes. This is only possible if local self-government institutions have the power over the functionaries of concerned departments. Practically, departments do not allow this to happen and the government employees threaten to go on strike if put under the jurisdiction of the Panchayats. State governments are not very keen on allowing the Zila Parishad to plan for the development of the district. There is a district planning committee which formulates district plans but, at least in UP, I found that these plans do not find a place in the state budget. I found that schemes which are to be a part of the district plan are identified but very often resources are allocated on the basis of decisions taken at the state level. The ideal situation should be that a fixed percentage of the state budget should be allotted for district plans as drawn up by the Zila Parishads. The ZP should prepare these plans on the basis of plans prepared by the village and intermediate Panchayats. Further, the village panchayat and other tiers have the powers of local taxation as per article 243 H of the constitution but internal revenue at the national level is barely four per cent of their total revenues. There is a case for these institutions to raise their internal revenues. Today, a major part of the revenue comes from devolution from state finance commission and central finance commission. Also, in a lot of schemes, funds are now being directly sent to the Panchayats, making it possible for them to spend on local needs. However, this has also created a situation where there are allegations of corruption against the elected members of the local government. These institutions need to be mentored and nurtured with patience so that they become genuinely accountable to the people. To control corruption, the mechanisms of local fund audit, social audit and having an ombudsman for a cluster of villages can certainly help.

It is in the interest for better governance to devolve funds, functionaries and functions to the local self-government institutions with a system of audit and oversight agencies to see that the funds are spent properly. To make this happen, direct elections to the post of chairman of ZP are also necessary. It will need a lot of vision on the part of the political parties and support of the bureaucracy to make these three tiers of government genuine institutions of decentralized governance.


Click to read original article.

Holistic gauge

Development indicators need to be reshuffled to go beyond mere growth goals and incorporate wider parameters

Ever since I was a student of economics at Delhi University, the growth versus equity debate has been at the centre stage of any discussion around development economics. Recently, I read an outstanding book titled “The Growth Delusion” by David Pilling which is a critique of overemphasis on the growth of GDP as an economic welfare measure across the world. India is no exception. The current budget boldly talks about economic growth as the goal to be achieved — based on the philosophy that only if the size of the cake is large, it can be distributed amongst maximum people. We hear the talk that India has already become the fifth largest economy and is soon likely to become the third-largest. The Government of India has set up an ambitious goal to achieve a USD five trillion economy by 2025. The UP government has also set a goal of a USD one trillion economy by that period. GDP is an indicator of the size of the economy but not of the wellbeing or quality of life of the people. Pilling has been severe in his comment when he says that all countries are obsessed with the rate of growth of GDP and put all their energy in chasing this chimera.

Despite growth in GDP, economies are witnessing rising inequalities. This has been highlighted in a famous book written by Thomas Piketty. We have also read the opposing viewpoints of eminent economists like Jagdish Bhagwati and Amartya Sen; the former emphasising growth and the latter talking about state intervention in public services like health and education to bring about genuine economic welfare. In India, over the years, we have witnessed jobless growth leading to an increasing rate of unemployment. Further, despite being one of the largest economies in the world, the per capita income of citizens is abysmally low, leaving us as a developing economy, far behind the developed world. There is still a lot of poverty and the second wave of the pandemic has exposed the poor quality of public health infrastructure in the country. Education and nutrition levels are far behind the developed countries and our rank in the Human Development Index is beyond 100. This clearly shows that growth by itself is not going to solve the problems of our country and we need inclusive growth. The latter requires specific state intervention in favour of the poor and the marginalised. This clearly indicates a need to have a broader index of development that goes beyond GDP and allows us to aspire for an improved quality of life for the people.

Pilling discussed various alternatives to GDP in his book. We could have goals for increasing per capita income or net domestic product. Then, we could have the Human Development Index as an indicator or evolve a Sustainability Index which would factor in the crucial environmental needs. He developed a matrix of economic, environmental and social indicators that can best bring out the status of quality of life in a country. Recently, India lost the World Test Championship to the tiny island nation New Zealand. I read an interesting article which tried to analyse the rise of New Zealand as a cricketing power by bringing out the differences in per capita income and various other social and economic indicators between New Zealand and India. The comparison held India in a very unfavourable light.

Most countries have added parameters other than GDP in their evaluation of development. The most significant has been the concept of Gross National Happiness developed by Bhutan. The utilitarian approach of the greatest happiness of the greatest number is not the solution as it ignores the problems of the minority and tends to perpetuate inequalities. Happiness economics has evolved as a discipline in itself, and 20th March has been declared as the International Happiness Day. India has unfortunately ranked 140 out of 156 countries on happiness indicator, with Denmark, Sweden, Norway and Switzerland being amongst the top nations. Happiness index accounts for GDP per capita, social support systems and healthy life expectancy, freedom to make life choices, generosity, trust and corruption levels. One can think of including more aspects of happiness in this indicator like the government of Bhutan which calculates gross national happiness on the basis of four pillars — promotion of sustainable development, preservation of cultural values, conservation of natural environment and establishment of good governance.

Currently, a new concept known as subjective well-being (SWB) is being used at the global level to measure the quality of life and the extent of happiness. SWB links happiness with life satisfaction which is a function of in-born temperament, fulfilment of basic needs and quality of social relationships. We all know that happiness has both internal and external causes. Internal happiness, of course, is a spiritual concept where happiness depends on inner contentment and the response of an individual to life situations. This is something that is influenced by the culture of the family of an individual and the spiritual practices that he follows. However, external happiness is determined, to a large extent, by the policies of the government. It is this external happiness that can be measured through an index and governments can influence this in a big way. Happiness can be defined as a state of being where there is a high level of satisfaction, positive feelings and infrequent negative feelings. External happiness depends upon a person having sufficient material resources like money, sufficient social resources like family and friends and a desirable society that is free of hunger, injustice, corruption and war; and is full of spirit of trust and cooperation. If the citizens of a country feel that they are leading a purposeful and meaningful life, and are optimistic about their current position and outlook for the future, then they can be considered to be high on the happiness index. The difference between the SWB approach and GDP is the focus on multiple dimensions of the human lives in the former. It is also true that if there are a large number of inequalities in society, particularly in the form of opportunities, then happiness decreases.

It is thus important that we are not caught in the GDP trap and focus on the larger issues of life which lead to a better quality of life for citizens and makes for a happy society. None other than the famous economist Simon Kuznets said, “The welfare of a nation can scarcely be inferred from a measurement of national income.” Robert Kennedy of the United States famously said, “GDP measures neither our wit nor our courage; neither our wisdom nor our learning; neither our compassion nor our devotion to our country; it measures everything but that which makes life worthwhile.” Human beings have to be at the centre of development policies. We have to evolve an index where we measure the quality of life that we are giving to the people. I would like to end this article by quoting David Pilling where he says towards the end of his book, “Growth was a great invention. Now get over it”.

Click to read original article.

Measures for revival

Even as the economy starts limping back to normal, increased poverty and unemployment would require effective policy intervention


Mercifully, the disastrous Covid second wave, largely fueled by the delta variant, has begun to recede. It is time now to take stock of the impact that Covid has had on the lives and livelihood of the people. The numbers of cases, as well as the fatalities, were much higher during the second wave in comparison to the first. Almost all my friends have told me that someone near and dear to them has passed away due to Covid. The fear of Covid has entered every home. There was a period from mid-April to the first week of May when people were clamouring for oxygen, ICU beds, medicines and treatment. Even though I have retired from the civil service I recollect getting at least a dozen calls each day requesting help for getting someone admitted to a hospital. That was indeed a very traumatic period. One state government followed the other in imposing various degrees of lockdown to break the infection chain. Things are much better now with normalcy approaching, the lockdowns lifted in most states and economic activity limping back to normal. Of course, there is always the apprehension that the virus is not likely to disappear soon and may even come back for a third wave. The government is certainly not taking any chances this time and is likely to be better prepared. The people also would be more careful now.

The future would be determined by the pace, extent and efficacy of the vaccination campaign. The goal is to achieve the vaccination target by end of December as, only if the majority is vaccinated, will we be able to escape the scourge of the pandemic. Various policy options are being considered, debated and implemented. Normal life would return after the battle is won but the scars of the Covid will take years to disappear. The economy has been badly damaged. The year 2020-21 showed a negative GDP rate of -7.3 per cent and now the growth rate projected for 2021-22 has been scaled down even by the RBI to 9.5 per cent. This has impacted the level of unemployment in the economy. The finance ministry has come out clearly putting growth as its main objective in the current budget. However, the anticipated growth momentum has encountered a roadblock in the second wave. Economists and governments are banking on private consumption demand to pick up significantly after the lifting of lockdowns. We have to wait and see with what pace the economy will bounce back. The finance ministry has clearly stated that everything will depend on the pace of the vaccination process and talked about completing maximum vaccination by September end to push forward the growth of the economy. The government is planning to front-load its capital expenditure and also the private sector is planning major capex infusion. All this would certainly help but it remains to be seen to what extent this would raise the spirits of the economy and in how much time.

The CMIE report on unemployment in the Indian economy shows that as of June 17, 2021, the unemployment rate has been as high as 11.2 per cent with urban unemployment being at a staggering 13.9 per cent and rural unemployment at 10 per cent. The unemployment issue which was already troubling the youth before the onset of the pandemic has now assumed dangerous proportions with its consequential impact on the level of poverty. The poor and the marginalised, especially those in the informal economy, have been the worst hit. The State of Working India Report, 2021 prepared by Azim Premji University before the second wave had indicated issues of serious concern. The report proposes policy imperatives for the government to respond to the impact of Covid on the poor. Firstly, it is clear that the Central and state governments will have to focus on healthcare and education. The pandemic exposed the poor quality of health infrastructure in the rural areas which requires massive investment. The sector will assume greater importance in the coming decade and will be a major job provider.

Additionally, the government has to focus on increased poverty resulting from Covid. The Azim Premji report shows that despite the V-Shaped recovery after the first wave about fifteen million workers remained out of work and the per capita income remained below the pre-Covid level. The huge employment and income losses led to the labour share of GDP falling by over five percentage points to 27 per cent in the second quarter of 2021. Most of the decline in income was due to a reduction in earnings. It also came out that the poorer states suffered more in terms of job losses. The women and the young workers were disproportionately affected and many could not return to work even by the end of 2020. The report says that 33 per cent of workers in the 15-24 age group could not recover their employment by the end of the year.

The most significant finding of the above study was that monthly earnings for all workers fell and that of the poorer households declined more than the others. More than 230 million people were pushed into poverty with a 15 per cent increase in rural poverty and 20 per cent in urban poverty. This is indeed an alarming picture and negates all the poverty eradication efforts made since 1991. The challenge now is to provide gainful employment to these displaced people so that they can come out of the poverty trap. It becomes all the more significant as India is aiming to achieve the dream of a five-trillion-dollar economy by 2025. Agriculture has performed in a stable manner and has been the saving grace yet we have to see how this sector can generate more employment. Increased allocation for MGNREGA and more jobs to people on MGNREGA-related projects would certainly help. In addition, the agriculture sector has to be reformed and modernised with the aim to increase the income of the farmer. The Government of India has promised to double the income of the farmers by 2022. However, we are far away from this goal at the moment. A concentrated effort is required to bring out major reforms in the sector to increase the income of the farmer. The recently proposed structural reforms have run into heavy weather but are in the right direction and, with some modifications to protect the interest of the farmers, they can make a difference. Dairy and other animal husbandry projects can contribute to increasing the income of the farmer. Massive investment in storage and cold chain is required. To shift workers from farm to non-farm activities and discourage migration, there is an immediate need for setting up rural growth centers — each of those being a hub of rural industrialisation, particularly for the agro-processing sector.

A lot more needs to be done to support the worst-hit MSME sector. Merely giving loans will not suffice; a fiscal package of direct support is required because this sector has immense potential for employment. In particular, the services sectors like hospitality and tourism have been badly hit and need a special relief package for revival. The time for such a fiscal stimulus is now and should be done without any further delay. A major scheme for employment in the urban areas has to be implemented to cater to the issue of urban unemployment. Measures like increasing the old-age and widow pension and direct cash transfer to the poor can also bring about faster recovery. The impact of Covid on lives cannot be done away with but we can certainly take urgent steps to see that the livelihood of people is not threatened. The impact of Covid on poverty and unemployment needs to be seriously addressed.


Click to read article.

Expanding the base

Replication of MGNREGA’s resounding success to urban areas is an emergent need

Ever since I joined the IAS in 1978 there have been numerous schemes catering to the creation of employment in the rural areas. I recall that we used to implement NREP (National Rural Employment Programme) and RLEGP (Rural Employment Guarantee Programme). The main objective of the schemes was the creation of employment and even at that time, I felt that there should be a greater focus on the creation of productive assets along with the generation of employment. I remember constructing primary schools with NREP funds in district Ghazipur, UP as a pilot which was later on appreciated by the state government. Looking at the positive impact of these schemes Government of India in 2006-07 launched the MGNREGA (Mahatma Gandhi National Rural Guarantee Act) in the year 2000 for the most backward blocks of the country. Subsequently, it was extended to 130 more blocks in 2007-08 and then finally to the entire country in 2008-09. The scheme had the backing of an Act of the Parliament and it was a rights-based approach having a clear legal framework. The Act prescribed that anybody in rural India who was desirous of getting employment could apply for the same and his Job Card would be prepared after which he would be given up to 100 days of employment in a year. The funds of MGNREGA were to be spent in such a manner that 60 per cent would be spent on the labour component and 40 per cent on the materials. This did lead to the creation of productive assets along with the generation of employments but it was a safety net for the poor unemployed in the rural areas. A shelf of projects was prepared for each village and works taken up accordingly. Immediate payment through a bank account was to be made to the beneficiary.

March 20 onwards, we have been in the grip of a pandemic that has led to people losing jobs and slipping back into poverty. We all witnessed the sorry spectacle of thousands of migrant labourers losing their jobs and returning to their villages with no source of income. The MGNREGA became a lifesaver for them at a time of tremendous economic crisis. Almost all the states resorted to this scheme, more evidently in the poorer states of Uttar Pradesh and Bihar.

A comparative study shows that MGNREGA led to an increase in person days generated from 265.35 crore to 385.89 crore (45.43 per cent increase) between 2019-20 and 2020-21. It also shows that there was a 68.9 per cent increase in the number of households completing 100 man-day’s employment and there was a 37.59 per cent increase in the total number of households getting employment. The total number of employed individuals went up from 7.88 crore to 11.17 crore showing a 41.7 per cent increase. The total expenditure on the scheme also went up by 62.13 per cent.

Apart from the pandemic, MGNREGA has penetrated to 40 per cent of the rural households and has on average provided 40 to 55 days of work per household. Various evaluation studies have shown that the additional income earned through MGNREGA has increased the purchasing power of the people leading to improved quality of life for them. The poor have been able to afford food, spend more on the education of children and on health as well as on buying household goods and paying back debts. In particular, the impact on migration of labourers has been significant, leading to a three to four per cent reduction in the figure. In addition, it has led to women getting employment and wages equal to men helping them to become financially independent and also providing food security. It has also helped in creating useful assets for the community. It is significant to note that MGNREGA has had a positive impact on climate change as two-thirds of the projects taken up under MGNREGA have been in the natural resource management area like soil fertility, tree plantation and water conservation. In fact, more than 70 per cent of the projects have been related to water conservation and irrigation. This has led to the creation of a large carbon sink to sequestrate carbon.

The scheme can indeed be implemented better at the field level if certain actions are taken. First of all the scheme involves the mobilization of the community which should be done on priority basis to see that the benefits of the scheme reach the beneficiary. In fact, social audit is used as a tool for the community to monitor the implementation of the scheme and has given a lot of positive results. It is important to carry out extensive capacity-building of the Panchayati raj functionaries and also train the block and village level staff properly so that they are motivated and in a position to implement the scheme as per its objectives. There is also a case for increasing the maximum number of days prescribed from 100 to 150 to provide more relief to the people and also to increase the wage rate being given. Here, I must mention that one consequence of MGNREGA has been that the general wage rate in rural India has gone up about which the farmers sometimes complain. I think one should seriously consider having some flexibility in the labour and material component ratio to allow more projects of importance to be taken up. To make the scheme a success genuine, participatory planning must be ensured. More women should be given employment and the most important thing is the timely flow of funds so that wages are paid on time.

If properly implemented this scheme can be a game-changer. There is a case for not only continuing it with higher allocation but expanding it, particularly as the corona pandemic has still not abated. I personally used the scheme to counter the severe drought in the Bundelkhand area of Uttar Pradesh and not only gave life-saving employment to people but also implemented a lot of water conservation and harvesting measures. This is one of those schemes of the Government which has had a very positive outcome. There is, in these times of unemployment, an immediate need to widen the scope of this scheme and implement it in urban areas also where they can focus on water-related projects. MGNREGA, both in rural and urban areas, would be an excellent response to the problems of poverty and unemployment.

Click to read original article.

Proven competence

Successful implementation of programmes like SBM and RSBY shows that civil servants have the potential to ensure good governance

I just finished reading an outstanding book “Method in Madness — Insider-Outsider” written by Parmeshwaran Aiyyar who was Secretary, Government of India, in the Department of Drinking Water and Sanitation. He was also the architect behind the immensely successful implementation of Swachh Bharat Abhiyaan which culminated in the declaration of India as open defecation free (ODF) on October 2, 2019. It is indeed a remarkable read about a result-oriented civil servant who has had an unconventional career moving from IAS to the World Bank, and then back again as a lateral entrant into the Government as Secretary. He writes that one fine morning sitting in Hanoi (Vietnam) as a drinking water and sanitation specialist for the World Bank, he was astounded to hear the August 15 speech of Prime Minister Narendra Modi in 2014 in which the PM, while outlining his agenda for the development of the country, spoke about sanitation as a national priority and also declared that he intended to make India ODF by October 2, 2019. Parmeshwaran was amazed because he felt that rarely does a topic like sanitation get a mention in the speech of the Prime Minister of a country and he was excited by the vision painted by the PM. A desire to be associated with the project was born in his heart at that very moment which fructified two years later with his appointment as Secretary. It is indeed a remarkable story of grit, determination, leadership and passion that made the seemingly impossible goal a reality.

Toilets were being constructed in the villages and cities for the past several years but it was definitely a low priority programme with insufficient available funds. The quality of construction used to be poor and it was more of an engineering exercise without any effort to change the mindset of the people. The result was a total failure to curb open defecation and check the use of these toilets as cattle sheds or storerooms by the people. India is a country having a population of over 130 billion providing sanitary facilities to which and making it use the toilet was a herculean task. My experience of 38 years as an IAS officer shows that no project or initiative succeeds without strong political will and backing. Fortunately, for this programme, the political will emanated right from the Prime Ministerial level and percolated to the Chief Ministers. Parmeshwaran provided the next required condition — strong and passionate administrative leadership. He writes that he soon realised that in India it is the PM, CM and DM (District Magistrate) model which works. He personally made presentations to the CMs to align them with the vision of the PM and toured extensively to meet the DMs to ignite their zeal for the implementation of the programme at the ground level. Despite sufficient availability of funds, the huge target of construction of toilets required close coordination, regular review and monitoring. The important thing, however, is not merely the construction of toilets but to bring about a change in the attitude and behaviour of people. The majority of the Indian population live in rural areas and were accustomed to open defecation for generations. Parmeshwaran and his team appointed ‘Swatcha Grahis’ (Volunteers) who worked as social influencers in each village and communicated, along with the DM and his team, regularly and intensely with the villagers about the ill-effects of open defecation. Mothers had to be convinced that infant mortality is closely linked to this practice as also are several diseases. The name and shame method was used along with a presentation of a realistic picture of the kind of filth people were living in and its impact on their lives. DMs were assisted by young interns, and communication through films and media was used extensively. The Akshay Kumar starrer “Toilet Ek Prem Katha” is an example of case. Parmeshwaran is very clear in his book that this was more a programme of behavioural change rather than merely the construction of toilets.

I recall being associated with this project as chief secretary, UP. Initially, I believed in the CELTS model which was advocated by many experts and was used in countries like Bangladesh to eliminate open defecation. I also strongly believe that instead of taking the entire state of UP which comprised of 75 districts I should focus on the 10 districts where the DMs had drive and energy and had already done the groundwork for the implementation of this scheme. Parmeshwaran and his team, however, thought otherwise. They wanted the entire state to be taken up at one go. I was sceptical initially but later events have proved me wrong as not only in UP but the entire country made this goal a reality.

While talking of good governance, we often lament the Indian system and its civil services. The making of India ODF is a shining example of the working of the Indian administrative system and the civil service. It proves that given the right kind of leadership and working environment the civil service is in a position to deliver good governance to the citizens. We see it happening regularly at the time of elections when the District Magistrate and his team are free from any kind of political interference and fully empowered to conduct free and fair elections and they succeed in doing so. In a similar vein, I can talk of the success of the Rashtra Swasthya Beema Yojna (RSBY) which was conceptualised and implemented by my colleague Anil Swarup. It was also a stupendous success and has become the precursor to the intensely aspirational and ambitious scheme of Ayushman Bharat.

Good governance is required to deliver quality public service to the people of this country and the SBM or RSBY only go to show that there is nothing rotten in the system. The same system and the same set of civil servants can deliver outstanding results, provided, they get political support, strong leadership, unambiguous goals and the right kind of motivation. It is leadership that is important as it helps in building teams, sharing goals, being transparent and accountable and working with total objectivity. Civil servants have to be transformed from being wedded to process, procedures and regulations to those having a passion for delivering results and outcomes. The performance evaluation of civil servants should also be done on the basis of indicators they are supposed to fulfil within a time frame. Of course, this would require allowing a civil servant to stay at a post for a minimum period of 2 to 3 years. It is also important for the political executive to realise that policymaking is their role and they should do so with the advice of the civil servants, but policy implementation should be left entirely to the civil service without any direct interference or through the obnoxious weapon of transfer. I read many articles of intellectuals who desire reform of the civil services and the administration. The fulfilment of the above-mentioned conditions could lead to civil servants delivering extraordinary results. It all appears so simple and yet does not happen because of certain vested interests. Governance is linked to providing a better quality of life to the ordinary citizen and systems have to be built which will make this possible.


Click to read original article.

Communicating farm reforms

While the new farm bills will bring much-needed reforms, continuing miscommunication with the farmers has seen the Government’s intentions being lost in translation

Almost for the last twenty days, the agitation of the farmers has been catching the national headlines and a situation of stalemate has been created. It is hoped that very soon a solution which is acceptable to both parties is arrived at. The real issue to my mind is that of a lot of apprehensions in the minds of the farmers due to miscommunication and these concerns need to be addressed and the interest of the development of the agriculture sector and the farmers. Agriculture sector structural reforms are ultimately for the benefit of the farmers and, therefore, it is important that they understand and support them and realise the gains that shall flow to them as a consequence of these reforms.

India undertook major economic reforms in the year 1991 which opened up the industrial and the international trade sector leading to a positive impact on the GDP of the country and overall economic development. However, it is true that these reforms bypassed the agriculture sector leading to a situation where over several years we have been witnessing farmer distress. Not since the Green Revolution in the 60s have any major reforms been undertaken to energise the agriculture sector and the benefits of the Green Revolution have long since reached a plateau. I recall during my civil service days we always focused on making inputs like high yielding variety seeds, fertiliser, pesticides and other micronutrients along with water for irrigation and adequate power supply available to the farmers. This led to considerable gains in productivity and overall production leading to India becoming food self-sufficient from an importer of food grains. It has now been realised that raising productivity is not sufficient and the most important thing is giving the farmer a higher income. With this objective in mind, the Government of India constituted a committee known as the Dalwai Committee which has given detailed recommendations and the honourable Prime Minister gave the target of doubling farmer’s income by 2022. This is indeed a laudable goal but it is not possible to achieve this without significant market reforms which would ensure that the farmer gets the right price for his produce.

The current structural reforms seek to address the structural issues in agricultural marketing and can definitely be viewed as a major initiative in opening up the agriculture markets and bringing about value addition to agriculture produce. However, the farmers evidently are not convinced of the intentions of these laws as perhaps adequate time was not given to have a full and comprehensive debate on these issues to make them acceptable. Any major structural reform disturbs the existing equilibrium and shakes people out of their comfort zones which always causes disturbances. We know that any path-breaking change measure goes through various stages before it is accepted. The first reaction is to oppose it, then early adopters respond positively to it and finally on seeing the results the others follow. Change can never be brought about overnight and needs patience and continuous communications to make it acceptable. This, in my opinion, is at the root of the farmer agitation. These measures structural reforms were announced at a press conference about relief packages for the impact of the Coronavirus on the economy and thereafter, ordinances were issued and subsequently acts passed in Parliament without debate leading to different people understanding the reforms in different ways and feeling uncomfortable with the change. We all know that policies always need detailed deliberations with the stakeholders and should not be rushed through. There is an adage which says that when you cross a river you should feel the pebbles below your feet meaning that policy cannot ignore the real issues which have to be taken into account at the time of formulation. However, there is no point in talking about the past. Today there is an opportunity to discuss all issues threadbare with the farmers in a spirit of accommodation and with a flexible approach which would certainly lead to an amicable and acceptable solution.

A written assurance can be given that the MSP mechanism will not be interfered with and that APMC mandis would be strengthened rather than abolished or allowed to decay. To protect the small and marginal farmer a regulatory mechanism is required to enable the farmers and the corporates to be on an equal footing. Farmer producer companies which are genuinely operational should be set up through a major campaign with funding from the Government to ensure that the small farmer is not exploited by the market. Warehouse and cold chain infrastructure have to be developed on a massive scale taking advantage of the one lakh crore Government of India scheme for this purpose and warehouse receipts should be made negotiable instruments so that the farmer does not have to indulge in distress selling and take advantage of the upswing in the markets. Another alternative is to implement the Amul model used for milk in the case of all the vegetables and fruits. Once the farmer is able to parley on equal terms with the corporates this could lead to a massive spread of food processing industries in the rural areas generating non-farm employment for the youth and transforming farmers into agri-business entrepreneurs thereby considerably increasing their income. Taken to their logical conclusion these reforms if properly implemented can lead to a big increase in agriculture exports.

The reforms are in the right direction but have been announced in too much of a hurry. It is important to address all the genuine concerns of the farmers and take the reform process forward.


Click to read original article.