India’s Human Capital Problem Won’t go Away.

The World Bank released it’s first Human Capital Index (HCI) on the 11th.

Our government was quick to reject the findings – presumably, in respect of the comments on India*.

The headline finding – “A child born in India today will be 44 percent as productive when she grows up as she could be if she enjoyed complete education and full health.”

But we already know much of this – for example, that we have more stunted children than all of sub-Saharan Africa.

Part of the motivation for the Swacch Bharat exercise came from the research regarding stunted chidren – the insight being that fecal-borne diseases led to stunted growth, rather than food shortage. Sanitation would be a key contributor to children achieving their full growth potential.

Rejecting the World Bank findings does nothing to improve the lot of these children.

Our government’s reaction to the HCI report mirrors the reaction of an earlier regime to our participation in the bi-annual PISA rating on education in 2009. The report showed our students at the bottom of the charts – we did beat Kyrgyzistan, though**. Lant Pritchett said, “The PISA 2009+ results, which are both official and are beyond gain-saying, are unspeakably bad.” Our bureaucrats and politicians muttered some stuff about the tests being inappropriately designed, and withdrew in a sulk.

But again, we already know how dysfunctional our school system is. The home-grown ASER tests have measured learning levels for over a decade now, and tell us that less than half our 5th grade children can read a 2nd grade text; less than half of 8th grade children can do a simple division. The 2016 ASER report underlined that “this situation has remained unchanged since 2009, when the Right to Education, or RTE, Act was passed by Parliament.”

Dismissing a report just because it was Not Made Here helps no one – it shows a deep-seated inferiority and refusal to deal with reality.

 

*http://databank.worldbank.org/data/download/hci/HCI_2pager_IND.pdf

** https://blog.theleapjournal.org/2012/01/first-pisa-results-for-india-end-of.html

 

Why the RBI held interest rates (the dog that didn’t bark)

On Friday, the RBI surprised our financial markets by holding the interest rate structure.

There was a broad-based consensus that the Monetary Policy Committee (MPC) of the RBI would raise rates by 0.25% (25 bps). Some market watchers predicted a steeper hike, of 0.5%. Less than 20 % of economists surveyed before the MPC meet thought it would vote to hold rates. Yet, the committee took that decision, by an overwhelming majority of 5:1.

My effort here is not to opine whether the MPC took the right decision or not; both on the committee, and outside, there are highly qualified economists, armed with massive data sets, who do this kind of analysis full-time. I am, instead intrigued by how there can be such a sharp divide between economists on the panel, and those outside – 82% on the outside for a hike; 83% on the inside against it. Polar opposites.

Why would this have happened?

At this point, I can think of only one reason – the economists on the inside have access to data that those on the outside don’t have.

This cannot be about external conditions, which occupy so much of the economic news today – oil prices on the boil; our widening foreign exchange gap; the sliding rupee; surging interest rates in the US; reverse fund flow from emerging markets to global financial centres.

It can only be about Indian data sets. Our public data shows India is growing at 8.2% per annum. If this were the case, since imported inflation is a threat, it would make sense to raise interest rates pre-emptively. But supposing the economy is NOT growing at 8%, and domestic demand is under threat, then it might just make sense to hold back an interest rate hike.

Economy-watchers know that the new GDP series has several inconsistencies, but are not equipped with the data to understand exactly how wrong it is; the RBI, on the other hand, has much more insight into the current state of the economy, and the risks to growth.

To my mind, the RBI’s concern about the fragility of the Indian economy is the most logical explanation for its surprise decision to hold back a rate hike.

Why do Murder Rates Vary so Much Between Nations?

Earlier this year, my wife was invited to Brazil for a conference. When she said she would extend her trip to travel a bit, I was more than a little concerned by the prospect of her traveling alone in a country I associated with violence.

Travel Advisories from US and UK governments were not very cheery, but when we talked to friends who had been there, and mailed contacts in Brazil, the general consensus was, one needed to be careful, and aware of ‘No-Go’ areas.

Meanwhile I had looked at the numbers – Brazil has a homicide rate of almost 30 per 100,000 people per annum. India is just above 3. The global average is just above 6.

I can’t make sense of the numbers; the popular notion is that poverty, inequality and joblessnes bring violence.  Brazil and India have all three afflictions – both are poor, though India does worse in this regard; both are highly unequal, with Brazil worse off; jobs for the youth a common problem. Why does one nation have a homicide rate that is almost 10 times as high as the other?

I don’t have a clue, and welcome inputs. Global data suggests there is a geographical (and hence cultural) pattern. The Americas have a homicide rate of 16.3, with the Central American nation of El Salvador topping the charts at 80+. Africa comes next at 12.5. Europe, Oceania and South Asia, are all around 3, with some tiny nations like Liechtenstein and Nauru reporting zero homicides.

 

 

 

Interventions at MSME level are not the answer for job creation

The jobs problem in India is acute and there isn’t enough we have done to solve it. We have around 12 million new people joining the working age population every year but we create only 4 million jobs per year. To solve this grave issue, the Union Skill Development and Entrepreneurship Minister Dharmendra Pradhan recently started a new centre to guide new entrepreneurs and provide helpline to MSMEs. A novel step but it based on a common assumption that interventions targeted at MSMEs would create new jobs. This assumption has been questioned by a systematic review by Michael Grimm and Anna Luisa Paffhausen that looks at whether the interventions targeted at MSMEs create new jobs.

Grimm and Paffhausen reviewed the existing evidence on the employment impact programmes to evaluate what impact do interventions have when made on the MSME level. The review concluded that the impact was modest. The interventions are able to “successfully affect intermediate outcomes such as management skills (however) only very few interventions enhance job creation.”

The reviewers have looked at employment created as the new jobs coming up in existing MSMEs (privately or publicly owned) and as jobs that arise through the creation of new MSMEs, including self-employment. The authors analysed 53 studies to understand what form of interventions were taken and if employment generation was the primary objective. The review considers that various interventions would have varied responses. For instance, a measure to increase productivity, such as training, would only result in an increase in employment if the interventions are able to increase outputs and reduce cost. A mere increase in efficiency that does not help reduce cost would not convert into more hiring.

The review brings out various insights but some of the most significant ones are:

  • Most interventions at the MSME level are not intended to create jobs. Primarily because, “enterprise performance is typically measured in terms of output, sales, revenues, business expenditures and profits.” The interventions, therefore, focus more on entrepreneurship training and business development.
  • Entrepreneurship training is beneficial for business skills but mostly does not result in business expansion or more jobs. Unless the firms can generate profit and reduce the cost to a point where they can expand, the training does not do much for job creation.
  • Addressing capital constraints is not enough. Most of the firms use the credit or cash provided as working capital used to increase the inventories. It is rare for firms to use it on fixed capital investment like labour. To add to it, the credit is mostly too small to lead to large changes in capital or production technology which could lead to an increase in employment. For potential business starters or subsistence-type enterprises, the credit is substituted for personal needs like healthcare, housing improvement etc.
  • Formalising the firms does not translate into job creation. To begin with, it is difficult to formalise a firm “because the average firm is simply too small and not profitable enough to make use of the potential that formality offers”. Instead one of the studies shows that the firms that do generate more jobs are the ones that create more permanent and large-scale jobs.

One of the things that do work is an intervention that provides a mix of financial assistance and entrepreneurial training. Although the review has looked at a handful of studies for certain conclusions, the learning is in-depth and needs to be taken seriously to avoid falling into the same traps as other countries have.

Traffic cops and a city’s ethos

Yesterday, I got flagged down by traffic cops for steering my car across the yellow line in the middle of the road. I was bemused, because I don’t think any Delhi driver regards it as a traffic violation.

I pulled over, and lowered my window. The constable asked me whether I knew what I had done; I said yes. “That’s a fine of Rs. 1100”, he said, and asked for my driving licence. I handed it over, and while entering my name into his machine, he paused and said – “I was transferred to traffic duty 6 months ago, and you’re the only person I’ve met who admitted to making a mistake, without argument”.

That’s a crazy comment on our city, I thought – 2 minutes at a  traffic crossing, and you can document 10 traffic violations, but people do not want to be told they’re in the wrong.

“I’m glad you’re trying to enforce the yellow line”, I told the constable, and handed over 3 five-hundred rupee notes. “Wait,” he gestured with his palm.

“Insaaniyat ka javaab insaaniyat se karna padegaa”.

(Civility must be reciprocated by civility).

He busied himself with his machine, and then looked up – ” I’ve issued a ticket for driving without your seat-belt. That’ll be a hundred rupees.”

Here was a completely different comment on our city, one you don’t hear often – an uncivil populace, and a charming, sensitive man in uniform.

Excerpted economics doesn’t work

“Even if the rupee falls to 80, it will not be a concern, providing all other currencies depreciate”, our Economic Affairs Secretary was quoted as saying, earlier this week, on the front page of the Mint.

The logic is pure Alice in Wonderland – if all other currencies depreciate, then what exactly does the rupee depreciate against? One commentator explained – “he’s transposing the dollar against the rest of the world”. She was probably right. And maybe the honorable secretary had mentioned that elsewhere. If so, then the Mint editors took the quote out of context.

This morning, the Vice Chairman of Niti Ayog, Rajiv Kumar, was quoted, in the same paper, as saying,

“The rupee rose by about 17% during the last three years. Since the beginning of this year, rupee has declined 9.8%. So it has recovered. It is coming back to natural value”.

This is a staggering statement, for many reasons:

  1. The math – if something rises 17%, then drops 10%, it ends up 5% higher. But the rupee is at it’s lowest against the dollar. If the dollar is the benchmark here – which it typically is, this defies logic.
  2. If the rupee has declined, how exactly has it ‘recovered’? Recovery usually suggests rising, not falling.
  3. What is the ‘natural value’ of a currency?

Again, in response to my tweets, a  commentator tried to add context – namely that Mr. Kumar was talking in the context of REER (Real Effective Exchange Rate). That may well be the case, but even read like that, it makes the math illogical. And it definitely puts the Mint editors in the dock, again, for printing an excerpt out of context.

Careless comments typically appear when people are in a hurry. Why are our senior-most economic bureaucrats in a hurry? It doesn’t behove the custodians of a large rapidly growing economy. And it certainly doesn’t behove the custodians of a responsible newspaper, to rush half-baked statements to press.

 

Mohit Satyanand

Who the *@# are you?

I am that pesky Uncle whose car blocks a motorcycle heading the wrong way up a one-way street, and asks the driver what he thinks he’s doing.

I’m also that elitist idiot who once rapped on a lady’s car window, and handed her a Subway sandwich wrapper she just tossed, saying, “Madam, you left something behind.”

When I was not a silver-haired senior citizen, I would often get “Who the @#* do you think you are?” in words, or body language. Now, it’s more, “Don’t waste my time, move on.”

Sometimes, it’s more hopeful. Recently, on my cycle, I caught up with a motor-cyclist who swerved across two lanes, crashed one red-light, but was forced by traffic to wait at the next. I smiled at him, and asked him how much time he’d saved by the last manouver. “Not much”. he acknowledged.

And even if he had, I persisted, what would he have done with the time. He had the grace to consider that a valid question. “True”. And actually went to say, ” I won’t do that again.”

I’m not idealistic enough to believe that I modified someone’s behaviour that morning; but I got through.

I once read that traffic in Italy – long renowned for it’s unruliness – began to tip into the lane of European civility when it became socially unacceptable to drive with extreme selfishness. In Delhi, where I live, the blatant disregard of driving rules is worsening; I don’t see the traffic police responding in any meaningful manner.

As long as I have the energy, I will continue to be that pesky Uncle. But the years have taught me that you have a much better chance of getting through when you engage with civility and decency, rather than anger. And humor is the best recipe.

Once, tired at the end of a long day commuting by metro, I stood in front of the seats reserved for senior citizens and the disabled. The two young men occupying the seats pretended not to have noticed me. Loudly, I asked, “Which one of you is a senior citizen, and which one disabled?”

One scooted into the next carriage. The other looked around, saw another white haired-gent, and asked him resignedly, “Would you want to be sitting, too?”

I think we have a responsibility to engage with our fellow citizens, to make ours a more respectful, orderly society. But, if we want to succeed, we too, need to engage with respect.

The World’s most livable city

Yesterday, a cousin sent me a triumphant WhatsApp message from Munich, a city he has made his own: “Munich named world’s most livable city, again!”

The top city ranking was awarded by Monocle Films, which does an annual ranking of the world’s 25 top cities. Mercer, a global consultancy firm, ranks Munich at Number 4.

No.1 or No.4, Munich’s a gorgeous city, with great museums, a vibrant student life across 16 universities, beer, and above all, the English garden. With 78 kilometers of paths, this is one of the world’s largest urban parks. The Isar river runs through it, and a quirk in the topography creates a standing wave that challenges surfers in body suits. 10 minutes downstream, an artificial island hosts a Japanese tea house. Some of the garden’s architectural features are somewhat kitschy, but the feature that caught my liberal soul was this signboard posted at the top end of a meadow reserved for nude sun-bathers

 

I translate loosely:

LAWN FOR NUDE SUNBATHERS

 

  • Nude sunbathing is permitted in the meadow within the horse track
  • It doesn’t need saying that dogs in this area must be on a short leash
  • Please don’t disturb the peace of sunbathers here – many other lawns within the garden are at your disposal
  • Football and other ballgames are not permitted

Please regard this freedom as a special expression of a liberal and tolerant society

 

For this one sign board, and the worldview it represents, I hereby nominate Munich as the most tolerant city I have ever visited.

 

Jobs amongst the Transgender community

The employment figures tell a positive story but much is left to get jobs for the transgender community in India.

It was a major feat when Transgender Persons (Protection of Rights) Bill, 2016 was tabled in the parliament. Even though the bill was not passed, the mere act of recognising the community provided economic freedom and social support for around 4.88 Lakh people. Also finally, the transgender community has became a part of vital data sets like employment and unemployment surveys.

Source: Labour Force Participation Rate (LFPR), Worker Population Ratio (WPR) and Unemployment Rate (UR) for persons aged 15 year & above according to Usual Principal Status Approach (UPS) based on 2″d, 3’d, 4th and 5th Employment-Unemployment Survey (EUS), Annual Report 2017-18

The 2016-17 Employment and Unemployment Survey captured the Labour Force Participation rate amongst the transgender population. Labour force participation rate refers to the part of working population that is currently employed or seeking employment. It is, hence, used widely to understand the willingness to work within the population between 16-65 year olds. Hence, its a major accomplishment if the LFPR for transgender population was 48 percent in 2016-17. In comparison,  the LFPR for women and men was 23 and 75 per cent respectively clearly signifying how low the female labour force participation is.

Although the figures tell a positive story, the reality lies in the fact that in the first week of their job, 8 of the 23 transgender people, all trans women, quit. As elaborated by Somak Ghoshal,

Employed in a variety of roles, from ticketing to housekeeping staff, which paid between ₹9,000-₹15,000 a month, most of them found it impossible to make ends meet, especially since landlords in the city charged them ₹400-₹600 a day for the most basic accommodation. That is, if they agreed to rent a place to them at all.

The Ocean of Humanity

Ex-President Pranab Mukherjee’s speech at the Rashtriya Swayamsevak Sangha (RSS) headquarter has stirred up the proverbial hornets’ nest.

The RSS is not an academic institution. It is a cadre-based organisation with strong ideological moorings. Certitudes are important both for it’s existence and survival. Despite this, they invited probably the most cerebral and scholarly ideological opponent to address their valediction. It shows a certain confidence and suppleness that must be appreciated.

As for the citizen Mukherjee’s speech, it was impressive to say the least. The central feature of his speech was neither the invocation of Jawaharlal Nehru nor of the constitutional patriotism. For me, it was the reference to Tagore’s celebrated poem ‘Bharat Tirtha’. Tagore’s formulations on the nationalism and patriotism are important and have a contemporary resonance for a variety of reasons.

Tagore was in the search of an authentic Indianness. He expressed his vision lyrically in a number of poems and more concretely in the form of Shantiniketan, the institution he established and nurtured. His vision was rooted, yet cosmopolitan; traditional yet modern. Synthesis and reconciliation, and not recrimination, was it’s essence. Tagore was also the most important spokesperson of the Indian version of liberalism. His ‘Ekla chalo re’ is possibly the best articulation of an individual spirit unafraid of the collective tyranny and his ‘Chitto jetha bhayashunyo’ the most appropriate translation of the Kant’s Sapere Aude.

Needless to say, Tagore’s vision of India is very different from the ethnicity and identity centric versions of nationalism. If the subsequent discussions of Mukherjee’s provocative speech can bring out those nuances and rescue the richness of Tagore’s message from the collective amnesia, it will have served it’s purpose.

Social norms and the Bangalore Metro

I am a regular user of the Bangalore Metro. In the monstrosity that this city’s traffic is, Bangalore metro is an island full of all things beautiful. One can be sure of no pollution, no traffic snarls, no delays, functioning public utilities (elevators, escalators, etc.), clean platforms, and clean train compartments. There are no bins inside the compartments. In the three years of travelling on the Metro, I haven’t seen even one person eating inside the train let alone throw things there. Ditto for platforms.

I’m surprised by how the organised metro world is so different from the chaotic one you experience as soon as you step out of the metro station. In particular, the cleanliness inside the metro trains and stations causes cognitive dissonance. Even more so, if you think of the damaging behaviour that people usually have toward public transport.

What explains this rule-following by the otherwise rule-violating people that the Indians are? Mind you, people adhere to rules even though there are no guards inside the train compartments. While pondering over this question yesterday with colleagues, here are the few explanations that we came up with. Metro stations are ring-fenced and stepping inside this ring signals to the people that they must now play by the rules inside. There are surveillance cameras on the platform and inside the trains, so there is fear of humiliation if caught on camera. Fines/penalties inside the metro stations are spelt out and displayed, so people know their liability should they flout the rule. Metro stations, platforms, and trains are new, and people’s psychology is to not dirty what looks shiny and clean.

Last year the government started a new train, equipped with personal TV screens, clean toilets, and everything. The train was vandalised in the first journey. And one can argue that that was because for the people who boarded the train, it was only the train which was shiny new. The railway platform and the rest of the experience was same old same old. In contrast, once you enter the metro station, your “world” changes completely. For similar reasons, malls are less littered than BDA complexes.

So here are the questions that follow. If the same commuters are put in the trains and platforms run by the Indian Railways, will we achieve similar standards of cleanliness and rule-compliance? What does the Bangalore Metro tell us about social norms and how to create and change them?

The philosopher Christina Bichhieri says, “for a social norm to exist, social expectations must matter.” Should we then stop saying that “we are like this only” and look at how to change the expectations that we have of ourselves as a society? Will we have to recreate the world to change how people behave?

Beyond petty politics

A few days ago my office folks had a long debate on the morality of voting. This entire conversation was ignited when one of the colleagues questioned how non-voting is considered to be a lesser moral position that voting. The conversation that followed was a like a strong debate where both sides had valid arguments. On one hand came the argument that supported non-voting as a lesser moral activity since it’s about the aggregates impact that registering the discontent has as opposed to not voting. On the other hand, it was argued that going to the voting booth to cast a NOTA (None Of The Above) vote was as good as showing dislike for all parties and emphasised on how little an impact a single vote has in such situations. I supported the latter. 

All of this conversation reminded me of a brilliant book by José Saramago called Seeing. Here’s the brief summary from a review:

The story begins with those ordinary citizens, who not so long ago regained their sight and their tranquil day-to-day lives, doing something that seems quite unconnected with vision or lack of it. It is voting day, and 83% of them, after not going to the polls at all in the morning, go in the late afternoon and cast a blank ballot.

We see the dismay of bureaucrats, the excitement of journalists, the hysteria of the government, and the mild non-response of the citizens, who, when asked how they voted, refuse to say, reminding the questioner that the question is illegal.

I will not ruin the book for you but it was interesting to remember how the story shows that coalitions and disagreements between parties is a much smaller problem for a democracy compared to apathy of the people. The citizens in the book were not just indifferent to who came to power but did not see how the person who did come to power would make any difference to them. This stark realisation brings forth the significance of governance and institutions structures that secure the incentives and relations between the civilians and their governments, beyond the rigmarole of political terms.

While the Congress and JD(S) government come into an agreement over Karnataka’s election, it is time to see beyond the petty politics and realise that although there has been just 0.9 per cent of NOTA votes this time, it is more than six smaller parties in Karnataka, including two parties with a nation-wide presence. 

PS: I would also highly recommend Death at Intervals by José Saramago.