Saturday, November 26, 2016

Why Demonetisation Will Not Eliminate Black Money or Corruption / published in ''

Ringside View of an Economist at Washington D. C -2016

Mr. Trump Triumphs; against all odds and against own expectation; a spectacular win indeed! With traces of racial undertones and hordes rural white-supremacists voting in vengeance to eight years of the so called ‘black rule’ of America. Mrs. Clinton is a victim of anti-incumbency -third straight Democratic rule in Washington D.C. The vote has been a close, although Mrs. Clinton has counted more of the poplar votes, the US electoral process has a unique arithmetic specific to each state which gave the coveted the winning total of 270 electoral votes to Mr. Trump. Over all Mr. Trump shifted the electorate to political right and towards the right side of American map. In real political terms this nation is split in the middle the Rural (dominantly Republican) versus the Urban (dominantly Democrat) divide. The urban concentration across the US are characteristically unique due to pluralistic, multi-ethnic and multicultural concentrations in city centers and working spaces.
There are racial undertones of white supremacy; will this fade away or consolidate during Mr. Trumps presidency is yet to be seen.

The major difference between the two candidates beginning the primaries through national election canvassing was ‘predictability’. The case of Mrs. Clinton was most predictable often branded as the third-term of Mr. Obama; whereas almost no one including the media and political pundits could understand what Mr. Trump was talking about; excepting the fact that he clearly knew who was his electorate - rural, predominantly white, relatively more men and less educated. A quick compare -Mrs. Clinton a long time political activists, politician and know the tone and tenor of Washington DC for over 30 years of her professional life; where as Mr. Trump had never been to this place, excepting last about a year when he rehabilitated the old post office headquarters in to Trump-luxury hotel.

Now that a political novice Mr. Trump is the President elect, what can one expect his government, policies and governance looks like. At the moment his ‘Idea of America’ is rhetorical and policies at best opaque. Issues are complex and the answers lie in his desire, ability and competence to control and maneuver the established democratic, economic and social ‘institutions’ of America. Note that there has never been a President placed as powerful, given that both the Senet and House are now in control of the Republicans. Will Mr. Trump be positively guided by both these houses or will he try to subvert and at odds with these legislative institutions is yet to be seen. At the moment predictability quotient on this count is low.

A contrast is in order - in India Mr. Modi did won his office in a somewhat similar style yet the additive arithmetic in Rajya Sabha is in opposition due to lack of numbers. Mr. Trump on the other hand has the advantage of having both houses on the same side as his own. Yet these legislative institutions may become functional in opposing radical and reckless initiatives should Mr. Trump decides to unexplored and uncharted spaces on his own. The separation of power between the executive, legislature and judiciary in the USA is strong and easy to comprehend than in India.

For Mr. Trump, his decision to jump into the race is akin to taking large bets in the expanse of Trump Taj Mahal Casino at Atlantic Ocean (closed since a couple of months). This bet he took and won just like it; does not even know what has he won - a fortune called America, a nation in the forefront since the second world war and an economic power house hosting almost one-fourths of the global market and GDP. Trump jumped in the political bandwagon as if on a bet after exhausting all poker machines at Taj Trump and then has hit a jackpot! All the way during his life he has learned to take risk and overcome it often with the manipulation of laws and utilizing fiscal incentives through insolvencies. Now, will he know as to do what with the booty - the whole of United States, will it be on the betting table? As this Presidency sets in and days go by pertinent questions will be - who is the President Trump? Will his presidency take off at all? (there are protest all over the USA and some are violent). There is also tendency among the winners of the jack-pots to lose almost at the same it was won. A windfall found and lost at the same time.

Predictability of the un-predictable - how will the Trumpism deal with issues of immediate concern, for example, entitlement reforms relating to government administered funds; federal minimum wage policy or differentiated state minimum wages and so on. If deportation of illegal migrants is hastened the real wage rates will blot to unsustainable levels affecting small business and enhancing unemployment rate. Is it possible to achieve a balancing point; building a wall may not be economical in the complex interaction of labor demand, supply and wage rates. Reducing direct taxes specially to favor large business may also impact precarious fiscal balance while the public debt is almost equal to the level of the GDP, about $18 trillion.

The policy watch points and economic emphasis seems to be on restoring crippling infrastructure, followed internal security, trade and environment. major watch points. There will be symbolic pressures for domestic capital to return, for example, the Ford’s Mexico investment; but that will be a kind of end to it; because international capital flows are determined by a very rules of money that Trumpism may still not mature enough to know. Today the US international investments bring in huge profits back home and also create jobs for Americans abroad. Will the coal pits begin to spew carbon, looks like the competition between coal and shale extracted gas will continue?  But the real issue will be revolving around harnessing the Sun that is now mired with state level political corruption. It would be in the interest of the Presidency and the nation that he calls on talent from all across the board irrespective of party leaning. The policies during 2017-2020 will be as good as Mr. Trumps advisers and cabinet selects.

Someone who pass over twice on Constitution Av at the back side of the White House and Pennsylvania Av from in front of the Trump Hotel, to this author, it is clear that Mr. Trump will face serious issues of ‘Conflict of Interest’ with the Presidency and his business interests with potential to destabilize his position in office. Now that the democratic President Mr. Obama and even the failed competitor Mrs. Clinton has offered unconditional support to Mr. Trump; he has to think wise. There are thousands on the street affirming ‘not my president’. This has never happened in the USA before, protest against President Elect. And this will not be the only type of resistance in during the next four years of Trump Presidency.  

Monday, November 16, 2015

Population Imbalance Dangerous to Economic Growth and Social Cohesion:

Demographic Transition:
Records of demographic transitions across the globe have shown almost irreversible trends leading towards low fertility, low mortality and high living expectancy regimes.  Last about two thirds of century, especially period after the Second World War has seen revolutionary trends in population growth, stabilization and falling fertility. Most of the countries in Europe, Japan, USA, Australia and Canada have been recording lower than replacement fertility, low levels of mortality and high life expectancy.  It takes at least two child births in the life of a married couple, or 2.1 births per woman to sustain the human population.     
China and India have been two large economies that experienced unprecedented high levels of fertility during the mid-period of 20th century. Yet the data below suggests that China achieved a lower than replacement fertility by 1995 itself although its had much higher fertility than India’s in 1970 (see below). In India the ‘total fertility rate’ is still far too high at 2.5; thereby the projections suggest that by the year 2030 India’s population will cross that of China to occupy the top spot of the most populous country in the world. Now that one child policy is relaxed in to two-child policy in China it is expected that the population stabilization can occur somewhat earlier and by 2030 it is expect to have a population of 1.45 billions.

Population in Millions of China and India over years
(with 2 child policy)

Multiple Sources and Projections
Average number of births per woman over the years
China –‘late, long, few’ policy
China- One Child Family (urban) Rural exceptions
China-Urban 1.3 | Rural <2 o:p="">

Multiple Sources
China’s One Child Policy:
China has withdrawn its controversial one-child policy due to the realization of imminent prospects of an ageing society and a growing shortfall in the workforce. According to UN estimates, nearly 440 million people in China would be over 60 by 2050, signaling a sharp decline in the labor pool. Recently the working population between the ages 15-59 slid by 3.71 million in one year alone.

Three strong implications of the population imbalance are : (a)  labour shortages; (b) lower sex ratios affecting women’s status and increasing family stress; and (c) increase in the ratio of old-age dependency.
The rapid decrease in the birth rate, combined with an improving life expectancy, has led to an increasing proportion of elderly people and an increase in the ratio between elderly parents and adult children. In the absence of old-age pensions, approximately 70 per cent of the elderly are financially dependent on their offspring. In China, this problem has been labelled the "4:2:1" phenomenon, meaning that a couple (two) are responsible for the care of one child and four parents. The government has eased access to government pensions and has launched schemes to encourage saving for private pensions in an attempt to reduce the burden of the 4:2:1 phenomenon. In addition, urban couples who are themselves both only children are now allowed to have more than one child.  Yet the recent policy liberalization allows only for two children!

The sex ratio (male: female live births) is 1.03 to 1.07 in industrialized countries. In China, this ratio has increased from 1.06 in 1979, to 1.11 in 1988 and 1.17 in 2001, with even higher ratios in rural areas. In rural areas, the sex ratio is 1.05 for the first birth and rises steeply subsequently. In urban areas, the sex ratio is 1.13 for the first birth and peaks at 1.30 for the second birth showing that some urban Chinese make the choice to perform sex selection with the first pregnancy, since they are allowed only one child. In rural areas, most couples were permitted to have a second child, especially if the first is female. So if the second (or subsequent) child is female, the pregnancy often ‘disappears’, allowing the couple to have another child in an attempt to have a son.

China and India:
China and India are experiencing rapid economic growth. Both have huge poor as well as rural agrarian populations. Neither country provides an effective social security net for the elderly. Both realized that population control is essential to increasing per capita GDP. In both societies there is a strong cultural preference for sons. Both are facing declining sex ratios through use of sex selective abortions.

Labor needs for an economy growing fast are immense. In today’s world when life expectancy is growing to higher levels, there has to be fare balance between the able bodied labor with the aging people on the one hand and the children and adolescents on the other. A well-educated and skilled labor force is the necessity of a nation which is experiencing fast pace of development such as India and also China.  But as one can see below India has still been experiencing high fertility and huge child and youth population compared with China. Note that China has relatively far too lower proportion of child population upto the age of 20 years and also has huge older population above the age of 50 years. Thus a lower proportion of able bodied middle aged has to take the brunt of meeting the essential needs of both the young and the old.  At this juncture it is difficult to say which of the two age distributions are virtuous; the seemingly better age structure in India can be curse if the huge population created additional pressure on resources and public services.

However, not far from now, just two generations ago, both India and China were poor and population growth was phenomenal caused by decline in diseases of the masses such cholera, plague, smallpox, polio as well as almost no deaths caused by famines. There has also been a slow but certain reduction in infant mortality which has caused the life expectancy to reach about 65 years even in India.

Just as the less coercive Chinese  ‘late, long and few’ policy was slowly but steadily reducing fertility, similarly an Indian policy of a mix of incentives and dis-incentives, such as family ration for the female child attending school; monitory incentives for girl child enrolled in higher school grades may impact fertility decline in the long run.

The importance of population size of India has specially significance to the economics in the west including the USA.  Given below replacement level fertility in most of Europe and high dependence on migrant labor in the USA; it is extremely essential that English speaking skill labor is available for the world to draw upon. While China could use its labor force during the past four decades of high economic growth rates; its future growth is dependent upon the sustained supply of youth and skilled workers. In spite of fast pace of technological innovations and applications to labor saving manufacturing and services; there are a certain minimum amount of labor demand which is difficult to be domestically sources in the European economics.  Thus the so-called curse of high population and high fertility in India seems to be turned to be a virtue but not for the Indians – but for the western world.

Tuesday, May 19, 2015

India’s Pink Gold: an Ocean of Nutrition and Protein

Meddling with the well established Bovine Economy will be a drag on India’s Development 


Thursday, May 7, 2015

Hindu Rate of Growth! BJP’s Social Ideology a drag on Economic Development?

India’s efforts to race in the league of the economically developed and politically matured countries of the world look somewhat premature. There is a lot of hype mostly emerging from relatively higher levels of growth rates during the last decade and half; as this happened due to low absolute levels to begin with. It is the large population count, a basic multiplier that leads to grand GDP estimates, real opulence that could generate sustained demand, promote economic activity and spiral up further growth is limited. At best the consumer-heroes of India are the middle and lower middle class who must engage the market to meet their basic needs such as food, energy, transportation, education, health and technological essentials. While affordability and appropriate technology is still the issue, the relatively higher inflation is leading unexpected race to achieve affordable living.

A considerable social and ideological baggage has sprung-up since the BJP assumed power which potentially can pull down and derail the economic growth and social development prospects of India. Note that India has come a long way overcoming the drag of the socialistic ideology, since about 1985 the GDP grew to increasingly higher levels continuing until now. Although the recent global downturn has only marginally depressed India’s GDP growth, it will be the only large economy in the globe expected to register a relatively high growth of around 6-7 percent during 2016 and 2017. Such a higher rate of growth if sustained for a decade and more, can then enable India register a place in the ‘new league of nations’ that will propel global economic development during the best part of 21st century.                                                                                                                                                                                                                                                                                                                         Now let us ponder over the conditions that are necessary for India to register a sustained higher growth rate during the immediate to medium term. Firstly, India’s natural advantage of harvesting and exploiting vast natural resources will yield higher growth only when it has access to investible funds and appropriate (green) technology. Both these inputs are available to India from abroad through the process of foreign direct (FDI) and foreign institutional (FII) investments. Secondly, the relative advantage of having a youthful population which will continue for at least another two to three decades can sustain only when they are educated and skilled appropriately; which in tandem with increasing investments get worthwhile rates of return through enhanced productivity in essential sectors of the economy such as manufacturing, services and agriculture.  Lastly but not the least, India must exhibit social cohesion and societal peace in the manner that it becomes the preferred destination for foreign investors and technological flows assisting the economy to progress through improved financial efficiency and reduced cost of production.  The structure of modern labour supply in India is uniquely lopsided favouring the high castes who are socially and economically better-off, keeping away large proportions of Scheduled Castes and Tribes, the Muslims and selected ‘other backward classes’  from the modern labour market. This scenario needs to be calibrated towards socially inclusive labor market, which amounts to no less than a paradigm shift.

Recent interferences by the ultra right-wing groups who fantasise India to be a Hindu state often identify themselves as a form of social-civil society have thrown off-gear the policy frameworks, legal and civic institutions regulating economic and social domains of millions of citizens. They are able to effect policy reversals in selected states and even at the centre, such as withdrawal of quota-reservations to Muslims (a case in Maharashtra), banning the culling and consumption of livestock and so on. Even many compelling legal cases with respect to police excesses and motivated political threats are being withdrawn. There are changes and revisions being made in school curriculums promoting right wing Hindutva ideology. The scientific temper among the students and the population at large is being challenged in a manner that unsubstantiated beliefs are used as citations and theories to the dismay of modern thinkers, practitioners of reason and science.

Establishing links between religion and levels of GDP across the nation is taboo. It is instructive, however, to learn that, unlike the Christians, the Muslims and the Buddhists who constitute much of the population of the globe and spread around a large number of countries across the continents; the Hindu religion is confined within shores of India from three sides and the imposing Himalayas in its north.  Note also that over 95% of the Hindus live in India and only small numbers in Nepal, Bangladesh and Pakistan; all these countries have registered low levels of per capita GDP of less-than USD 1500, India being on the top.

Over 61 per cent of the Buddhists on the other hand domicile in countries which have high levels of GDP including Japan, South Korea and China.  Incidentally it is a matter of historical fact that Buddhism emerged in the Indian sub-continent yet it did not survive on these lands to the extent that only about two percent of India’s population is Buddhists. Similarly, practically all Christians with the exception of Congo and Ethiopia (about 124 million out of 1.5 billion) live in countries with very high levels of GDP, such as the USA, most of European nations, Brazil, Mexico and Russia.  Even over 55% of the Muslims live in countries which have relatively higher per capita GDP although the most numerous of the Muslims live in India, Pakistan and Bangladesh with meagre GDP. This simple association between religion and GDP summarizes the broad parameters of religiosity and culture and its influence on the economy and Hindu-radical groups need be better informed about this association.

On another plain, it took a President of another country - the USA to preach lessons on diversity, tolerance and creation of equal opportunity during his visit to New Delhi in January 2015. Mr. Obama even invoked Mahatma Gandhi, the icon of religious tolerance during the ‘63nd annual national prayer breakfast’ speech in Washington D. C, to point out that ‘looking at what is happening in India even Gandhi would have ashamed’.  Politically though, at the moment in India, the presence of minorities especially the Muslims are of no significance excepting as a historical fact. They often are of entertainment value for the general masses and not welcome co-patriots.  However, the Muslims constitute the backbone for a number of traditional manufacturing; the structure and growth of modern industry especially in the areas of textiles, construction, leather, garments, gems and jewellery and iron and steel and have been based on the artisanal skills they carry to this day. A recent estimate undertaken by this author suggests the Muslim labour force contributes relatively higher value added compared to all other socio-religious categories at all levels of education excepting the topmost which is affected by labour market and employment distortions caused by quota system.

The state governments in India wield a substantial independent power in many areas of governance especially those affecting the basic needs and human development. The public police are implemented mostly through state bureaucracy the solutions for the social and also many economic issues have to be found at the local level. It is in this context that India and its states need to establish institutional arrangements to ‘equal opportunity a cherish goal and institutional mechanism to be found and executed. Prudent economic and social policies both at the national and state levels can yield higher economic growth lets India falls again in the trap of the so called ‘Hindu (Low) Rate of Growth’.

Wednesday, January 28, 2015

Pathways to link Communities with Governance at the Grassroots in India

National Planning takes effect and yield fruits at the grassroots. It is essential therefore to make assessment of the efficiency of the government programs at the lower level of administration. Factual and evidence based research will enable effective policy engagements with the district and state level political and bureaucratic institutions for corrective measures as well as making new demands that are needed for the communities and local stake holders.  Public policy approaches to development are generally limited to levels of India and States. Given the vast geographic expanse and high population concentrations across India a meaningful development strategy that address acute poverty, malnutrition, illiteracy, ill-health must occur at the level of the districts. Further, hitherto development policy decisions were made using a combination of district level per capita averages and a small set of indicators such as average rainfall and agricultural productivity; little information on the quality of life and human development were available.

In the recent past, however, dependable data on a number of qualitative aspects of human lives have become available at the level of the district. Such data can be extracted from the decadal Census (most recent 2011), the annual national sample surveys (large sample size surveys are done at about five years interval) and district level household surveys. The ‘US-India Policy Institute’, Washington D. C and ‘Centre for Research and Debates in Development Policy’, New Delhi have extracted a number of socio-economic and human development indicators from such multiple, nationally representative sample surveys, for all districts of India. They are reviewed to assess and compute the ‘levels of development’ and ‘equity of access’ to development for each district. The composite index consists of four dimensions - economic, enabling material-well being assets, education and health. The final results in the form of maps are scheduled to be released at New Delhi in January 2015, in the form of a composite development index and four indices highlighting components described above.

Continuing this district level analysis, in the second-stage the development indices are computed to each of the major socio-religious communities (SRCs) for each district of the state and all districts of India.  The differentials according to SRCs are presented in graphic format. This analysis is resonant of the Sachar Committee Report which was completed in 2006; current analysis can be termed as mini-Sachar report for each district of India. In this context there is scope to elaborate analysis of data on employment, financial allocations and measurable outcomes disaggregated by SRCs so as to operationalise policies for improving diversity in public programs. The district level mapping and analysis for operationalising diversity in public and private space cannot be over emphasised.

Generally the district-level reviews use service statistics drawn from district records which often are dated and qualitatively poor. The strength of the current research lies in the type and source of data as well as methodologies used in analysis. Information are extracted from unit (household) level records from well respected surveys, therefore estimates are robust and academically sound. These estimates provide the academics, watchful communities, civil society and people at large opportunities to find out the pathways to engage the district level bureaucrats and governance.

The most important issues confronting the communities at the district level are two: a) to begin with financial allocations are inadequate; yet huge proportions of the development funds earmarked for annual expenditures on essential programs such as mass primary/elementary education, women and child development services, public healthcare and employment guarantee scheme are never appropriated and spent. b) The inequity at the level of the district is a serious issue; there are many versions to it such as based on occupations, education levels and also social identities expressed in terms of religious and caste affiliation. The last dimension which important at local level in distribution of welfare benefits; they have become contentious at national-political level leading to promotion of discrimination at the grassroots.

The following is a short list of selected districts at about one hundredth interval. North Delhi is ranked 1 with an index of 0.69. Ideally first rank holder could have taken a value of 1.00 but even the first district has huge scope to develop for example in health parameters which has only a value of 0.51 although the enabling index is 0.91. 

Rank |Dist | State
Devpt. Index
1     - North Delhi (DL)
100 - Shimla (HP)
200 - Uttarkashi (UT)
301 - Saharanpur (UP)
308 - Varanasi (UP)
400 - Osmanabad (MH)
500 - Chandauli (UP)
599 - Araria (BI)

However, the contrast is comparing the first ranker and the last. Araira in Bihar has recorded a development index of only 0.16 compare this with North Delhi which has a value of 0.69. Note that Araira has no enabling economic environment which can push development any time near future unless critical policy strategy and investments are made soon. It is this kind of analysis both within the state and across the state which gives comprehensive information for upliftment of communities living in clearly identified districts of India.

It is in this context that the district level development and development index provide ‘essential empirical evidence that makes a case for setting up of National and State-level Equal Opportunity Commissions (EOCs)’. The state level aggregated district-reports will help the state government in many respects. Besides enabling assessing and monitoring the levels of development and equity, the indices will make it easy for the state government to articulate the need to establish 'State Level Equal Opportunity Commission'. Such EOCs can independently deal with differentiation in access to public services at the grassroots level, thereby enabling the elected government and associated institutions to focus their time and energy to the development of the state.  The EOC as an independent institution will facilitate communities and local stakeholders - civil society and private investors, to interact with each other as well as with the government bureaucracy to thrash out contentious issues and strengthen welfare policies. Further establishing State-EOCs will severe as examples for setting up a national EOC as well.  

To articulate these relationships better it is essential that development practitioners, government officials, political leaders and civil society groups come together to discuss and debate strategies to address district level development and diversity of development. Such data will also give a comprehensive visual picture of the development of the nation in a comparative perspective promoting strong sense of nationalism and patriotism. DDDIx makes a good case for district level monitoring of development strategy considering the aspects of equity and social justice.