Saturday, November 19, 2011

The government-private interface for India's rich and poor

A strong perception has been gaining ground in the mainstream debates that private sector in India has acquired enough strength to replace the government in many areas. However, this impression may not quite match up with the reality of life for the overwhelming majority of Indians.

The graphic below tries to summarize the respective roles of the government and the private sector in the lives of the three categories of Indians - those in the bottom half of the income ladder, the elites, and the remaining population.

As can be seen, the government interface for the corporate elites is limited to facilitating the regulatory and other clearances required to run their businesses. And even this role is receding as the economy becomes increasingly deregulated. In contrast, the government continues to play the overarching role in the lives of the poorer half of Indians (and even the others excluding the elites).


sr said...

completely agreed with this sir...even I think in a welfare state, govt has role from womb to tomb!


KP said...

Dear Gulzar,


Hope I can respond in two parts.

This must be one of your more cryptic posts.

So let me connect this to a whole lot of implications on rent seeking / institutional failure / the absence of any self-revising or correcting mechanism that move institutions (regulatory or delivery related) from compromised inertia to a level of performance justifying huge expenditures – ensuring that it reach the intended recipients efficiently.

The almost too clever by half solution to every problem - is the current mantra of markets – if the high priests of business /media had their way.

Every problem is manipulated as propaganda for market based solution - The ET "10 reforms to turn the tide" is a good example. Selling optimism and market solutions like ice-cream for instant gratification of children – seems almost an editorial policy?

Some of the suggestions and my comments:

“Foreign investment in education “- means schools for the urban/ rural poor?? – non sequitur

“Foreign investment in retail”-better prices for farmers? -non sequitur.

“Better inter-ministerial coordination “- a laughable suggestion – a ‘pretend’ problem

“Political funding and judicial reforms” – the usual cliché keeps up appearances of attempting a solution – rather than political /bureaucratic integrity be rigorously enforced - like the recent court rulings on corruption.

"Sense of victimhood to be replaced by optimism"– nonsensical motherhood.

If institutions are poorly designed, insufficiently capable, and lack integrity - any expanded use of the market mechanism results in compromised outcomes almost by design.

The flaw in our political discourse (and our discourse on politics) is to treat every problem as requiring an exogenous solution, and that too from the very system that is the core source of the problem.

The problem is endogenous - it is NOT chicken and egg - the problem is an outcome of a largely compromised bureaucratic state and elite.

All the prattle about markets – is disingenuous propaganda masquerading as solution – to that extent your graphic serves the purpose of exposing the skewed nature of the debate – urban, elitist, disingenuous - and refusing to take a harder look at the harsh reality of a compromised system and harping on solutions that retain self-interested status quo.

KP said...


Markets can and will provide solutions, but they serve segments based on the capability to pay - and thus will have specific relevance only to those target segments. But to expand markets without any fundamental corrective applied to our institutions is to continue large scale corruption– and stratify status quo.

The elite that trot out the “market mantra “ – are purely self-serving or strongly believe that governments once elected, exist to serve their interests alone.

Otherwise this ideological skew – and the inability to identify hard issues – and strategizing solutions ignoring the large majority that lie outside the ambit of their interest – only serves to expose the self-referential nature of the debate.

The large underserved poor are completely glazed-over and continue to depend on government because they don’t meet the markets threshold requirement of profits – for all the talk of the BOP market.

Why don’t political parties campaign on (and the elite insist on) the basis of fundamental institutional reform and improving institutional integrity – I believe, it is because the elite and politicians are in a mutual back scratching mode.

For instance, large sections complained about the anti-corruption agitation – because it was slowing down their business – yes, they represent that very same market that could not care less for those outside its ambit.

It is time to stop waffling and using a chicken and egg logic – government institutions are the largest provider of services – whether in the market making regulatory mode or as a direct provider to the underserved.– the corrective has to start at the source of the problem – our mediocre and compromised institutions.

In this regard, people like CJ S H Kapadia, CBI Justice Saini, Justice Pandey, CAG Rai, Kejriwal , Lok Ayukta Hegde and others deserve aggressive and visible support - these justices and bureaucrats are taking on a system where institutional equilibrium has settled down to "institutionalized corruption". Like T N Seshan in the 90's, these are heroes who as institutional agents may change the rules and rescue us from our institutions compromised stupor.

If we don’t encourage the self-revising movement in these (our) institutions, towards a better place - we fail – notwithstanding the elites fashionably babbling about markets.


gulzar said...

Thanks KP for those insightful comments. the 10 ET ideas fit in nicely into the classic elite paradigm of reforms. (of all the second generation of reforms, i still haven't figured out why retail should be a priority)

it is either naive or disingeuous to claim that, for example, among all the reforms needed in education, easing private participation in school education should be the priority. instead of reforms that help improve and strengthen government schools, the elite and opinion makers search for readymade private fixes.

as you rightly say, markets can step in where there exists an ability to pay. elements of the market system, when carefully structured, have a role to play in disciplining and increasing the effectiveness of public service delivery systems. in all other places, and they dominate the public sphere, governments will continue to play the major role. the challenge lies in strengthening them and making them more effective.

while i agree with the need for purging our compromised institutions, i am not sure whether the self-revising movement that we see in the form of Anna Hazare like movements is the solution. it may be better than all other presently visible alternatives, but that is so since we are not debating the full range of reform options.

KP said...

Dear Gulzar,

Thank you for the comments.

Specifically, on the last paragraph, Anna Hazare is important since he represents voice external to the establishment - that among other things strengthens and nudges the self-revising sparks within.

I was primarily refering to bureaucrats within and outside(with bureaucratic experience) - but mostly within who were showing the systemic capacity for self - revising.

Since it is easy for an entrenched elite to completely destroy the credibility of people who try to force checks and balances - very rarely do people try.

I am all for the various alternatives that strengthen the system and drive it towards effective integrity - to me the note was also an opportunity to acknowledge the work of committed bureaucrats and exemplary work by the judiciary - whose feisty sense of purpose is impressive.


gulzar said...

again, i fully agree with the larger point you make about internal change/transformation agents. for example, the role of CJI Kapadia in single-handedly and unobtrusively reinvigorating and restoring the credibility of the higher judiciary is worth its weight in gold.

and such actions, which stand out against the norm, are all the more remarkable since these individuals open themselves to great personal risks when embracing such stances.

but there is also the danger, as the anna hazare movement did with the lok pal bill (not with the larger issue of corruption in public institutions), about the debate and agenda getting distorted.