The supply side analysis of India and China

Comparing China and India is a fascinating experiment. The dragon and the tiger, the manufacturing hub of the world and the outsourcing capital of the world, communism and democracy, the comparisons go on. While China has been growing at a breakneck double digit pace for nearly two decades, India is only now accelerating into that growth league. If viewed in its proper historical perspective, the Chinese growth story is frightening. In the economies of scales of production, manufacturing and construction, India is decades behind China. Let me give some examples.

While India generates 1,29,000 MW of power of a total demand of over 2,00,00 MW, China has a generation capacity of 622,000 MW. China added a fifth of this capacity, or almost equal to India's total generation, last year alone. India's total capacity addition in the full Tenth Five Year Plan period was less than 20,000 MW. Depsite all the hype surrounding the Goldern Quadrilateral Project, India added less than 2000 km of National Highways, whereas China laid 25000 km of National Highways in 2006.

A recent World Bank report titled, "Highway and Railway Development in India and China from 1992 to 2002," points out that in the early 1990s India's railway infrastructure was actually ahead of China's in terms of total route kilometre and route kilometre per head of population. Over the next 10 years, however, China's rail network outstripped India's on virtually every parameter. In the period 1992-2002 while India's overall rail network grew by only 1%, length of double track by 10%, and electrified lines by 48%, the corresponding figures for China were 24 %, 69 %, and 50 %. Investment in the railways in China during this period was estimated at $85 billion, compared to $17.3 billion in India. China is set to build 19,800 km of new railway lines by 2010 in addition to upgrading 15,000 km of existing lines. In 2006 alone, $19.7 billion was invested in railway construction allowing 912 km of new lines to be completed and 1,016 km of lines to be double-tracked, besides starting work on 1,609 km of new lines.

While India is struggling to establish 150 kmph rail corridors, China already has 5,370 km of tracks that can take speeds of up to 200 kmph, in addition to another 14,000 km where trains can run at speeds of 160 kmph. Over the next five years, China aims to raise further the speed of passenger trains to 200 kmph on an additional 13,000 km of existing rail tracks.

The annual cement production of China is nearly 1000 mt, whereas the Indian production was only 160 mt in 2006-07. India's steel production of 40 mt, pales in comparison to China's production of 400 mt in 2006.

In contrast to the breakneck, almost suicidal pace at which China is growing, we have a serious problem getting to overcome our snail's pace. We struggle to build even 2000 km of world class six and eight lane highways a year, or 5000 MW of power, or 2000 km of railway lines. In fact, except for telecommunications, the growth of our infrastructure sector has been as abysmally poor as China's has been spectacular.

This can be extrapolated to closer home, in Vijayawada Municipal Corporation (VMC). Among the different agencies in Vijayawada, including the private sector, the VMC is the largest provider of construction contracts. In the past three years, the VMC has done capital works worth Rs 22 Cr in 2003-04, Rs 28 Cr in 2004-05, and Rs 37 Cr in 2005-06. Then in March 2006, Vijayawada became one of the cities selected for the JNNURM Project. In 2006-07, the VMC was sanctioned Projects worth Rs 750 Cr, to be completed over the next 2 years. Given the existing capacity, both internal and external, and even with the most optimistic projections, it is difficult to imagine more than Rs 200-300 Cr being spent under the Project over the next two years. Even this would be some achievement, being 3 to 5 times the present expenditure.

On the demand side, achieving these targets would require extensive outsourcing of many engineering services, besides personnel augmentation. Innovative solutions like Project Monitoring Software can help the existing system monitor and execute much larger quantities of works. It would be necessary to carry out radical streamlining and liberalisation of the existing tendering and contracting procedures, so as to expedite awarding of large amounts of works. I had touched upon some of them in a previous post.

But going beyond the aforementioned demand side problems, we have more difficult supply side challenges. Do we have the resources in terms of contractors, skilled manpower, construction materials and logistics available to execute these works? This question has to be answered in the context of a massive boom in construction activity in real estate and infrastructure, including urban infrastructure.

Let me illustrate this with a few examples picked up from our experience in VMC. As I had mentioned in a previous post, there are no Readymix Concrete (RMC) Plants in the entire District, and only two for 4 districts. Even the smallest capacity RMC plants can produce 30 cubic meters per hour, as against 15-20 cubic meters produced the whole day with site production. There is a lone contractor in Vijayawada who owns centering material (required for storm water drains), and he has only material for 1500 m. Under the JNNURM, we have about 50 km of storm water drains sanctioned. Given this severe scarcity, the material is being rationed out between the ongoing works, thereby severely retarding the progress of works.

The example of Under Ground Drainage (UGD) sector is typical of the capacity problems faced by the system. With massive spurt in real estate construction activity, there is a severe shortage of stoneware pipes which form the major share of a UGD network. Faced with this demand pressure the prices for stoneware pipes have skyrocketed. There are only a handful of manufacturers with the required size dies for casting RCC pipes of 600 mm and above diameters. A single manufacturer monopolises the market for Ductile Iron (DI) pipe (required for water and UGD pumping lines) across the country. There are only two manufacturers in India of centrifugal and submersible pumps used in sewerage systems. In addition, the number of sewerage contractors with the capapbility of taking up major UGD works is also very small. The picture with water sector is only slightly better.

Severe demand strain is being put on the existing quarries for supply of 40-20 mm stone chips. Cement manufacturers are also not able to respond quickly to supply deficits, thereby driving up cement prices. Same is the story with steel and other construction material requirements. Over and above all this is the shortage in the number of experienced and qualified contractors for executing these works. After all, the same pool of contractors now have many times more works on their hands. Our pool of qualified and experienced structural engineers, environmental engnieers, and other professional experts is very limited. Even the best construction and consultancy firms are rationing the one or two qualified personnel they have, among the many Projects which they bid for. This severely affects the professionalism of these firms and the quality of their work output.

All these aforementioned indicate that the Indian economy is stretched out to its seams, and raises serious questions about our ability to move up to the next level of economic growth or even sustain the current growth momentum. It is therefore necessary for us to swiftly and steeply ratchet up our capacities in every sector, if we are to move up to a higher growth trajectory. It is only then that we can start dreaming about catching up with the Chinese economic miracle.

Capturing value from hotel visits

All of us would have experienced the frustration of waiting to find a table in restaurants during weekend nights. In fact, in Hyderabad it is fast becoming some achievement to find place at certain popular eating places, even on weekday nights. I am sure, a popular eating place would be turning away a good number of people over the night. What strikes me about this massive demand for restaurant tables is the amount of deadweight loss due to the failure in capturing the full willingness of customers to pay.

The utilities (for eating at the particular restuarant) of those on the waiting line would obviously be varying. There will be the group of eaters, willing to pay a premium for jumping the waiting line. The ardent fans of the restaurant would derive additional utility from eating there. Some others are there to check out the place and would be indifferent to eating there or elsewhere. There would be others with demands on their time, and therefore not willing to accomodate long waiting times. In contrast there would be those willing to hang out, and patiently wait out their turn.

A restaurant that does not discriminate between this wide spectrum of customers is surely losing an opportunity. For those indifferrent to the outcome, it does not matter when they eat, or even whether they eat at all at the restaurant. Any outcome that does not take into account the differential preferences of the consumers, lowers the utility gain of even those willing to pay the premium. With uniform pricing, we will therefore have a situation where more people are worse off than with any system of differential pricing. Those disappointed are more disappointed, than those happy are happy!

If we try to capture the full willingness to pay of the customers, a few options come to mind straight away. Would it not be a good idea to have differentially priced eating areas, so as to capture those customers willing to pay more than the regular menu fares? Maybe, during the weekends, when the demand is much higher, the prices can be marked up from the regular fare. Or else, the restaurant could have a higher rates during the peak hours, say between 9.00 PM and 11.00 PM. How about even auctions among those waiting in the ques, with the option of three to four categories being put for bid?

Sounds simple. Then why are not restaurants implementing the same? Difficulty in implementing cannot be a reason, since administering it appears fairly simple. (Though a few embarrassing situations can emerge, if not properly managed) I am inclined to believe that one reason is that it conveys a wrong impression to the customers. An eating place which appears to put profit over its customers, may put off its customers. There could also be the fear of seats going empty, with the retaurant pricing istelf out of the market. There is also the general inertia to not deviate too much from a well established market and its conventions. Thus differential pricing may paradoxically end up turning away more people than it is able to attract. But I suspect that the resurant business is waiting for the tipping point, where a few such deviations from the norm and their demonstrable success will make differential pricing the norm.

The Wal Mart effect and the retailing race

Here is an interesting article in the online magazine, Salon, by Andrew Leonard, about the race to the bottom that Wal Mart has started, and which its clones like "Reliance Fresh" are replicating. It is estimated that Wal Mart makes a profit of just 4 cents on every dollar of sales. But its high volume, profiting from economies of scale, model has been extremely successful and is being replicated across the world.

In India retailing is fast becoming the sector to be in, and in the glorious tradition of "irrational exuberance" of a vibrant market place, all and sundry have been piling on. The massive boom being experienced by real estate in Indian cities has only added to this attraction, as business houses see the potential for a double killing. Many of those entering the market have little expertise nor their existing businesses have any linkages with mass retailing. This retail push by a number of major groups in India, seems to be another bubble in its initial stages of build up. Fast forward, three or five years and do not be surprised if we have Indian city landscapes littered with massive unoccupied retail floor space.

I do not know whether there have been enough detailed studies about the potential market for mega retailers, about the shopping trends and patterns in existing malls and mega retail outlets etc. We need more information before drawing any meaningful conclusions about the challenges and opportunities in Indian retail industry. For the time being sample this extract from the article by Andrew Leonard:

The Communist government of Kerala is threatening to ban "retail giants" from setting up shop in the Indian state. The measure, which appears to be backed by all the major political parties in Kerala, is chiefly aimed at India's version of Wal-Mart, Reliance Industries. The concern is that a proliferation of large retail outlets would drive tens of thousands of mom-and-pop shop operators out of business. Kerala made headlines not so long ago for attempting to ban Coca-Cola; the state has a long history of pursuing its own unique path to development.

Let's switch venues. The safety of Chinese-made products is in the news again today, as China's government announced that a whopping one-fifth of the products on the shelves of Chinese stores were found to be substandard or tainted. The immediate, and understandable impulse, is to blame the health hazards of Chinese products on the lack of regulatory enforcement in China, a state of affairs exacerbated by state corruption, a weak judiciary, and a general absence of effective checks and balances in Chinese society. But that's only one-half of the picture. The other half is the imperative, in the biggest markets for Chinese exports, that demands ever-lower prices for everything.

In "The Wal-Mart Effect," Charles Fishman makes a compelling argument that Wal-Mart's market power inevitably forces its suppliers to cut corners on quality in order to deliver the lower and lower prices that Wal-Mart demands. So those suppliers close their American manufacturing facilities and start sourcing their products in China -- if they don't, they'll lose their place on Wal-Mart's shelves.

So whose fault is it really that so many problems are cropping up with Chinese-made products? Of course, the factory owner in China who authorizes the insertion of toxic chemicals in toothpaste and pet food bears a heavy liability, as does the government official who looks the other way. But shouldn't the Western mega-retailers fighting for market share with their "pro-people" low prices also be held to account?

Maybe tougher safety standards and enforcement of legal liability all the way up and down the supply chain, from China to the retail store, is a better answer, ultimately, than attempting to ban chain stores altogether. But the symbolism of Kerala's "bold" move, however quixotic, is still potent. Markets left to themselves do not deliver perfect outcomes. Sometimes government has to push back.

The Nimitz affair

Reading an article by Siddharth Varadarajan in The Hindu, "Between the Nimitz and the deep blue sea", I could not but help wading into the acrimonious debate raging in India over the past few days surrounding the visit of the US Navy's Aircraft Carrier, USS Nimitz. Some of the ideological explantions for opposing Nimitz like India's long and principled stand aganist Nuclear Weapons, are so shallow and even leaves us open to charges of hypocrisy.

Mr Varadarajan writes about the American propensity to put pressure on India and thereby wring out concessions that are detrimental to our interests. He brings out the American modus operandi of nuanced diplomacy that offers sweeteners while squeezing out our consent on issues of concern to the US. There is even a description of how the Americans have adopted a policy of creeping emergence of a new defence framework.

In a sense, the history of the Nimitz’s visit goes back to 1991, when Lt. Gen. Claude C. Kicklighter, erstwhile commander of the U.S. Army Pacific, handed over a set of proposals for army-to-army cooperation with India. These involved reciprocal staff visits and schooling and training for commanders as building blocks for more comprehensive U.S. access to Indian facilities. The 1995 ‘Agreed Minute on Defence Relations’ added joint exercises and held out the prospect of greater technology transfer but the Indian side soon discovered the U.S. was interested only in deepening service-to-service relations...

After India’s offer of military facilities to the U.S. for offensive operations in Afghanistan, the relationship took a new turn. The Pentagon preferred Pakistan as a staging post but used India’s offer to push for a logistics support agreement, as was acknowledged by Admiral Dennis C. Blair in February 2002. The pace of naval and air exercises shot up. However, the U.S. side realised a new charter was needed to tap the full benefits India offered. In particular, Pentagon planners knew a more relaxed policy on arms transfers was needed, not just as a sweetener for the Indian side but as a vital element in the pursuit of interoperability. As early as December 2001, senior U.S. military officials also floated the idea of an adjustment to American domestic nuclear legislation as an incentive for the Indians to cooperate.

Two weeks before the July 2005 nuclear deal, India and the U.S. signed a ‘New Framework for the Defence Relationship,’ which envisaged an action plan ranging from joint exercises, collaboration in multinational operations, “expand[ing] interaction with other nations” (i.e. U.S. allies such as Japan and Australia), enhancing capabilities to combat the proliferation of weapons of mass destruction, collaboration in missile defence, and so on. Two years on, several elements of this action plan have begun to fall into place. Though India remains opposed to the Proliferation Security Initiative (PSI), the last two ‘Malabar’ naval exercises have seen PSI-related drills such as maritime interdiction and VBSS (visit-board-search-seizure) operations. Quadrilateral security meetings have begun. The recent sale of the USS Trenton (rechristened the INS Jalashwa) — now the second largest ship in the Indian inventory — will allow the Indian Navy to deploy a landing platform dock for the kind of multinational operations the new defence framework envisages. Hercules transport aircraft have also been purchased from the U.S. On the anvil now is the contract for 126 multi-role combat aircraft (MRCA) for which Washington is mounting an aggressive campaign...

That is why the bargain it proposes is this: the U.S. will ‘help’ India become a major world power in exchange for India doing all its can to ensure the ‘American century in Asia’ becomes a reality. The July 2005 nuclear deal was partly motivated by this aim and the same rationale is propelling the incredible bonhomie on the military front.

I have no problem with this bargain, if the deal is that US "helps" India become a world power, while India help promote US interests in Asia. The only note caution should be that the promotion of those US interests in Asia should not come at the expense of India's core national interests in the same region. We can accept this line argument only if we give up our ideologically tinted pre-conceived notion, that any US role in Asia will be detrimental to the geo-political balance in Asia and the interests of Asian countries. For this we need to acknowledge that Asian and Indian interests need not necessarily be the same, and also that the balance of power game is not a zero-sum one. If the US has goals that squarely conflict with our interests, the onus is on us to not accommodate them. But I am sure that the US is too mature and seasoned a player to understand India's strategic importance to hold the bilateral relationship hostage to any single issue.

Indian foreign policy has yet to realise the importance of "engagement dipomacy", where outcomes do not emerge in binary black and white terms, but is often the result of long drawn out dialogue. Such dialogues are characterised by pressure tactics and brinkmanship, compromises and mutual adjustments, so as to accommodate differring view points, while at the same time not ceding ground on the core national interests. Any engagement diplomacy would be a series of two steps forward and one step backward movement. Every compromise has to be accompanied by a commensurate gain. The final outcome of any such engagement process is generally beneficial to both sides and is rarely a zero-sum game.

I cannot see anything wrong per se with American fighter planes or warships entering India as part of a diplomatic exchange nor in formalizing the bilateral relationship through treaties and agreements. It is in America's interest to institutionalize the engagement with India by means of legally binding agreements. It is in our interest to also do the same, but by negotiating out favorable terms which do not compromise our national interests nor constrain our ability to act in accordance with it.

American national interest in relationship with India would have many dimensions. India is an emerging economic powerhouse and hence presents many challenges and opportunities for the US. India's political stability and deomocratic polity means that it is a valuable and potentially reliable ally. India's own geo-political compulsions, especially vis-a-vis China and Pakistan, provides the US interesting opportunities to promote its own geo-political interests. The emergence of China and the dynamics of the new Asian balance of power considerably enhances India's utility. Our proximity to the volatile West Asia and our internal security challenges would not have missed the attention of US policy makers. America also realizes the challenges posed by our economic growth concerns. We need to engage with America knowing fully well all these and even worse. Therein lies the success of our foreign policy. We need to be forewarned to be forearmed.

The assumption that if we become close to Israel or US, we could alienate countries like Iran or China, is flawed and without basis. The onus would be on us to engage in bridge diplomacy with these countries, so as to assuage and reassure them with all the available levers of our diplomacy. However immoral as it may appear, we will need to learn to straddle different boats at the same time, play same games with different rules with different partners, all the while carefully balancing all of them. International relations is not a morality play. It is about hard-nosed bargaining and defending 'amoral' national interests. The foreign policy establishments of most countries, including China and Iran, are aware of the need to comprosmise for accommodating the concerns and interests of their partners.

We will need to exercise our ever growing prowess in economic diplomacy to engage Iran and cushion the Indo-Iranian relationship from the Indo-US engagement process. India will have to accomodate some of Iran's geo-political concerns and play it up, so as to nullify any negative effect of the progress on Indo-US front. Minuses in the relationship will have to be counteracted with pluses. After all the Chinese have played the double game in its relationship with countries like Iran, Iraq, North Korea, and Cuba, very effectively. While they have engaged these countries in a relationship, they have also aggressively reached out Israel and the US and even voted against the interests of these countries in the United Nations Security Council. We need to be keep in mind that, despite any brinkmanship arising from a closer Indo-US relationship, Iran realises its interest in engaging with India. A mature and seasoned practioner of engagement diplomacy like the US would easily understand our interests with China or Iran, and not let the progress on thoses relationships affect Indo-US ties. Stronger the engagement dialogue, the more shocks will the realtionship be able to withstand, without rocking the boat.

Siddharth Varadarajan himself appropriately describes the characteristics of the US strategic diplomacy thus,

When it comes to nurturing an ally, however, the U.S. has the stamina of a long-distance runner. It took 16 years after General Kicklighter’s visit to India for the USS Nimitz to drop anchor in Indian waters. The U.S. knows th at the more engagement it thrusts upon India, the harder it becomes for India to refuse incremental demands. In military terms, it has two goals. First, to make sure the Indian armed forces never become an obstacle to American hegemonic interests either by themselves or by bandwagoning with other Asian powers. And second, to outsource low-end tasks of hegemony, such as patrolling, humanitarian relief, peacekeeping, and stabilisation.

The foreign policy of any country is an exercise in managing a series of often mutually conflicting but interlocking relationships. But it is also increasingly acknowledged that the outcome of these interlocking relationships is not a zero-sum game. The strength of any relationship between two countries is increasingly being judged by the depth and intensity of engagement, rather than any shared historical or ideological concerns. Any engagment process has a life and logic of its own, and therefore has the inherent strength to withstand shocks. We need to base a relationship with another country using multiple levers of diplomacy, rather than base it on a single strand. We also need to underpin it with shared interests, rather than ideological or historical concerns.

The United States would obviously have an agenda, with clear terms of engagement with India. This agenda would be driven not by concerns of friendship and bonhomie with India, but by hard nosed calculations of national interest. That is the way it should be, and we can be rest assured that is the way it is with any engagement agenda put forward by the US. It is not friendship for friendship sake, but friendship for promotion of our national interest. We need to first accept that there is nothing wrong with this approach, and then formulate our responses keeping in mind the same principle that guides American (or Chinese or Iranian) diplomacy - national interest.

India needs to boldly chart out our foreign policy with the firm belief that we now pack enough economic and geo-political punch to be not cowed down or brow beaten by any country. Our foreign policy should be dictated by the firm assumption that India's strategic importance for any country is a fait accompli. There is also nothing wrong with compromises provided it promotes our national interests. If there arises a conflict between our long term national interest and our long held ideological beliefs, then the former should prevail. Always!

Managing debates on change

In the 1960s, Daniel Bell proclaimed the "end of ideology". It proved a false dawn and it took three more decades for that great ideological schism of our age to climax with the fall of the Berlin Wall. In the euphoria surrouding that event, Francis Fukuyama re-opened the debate by claiming the "end of history", with the triumph of western capitalist liberal democracy. But since then, the forces of globalisation, liberalisation, and privatization have unleashed dramatic socio-economic and political changes across the world. These changes have generated heated and intense debates about their consequences, especially on those not equipped to tackle them.

These debates are often obscured by ideological shibboleths and slogans. In an age of commoditized media, it has become standard practice for us to see every issue in binary opposition. Whether it be globalisation-privatization-liberalisation, or those issues of more immediate concern like reforms in service delivery and improving efficiency in the utilisation of our assets, it has become the fashion to circumscribe our debate to a simple one of whether we should accept it or reject it.

Most often these debates cannot be adjudicated on such simple terms. For example, when the entire world is moving in one direction, we simply cannot afford to turn our backs and reject ushering in reforms and changes. The challenge before us is to accept them and try to work out how these reforms and changes can be ushered in at our terms and conditions. We should spend our energies trying to develop capacity in our citizens, so as to cushion them against any pain arising out of them.

I have been witnessing some of these unfolding debates in the recent months, and it has helped me better understand the dynamics of such debates. Over the past year or so, there has been fierce and growing debates in Vijayawada on a few issues like water meters, outsourcing, cost recovery , user charges and Public Private Partnership (PPP). Of these, water meters and PPP have generated the greatest opposition. This is happening in a context when, both water meters and PPP are fast gaining universal acceptance as part of the solution for reducing NRW in urban water supply and in leveraging private capital for augmenting the scarce resources available with Government.

In keeping with this trend, the Vijayawada Municipal Corporation (VMC) also initiated steps to install water meters and also take up development of government assets through PPP. The opponents of both immediately claimed that introduction of water meters would result in higher water tariffs and PPP would be a surrogate for Privatization and handing over of valuable public assets to private agencies. A debate got initiated. The Council of the VMC got into over drive and passed resolutions banning the fixing of water meters on houses and executing any project under PPP. Given the inevitability of both, instead of discussing about how we can use water meters and PPP to our advantage, we have decided to completely turn our back on them. In fact, the Council also passed resolutions barring any outsourcing of civic service delivery, or collection of user charges to achieve cost recovery.

Instead of wholesale rejection, we should implement outsourcing wherever it has evident economic and technical benefits, and that too at terms and conditions which do not place additional burden on the citizens and the VMC. Similarly, cost recovery and user charges can be adopted in certain sectors and for certain categories of population. Before erecting water meters, we need to have a well thought out tariff policy that ensures no extra burden on the common citizen. PPP can be an option in some sectors, where the Corporation does not have resources to invest upfront.

If we continue to stick to a position of dogmatic binary opposition, we could end up having both water meters and PPP implemented in VMC, without none of the concerns being properly addressed. In the absence of any debate, I would not be surprised if water meters gets implemented in Vijayawada with a tariff structure that would not take into account the genuine concerns about the burden imposed on poor households and universal access to safe drinking water. The concept of PPP could get adopted in undesirable and inappropriate projects, and not being utilized where its impact would be beneficial. We could end up with incomplete and harmful outsourcing contracts in the wrong sectors, which would ultimately fail and discredit the entire outsourcing concept.

We have witnessed similar debates before too, across the national scene. The debate on WTO was restricted to whether India should join it or not. There was precious little analysis and discussion about the issues on the agenda of WTO and how they were beneficial or harmful to India's interests, and how we could steer the debate to leverage our strengths. There was limited appreciation of the fact that the world was moving inevitably towards a multi-lateral trading regime and an inter-connected structure, and we had no choice but to join WTO.

Finally when WTO became a reality, we did not have our citizens and our private sector properly equipped to face the challenges arising from it. By not being ready with counter proposals, meeting our requirements, on a variety of issues ranging from the Multi Fibre Agreement (MFA), TRIPS, and liberalisation of trade in Agriculture and Services, we were not able to influence the WTO decision making process on these issues. We were left repsonding to proposals put forward by other nations, most often dogmatically opposing it. In hindsight, all of us would agree that we ought to have more proactively come up with alternate proposals suiting our requirements and structure the phasing out of MFA, or the schedule for accepting TRIPS or GATS.

It is in our interest that we are active participants in any debate on reforms and changes, if possible be even leading it. Indeed the agenda for the debate and its Terms of Reference should be set by us. Blind ideological opposition to change will not get us anywhere and will only result in our marginalisation in the debate, ultimately resulting in our being unable to shape the change in the way best suited to our interests. By refusing to participate in the debate we are effectively giving a free hand to our opponents to implement their agenda unfettered.

We need to move beyond this binary paradigm on most issues facing us today and focus on how we can manage these changes and reforms to our advantage, rather than rejecting it wholesale and in the process losing out fully. We need to be active participants in the discourse that sets the agenda for change, rather than play catch up. Policy making is about identifying your priorities, then setting the context and trying to influence the terms of the debate. By blind ideological opposition and refusing to even participate on a debate, we risk completely marginalising our position and waking up one day to find a changed world and without any of the support mechanisms necessary to confront it.

Market solution to more effective debates in Councils

One of the thing that strikes you about the debates in any Parliament, State Assemblies or even local Councils, is the amount of time that gets wasted in filibustering. In an age of live television feed and intense media scrutiny, playing to the galleries is understandable. This wastage of time results in inadequate time being devoted to discussing important issues. In the circumstances, we need to devise mechanisms that will ensure that grandstanding and wasting public time is minimized, while all important issues are adequately discussed and debated. How do we do this?

Political parties espouse issues and interests, with varying priorities. It is natural that if a Party has strong support base among fishermen, it would be more interested than other parties, in being part of any debate on issues related to fishermen's livelihoods. In contrast, political parties for whom fishermen's issues are only one among the many issues in their agenda, may not be as interested in the issue as the Party with strong fishermen support base. The later would at best be a disinterested participant in the debate. It encourages meaningless speeches, where representatives of political parties speak about issues about which they have little interest, only because they have been given their turn to speak.

The cardinal principle of equality demands that all shades of opinion be given an equal right of being heard. This would necessitate giving every Group or Party equal time for representing their issue.

Assume that there is a "speaking time" account maintained in an Exchange within the Assembly, Parliament or Council. Let us also assume that each Party or Group is allotted some total speaking time for the session. In a splintered multi-party system as ours, we can even categorize parties based on their representation, and then allocate time based on the category. The Exchange monitors the time utilized by each Party or Group, with respect to the amount of time allotted to each.

Now let us introduce a mechanism whereby Parties can trade speaking times. Those Parties, unable to utilize their allotted speaking time for a session, can now trade their unutilized times to a Party which is in deficit of speaking time. The incentive for a party to trade its surplus speaking time is that this time can be carried forward for the entire tenure of the Assembly, so that they can utilize their times more efficiently over this tenure. Further, parties refusing to trade their surplus times can be penalized by deducting the same amount of time from their allocation for the next session.

The aforementioned arrangement has many advantages. It would straight away ensure that parties and speakers put more value on their speaking times. Given the cap on the amount of time available, political parties will be forced to better manage and schedule their priorties for the session. Bluster and grandstanding could get reduced. Important issues will get focussed on their substance, and the quality of debates will improve. It is also more probable now that important issues which are not exercising the priorities of the majority, will get highlighted and discussed.

Critics would complain that it promotes parochialism and interest group politics. My answer would be that in modern day democracy, interest group politics is unavoidable. One of the more interesting ways of mitigating the influence of something we want to avoid, but which is inevitable, is to co-opt and formalize it. Trading in speaking times would only recognize this reality and formalize institutional mechanisms to take this into account.

There could be other more interesting incentive structures for trading times. But that is a question of detail. The larger point emphasised here is the utility of trading of speaking times, in enforcing discipline and containing filibustering in the houses of democracy .

A case for scrapping common General Holidays

The Government of Andhra Pradesh has notified 23 General Holidays for 2007. Of these, 18 are in commemoration of some religious event. The remaining five are secular holidays, including the Republic Day and Independence Day. At the risk of being "politically incorrect", I will stick out my neck and claim that this means, there is varying utility associated with 18 of the 23 holidays.

It is only too evident that a person belonging to one religious group should attach much greater utility to a public holiday commemorating a festival of his religion, than a person belonging to another religious group. Further, some individuals may attach more importance and utility to one particular festival, as against another one of the same religion. An individual who may have been willing to work on a General Holiday, is now forced to sit at home, and spend his valuable holiday in the most unproductive manner. It therefore becomes clear that common General Holidays are an economically inefficient outcome. It leaves everybody unsatisfied.

What could be a more economically efficient outcome? The Government could notify all the important religious festivals and credit the same number of General Holidays into the account of each employee. The employees could then be given the option of availing the General Holidays in any combination, along with any of the notified religious festivals. Thus one employee could take his 18 General Holidays in say, three blocks associated with three festivals. This would restrict the holidays to the festival seasons, when in any case large scale absenteeism is common. Further, if these holidays are utilised only during the festivals and not spaced out across the year, we can limit any disruption at the work place. Also, by notifying these festivals as General Holidays, the Government will be able to satisy any socio-political compulsions.

The most efficient outcome would of course be to do away with all religious holidays and add the number of General Holidays to the Casual Leave Register of individual employees, thereby giving them the full flexibility to avail them.